Janeen Bedard - Vice President, Administration Executive Department John Case - Chief Executive Officer Sumit Roy - Chief Operating Officer and Chief Investment Officer Paul Meurer - Chief Financial Officer and Treasurer.

Nick Joseph - Citigroup Vikram Malhotra - Morgan Stanley Collin Mings - Raymond James Todd Stender - Wells Fargo Rich Moore - RBC Capital Markets Dan Donlan - Ladenburg Thalmann Chris Lucas - Capital One Securities.

Good day and welcome to the Realty Income First Quarter 2015 Operating Results Conference Call. Today's conference is being recorded. At this time I would like to turn the conference over to Janeen Bedard. Please go ahead, ma'am..

Thank you all for joining us today for Realty Income's First Quarter 2015 Operating Results Conference Call. Discussing our results will be John Case, Chief Executive Officer; Paul Meurer, Chief Financial Officer and Treasurer; and Sumit Roy, Chief Operating Officer and Chief Investment Officer.

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.

We will disclose in greater detail the factors that may cause such differences in the company's Form 10-Q. I will now turn the call over to our CEO, John Case..

Thanks, Janeen and welcome to our call today. We're pleased with our first quarter results with AFFO per share increasing by 4.7% to record quarterly amount of $0.67. As announced in yesterday's press release we are reiterating our 2015 AFFO per share guidance of $2.66 to $2.71 as we continue to anticipate another solid year for earnings growth.

We've had an active first four months of the year. We were added to the S&P 500 Index in April becoming the first net lease REIT to join this index. In January we were added to the S&P High Yield Dividend Aristocrats Index as a result of increasing our dividend every year for 20 consecutive years.

In addition we raised 379 million in equity capital at an attractive cost to fund our acquisitions activity. Now I will hand it over to Paul to provide an overview of our financial results.

Paul?.

Thanks John. As usual, I will comment and provide brief highlights regarding our financial results for the quarter starting with the income statement. Total revenue increased 11.4% for the quarter; this increase reflects our growth primarily from new acquisitions over the past year as well as same-store rent growth.

Our annualized rental revenue at March 31st was approximately $936 million. On the expense side, interest expense increased in the quarter to $58.5 million. This increase was primarily due to our two recent bond offerings, the $350 million 10 year notes we issued last June and $250 million 12 year notes issued in September.

We also recognized a non-cash $1.1 million loss on interest rate swaps during the quarter. On a related note our coverage ratios, both remained strong with interest coverage at 3.9 times and fix charge coverage at 3.4 times.

General and administrative or G&A expenses were approximately $12.9 million for the quarter, essentially unchanged from the prior year. Included in G&A expenses approximately $94,000 in acquisition cost.

Our G&A as a percentage of total rental and other revenues is only 5.4% and our projection for G&A expenses in 2015 remains the same at approximately $55 million. Property expenses which were not reimbursed by tenants totaled $4 million for the quarter.

Our current projection for property expenses that we will be responsible for in 2015 remained approximately $20 million. Provisions for impairment of approximately $2.1 million during the quarter includes impairments we recorded on one sold property, one property classified as held for sale and one property where the building was replaced.

Gain on sales were approximately $7.2 million in the quarter and just a reminder as always we do not include property sales gained in our FFO or in our AFFO.

Funds from operations or FFO per share was $0.68 for the quarter a 4.6% increase versus a year ago and adjusted funds from operations or AFFO or the actual cash we have available for distribution as dividends was $0.67 per share for the quarter a 4.7% increase versus a year ago.

Dividends paid increased 2.6% in Q1 and we again increased our cash monthly dividend this quarter. Our monthly dividend now equates to a current annualized amount of approximately $2.274 per share. Briefly turning to the balance sheet, we've continued to maintain a conservative and safe capital structure.

As you know in early April we raised approximately 276 million of new equity capital in conjunction to the S&P 500 Index. The index inclusion was an excellent opportunity to raise capital at a very lost by offering shares to the index fund needing to buy stock on that specific day.

Our bonds which are all unsecured and fixed rate and continued to be rated BAA1 BBB+ at a weighted average maturity of seven years. Our $1.5 billion acquisition credit facility had a $370 million balance at March 31st. After the equity offering and our acquisition activity in April the facility balance today is approximately $400 million.

We did not assume any mortgages during the quarter. We did pay off some at maturity so our outstanding net mortgage debt at quarter end decreased to approximately $785 million. Not including our credit facility, the only variable rate debt exposure to rising interest rates that we have is on just $15.5 million of mortgage debt.

And our overall debt maturity schedule remains in very good shape with only $68 million of mortgages and $150 million of bonds coming due in 2015 and our maturity schedule as well later thereafter. Currently our debt to total market capitalization is approximately 29% and our preferred stock outstanding is only 2.5% of our capital structure.

And our debt to EBITDA at quarter end was approximately 5.7 times. Now let me turn the call back over to John who will give you more background on the quarter..

Thanks Paul. I’ll begin with an overview of the portfolio which continues to perform well. Occupancy base on a number of properties was 98% a 40 basis points decline from last quarter. At the end of the quarter we had 86 properties held for lease out of nearly 4,400 properties in our portfolio.

Economic occupancy was 99.1% a 10 basis points decline from last quarter and a 10 basis points improvement year-over-year. Occupancy based on square footage was 98.7%. We had a number of properties come off lease during the first quarter which impacted primarily our physical occupancy.

Our leasing team will continue to address these properties as part of our standard portfolio management process. We continue to expect our occupancy to remain around 98% through 2015. Of the 43 properties we re-leased during the quarter 30 were leased to existing tenants and 13 were leased to new tenants, recapturing 99.2% of expiring rents.

Additionally five vacant properties were sold during the quarter. Our same store rent increased 1.4% during the quarter. The industry is contributing most to our quarterly same-store rent growth for convenience stores, health and fitness and quick service restaurants. We expect same-store rent growth to remain about 1.4% for the foreseeable future.

Our portfolio continues to be diversified by tenant, industry, geography, and to a certain extent property type. At the end of the first quarter, our properties were leased to 236 commercial tenants and 47 different industries located in 49 states and Puerto Rico. 78% of our rental revenue is from our traditional retail properties.

The largest component outside of retail is industrial and distribution properties at 11%. Our diversification contributes to the predictability of our cash flow. We continue to focus on retail properties leased to tenants with a service non-discretionary and/or low price point component to their business.

Today more than 90% of our retail revenue comes from businesses with these characteristic which better positions them to successfully operate in a variety of economic environments and to compete with ecommerce. At the end of the first quarter, our top 20 tenants represented 54% of rental revenue.

The tenants in our top 20 continue to capture nearly every tenant representing more than 1% of our rental revenue. With Circle K's acquisition of the Pantry, two of our top 20 tenants consolidated into one allowing the U.S. government to enter our top 20 at 1.2% of rent.

Now 10 of our top 20 tenants have investment grade credit ratings but rental revenues from these 10 investment grade rated tenants represent 60% of the rent from our top 20 tenants. Within our portfolio no single tenant accounts for more than 5.5% of rental revenue so diversification by tenant remains favorable.

Walgreens continues to be our largest tenant at 5.5% of rental revenue that actually remains our second largest tenant at 5.2% of rental revenue. Drugstores and convenience stores are our two largest industries each at 9.6% of rental revenue.

Drugstore is about 10 basis points from last quarter while convenience stores are down 20 basis points from last quarter. Our third largest industry is Dollar stores at 9.3% down 20 basis points from last quarter. As many of you know, Dollar Tree is expected to close its acquisition of Family Dollar later in the second quarter.

The FTC has substantially completed its review of the acquisition and identified 340 of the combined 14,000 stores for divestiture. We continued to expect no financial impact on our rental revenue given the minimal portfolio overlap that our Family Dollar locations have with Dollar Tree and the long leased durations of our locations.

We continued to have excellent credit quality in the portfolio with 48% of our rental revenue generated from investment grade rated tenants.

This revenue percentage is up from 46% at the end of 2014 primarily as a result of Couche-Tard's acquisition of the Pantry converting the Pantry our former 15th largest tenant from non-investment grade to investment grade status.

However, this percentage should move down a bit to the mid-40s later in the second quarter as a result of Dollar Tree’s pending acquisition of Family Dollar. In addition to tenant credit, the store level performance of our retail tenants remains positive.

Our weighted average coverage ratio on our retail properties was 2.6 times on a four wall basis, and importantly the medium is also 2.6 times. Moving on to acquisitions, we continue to see a very high volume of acquisition opportunities.

During the quarter, we sourced about 9.5 billion in acquisition opportunities and completed 210 million at a cash cap rate of 6.9%. So we remain selective in our investment strategy. There continues to be a lot of capital pursuing these transactions and we continue to see cap rates check down a bit for the higher quality properties we're pursuing.

However our investments spreads relative to our cost of capital continue to be quite attractive. Subsequent to the first quarter end we closed an additional 302 million in acquisitions bringing us to a total of 512 million in acquisitions for the first four months of the year.

We expect acquisitions volume for 2015 to be at the high end of our previous acquisitions guidance range of 700 million to 1 billion given what we’re seeing today. We continue to selectively sell assets and redeploy that capital and to properties that better fit our investment strategy. During the quarter, we sold nine properties for $22.1 million.

We continued to anticipate dispositions to be around 50 million for 2015. I’ll hand it over to Sumit to discuss our acquisitions and dispositions in more detail now.

Sumit?.

Thank you, John. We are in the first quarter of 2015, we invested 2010 million in 83 properties, approximately 2.5 million per property located in 24 states at an average initial cash cap rate of 6.9% and the weighted average lease term of 15.5 years.

As a reminder, our initial cap rates or cash are not GAAP which tend to be higher due to straight lining of rent. We define cash cap rates as contractual cash net operating income for the first 12 months of each lease following the acquisition date, divided by the total cost of the property including all expenses borne by Realty Income.

On a revenue basis, 60% of total acquisitions are from investment grade tenants and the rest of the revenues are from retail tenants that are non-investment grade or not rated. 74% of the revenues are generated from retail, and 26% are from industrial and distribution assets. These assets are leased to 15 different tenants in 12 industries.

Some of the most significant industries represented our diversified industrial, quick service restaurants and automotive services. Of the nine independent transactions closed in the first quarter only one transaction was about 50 million. Transaction still continues to remain healthy, resource more than 9 billion in the first quarter.

Of these opportunities, 54% of the volumes sourced were portfolios and 46% or approximately 4 billion were one-off assets. Investment grade opportunities represented 55% for the first quarter. Of the $210 million in acquisitions closed in the first quarter, approximately 41% were one-off transactions.

94% of the transactions closed were relationship driven. We remained selective and disciplined in our investment approach closing on less than 3% of deals sourced and continued to capitalize on our extensive industry relationships developed over our 46 year operating history.

As to pricing, cap rates continued to remain tight in the first quarter with investment grade properties trading from low 5% to high 6% cap rate range and non-investment grade properties trading from high 5% to low 8% cap rate range. As John highlighted, our disposition activities remained active.

During the quarter, we sold nine properties with 22 million at a net cash cap rate of 7.7% and realized an unlevered internal rate of return of over 12.5%.

Our investment spreads relative to our weighted average cost of capital were very healthy averaging 248 basis points in the first quarter which was significantly above our historical average spreads. We define investment spreads as initial cash yield less our nominal first year weighted average cost of capital.

In conclusion, the first quarter investments remained solid at 210 million while sourcing more than 9 billion in transactions. Our spreads remained comfortably above our historical level as a tight cap rate environment in the first quarter was more than offset by our improving cost of capital.

We remain selective in pursuing opportunities that are in line with our long-term strategic objectives and within our acquisition parameters. We continue to seek advantage of an aggressive pricing environment to accelerate disposition of assets that are no longer a strategic fit.

As John mentioned, we believe that our acquisitions for 2015 will be at the high end of our previous acquisitions guidance range of 700 million to 1 billion. With that I’d like to hand it back to John..

Thanks Sumit. Our activities continued to result in healthy per share earnings growth which supports the payment of the liable monthly dividends that increase over time. We increased the dividend this quarter by 2.6%.

We’ve increased our dividend every year since the company's listing in 1994, growing the dividend at a compound average annual rate of almost 5%. Our payout ratio in the first quarter was 83.7% which is a level we continue to be comfortable with.

Finally to wrap it up, we’re pleased with the results for the quarter and with the investment opportunities we continue to see in the acquisitions market We remain well positioned to execute on acquisitions with approximately 1.1 billion available on the credit facility today.

Our cost of capital advantage continues to support our ability to drive healthy earnings accretion for our shareholders.

At this time, I would like to open it up for questions, Operator?.

Thank you. [Operator Instructions]. We’ll take our first question today from Nick Joseph from Citigroup. Please go ahead..

I am wondering if you expect any impact to your portfolio from Walgreens’ announcement of the 200 store closings..

Nick this is John here. I think that Walgreens is looking at closing 200 underperforming stores while at the same time opening up 200 new stores. Our average lease term with Walgreens is 14 years and we have good performing stores we only have about five coming due in the next three or four years and those are all strong performers.

If they were to close one of our stores of course they would be responsible for paying rent through the term of the lease. But we’re not expecting any impact from that at all. We continue to like that business quite a bit as you know..

And then in terms of the updated guidance at least that acquisitions trending towards the high end, can you update us on the capital plan for the remainder of the year given where the balance sheet is today?.

So it will be a function of where we are on acquisitions for the remainder of the year.

We have front loaded our equity a fair amount this year as you know partly as a result of the S&P inclusion, so we've raised 379 million in equity to date I would see over the balance of the year we’ll tend to go in the direction of fixed income markets but we’ll look at both equity and debt markets and determine at the appropriate time what makes the most sense for the company from a funding perspective.

But given where we are with the balance sheet and what we’ve done year-to-date we’ve got a lot of flexibility there..

Our next question will come from Vikram Malhotra from Morgan Stanley..

I was just wondering if you could give us the cap rate, the overall cap rate on the acquisitions I think was 6, 7 if you could break that out between the retail and the industrial assets?.

Sure. Sumit, do you want to handle that..

So on the industrial side, the cap rate was in the low 6 zip code and on the retail side it was in the very low 7, just right above 7 so blended that was 6, 7 on the acquisitions..

And then on the additional assets that you bought subsequent to the quarter, could you just give us some more color as to maybe just high level which sectors or what type of asset they were?.

We will release the details on those acquisitions on our second quarter earnings call in July as we typically do. What we can say is that it was principally attributable to a large sale leaseback transaction with an existing tenant. And we're have limited in terms of what we can say about it at this time.

We thought it would be helpful to disclose amount in April to put context along with our guidance for the year in terms of acquisitions..

And then just looking at the investment grade exposure overall, I am sure it’s every quarter things can move around. But just high level it seems like that percentage has maybe creeped up the last few quarters.

I am just kind of wondering if you just have a sort of governor in some sense I mean you’re close to 48% now, where do you think that number could go over the next year or so..

We’re comfortable at 48%. We don’t have a litmus test or a target. We execute both the non-investment grade and investment grade transactions that are investment strategy within our investment parameters.

I will say that as a result of the Dollar Tree acquisition of Family Dollar you will see the investment grade percentage tick down to the mid-40 to probably be around 44% at the end of the quarter because Family Dollar will go from investment grade to non-investment grade.

But I think it will remain in the 40s and generally the mid-upper 40s for the remainder of the year. I don’t think it will change substantially. We’re happy with the credit profile of the portfolio and again we’ll execute both the non-investment grade and investment grade opportunities that make sense for us.

So that at this point driven by the opportunities we’re seeing in the marketplace..

And then just last one obviously I know it’s very small percentage of the portfolio that will come up for re-leasing.

But just have you seen any of the tenants or any desire to maybe move down in terms of whenever renewals come-up?.

Typically the renewals are for the existing tenants around five years and for new tenants about seven years, that’s held strong for last five, ten years and we’re not really getting much feedback that that’s changing.

So we’re not seeing much pressure for shorter lease terms nor we able to extend those lease terms much further into the future than five and seven years..

Our next question will come from Collin Mings with Raymond James. Please go ahead..

Just a couple of questions here, first, you guys provide maybe an update on where the watch list stand I think last quarter you referenced it maybe 1.5% of revenues, any changes to that, any changes in the composition?.

It’s 1.2% of revenues today. It’s about a 150 million in properties. There is a fair amount of casual dining and child daycare on that. This really hasn’t changed substantially since the last quarter..

And then as far as the acquisition is completed year-to-date but at least during the 1Q, can you may be talk about the breakout between rent bumps and what you’re getting for the investment grade versus non-investment grade..

Yes, it’s pretty much in line with what they’ve done historically. On investment grade overall they’re averaging around 1%. On the non-investment grade they are around 1.7% somewhere around there. So not much of the change in terms of rent growth from the acquisitions we did in the first quarter versus what we’ve done over the last few years..

And then maybe just remind us just bigger picture here John, as you think about where assets trading right now relative to replacement cost. I think in the past you’ve highlighted some of the deals that are getting out there. These assets are trading well above replacement cost.

I mean how does that look in the current environment and how much of a consideration is that if you’re thinking about the different deals that are coming across your desk..

It’s a significant consideration for us. When we have 9.5 billion of acquisition opportunities like we did in the first quarter yet we execute 210 million, we’re being very selective and a lot of that is driven by structures and pricing that is being given by the markets of these sellers that we’re not willing to match.

And that that certainly includes a fair amount of not only rents that are well above market but also replacement cost that are sometimes 150% to 200% pricing of replacement costs 150% to 200%. So there's some pretty aggressive structure in getting done and that’s while you see us continue to be quite selective..

And then just maybe one last one from me, this goes back talking about the deals that are relationship driven I think in the past you’ve suggested maybe 20, 25 basis point greater yield than some of the non-relationships deals.

Does that spread still hold true? And then is there any differential between some of the retail and non-retail assets when you think about that maybe 25 basis points advantage you get..

It’s really up to 20 basis points or so and we don’t see a difference between the retail and the industrial assets. It holds true for both classes of assets..

Our next question will come from Todd Stender with Wells Fargo..

If you were to rank the factors that are contributing to driving cap rate lower I guess across all the property types in that lease other than low interest rates, would your competitors are signing value too? We’re certainly familiar with what’s important in realty incomes portfolio but how are competitors thinking about this space, are they’re looking at the investment grade tenants the lease duration, what’s contributing to that to make net lease a lot prominent than it once was..

Yes, it’s really all over the place but the reason it’s so competitive today Todd because of the function of the yields offered and that’s clearly driven by the interest rates and alterative investments, but we see a lot of players work in this space five years ago coming at and aggressively buying assets.

And in some cases I would say that there is not a lot of discipline on some of the acquisitions we see done away from us. So there seems to be an aggressive search for yield..

And how about large deals you’re looking at certainly are comps for your guys, you go back to ARCT in inland, I think you highlighted that the stuff you've already acquired in Q2 as a portfolio. What do the portfolio premiums look like, how does that kind of compare to historically divest and maybe in the last two to three years..

Well, we've seen really an evaporation of the portfolio premium because of resurgence in the 1031 market and lenders lending to that buyer class. So we’ve seen the cap rates on the one-off transactions reach the cap rate that we were seeing on the portfolios and in some cases some asset classes that are even more aggressive.

So we're seeing may be the beginning of a reversal where the art is from portfolio to on-off transactions. But that clearly today is non-premium pricing for you know portfolio transactions of several hundred million..

We will take the next question from Rich Moore with RBC Capital Markets..

First thing on other revenue, Paul, that was up and I am curious what I guess that was and then what happens going forward?.

You know it's a typical number I think that it's best to be modeled not a zero as recommended in the past, right, because it's a active portfolio, it's large and you know we actively manage this such that you're going to find income there periodically from easements, proceeds from insurance situations on properties, takings, main takings of may be a small piece of land from an investment, interest income, so it's kind of a mismatch that you're going to have some level of a run rate there.

And then the reason was a little bit larger in this particular quarter was a whole back of some funds that we had set aside in an acquisition that was returned to us in the first quarter that the tenant did not need for some tenant improvements they had planned to do in a property that we were acquiring towards the end of last year.

So that pops it up a little bit more than usual..

So you did like 3 million last year so if you do you know 3 million to 4 million this year that’s kind of a reasonable number..

That feels about right, that's correct. And I wouldn’t annualize the number you are looking at here in this first quarter because it did have one unusual $400,000 item in it but otherwise you're going to have some income in that line item every quarter..

And then John, you talked last quarter about, on your development plans about wanting to grow your built-to-suit portfolio and receive a couple of hundred million annually and I think it's a little bit larger this quarter than it was, I mean what if you added you know what are you working and do you still growing it to a fairly substantial size as reality?.

Yeah, well you know we're pleased that we've been able to raise it to just under 75 million at the end of the quarter. We continue to look for opportunities to continue to grow that and given the returns we have on those investments and the higher yields.

So we're looking at industrial properties and retail sort of a balance of the two and you know good lease terms and cap rates that are in excess of 9% versus closer to 7% high 6% on the straight acquisition side..

So what would be annual?.

We would like to see that thing.

What's that?.

Sorry, I didn’t mean to interrupt you..

No, I was just going to say we would like to continue to grow that -- as the year goes on..

So what kinds of things did you add, do you have any examples of the sorts of projects you are working on?.

Yes, in industrial we had a number of expansions with FedEx, you know we had a large retail discount store that’s a ground up development that we started as well. So it's pretty representative of the portfolio..

Our next question will come from Dan Donlan with Ladenburg Thalmann. Please go ahead..

John I was wondering if you could talk a little about Page 16 of the supplemental, just looking at the fix charge coverage ratios that you guys gave there, what percentage of the portfolio, looks like it's 2.6 average EBITDA to rent ratio, what percentage of the portfolio does that represent?.

The 2.6?.

Yes sir..

Yes it represents the retail portfolio; we got sales and P&Ls on about 65% of the retail tenant. Most of the balance that we don’t get those on are investment grade tenants..

That was going to be my next question, what percentage of the non-investment grade do you not get in on, it sounds like it might be basically nothing..

Yes, very, very small..

And then that is a, that's a four wall coverage, could you may be guesstimate what you think you might be if included you know may be corporate overhead?.

Yes I mean it would probably see may be 2 to 3 somewhere in there, for G&A..

And then I guess for Paul, just kind of making sure the, just so I understand the balance sheet, is the CIP that you guys have, is that, is that roll through in the other assets line item?.

Yes it does..

And then just kind of curious as to your thoughts on may be doing some 30 year paper, I know you've done it before in the past are you guys open to that, is that market attractive, is it open to you guys?.

It’s certainly open and I would say as a general comment it’s always something of interest longer term, given that we like the match fund longer term with our liabilities versus as you know our long-term asset. So it’s really just a function of how it feels and worth price in a times, it’s very aggressive and is very, very compelling.

So it’s something we would always consider. You may recall that last time we did it, it really was the result of a reverse increase from the life company who specifically reached out to us wanting to place third year paper with us and then we surrounded that with some other investors to create a natural trade at that time.

But it’s something we will look at each and every time when we consider typically for us long-term fixed rate liability..

And then just kind of maybe bigger picture I guess John or Sumit, what are you seeing from retailers or companies that have large real-estate, exposure on their books maybe they’re getting pressure from the investors to monetize.

Do you see that continue to play out, is there other potential transactions out there that aren't so large that you think you can take down and what’s your appetite for this type of deals on a going forward basis..

Those [spots] continue to multiply and their discussions going on, we can’t go into particulars on those but we would expect to have a couple of opportunities over the next year or two. These things take a long-time.

The companies that we’re talking to that we’ve been talking to about this concept for a multiple years but it really seems to be gaining momentum with the activist investors coming in more pressure on some of the boards in management teams to more efficiently utilize their real-estate and potentially monetize it.

So the number of discussions we always had these discussions, and say the number of these discussions and the seriousness of these discussions is both my much greater today. So we would expect to execute on something over the next year or two on that front..

And is there some type of high water mark from percentage of rent perspective that you just don’t want to go above or if you really, really like the deal are you okay with maybe increasing the tenants exposure to 10% of rents, how should we think about that?.

I think we would be comfortable for the right tenant, right company, right transaction to go beyond the revenue percentage levels that we are at today. We are at 5.5% at Walgreens and then 9.6% in terms of industry.

I could see industry and tenant going beyond that in the near-term and they we try to work our way back down to 10% plus or minus industry revenue exposure and mid single-digits in terms of tenant revenue exposure. So we really like that diversification it’s always been an important element of the story.

We’ve never been more diversified than we are today but we would not turn in attractive transaction like that away for a period time to exceed those levels..

Our next question comes from Chris Lucas with Capital One Securities..

John, just kind of following up on a couple of earlier questions, really to the development program I guess could you remind us sort of how guys play there and how scalable your infrastructure is if you look to grow this and how you look to expand that program.

So what roles are you playing in that process, is it just capital or there are other things that you’re providing here?.

It’s a capital, we’re not acting as the developer, we have a relationship with the number of national development companies and we'll fund development or provide a take out. It’s always -- with the signed lease on hand. So there is no speculative development, so it’s really a capital function and I think because of that I think it’s quite scalable..

So, as it relates to the process development versus acquisitions, is there no more time spent on the development relative to the acquisition?.

No, there is more time spent by our team. We got to monitor the development process. We work with outside advisors in terms of monitoring the construction and development and then we have our own team and our own people also involved in that.

So there is more time, more effort from the management team from our team here in San Diego on development properties versus acquisitions generally speaking..

And ladies and gentlemen that concludes the question-and-answer portion of Realty Income’s conference call. I will now turn the call over to John Case for concluding remarks. Thanks Elisabeth and thanks everyone for joining us today. We look forward to speaking with you again next quarter..

Ladies and gentlemen that does conclude today’s conference. And we thank you for your participation..