Realty Income Corp – ‘424B5’ on 10/3/97

As of:  Friday, 10/3/97   ·   Accession #:  912057-97-32613   ·   File #:  333-34311

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Prospectus   —   Rule 424(b)(5)
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Document/Exhibit                   Description                      Pages   Size 

 1: 424B5       Prospectus                                           100    654K 

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Information contained in this prospectus supplement is subject to completion.   
This prospectus supplement and the prospectus shall not constitute an offer to  
sell or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be      
unlawful prior to registration or qualification under the securities laws of any
such State.                                                                     

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SUBJECT TO COMPLETION, DATED OCTOBER 1, 1997
PROSPECTUS SUPPLEMENT                                                           

(TO PROSPECTUS DATED OCTOBER 1, 1997)                                           

2,700,000 SHARES

[LOGO]

COMMON STOCK
------------------

   Realty Income Corporation, a Maryland corporation (the "Company" or "Realty
Income"), is a fully integrated, self-administered and self-managed real estate 
investment trust ("REIT") that acquires, owns and manages net leased, retail    
properties. The Company is the nation's largest publicly-traded owner of        
freestanding, single-tenant, retail properties diversified geographically and by
industry and operated under net lease agreements and, through its predecessors, 
has been in the real estate investment business since 1969. As of August 31,    
1997, the Company owned a diversified portfolio of 774 properties located in 42 
states with over 5.7 million square feet of leasable space. Over 99 percent of  
the Company's single-tenant properties were leased as of August 31, 1997        
pursuant to leases with an average remaining term (excluding extension options) 
of approximately 8.4 years.                                                     

  The Company currently pays regular monthly distributions to holders of its
outstanding shares of common stock, par value $1.00 per share ("Common Stock"). 
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under the
symbol "O." On September 30, 1997, the last reported sale price of the Common   
Stock on the NYSE was $26 15/16 per share.                                      

  All of the 2,700,000 shares of Common Stock being offered hereby are being
sold by Realty Income. Of the 2,700,000 shares of Common Stock offered hereby,  
2,160,000 shares are being offered in the United States and Canada by the U.S.  
Underwriters (the "U.S. Offering") and 540,000 shares are being offered in a    
concurrent offering outside of the United States and Canada by the International
Managers (the "International Offering" and, together with the U.S. Offering, the
"Offering"). The price to public and underwriting discount per share are        
identical for the U.S. Offering and the International Offering. See             
"Underwriting."                                                                 

   The shares of Common Stock are subject to certain restrictions on ownership
and transfer designed to preserve the Company's status as a REIT for federal    
income tax purposes. See "Restrictions on Ownership and Transfers of Capital    
Stock" in the accompanying Prospectus.                                          

    SEE "RISK FACTORS" BEGINNING ON PAGE S-13 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.                                                 
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND    
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES  
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE    
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO   
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL    
OFFENSE.

                                                        [Enlarge/Download Table]

                                                      PRICE TO  UNDERWRITING  PROCEEDS TO
                                                       PUBLIC    DISCOUNT(1)  COMPANY(2) 
                                                                                         
Per Share............................................     $           $            $     
Total(3).............................................     $           $            $     

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as 
amended. See "Underwriting."                                            

(2) Before deducting expenses payable by the Company estimated at $400,000.     

(3) The Company has granted the U.S. Underwriters and International Managers    
(the "Underwriters") options, exercisable within 30 days after the date 
hereof, to purchase up to 324,000 and 81,000 additional shares of Common
  Stock, respectively, in each case to cover over-allotments, if any. If all
   such shares are purchased, the total Price to Public, Underwriting Discount
  and Proceeds to Company will be $           , $          and $           ,
respectively. See "Underwriting."                                       

------------------------------

   The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued by the Company and delivered to and       
accepted by the Underwriters, subject to approval of certain legal matters by   
counsel for the Underwriters and subject to certain other conditions. The       
Underwriters reserve the right to withdraw, cancel or modify such offer and to  
reject orders in whole or in part. It is expected that delivery of the Common   
Stock will be made in New York, New York on or about October   , 1997.          
--------------------------

MERRILL LYNCH & CO.                                                             
A.G. EDWARDS & SONS, INC.                                       
PAINEWEBBER INCORPORATED                
        SUTRO & CO. INCORPORATED
                                                      WHEAT FIRST BUTCHER SINGER
----------------

The date of this Prospectus Supplement is October   , 1997. 

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Narrative Description of Colorwork

Front Inside Cover:                                                             

Map of the continental United States depicting the number of Company    
properties located in each state.                                               

  Photographs of several of the Company's properties including a Jiffy Lube,
Staples, Linens 'N Things and La Petite Academy.                                

   As of August 31, 1997, Realty Income owned and actively managed a portfolio
of 774 properties located in 42 states, consisting primarily of freestanding,   
single-tenant, net leased retail locations. The Company provides expansion      
capital to regional and national retail chain store operators in a variety of   
industries by acquiring, then leasing back, the location to the retailer. Realty
Income is the nation's largest publicly-traded owner of freestanding,           
single-tenant, retail properties diversified geographically and by industry and 
operated under net lease agreements.                                            

Back Inside Cover:                                                              

   Photographs of several of the Company's properties, including a Dairy Mart,
Barnes & Noble Bookstore, OfficeMax, Taco Bell and Petco.                       

 Realty Income's acquisition and investment activities are concentrated in
specific target markets as the Company focuses on middle and upper market       
retailers providing goods and services used by consumers every day.             

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PROSPECTUS SUPPLEMENT SUMMARY 

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED 
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING   
ELSEWHERE IN, OR INCORPORATED BY REFERENCE INTO, THIS PROSPECTUS SUPPLEMENT OR  
THE ACCOMPANYING PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS   
NOT EXERCISED. UNLESS THE CONTEXT OTHERWISE REQUIRES, AS USED HEREIN THE TERMS  
"COMPANY" AND "REALTY INCOME" REFER TO REALTY INCOME CORPORATION AND ITS        
SUBSIDIARIES ON A CONSOLIDATED BASIS FOR PERIODS FROM AND AFTER AUGUST 15, 1994 
(THE DATE OF THE CONSOLIDATION REFERRED TO IN NOTE (1) UNDER "--SUMMARY         
FINANCIAL INFORMATION" BELOW) AND TO THE COMPANY'S PREDECESSOR PARTNERSHIPS FOR 
PERIODS PRIOR TO AUGUST 15, 1994. UNLESS OTHERWISE INDICATED, INFORMATION       
REGARDING THE COMPANY'S PROPERTIES IS AS OF AUGUST 31, 1997. ALL REFERENCES TO  
"$" OR "DOLLARS" MEAN UNITED STATES DOLLARS.                                    

    NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY OR BY
ANY UNDERWRITER THAT WOULD PERMIT THE PUBLIC OFFERING OF THE COMMON STOCK OR THE
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING    
PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED, OTHER 
THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS        
SUPPLEMENT COMES ARE REQUIRED BY THE COMPANY AND THE UNDERWRITERS TO INFORM     
THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF THE      
COMMON STOCK AND THE DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT AND THE         
ACCOMPANYING PROSPECTUS.                                                        

THE COMPANY 

 Realty Income Corporation, a Maryland corporation ("Realty Income" or the
"Company"), is a fully integrated, self-administered and self-managed real      
estate investment trust ("REIT") that acquires, owns and manages net leased,    
retail properties. The Company is the nation's largest publicly-traded owner of 
freestanding, single-tenant, retail properties diversified geographically and by
industry and operated under net lease agreements. As of August 31, 1997, the    
Company owned a diversified portfolio of 774 properties located in 42 states    
with over 5.7 million square feet of leasable space. Over 99% of the Company's  
single-tenant properties were leased as of August 31, 1997.                     

Realty Income adheres to a focused strategy of acquiring freestanding,  
single-tenant, retail properties leased to national and regional retail chains  
under long-term, net lease agreements. The Company typically acquires, and then 
leases back, retail store locations from retail chain store operators, providing
capital to the operators for continued expansion and other purposes. The        
Company's net lease agreements generally are for initial terms of 10 to 20      
years, require the tenant to pay a minimum monthly rent and property operating  
expenses (taxes, insurance and maintenance), and provide for future rent        
increases (typically subject to ceilings) based on increases in the consumer    
price index or additional rent calculated as a percentage of the tenant's gross 
sales above a specified level.                                                  

Since 1970 and through August 31, 1997, Realty Income has acquired and  
leased back to national and regional retail chains 744 properties (including 31 
properties that have been sold) and has collected approximately 98% of the      
original contractual rent obligations on those properties. Realty Income        
believes that the long-term ownership of an actively managed, diversified       
portfolio of retail properties leased under long-term, net lease agreements can 
produce consistent, predictable income and the potential for long-term capital  
appreciation. Management further believes that long-term leases, coupled with   
tenants assuming responsibility for property expenses under the net lease       
structure, generally produce a more predictable income stream than many other   
types of real estate portfolios. As of August 31, 1997, the Company's           
single-tenant properties were leased pursuant to leases with an average         
remaining term (excluding extension options) of approximately 8.4 years.        

 CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF SHARES OF COMMON STOCK 
TO COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE  
"UNDERWRITING."                                                                 

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The Company is a fully integrated real estate company with in-house     
acquisition, leasing, legal, research, financial underwriting, portfolio        
management and capital markets expertise. The five senior officers of the       
Company, who have each managed the Company's properties and operations for      
between six and 12 years, owned approximately 1.0% of the Company's outstanding 
Common Stock as of September 15, 1997. The directors and officers of the        
Company, as a group, owned approximately 3.5% of the Company's outstanding      
Common Stock as of September 15, 1997. Realty Income had 44 employees as of     
September 15, 1997.                                                             

RECENT DEVELOPMENTS 

ACQUISITION OF 43 PROPERTIES THROUGH AUGUST 31, 1997.                   

During the 1997 calendar year, the Company has continued to increase the
size of its portfolio through a strategic program of acquisitions. The Company  
acquired 43 additional properties (the "New Properties"), and selectively sold 9
properties, increasing the number of properties in its portfolio by 4.6% from   
740 properties at December 31, 1996 to 774 properties at August 31, 1997. Of the
New Properties, 36 were occupied as of September 15, 1997 and the remaining     
properties were pre-leased and under construction pursuant to contracts under   
which the tenants have agreed to develop the properties (with development costs 
funded by the Company) and to begin paying rent when the premises open for      
business. The New Properties were acquired for an aggregate cost of             
approximately $58.1 million (excluding the estimated unfunded development costs 
totaling $2.4 million on properties under construction) at August 31, 1997. The 
New Properties are located in 20 states, will contain approximately 610,100     
leasable square feet and are 100% leased under net leases, with an average      
initial lease term of 14.4 years. The weighted average annual unleveraged return
on the cost of the New Properties (including the estimated unfunded development 
cost of properties under construction) is estimated to be 10.3%, computed as    
estimated contractual net operating income (which in the case of a net leased   
property is equal to the base rent or, in the case of properties under          
construction, the estimated base rent under the lease) for the first year of    
each lease, divided by total acquisition and estimated development costs. Since 
it is possible that a tenant could default on the payment of contractual rent,  
no assurance can be given that the actual return on the cost of the New         
Properties will not differ from the foregoing percentage. During the first eight
months of 1997, the Company also invested $3.1 million in 12 development        
properties acquired during 1996.                                                

ACQUISITION OF 21 PROPERTIES IN SEPTEMBER 1997.                         

   During the month of September 1997, the Company acquired 21 properties (the
"September Properties"), all of which were completed and occupied. The September
Properties were acquired for an aggregate cost of approximately $54.4 million.  
These properties are located in 10 states, contain approximately 344,900        
leasable square feet and are 100% leased under net leases with an average       
initial lease term of 15 years. The September Properties added two new          
industries to the portfolio, footwear and apparel, and are leased to Bob's      
Stores, Hollywood Video, Jiffy Lube, Just For Feet, Linens 'N Things, OfficeMax,
and Speedy Brake & Muffler. The weighted average annual unleveraged return on   
the cost of the September Properties is estimated to be 10.4%, computed as      
estimated contractual net operating income, which in the case of a net leased   
property is equal to the base rent for the first year of each lease, divided by 
total acquisition costs. As noted above, no assurance can be given that the     
actual return on the cost of the September Properties will not differ from the  
foregoing percentage.                                                           

NOTES OFFERING.                                                         

 On May 6, 1997 Realty Income issued $110 million of 7 3/4% Notes due 2007
(the "Notes"). The Notes were sold at 99.929% of par for a yield to the         
investors of 7.76%. After taking into effect the $1.1 million gain realized on a
treasury interest rate lock agreement entered into by the Company, the effective
interest rate to the Company on the Notes is 7.62%. The net proceeds from the   
sale of the Notes were used to repay $93.7 million of outstanding borrowings    
under the Company's credit facility and to acquire properties. Currently, there 
is no formal trading market for the Notes and the Company has not listed and    
does not intend to list the Notes on any security exchange.                     

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The Company received investment grade credit ratings from Duff & Phelps 
Credit Rating Company, Moody's Investors Service, Inc., and Standard & Poor's   
Rating Group in December 1996. Duff & Phelps assigned a rating of BBB, Moody's  
assigned a rating of Baa3, and Standard & Poor's assigned a rating of BBB- to   
the Company's senior debt. These ratings are subject to change based upon, among
other things, the Company's results of operations and financial condition.      

NEW PROPERTIES

   The following table sets forth information concerning the New Properties as
of August 31, 1997.                                                             

                                                        [Enlarge/Download Table]

                                                                                                           APPROX.  
                                                                                         INITIAL LEASE    LEASABLE  
PERIOD ACQUIRED              TENANT               INDUSTRY              LOCATION         TERM (YEARS)    SQUARE FEET
--------------------  --------------------  --------------------  --------------------  ---------------  -----------
                                                                                                                    
1st Qtr 1997          Aaron Rents           Home Furnishings      Arlington, TX                 10.0         68,100 
1st Qtr 1997          Aaron Rents           Home Furnishings      Cedar Park, TX                10.0         23,300 
1st Qtr 1997          Aaron Rents           Home Furnishings      Houston, TX                   10.0         70,300 
1st Qtr 1997          Barnes & Noble        Book Store            Tampa, FL                     14.2         30,000 
1st Qtr 1997          Econo Lube            Auto Service          Greensboro, NC                15.0          2,300 
1st Qtr 1997          Econo Lube            Auto Service          Columbia, SC                  15.0          2,800 
1st Qtr 1997          Econo Lube            Auto Service          Durham, NC                    15.0          2,800 
1st Qtr 1997          Econo Lube            Auto Service          Charleston, SC                15.0          2,800 
1st Qtr 1997          Econo Lube            Auto Service          Greenville, SC                15.0          2,800 
1st Qtr 1997          Jiffy Lube            Auto Service          Springboro, OH                20.0          2,400 
1st Qtr 1997          OfficeMax             Office Supplies       Lakewood, CA                  14.6         28,700 
2nd Qtr 1997          Aaron Rents           Home Furnishings      Ridgeland, MS                 10.0         22,300 
2nd Qtr 1997          Aaron Rents           Home Furnishings      Memphis, TN                   10.0         51,500 
2nd Qtr 1997          Aaron Rents           Home Furnishings      Webster, TX                   10.0         22,500 
2nd Qtr 1997          Best Buy              Consumer Electronics  Smyrna, GA                    20.0         46,100 
2nd Qtr 1997          Econo Lube (1)        Auto Service          Denver, CO                    15.0          2,800 
2nd Qtr 1997          Econo Lube (1)        Auto Service          Duluth, GA                    15.0          2,800 
2nd Qtr 1997          Econo Lube (1)        Auto Service          Garner, NC                    15.0          2,800 
2nd Qtr 1997          Econo Lube            Auto Service          Pineville, NC                 15.0          2,800 
2nd Qtr 1997          Jiffy Lube (1)        Auto Service          Brentwood, TN                 20.0          2,000 
2nd Qtr 1997          Linens 'N Things      Home Accessories      Omaha, NE                     15.8         46,600 
2nd Qtr 1997          OfficeMax             Office Supplies       Hutchinson, KS                15.0         23,500 
2nd Qtr 1997          OfficeMax             Office Supplies       Salina, KS                    15.0         23,500 
2nd Qtr 1997          Petco                 Pet Supplies          Dickson City, PA              14.7         16,000 
2nd Qtr 1997          Quik Trip             Convenience Store     Dunwoody, GA                  11.3          3,200 
2nd Qtr 1997          Quik Trip             Convenience Store     Lithonia, GA                  18.3          3,200 
2nd Qtr 1997          Quik Trip             Convenience Store     Mableton, GA                  17.4          3,200 
2nd Qtr 1997          Quik Trip             Convenience Store     Norcross, GA                  17.4          3,200 
2nd Qtr 1997          Quik Trip             Convenience Store     Stone Mountain, GA            11.3          3,200 
2nd Qtr 1997          Quik Trip             Convenience Store     Godfrey, IL                   13.3          3,200 
2nd Qtr 1997          Quik Trip             Convenience Store     Granite City, IL              13.3          3,200 
2nd Qtr 1997          Quik Trip             Convenience Store     Madison, IL                   13.3          3,200 
2nd Qtr 1997          Quik Trip             Convenience Store     Tulsa, OK                     11.3          3,200 
2nd Qtr 1997          Speedy Brake          Auto Service          Southington, CT               15.1          5,300 
2nd Qtr 1997          Speedy Brake          Auto Service          Billerica, MA                 15.0          5,000 
2nd Qtr 1997          Staples               Office Supplies       Helena, MT                    14.7         24,600 
2nd Qtr 1997          Staples               Office Supplies       New Philadelphia, OH          14.9         24,000 
3rd Qtr 1997          East Coast Oil        Convenience Store     Midlothian, VA                15.0          2,400 
3rd Qtr 1997          Econo Lube(1)         Auto Service          Flagstaff, AZ                 15.0          2,800 
3rd Qtr 1997          Econo Lube(1)         Auto Service          Midwest City, OK              15.0          2,800 
3rd Qtr 1997          Econo Lube(1)         Auto Service          The Village, OK               15.0          2,800 
3rd Qtr 1997          Econo Lube            Auto Service          Houston, TX                   15.0          2,600 
3rd Qtr 1997          Hollywood Video       Video Rental          Lubbock, TX                   15.0          7,500 
                                                                                                 ---     -----------
                                                                  Average/Total                 14.4        610,100 
                                                                                                 ---     -----------
                                                                                                 ---     -----------

------------------------------                                                  

(1) The Company acquired these properties as undeveloped land and is funding    
  construction and other costs relating to the development of the properties
by the tenants. The tenants have entered into leases with the Company   
covering these properties and are contractually obligated to complete   
   construction on a timely basis and to pay construction cost overruns to the
extent they exceed the construction budget by more than a predetermined 
percentage.                                                             

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PROPERTIES

As of August 31, 1997, the Company owned 774 properties in 42 states    
consisting of 98 automotive parts and accessories stores, 72 automotive service 
locations, one book store, 317 child care centers, 37 consumer electronics      
stores, 52 convenience stores, 11 home furnishings stores, five office supplies 
stores, one pet supplies store, 167 restaurant facilities, one video rental     
store and 12 other properties. Of the 774 properties, 710 or 92% were leased to 
national or regional middle market retail chain operators; 41 or 5% were leased 
to franchisees of retail chain operators; 16 or 2% were leased to other tenant  
types; and seven or less than 1% were available for lease. Of the 774           
properties, over 98% were under net lease agreements as of August 31, 1997. Net 
leases typically require the tenants to be responsible for property operating   
costs, including property taxes, insurance and maintenance.                     

   The following table sets forth certain state-by-state information regarding
the properties owned by the Company as of August 31, 1997.                      

                                                        [Enlarge/Download Table]

                         NUMBER                           APPROX.                   PERCENT OF TOTAL
                           OF                            LEASABLE     ANNUALIZED       ANNUALIZED   
STATE                  PROPERTIES     PERCENT LEASED    SQUARE FEET  BASE RENT(1)      BASE RENT    
--------------------  -------------  -----------------  -----------  -------------  ----------------
                                                                                                    
Alabama                         6             100%          42,300   $     319,000          0.5%    
Arizona                        27              99          181,200       2,407,000          3.6     
California                     53              92        1,001,900      10,392,000         15.7     
Colorado                       43              98          236,400       3,067,000          4.6     
Connecticut                     5             100           22,500         337,000          0.5     
Florida                        48             100          457,300       4,227,000          6.4     
Georgia                        44             100          252,500       3,480,000          5.3     
Idaho                          11             100           52,000         656,000          1.0     
Illinois                       28             100          192,200       2,389,000          3.6     
Indiana                        22             100          117,600       1,408,000          2.1     
Iowa                            8             100           51,700         456,000          0.7     
Kansas                         17             100          176,000       1,862,000          2.8     
Kentucky                       11             100           33,300         847,000          1.3     
Louisiana                       2             100           10,700         126,000          0.2     
Maryland                        6             100           34,900         505,000          0.8     
Massachusetts                   5             100           25,900         534,000          0.8     
Michigan                        5             100           26,900         355,000          0.5     
Minnesota                      17             100          118,400       1,713,000          2.6     
Mississippi                    12             100          128,900         901,000          1.4     
Missouri                       27             100          163,600       1,908,000          2.9     
Montana                         2             100           30,000         276,000          0.4     
Nebraska                        9             100           93,700       1,071,000          1.6     
Nevada                          5             100           29,100         353,000          0.5     
New Hampshire                   1             100            6,400         122,000          0.2     
New Jersey                      2             100           22,700         346,000          0.5     
New Mexico                      3             100           12,000         103,000          0.2     
New York                        5             100           38,300         539,000          0.8     
North Carolina                 22             100           87,800       1,466,000          2.3     
Ohio                           49             100          234,000       3,668,000          5.6     
Oklahoma                       12             100           69,000         707,000          1.1     
Oregon                         17             100           92,400       1,062,000          1.6     
Pennsylvania                    5             100           44,300         676,000          1.0     
South Carolina                 19             100           75,000       1,152,000          1.7     
South Dakota                    1             100            6,100          79,000          0.1     
Tennessee                      12             100          132,400       1,281,000          1.9     
Texas                         130              99        1,015,300       9,317,000         14.1     

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                         NUMBER                           APPROX.                   PERCENT OF TOTAL
                           OF                            LEASABLE     ANNUALIZED       ANNUALIZED   
STATE                  PROPERTIES     PERCENT LEASED    SQUARE FEET  BASE RENT(1)      BASE RENT    
--------------------  -------------  -----------------  -----------  -------------  ----------------
                                                                                                    
Utah                            7             100%          45,400   $     591,000          0.9%    
Virginia                       17             100           81,500       1,323,000          2.0     
Washington                     42              98          249,700       2,959,000          4.5     
West Virginia                   2             100           16,800         147,000          0.2     
Wisconsin                      11             100           60,500         738,000          1.1     
Wyoming                         4             100           20,100         264,000          0.4     
                              ---             ---       -----------  -------------        -----     

Total/Average                 774              99%       5,788,700   $  66,129,000        100.0%    
                              ---             ---       -----------  -------------        -----     
                              ---             ---       -----------  -------------        -----     

------------------------                                                        

(1) Annualized base rent is calculated by multiplying the monthly contractual   
base rent as of August 31, 1997 for each of the properties by 12, except
 that, for the properties under construction, estimated contractual base
   rent for the first month of the respective leases is used instead of base
 rent as of August 31, 1997. The estimated contractual base rent for the
     properties under construction is based upon the estimated acquisition costs
   of the properties. Annualized base rent does not include percentage rents
 (i.e., additional rent calculated as a percentage of the tenant's gross
  sales above a specified level), if any, that may be payable under leases
covering certain of the properties.                                   

  The following table sets forth certain information regarding the Company's
properties as of August 31, 1997, classified according to the business of the   
respective tenants.                                                             

                                                        [Enlarge/Download Table]

                                                                                   REALTY                                   
                                                                  APPROXIMATE      INCOME       APPROXIMATE     ANNUALIZED  
                                               INDUSTRY              TOTAL          OWNED         LEASABLE         BASE     
TENANT(1)                                     SEGMENT(1)         LOCATIONS(2)     LOCATIONS    SQUARE FOOTAGE     RENT(3)   
-------------------------------------  ------------------------  -------------  -------------  --------------  -------------
                                                                                                                            
AUTOMOTIVE PARTS & ACCESSORIES                                                                                              
CSK Auto                                 Parts & Accessories             580             79          409,200   $   4,192,000
Discount Tire                            Parts & Accessories             310             18          104,900       1,178,000
Other                                    Parts & Accessories               -              1            3,400          49,000
                                                                                        ---    --------------  -------------
    TOTAL AUTOMOTIVE PARTS & ACCESSORIES                                                 98          517,500       5,419,000

AUTOMOTIVE SERVICE                                                                                                          
Econo Lube 'N Tune                             Service                   210             26           71,800       1,763,000
Jiffy Lube                                     Service                 1,400             30           70,200       1,935,000
Q-Lube                                         Service                   490              4            7,600         183,000
R&S Strauss                                    Service                   110              2           31,200         431,000
Speedy Brake                                   Service                 1,080              9           51,200         722,000
Other                                          Service                     -              1            3,100          41,000
                                                                                        ---    --------------  -------------
    TOTAL AUTOMOTIVE SERVICE                                                             72          235,100       5,075,000

BOOK STORES                                                                                                                 
Barnes & Noble Bookstores                    Book Stores               1,010              1           30,000         450,000
                                                                                        ---    --------------  -------------
    TOTAL BOOK STORES                                                                     1           30,000         450,000

CHILD CARE                                                                                                                  
Children's World Learning Centers             Child Care                 530            134          964,000      13,612,000
KinderCare Learning Centers                   Child Care               1,150             13           79,800       1,087,000
La Petite Academy                             Child Care                 790            167          959,000       8,738,000
Other                                         Child Care                   -              3           13,300          70,000
                                                                                        ---    --------------  -------------
    TOTAL CHILD CARE                                                                    317        2,016,100      23,507,000

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                                                                                   REALTY                                   
                                                                  APPROXIMATE      INCOME       APPROXIMATE     ANNUALIZED  
                                               INDUSTRY              TOTAL          OWNED         LEASABLE         BASE     
TENANT(1)                                     SEGMENT(1)         LOCATIONS(2)     LOCATIONS    SQUARE FOOTAGE     RENT(3)   
-------------------------------------  ------------------------  -------------  -------------  --------------  -------------
                                                                                                                            
CONSUMER ELECTRONICS                                                                                                        
Best Buy                                 Consumer Electronics            270              3          150,900   $   1,738,000
Rex Stores                               Consumer Electronics            230             34          408,300       2,694,000
                                                                                        ---    --------------  -------------
    TOTAL CONSUMER ELECTRONICS                                                           37          559,200       4,432,000

CONVENIENCE STORES                                                                                                          
7-ELEVEN                                  Convenience Stores          20,240              3            9,700         235,000
Dairy Mart                                Convenience Stores           1,020             22           66,500       1,522,000
East Coast Oil                            Convenience Stores              40              3            8,800         286,000
Quick Trip                                Convenience Stores             330              9           28,800         924,000
The Pantry                                Convenience Stores             400             14           34,400       1,333,000
Other                                     Convenience Stores               -              1            2,100               0
                                                                                        ---    --------------  -------------
    TOTAL CONVENIENCE STORES                                                             52          150,300       4,300,000

HOME FURNISHINGS & ACCESSORIES                                                                                              
Aaron Rents                                Home Furnishings              290              6          258,000         888,000
Levitz Furniture                           Home Furnishings              130              4          376,400       2,502,000
Linens 'N Things                           Home Accessories              170              1           46,600         561,000
                                                                                        ---    --------------  -------------
    TOTAL HOME FURNISHINGS & ACCESSORIES                                                 11          681,000       3,951,000

OFFICE SUPPLIES                                                                                                             
OfficeMax                                  Office Supplies               560              3           75,700         854,000
Staples                                    Office Supplies               560              2           48,600         456,000
                                                                                        ---    --------------  -------------
    TOTAL OFFICE SUPPLIES                                                                 5          124,300       1,310,000

PET SUPPLIES                                                                                                                
Petco                                        Pet Supplies                340              1           16,000         253,000
                                                                                        ---    --------------  -------------
    TOTAL PET SUPPLIES                                                                    1           16,000         253,000

RESTAURANTS                                                                                                                 
Carver's                                     Dinner House                 90              3           26,600         495,000
Don Pablo's                                  Dinner House                 70              7           60,700         607,000
Other                                        Dinner House                  -             12           93,100         887,000
Golden Corral                                   Family                   460             85          501,200       6,616,000
Sizzler                                         Family                   630              7           37,600         848,000
Other                                           Family                     -              2           11,600         108,000
Hardee's                                      Fast Food                3,100              3           10,300         144,000
Taco Bell                                     Fast Food                4,890             24           54,100       1,502,000
Whataburger                                   Fast Food                  520              9           23,000         616,000
Other                                         Fast Food                    -             15           50,000         897,000
                                                                                        ---    --------------  -------------
    TOTAL RESTAURANTS                                                                   167          868,200      12,720,000

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                                                                                   REALTY                                   
                                                                  APPROXIMATE      INCOME       APPROXIMATE     ANNUALIZED  
                                               INDUSTRY              TOTAL          OWNED         LEASABLE         BASE     
TENANT(1)                                     SEGMENT(1)         LOCATIONS(2)     LOCATIONS    SQUARE FOOTAGE     RENT(3)   
-------------------------------------  ------------------------  -------------  -------------  --------------  -------------
                                                                                                                            
VIDEO RENTAL                                                                                                                
Hollywood Video                              Video Rental                660              1            7,500   $     118,000
                                                                                        ---    --------------  -------------
    TOTAL VIDEO RENTAL                                                                    1            7,500         118,000

    TOTAL OTHER                             Miscellaneous                                12          583,500       4,594,000
                                                                                        ---    --------------  -------------
    TOTAL                                                                               774        5,788,700   $  66,129,000
                                                                                        ---    --------------  -------------
                                                                                        ---    --------------  -------------

------------------------                                                        

(1) See "Business and Properties--Matters Pertaining to Certain Properties and  
Tenants."                                                               

(2) Approximate total number of retail locations in operation by each tenant    
(including both owned and franchised locations), based on information   
provided to Realty Income by the respective tenants.                  

(3) Annualized base rent is calculated by multiplying the monthly contractual   
   base rent as of August 31, 1997 for each of the properties owned as of that
   date by 12, except that, for the properties under construction, estimated
    contractual base rent for the first month of the respective leases is used
    instead of base rent as of August 31, 1997. The estimated contractual base
rent for the properties under construction is based upon the estimated
    acquisition costs of the properties. Annualized base rent does not include
     percentage rents, if any, that may be payable under leases covering certain
of the properties.                                                    

THE OFFERING

    All the shares of Common Stock offered hereby are being sold by the Company.
None of the Company's stockholders is selling any shares of Common Stock. For a 
more complete description of the Common Stock, see "Description of Common Stock"
in the accompanying Prospectus.                                                 

                                                        [Enlarge/Download Table]

Shares of Common Stock Offered...............  2,700,000                                    

                                                                                            
Common Stock Offered for Sale in the:                                                       

  U.S. Offering..............................  2,160,000                                    

  International Offering.....................  540,000                                      

    Total Common Stock Offered...............  2,700,000                                    

Shares of Common Stock Outstanding After this                                               
  Offering...................................  25,698,664                                   

Use of Proceeds..............................  To pay down amounts drawn under the Company's
                                               $130 million revolving, unsecured acquisition
                                               credit facility (the "Credit Facility") and  
                                               for other general corporate purposes. The    
                                               Credit Facility had an outstanding balance at
                                               September 29, 1997 of $67.6 million and is   
                                               expected to be approximately $65 million on  
                                               the closing date of the Offering. See "Use of
                                               Proceeds."                                   

NYSE Symbol..................................  "O"                                          

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DISTRIBUTION POLICY 

   Distributions are paid to the Company's stockholders on a monthly basis if,
as and when declared by the Company's Board of Directors. The monthly           
distribution of $0.1575 per share represents a current annualized distribution  
of $1.89 per share, and an annualized distribution yield of approximately 7.0%  
based on the last reported sale price of the Company's Common Stock on the NYSE 
on September 30, 1997. The Company's Board of Directors has declared a          
distribution of $0.1575 per share of Common Stock payable October 15, 1997 to   
stockholders of record on October 1, 1997. PURCHASERS OF THE SHARES OF COMMON   
STOCK OFFERED HEREBY WILL NOT RECEIVE THE OCTOBER 15, 1997 DISTRIBUTION IN      
RESPECT OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY. The distributions   
paid by the Company for the six months ended June 30, 1997 represented          
approximately 87.5% of the Company's funds from operations (" FFO") for such    
period. Although the Company expects to continue its policy of paying monthly   
distributions, there can be no assurance that the current level of distributions
will be maintained by the Company or as to the actual distribution yield for any
future period. See "Distribution Policy" herein.                                

RISK FACTORS

   For certain factors which investors should carefully consider in evaluating
an investment in the Company's Common Stock, see "Risk Factors" herein.         

 THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, INCLUDING THE
DOCUMENTS INCORPORATED AND DEEMED TO BE INCORPORATED HEREIN AND THEREIN BY      
REFERENCE, CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A 
OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION   
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").    
FORWARD-LOOKING STATEMENTS ARE INHERENTLY SUBJECT TO RISK AND UNCERTAINTIES,    
MANY OF WHICH CANNOT BE PREDICTED WITH ACCURACY AND SOME OF WHICH MIGHT NOT EVEN
BE ANTICIPATED. FUTURE EVENTS AND ACTUAL RESULTS, FINANCIAL AND OTHERWISE, MAY  
DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. 
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO,     
THOSE DISCUSSED IN "RISK FACTORS" AND "BUSINESS AND PROPERTIES-- MATTERS        
PERTAINING TO CERTAIN PROPERTIES AND TENANTS" IN THIS PROSPECTUS SUPPLEMENT AND 
IN THE SECTIONS ENTITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL     
CONDITION AND RESULTS OF OPERATIONS" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 AND IN THE COMPANY'S QUARTERLY      
REPORTS ON FORM 10-Q FOR THE QUARTERS ENDED MARCH 31, 1997 AND JUNE 30, 1997    
INCORPORATED BY REFERENCE IN THE ACCOMPANYING PROSPECTUS.                       

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SUMMARY FINANCIAL INFORMATION 

    The following table sets forth summary financial information for the Company
and the Predecessor (as defined below), as the case may be, for the six-month   
periods ended June 30, 1997 and 1996 and each of the five years in the period   
ended December 31, 1996. Data for the five years ended December 31, 1996 has    
been derived from financial statements which have been audited by the Company's 
independent auditors, KPMG Peat Marwick LLP. Data for the six month periods     
ended June 30, 1997 and 1996 is unaudited but, in the opinion of management of  
the Company, includes all adjustments (consisting of only normal recurring      
accruals) necessary to fairly present such information. Data as of and for the  
six months ended June 30, 1997 does not purport to be indicative of results for 
the fiscal year ending December 31, 1997. The following financial information   
should be read in conjunction with the consolidated financial statements and    
notes thereto and "Management's Discussion and Analysis of Financial Condition  
and Results of Operations" incorporated by reference in the accompanying        
Prospectus from the Company's Annual Report on Form 10-K for the year ended     
December 31, 1996 and Quarterly Reports on Form 10-Q for the quarters ended     
March 31, 1997 and June 30, 1997. The following table also includes certain     
property data.                                                                  

                                                        [Enlarge/Download Table]

                                                              COMPANY                                      PREDECESSOR(2)     
                                --------------------------------------------------------------------  ------------------------
                                     AS OF OR FOR THE                   AS OF OR FOR THE                  AS OF OR FOR THE    
                                     SIX MONTHS ENDED                     YEARS ENDED                       YEARS ENDED       
                                         JUNE 30,                         DECEMBER 31,                      DECEMBER 31,      
                                --------------------------  ----------------------------------------  ------------------------
                                    1997          1996          1996          1995        1994(1)        1993         1992    
                                ------------  ------------  ------------  ------------  ------------  -----------  -----------
                                                        (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)                         
                                                                                                                              
OPERATING DATA                                                                                                                
  Revenue:                                                                                                                    
    Rental revenue............  $     31,455  $     27,330  $     56,777  $     51,185  $     47,905  $    48,584  $    48,694
    Interest and other                                                                                                        
      income..................           148            85           180           370           958          434          340
                                ------------  ------------  ------------  ------------  ------------  -----------  -----------
      Total revenue...........        31,603        27,415        56,957        51,555        48,863       49,018       49,034
                                ------------  ------------  ------------  ------------  ------------  -----------  -----------
  Expenses:                                                                                                                   
    Depreciation and                                                                                                          
      amortization............         8,948         8,123        16,422        14,849        13,790       14,689       14,811
    General and administrative                                                                                                
      expenses and advisor                                                                                                    
      fees....................         2,585         2,598         5,181         6,875         7,187        5,886        5,416
    Property..................           853           859         1,640         1,607         2,095        1,768        1,867
    Interest..................         3,321         1,005         2,367         2,642           396            5      --     
    Provision for impairment                                                                                                  
      losses..................            70           323           579       --                135          935      --     
    Consolidation costs.......       --            --            --            --             11,201      --           --     
                                ------------  ------------  ------------  ------------  ------------  -----------  -----------
      Total expenses..........        15,777        12,908        26,189        25,973        34,804       23,283       22,094
                                ------------  ------------  ------------  ------------  ------------  -----------  -----------
  Income from operations......        15,826        14,507        30,768        25,582        14,059       25,735       26,940
  Net gain on sales of                                                                                                        
    properties................           427           958         1,455            18         1,165        3,583        1,113
                                ------------  ------------  ------------  ------------  ------------  -----------  -----------
  Net income..................  $     16,253  $     15,465  $     32,223  $     25,600  $     15,224  $    29,318  $    28,053
                                ------------  ------------  ------------  ------------  ------------  -----------  -----------
                                ------------  ------------  ------------  ------------  ------------  -----------  -----------
  Net income per share(3).....  $       0.71  $       0.67  $       1.40  $       1.27  $       0.78  $   --       $   --     
                                ------------  ------------  ------------  ------------  ------------  -----------  -----------
                                ------------  ------------  ------------  ------------  ------------  -----------  -----------
  Weighted average common                                                                                                     
    shares outstanding(3).....    22,990,163    22,976,756    22,977,837    20,230,963    19,502,091      --           --     
                                ------------  ------------  ------------  ------------  ------------  -----------  -----------
                                ------------  ------------  ------------  ------------  ------------  -----------  -----------

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                                                             COMPANY                                      PREDECESSOR(2)     
                               --------------------------------------------------------------------  ------------------------
                                    AS OF OR FOR THE                   AS OF OR FOR THE                  AS OF OR FOR THE    
                                    SIX MONTHS ENDED                     YEARS ENDED                       YEARS ENDED       
                                        JUNE 30,                         DECEMBER 31,                      DECEMBER 31,      
                               --------------------------  ----------------------------------------  ------------------------
                                   1997          1996          1996          1995        1994(1)        1993         1992    
                               ------------  ------------  ------------  ------------  ------------  -----------  -----------
                                                       (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)                         
                                                                                                                             
BALANCE SHEET DATA (AT END OF                                                                                                
 PERIOD)                                                                                                                     
  Real estate, at cost,                                                                                                      
    before accumulated                                                                                                       
    depreciation.............. $    616,432  $    517,707  $    564,540  $    515,426  $    450,703  $   451,738  $   476,822
  Total assets (book value)...      500,321       411,842       454,097       417,639       352,768      384,474      395,671
  Total liabilities...........      131,344        32,951        79,856        36,218        17,352        2,570        2,150
  Stockholders' equity........      368,977       378,891       374,241       381,421       335,416      381,904      393,418

OTHER DATA                                                                                                                   
  FFO(4)...................... $     24,820  $     22,927  $     47,718  $     40,414  $     39,185  $    41,359  $    41,751
  Capital expenditures........            7             9            37           296           222           94           13

PORTFOLIO DATA (AT END OF                                                                                                    
 PERIOD)                                                                                                                     
  Number of properties........          770           692           740           685           630          631          634
  Net leasable square feet....    5,777,500     4,688,100     5,226,700     4,673,700     4,064,800    4,052,800    4,468,200

------------------------------                                                  

(1) Realty Income commenced operations as a REIT on August 15, 1994 through the 
 merger of the 25 public and private real estate limited partnerships (the
"Partnerships") with and into the Company (the "Consolidation"). The    
  Consolidation was accounted for as a reorganization of affiliated entities
 under common control in a manner similar to a pooling-of-interests. Under
this method, the assets and liabilities of the Partnerships were carried
    over at their historical book values and their operations have been recorded
on a combined historical cost basis. The pooling-of-interests method of 
accounting also requires the reporting of the results of operations as  
 though the entities had been combined as of the beginning of the earliest
   period presented. Accordingly, the results of operations for the year ended
   December 31, 1994 comprise those of the separate Partnerships combined from
    January 1, 1994 through August 15, 1994 and those of the Company from August
16, 1994 through December 31, 1994. Costs incurred to effect the        
Consolidation and integrate the continuing operations of the separate   
Partnerships were expenses of the Company in 1994, the year in which the
Consolidation was consummated.                                          

(2) Prior to the Consolidation, the Company had no significant operations.      
    Therefore, the combined operations for the period prior to the Consolidation
represent the operations of the Partnerships (the "Predecessor").       

(3) Due to the change in the capital structure caused by the Consolidation as   
 described in note (1) above, share and per share information would not be
meaningful for 1993 and 1992 and therefore has not been included.       

(4) Funds from operations ("FFO") is calculated by adding (i) net income before 
  net gain on sales of properties, (ii) depreciation and amortization, (iii)
provision for impairment losses and (iv) one-time Consolidation costs.  
   Management considers FFO to be an appropriate measure of the performance of
 an equity REIT. FFO is used by financial analysts in evaluating REITs and
can be one measure of a REIT's ability to make cash distributions.      
   Presentation of this information will provide the reader with an additional
  measure to compare the performance of different REITs; however, FFO is not
 comparable to "funds from operations" reported by other REITs that do not
   define funds from operations in accordance with the National Association of
   Real Estate Investment Trusts ("NAREIT") definition. FFO is not necessarily
indicative of cash flow available to fund cash needs and should not be  
    considered as an alternative to net income as an indication of the Company's
performance or to cash flow from operating, investing and financing     
  activities as a measure of liquidity or ability to make cash distributions
or pay debt service.                                                    

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RISK FACTORS

   In evaluating an investment in the Common Stock, investors should carefully
consider the following factors, in addition to other matters set forth or       
incorporated in this Prospectus Supplement or the accompanying Prospectus.      

REAL ESTATE INVESTMENT RISKS                                                    

RISK OF DEFAULT BY MAJOR TENANTS.  The Company's three largest tenants  
currently are Children's World Learning Center, La Petite Academy and Golden    
Corral Restaurants which accounted for approximately 21.6%, 14.1% and 11.2%,    
respectively, of the Company's rental revenue for the six months ended June 30, 
1997. The financial position and results of operations of the Company and its   
ability to make distributions to stockholders and debt service payments may be  
materially adversely affected by financial difficulties experienced by any such 
major tenants or other tenants, including, but not limited to, a bankruptcy,    
insolvency or general downturn in the business of such tenants.                 

    For the six months ended June 30, 1997, approximately 37.4% and 21.4% of the
Company's rental revenues were attributable to tenants in the child care and    
restaurant industries, respectively. A downturn in any of these industries      
generally, whether nationwide or limited to specific sectors of the United      
States, could adversely affect tenants in those industries, which in turn could 
materially adversely affect the financial position and results of operations of 
the Company and its ability to make distributions to stockholders and debt      
service payments. In that regard, a substantial number of the Company's         
properties are leased to middle market retail chains which generally have more  
limited financial and other resources than certain upper market retail chains   
and therefore are more likely to be adversely affected by a downturn in their   
respective business or in the national or regional economy generally.           

On September 5, 1997, Levitz Furniture filed a voluntary petition for   
reorganization under Chapter 11 of the Federal Bankruptcy Code. Levitz Furniture
occupies four of the Company's properties: two in California, one in Texas and  
one in Florida. As of August 31, 1997, the annualized base rent (computed as    
described in note (1) to the table under "--Prospectus Supplement               
Summary--Properties") from the four stores leased to Levitz Furniture was       
approximately $2.5 million, or approximately 3.8% of the Company's total        
annualized base rent at that date. While Levitz Furniture has paid its most     
recent rental payments and has not informed the Company that it will be unable  
to continue to fulfill its obligations under its lease agreements with the      
Company, there can be no assurance that Levitz Furniture will continue to pay   
rent for the remainder of the lease terms for the four Levitz properties.       
Likewise, there can be no assurance that Levitz Furniture will not be released  
from its obligations under its leases with the Company pursuant to these        
bankruptcy proceedings. This may result in an adverse impact on the Company's   
financial condition, results of operations and ability to make distributions to 
stockholders and debt service payments.                                         

   Certain of the Company's properties have been subleased to tenants in other
industries and certain of its properties are available for lease. See "Business 
and Properties--Matters Pertaining to Certain Properties and Tenants."          

  COMPETITION FOR ACQUISITION OF REAL ESTATE.  The Company faces competition
in the acquisition, operation and sale of its properties. Such competition can  
be expected from other businesses, individuals, fiduciary accounts and plans and
other entities engaged in real estate investment. Some of the Company's         
competitors are larger and have greater financial resources than the Company.   
This competition may result in a higher cost for properties the Company wishes  
to purchase. The tenants leasing the Company's properties generally face        
significant competition from other operators. This may result in an adverse     
impact on that portion, if any, of the rental stream to be paid to the Company  
based on a tenant's revenues and may also adversely impact the tenants' results 
of operations or financial condition.                                           

  REAL ESTATE OWNERSHIP RISKS.  The Company is subject to all of the general
risks associated with the ownership of real estate, in particular the risk that 
rental revenue from the properties will not be sufficient to cover all corporate
operating expenses and debt service payments on indebtedness incurred by the    

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Company. These risks include adverse changes in general or local economic       
conditions, changes in supply of or demand for similar or competing properties, 
changes in interest rates and operating expenses, competition for tenants,      
changes in market rental rates, inability to lease properties upon termination  
of existing leases, renewal of leases at lower rental rates and inability to    
collect rents from tenants due to financial hardship, including bankruptcy.     
Other risks include changes in tax, real estate, zoning and environmental laws  
which may have an adverse impact upon the value of real estate, uninsured       
property liability, property damage or casualty losses and unexpected           
expenditures for capital improvements or to bring properties into compliance    
with applicable federal, state and local laws. Acts of God and other factors    
beyond the control of the Company's management might also adversely affect the  
Company.                                                                        

RISKS RELATED TO OWNERSHIP AND FINANCING OF COMMERCIAL                  
PROPERTIES.  Investment in commercial properties may be affected by adverse     
changes in national, regional or local economic or market conditions, poor      
management, increases in the number and density of competing commercial         
properties of the same type and other competitive factors. Other factors        
affecting ownership and financing of commercial properties include the limited  
alternative uses for the buildings and any equipment utilized for the business, 
changing consumer habits, condemnation or uninsured losses, changing            
demographics, changes in labor and insurance costs, government regulations,     
changing traffic patterns and the credit, financial stability and management    
skills of the operator. In the event of a default under a lease, the Company may
experience delays in regaining possession of the property and thereafter may not
be able to enter into a new lease with respect to the property on the same terms
or sell the property on favorable terms. In addition, in the event of the       
financial failure of a commercial property operator, there can be no assurance  
that the Company could promptly recover the property from a trustee or          
debtor-in-possession in any bankruptcy proceedings filed by such person, or that
the Company would receive rent in such proceedings sufficient to cover its      
expenses with respect to such property. In the event of foreclosure of the      
Company's interest in real estate in connection with the bankruptcy of a        
commercial property operator, the Company may be subject to the substantive and 
procedural matters affecting creditors' remedies in bankruptcy.                 

   ENVIRONMENTAL LIABILITIES.  Investments in real property create a potential
for environmental liability on the part of the owner of such property for       
contamination resulting from the presence or discharge of hazardous substances  
on the property. Such liability may be imposed without regard to knowledge of,  
or the timing, cause or person responsible for the release of such substances   
onto the property. There may be environmental problems associated with the      
Company's properties which are not known to the Company. In that regard, a      
number of the Company's properties are leased to operators of oil change and    
tune-up facilities and to convenience stores which sell petroleum-based fuels.  
These facilities or other of the Company's properties utilize, or may have      
utilized in the past, underground tanks for the storage of petroleum-based or   
waste products which could create a potential for release of hazardous          
substances. The presence of hazardous substances on a property may adversely    
affect the Company's ability to sell such property or to borrow using such      
property as collateral, and it may cause the Company to incur substantial       
remediation costs. In addition to claims for cleanup costs, the presence of     
hazardous substances on a property could result in the Company incurring        
substantial liabilities as a result of a claim by a private party for personal  
injury or a claim by an adjacent property owner for property damage. Although   
tenants of the Company's properties generally are required by their leases to   
operate in compliance with all applicable federal, state and local laws and     
regulations and to indemnify the Company against any environmental liabilities  
arising from the tenants' activities on the properties, the Company could       
nevertheless be subject to strict liability by virtue of its ownership interest 
and there can be no assurance that the tenants would satisfy their              
indemnification obligations under the leases. There can be no assurance that any
environmental assessments undertaken by the Company with respect to the         
properties that it owns have revealed all potential environmental liabilities,  
that any prior owner or prior or current operator of the properties did not     
create any material environmental condition not known to the Company, or that an
environmental condition does not otherwise exist as to any one or more of the   
properties that could have material adverse effect on the Company's financial   
condition or results of operations and on its ability to make distributions to  
stockholders and debt service payments. In addition, there can be no assurance  
that (i) future laws, ordinances or regulations will not impose material        
environmental liability, (ii) the current environmental conditions of the       
properties will not be affected by the condition of properties in the vicinity  

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of such properties (such as the presence of leaking underground storage tanks)  
or by third parties unrelated to the Company, or (iii) tenants will not violate 
their leases by introducing hazardous or toxic substances into the properties in
a manner that could expose the Company to liability under federal or state      
environmental laws. The Company believes that its properties are in compliance  
in all material respects with all federal, state and local laws, ordinances and 
regulations regarding hazardous or toxic substances or petroleum products. The  
Company has not been notified by any governmental authority, and is not         
otherwise aware, of any material noncompliance, liability or claim relating to  
hazardous or toxic substances or petroleum products in connection with any of   
its present properties. Nevertheless, if environmental contamination should     
exist, the Company could be subject to strict liability by virtue of its        
ownership interest.                                                             

  In December 1996, the Company obtained a five year environmental insurance
policy on the property portfolio. Based upon the 774 properties in the portfolio
at August 31, 1997, the cost of the insurance will be approximately $84,000 per 
year. The limit of the policy is $10.0 million for each loss and $20.0 million  
in the aggregate, with a $100,000 deductible. There is a sublimit on properties 
with underground storage tanks of $1.0 million per occurrence and $5.0 million  
in the aggregate, with a deductible of $25,000.                                 

  UNINSURED LOSS.  Under the terms and conditions of the leases currently in
force on the Company's properties, tenants generally are required to indemnify  
and hold the Company harmless from any and all liabilities resulting from injury
to persons, air, water, land, or property, on or off the premises, due to       
activities conducted on the properties, except for claims arising from the      
negligence or intentional misconduct of the Company or the Company's agents.    
Additionally, tenants are generally required, at tenant's expense, to obtain and
keep in full force during the term of the lease, liability and property damage  
insurance policies issued by companies holding general policy holder ratings of 
at least "A" as set forth in the most current issue of BEST'S INSURANCE GUIDE.  
Insurance policies for property damage are generally in amounts not less than   
the full replacement cost of the improvements less slab, foundations, supports  
and other customarily excluded improvements, insured against all perils of fire,
extended coverage, vandalism, malicious mischief and special extended perils    
("all risk," as such term is used in the insurance industry). Insurance policies
are generally obtained by the tenant providing general liability coverage       
varying between $1,000,000 and $10,000,000 depending on the facts and           
circumstances surrounding the tenant and the industry in which it operates and  
include liability coverage for bodily injury and property damage arising out of 
the ownership, use, occupancy or maintenance of the properties and all of its   
appurtenant areas.                                                              

 In addition to the indemnities and required insurance policies identified
above, most of the Company's properties are also covered by flood and earthquake
insurance policies (subject to substantial deductibles) obtained by and paid for
by the tenants as part of their risk management programs. Additionally, the     
Company has obtained blanket liability, flood and earthquake (subject to        
substantial deductibles) and property damage insurance policies to protect the  
Company and its properties against loss should the indemnities and insurance    
policies provided by the tenants fail to restore the properties to their        
condition prior to a loss. Should a loss occur that is uninsured or in an amount
exceeding the combined aggregate limits for the policies noted above, or in the 
event of a loss which is subject to a substantial deductible under an insurance 
policy, the Company could lose all or part of its capital invested in, and      
anticipated revenue from one or more of the properties, which could have a      
material adverse effect on the Company's financial condition and results of     
operations and on its ability to make distributions to stockholders and debt    
service payments.                                                               

COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT (THE "ADA") AND FIRE AND
SAFETY REGULATIONS.  All of the Company's properties are required to comply with
the ADA. The ADA has separate compliance requirements for "public               
accommodations" and "commercial facilities," but generally requires that        
buildings be made accessible to people with disabilities. Compliance with the   
ADA requirements could require removal of access barriers and non-compliance    
could result in imposition of fines by the U.S. government or an award of       
damages to private litigants. The tenants are obligated by law to comply with   
the ADA provisions, and management believes that such tenants may be obligated  
to cover costs associated with such compliance. If required changes involve     
greater expenditures than anticipated, or if                                    

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the changes must be made on a more accelerated basis than anticipated, the      
ability of tenants to cover such costs could be adversely affected and the      
Company could be required to expend its own funds to comply with the provisions 
of the ADA, which could adversely affect the Company's financial condition and  
results of operations and its ability to make distributions to stockholders and 
debt service payments. In addition, the Company is required to operate its      
properties in compliance with fire and safety regulations, building codes and   
other land use regulations, as they may be adopted by governmental agencies and 
bodies and become applicable to the Company's properties. Compliance with such  
requirements may require the Company to make substantial capital expenditures   
and these expenditures could adversely affect its financial condition and       
results of operations and its ability to make distributions to stockholders and 
debt service payments.                                                          

PROPERTY TAXES.  Each of the Company's properties is subject to real    
property taxes. The real property taxes on the Company's properties and any     
other properties that the Company develops or acquires in the future may        
increase as property tax rates change and as such properties are assessed or    
reassessed by tax authorities.                                                  

RISKS RELATING TO QUALIFICATION AND OPERATIONS AS A REIT                        

    FAILURE TO QUALIFY AS A REIT.  The Company has elected to be taxed as a REIT
under the Internal Revenue Code of 1986, as amended (the "Code"), commencing    
with its taxable year ended December 31, 1994. As long as the Company meets the 
requirements under the Code for qualification as a REIT each year, the Company  
will be entitled to a deduction when calculating its taxable income for         
dividends paid to its stockholders. For the Company to qualify as a REIT,       
however, certain detailed technical requirements must be met (including certain 
income, asset, distribution and stock ownership tests) under Code provisions for
which, in many cases, there are only limited judicial or administrative         
interpretations. Although the Company intends to operate so that it will        
continue to qualify as a REIT, the highly complex nature of the rules governing 
REITs, the ongoing importance of factual determinations and the possibility of  
future changes in the Company's circumstances preclude any assurance that the   
Company will so qualify in any year. For any taxable year that the Company fails
to qualify as a REIT, it would not be entitled to a deduction for dividends paid
to its stockholders in calculating its taxable income. Consequently,            
distributions to stockholders would be substantially reduced and could be       
eliminated because of the Company's increased tax liability. In addition, if the
Company fails to qualify as a REIT, all distributions to stockholders will be   
taxable as ordinary income to the extent of current and accumulated earnings and
profits, but, subject to certain limitations of the Code, corporate distributees
may be eligible for the dividends received deduction. Should the Company's      
qualification as a REIT terminate, the Company may not be able to elect to be   
treated as a REIT for the subsequent five-year period, which would substantially
reduce and could eliminate distributions to stockholders for the years involved.
See "Certain Federal Income Tax Considerations--Failure to Qualify" in the      
accompanying Prospectus.                                                        

  EFFECT OF DISTRIBUTION REQUIREMENTS.  To maintain its status as a REIT for
federal income tax purposes, the Company generally is required each year to     
distribute dividends (other than capital gain dividends) to its stockholders in 
an amount equal to at least 95% of its taxable income. In addition, the Company 
is subject to a 4% nondeductible excise tax on the amount, if any, by which     
certain distributions paid by it with respect to any calendar year are less than
the sum of 85% of its ordinary income for such calendar year, 95% of its capital
gain net income for the calendar year and any amount of such income that was not
distributed in prior years. The Company may be required, under certain          
circumstances, to accrue as income for tax purposes interests, rent and other   
items treated as earned for tax purposes but not yet received. In addition, the 
Company may be required not to accrue as expenses for tax purposes certain items
that actually have been paid. In any such event, the Company could have taxable 
income in excess of cash available for distribution. In such circumstances, the 
Company could be required to borrow money or liquidate investments in order to  
satisfy its federal income tax obligations, to fully distribute its income, or  
to meet the distribution requirements applicable to a REIT, and there can be no 
assurance that the Company would be able to do so.                              

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 In calculating the Company's taxable income for purposes of the foregoing
distribution requirements, the Code does not permit taxable income to be reduced
by required principal payments on indebtedness. To the extent that the Company  
is obligated to make substantial principal payments in any year, such payments  
might make it difficult or impossible for the Company to satisfy its obligation 
to distribute 95% of its taxable income. If the Company borrows a substantial   
amount under the Credit Facility, the requirement that such borrowings be repaid
when the Credit Facility matures in November 1999 could make it difficult for   
the Company to satisfy its obligations to distribute 95% of its taxable income  
in that year. Refinancing of the Credit Facility may be the only way in which   
the Company could satisfy its obligations to make distributions under the Code  
and there can be no assurance that the Company would be able to effect any such 
refinancing or regarding the terms on which such refinancing could be           
accomplished. See "Certain Federal Income Tax Considerations--Taxation of the   
Company as a REIT--Annual Distribution Requirements" and "--Distributions of    
Acquired Earnings" in the accompanying Prospectus.                              

On August 17, 1995, the Company acquired R.I.C. Advisor, Inc. ("R.I.C.  
Advisor") pursuant to a merger (the "Merger"). As a result of the Merger, the   
Company was treated as having acquired the earnings and profits (the "Acquired  
Earnings") of R.I.C. Advisor for U.S. federal income tax purposes and, pursuant 
to the REIT requirements under the Code, was required to distribute (or be      
deemed to have distributed) the Acquired Earnings prior to the close of 1995.   
Based upon an earnings and profits study and certain other procedures, the      
Company believes that it distributed (or was deemed to distribute) the Acquired 
Earnings prior to the close of 1995. However, the calculation of the amount of  
Acquired Earnings is not binding on, and therefore could be challenged by, the  
Internal Revenue Service (the "IRS") and, if it is determined that the Company  
did not distribute all of the Acquired Earnings prior to the end of 1995, the   
Company would fail to qualify as a REIT for 1995 and perhaps for subsequent     
years, which would have a material adverse effect on the Company's financial    
position and results of operations and ability to make distributions to         
stockholders and debt service payments. See "Certain Federal Income Tax         
Considerations--Taxation of the Company as a REIT--Distribution of Acquired     
Earnings" in the accompanying Prospectus.                                       

  RESTRICTIONS ON OWNERSHIP AND TRANSFERS OF CAPITAL STOCK.  For the Company
to qualify as a REIT, among other things, not more than 50% in value of the     
Company's outstanding capital stock may be owned, actually or constructively, by
five or fewer individuals (defined in the Code to include certain entities)     
during the last half of a taxable year, and such capital stock must be          
beneficially owned by 100 or more persons during at least 335 days of a taxable 
year of 12 months or during a proportionate part of a shorter taxable year. To  
ensure that the Company remains qualified as a REIT, the Company's Charter      
provides, subject to certain exceptions specified therein, that no stockholder  
may actually own, or be deemed to own by virtue of the constructive ownership   
provisions of the Code, in excess of 9.8% of the outstanding shares of Common   
Stock (the "Ownership Limit"). In addition to preserving the Company's status as
a REIT, the Ownership Limit may have the effect of precluding acquisition of    
control of the Company by a third party unless the Board of Directors determines
that an exception to such limit would not impair the Company's status as a REIT 
or that maintenance of REIT status is no longer in the best interest of the     
Company. See "Restrictions on Ownership and Transfers of Capital Stock" in the  
Prospectus.                                                                     

OTHER GENERAL RISKS                                                             

   DILUTION OF COMMON STOCK.  The Company's future growth will depend in large
part upon its ability to raise additional capital. If the Company were to raise 
additional capital through the issuance of equity securities, the interests of  
holders of Common Stock, including the shares of Common Stock offered hereby,   
could be diluted. Likewise, the Company's Board of Directors is authorized to   
cause the Company to issue preferred stock in one or more series and entitled to
such dividends and voting and other rights as the Board of Directors may        
determine. Accordingly, the Board of Directors may authorize the issuance of    
preferred stock with voting, dividend and other similar rights which could be   
dilutive to or otherwise adversely affect the interests of holders of Common    
Stock.                                                                          

RISKS OF DEBT FINANCING.  Although the Company intends to apply the net 
proceeds from the sale of the Common Stock offered hereby to repay borrowings   
outstanding under the Credit Facility, the Company intends to incur additional  
indebtedness in the future, including through additional borrowings             

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under the Credit Facility. In addition, at September 15, 1997, $110 million     
aggregate principal amount of the Company's 7 3/4% Notes due 2007 was           
outstanding. As a result, the Company will be subject to risks associated with  
debt financing, including the risk that the Company's cash flow will be         
insufficient to meet required payments on such debt, particularly in light of   
the fact that the interest rate on the Credit Facility is variable and could    
increase over time, and the risk that the Company may be unable to refinance or 
repay its debt as it comes due. In addition, the Credit Facility provides that, 
in the event of a failure to pay principal or interest on borrowings thereunder 
when due (subject to any applicable grace period), the Company and its          
subsidiaries may not pay any dividends on the Common Stock.                     

    DEPENDENCE ON KEY PERSONNEL.  The Company is dependent on the efforts of its
executive officers and key employees. See "Management." The loss of the services
of its executive officers and key employees could have a material adverse effect
on the Company. There can be no assurance that the Company would be able to     
recruit additional personnel with equivalent experience in the retail, net      
leasing industry.                                                               

EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON STOCK.  One of the   
factors that influences the price of the Company's Common Stock in public       
trading markets is the annual yield from distributions by the Company as        
compared to yields on other financial instruments. Thus, an increase in market  
interest rates will result in higher yields on other financial instruments,     
which could adversely affect the market price of the Company's Common Stock.    

USE OF PROCEEDS 

 The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be approximately $68.5 million (approximately $78.8     
million if the Underwriters' over-allotment option is exercised in full),       
assuming a public offering price per share equal to the last reported sales     
price of the Common Stock on the NYSE set forth on the cover page of this       
Prospectus Supplement. The Company intends to use the net proceeds to pay down  
outstanding indebtedness under the Credit Facility and for other general        
corporate purposes. Pending application for such purposes, such net proceeds may
be invested in short-term investments.                                          

The Credit Facility had an outstanding balance at September 29, 1997 of 
$67.6 million and is expected to be approximately $65 million on the closing    
date of the Offering. Borrowings under the Credit Facility currently bear       
interest at a spread of 1.25% over the London Interbank Offered Rate ("LIBOR"). 
The Credit Facility also offers the Company other interest rate options. The    
maturity date on the Credit Facility is November 27, 1999 and the effective     
interest rate on outstanding borrowings was 6.9% at September 29, 1997.         

DISTRIBUTION POLICY 

   Distributions are paid to the Company's stockholders on a monthly basis if,
as and when declared by the Company's Board of Directors. In order to maintain  
its tax status as a REIT, the Company is generally required to distribute       
annually to its stockholders at least 95% of its taxable income (determined     
without regard to the deduction for dividends paid and by excluding any net     
capital gain). The Company intends to make distributions to its stockholders    
which are sufficient to meet this requirement. See "Risk Factors-- Risks        
Relating to Qualification and Operations as a REIT--Effect of Distribution      
Requirements."                                                                  

  The current monthly distribution of $0.1575 per share represents a current
annualized distribution of $1.89 per share, and an annualized distribution yield
of approximately 7.0% based on the last reported sale price of the Company's    
Common Stock on the NYSE on September 30, 1997. The Company's Board of Directors
has declared a distribution of $0.1575 per share of Common Stock payable October
15, 1997 to stockholders of record on October 1, 1997. PURCHASERS OF THE SHARES 
OF COMMON STOCK OFFERED HEREBY WILL NOT RECEIVE THE OCTOBER 15, 1997            
DISTRIBUTION IN RESPECT OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY. The 
distributions paid by the Company for the six months ended June 30, 1997        
represented approximately 87.5% of the Company's FFO for such period. Although  
the Company expects to continue its policy of paying monthly distributions,     
there can be no assurance that the current level of distributions will be       
maintained by the Company or as to the actual distribution yield for any future 
period.                                                                         

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  Future distributions by the Company will be at the discretion of its Board
of Directors and will depend on, among other things, its results of operations, 
financial condition and capital requirements, the annual distribution           
requirements under the REIT provisions of the Code, its debt service            
requirements and such other factors as the Board of Directors may deem relevant.
In addition, the Credit Facility contains financial covenants which could limit 
the amount of distributions payable by the Company in the event of a            
deterioration in the results of operations or financial condition of the        
Company, and which prohibit the payment of distributions on the Common Stock in 
the event that the Company fails to pay when due (subject to any applicable     
grace period) any principal of or interest on borrowings under the Credit       
Facility.                                                                       

 Distributions by the Company to the extent of its current and accumulated
earnings and profits for federal income tax purposes generally will be taxable  
to stockholders as ordinary income. Distributions in excess of such earnings and
profits generally will be treated as a non-taxable reduction in the             
stockholders' basis in its stock to the extent of such basis, and thereafter as 
a gain from the sale of such stock. Approximately 13.2% of the distributions    
made or deemed to have been made in 1996 were classified as a return of capital 
for federal income tax purposes. Although the Company believes that a portion of
its distributions for 1997 will be classified as a return of capital for federal
income tax purposes, the Company is unable to predict the portion of 1997 or    
future distributions which may be classified as a return of capital since such  
amount depends on the Company's taxable income for the entire year.             

CAPITALIZATION

   The following table sets forth the historical capitalization of the Company
as of June 30, 1997 and as adjusted to give effect to the issuance and sale of  
the Common Stock offered hereby (assuming a public offering price per share     
equal to the last reported sale price of the Common Stock on the NYSE set forth 
on the cover page of this Prospectus Supplement) and the use of the estimated   
net proceeds therefrom to repay borrowings under the Credit Facility as         
described in "Use of Proceeds." This information should be read in conjunction  
with the summary financial information presented elsewhere in this Prospectus   
Supplement, and the consolidated financial statements and notes thereto         
incorporated by reference in the accompanying Prospectus.                       

                                                        [Enlarge/Download Table]

                                                                                           AS OF JUNE 30, 1997   
                                                                                         ------------------------
                                                                                         HISTORICAL   AS ADJUSTED
                                                                                         -----------  -----------
                                                                                          (DOLLARS IN THOUSANDS) 
                                                                                               (UNAUDITED)       
                                                                                                                 
Credit Facility(1)...................................................................... $    12,000   $       0 
Notes due 2007..........................................................................     110,000     110,000 
                                                                                         -----------  -----------
    Total debt..........................................................................     122,000     110,000 
                                                                                         -----------  -----------
Preferred stock, $1.00 par value per share, 20,000,000 shares authorized, no shares                              
  issued or outstanding.................................................................     --           --     
Common Stock, $1.00 par value per share, 100,000,000 shares authorized, 22,988,186 and                           
  25,688,186 issued and outstanding at the June 30, 1997 historical and as adjusted,                             
  respectively..........................................................................      22,988      25,688 
Capital in excess of par value..........................................................     516,202     582,015 
Accumulated distributions in excess of net income.......................................    (170,213)   (170,213)
                                                                                         -----------  -----------
    Total stockholders' equity..........................................................     368,977     437,490 
                                                                                         -----------  -----------
    Total capitalization................................................................ $   490,977   $ 547,490 
                                                                                         -----------  -----------
                                                                                         -----------  -----------

------------------------                                                        

(1) The amount drawn on the Credit Facility was $12.0 million at June 30, 1997  
  and is expected to be approximately $65 million on the closing date of the
Offering.                                                             

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PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY

 On October 18, 1994, the Company's Common Stock began trading on the NYSE
under the symbol "O." Prior to October 18, 1994, the Common Stock was not       
publicly traded. On September 30, 1997, the last reported sales price per share 
of Common Stock on the NYSE was $26.9375. The table below sets forth for the    
periods indicated the high and low sales prices per share of the Company's      
Common Stock, as reported on the NYSE composite tape, and distributions declared
per share of Common Stock.                                                      

                                                        [Enlarge/Download Table]

                                                                                PRICE PER SHARE OF                 
                                                                                   COMMON STOCK                    
                                                                               --------------------  DISTRIBUTIONS 
                                                                                 HIGH        LOW      DECLARED(1)  
                                                                               ---------  ---------  ------------- 
                                                                                                                   
1995                                                                                                               
  First Quarter............................................................... $  19.250  $  16.375    $   0.450   
  Second Quarter..............................................................    21.500     17.875        0.450   
  Third Quarter...............................................................    22.125     20.250        0.465   
  Fourth Quarter..............................................................    22.500     19.125        0.850(2)
                                                                                                          ------   
                                                                                                       $   2.215   
                                                                                                          ------   
                                                                                                          ------   
1996                                                                                                               
  First Quarter...............................................................    23.250     20.250    $   0.310(3)
  Second Quarter..............................................................    21.375     19.500        0.465   
  Third Quarter...............................................................    23.750     20.375        0.465   
  Fourth Quarter..............................................................    24.500     22.250        0.470   
                                                                                                          ------   
                                                                                                       $   1.710   
                                                                                                          ------   
                                                                                                          ------   
1997                                                                                                               
  First Quarter...............................................................    26.625     23.000    $   0.473   
  Second Quarter..............................................................    26.500     22.625        0.473   
  Third Quarter...............................................................    27.813     25.438        0.473   
                                                                                                          ------   
                                                                                                       $   1.419   
                                                                                                          ------   
                                                                                                          ------   

------------------------                                                        

(1) Distributions are currently declared monthly by the Company based on        
   financial results for the prior month. The Company's Board of Directors has
declared a monthly distribution of $0.1575 per share of Common Stock  
payable October 15, 1997 to stockholders of record on October 1, 1997.
PURCHASERS OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY WILL NOT
RECEIVE THE OCTOBER 15, 1997 DISTRIBUTION IN RESPECT OF THE SHARES OF 
     COMMON STOCK BEING OFFERED HEREBY. Although the Company expects to continue
    its policy of paying monthly distributions, there can be no assurance that
   the current level of distributions will be maintained by the Company. See
"Distribution Policy."                                                

(2) In the fourth quarter of 1995, four monthly distributions of $0.155 per     
share and a special distribution of $0.23 per share were declared.      

(3) In the first quarter of 1996, two monthly distributions of $0.155 per share 
were declared.                                                          

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BUSINESS AND PROPERTIES 

GENERAL                                                                         

  The Company is a fully integrated, self-administered and self-managed REIT
that acquires, owns and manages net leased retail properties. The Company is the
nation's largest publicly-traded owner of freestanding, single-tenant, retail   
properties diversified geographically and by industry and operated under net    
lease agreements. As of August 31, 1997, the Company owned a diversified        
portfolio of 774 properties located in 42 states with over 5.7 million square   
feet of leasable space. Over 99% of the Company's single-tenant properties were 
leased as of August 31, 1997. Unless otherwise indicated, information regarding 
the Company's properties is as of August 31, 1997.                              

Realty Income adheres to a focused strategy of acquiring freestanding,  
single-tenant, retail properties leased to national and regional retail chains  
under long-term, net lease agreements. The Company typically acquires, and then 
leases back, retail store locations from retail chain store operators, providing
capital to the operators for continued expansion and other purposes. The        
Company's net lease agreements generally are for initial terms of 10 to 20      
years, require the tenant to pay a minimum monthly rent and property operating  
expenses (taxes, insurance and maintenance), and provide for future rent        
increases (typically subject to ceilings) based on increases in the consumer    
price index or additional rent calculated as a percentage of the tenant's gross 
sales above a specified level.                                                  

Since 1970 and through August 31, 1997, Realty Income has acquired and  
leased back to national and regional retail chains 744 properties (including 31 
properties that have been sold) and has collected approximately 98% of the      
original contractual rent obligations on those properties. Realty Income        
believes that the long-term ownership of an actively managed, diversified       
portfolio of retail properties leased under long-term, net lease agreements can 
produce consistent, predictable income and the potential for long-term capital  
appreciation. Management further believes that long-term leases, coupled with   
tenants assuming responsibility for property expenses under the net lease       
structure, generally produce a more predictable income stream than many other   
types of real estate portfolios. As of August 31, 1997, the Company's           
single-tenant properties were leased pursuant to leases with an average         
remaining term (excluding extension options) of approximately 8.4 years.        

    The Company was formed on September 9, 1993 in the State of Delaware. On May
28, 1997 the Company was reincorporated in the State of Maryland. Realty Income 
commenced operations as a REIT on August 15, 1994 through the merger of 25      
public and private real estate limited partnerships (the "Partnerships") with   
and into the Company (the "Consolidation"). Each of the Partnerships was formed 
between 1970 and 1989 for the purpose of acquiring and managing long-term, net  
leased properties.                                                              

RECENT DEVELOPMENTS                                                             

ACQUISITION OF 43 PROPERTIES THROUGH AUGUST 31, 1997.  During the 1997  
calendar year, the Company has continued to increase the size of its portfolio  
through a strategic program of acquisitions. The Company acquired the 43 New    
Properties, and selectively sold 9 properties, increasing the number of         
properties in its portfolio by 4.6% from 740 properties at December 31, 1996 to 
774 properties at August 31, 1997. Of the New Properties, 36 were occupied as of
September 15, 1997 and the remaining properties were pre-leased and under       
construction pursuant to contracts under which the tenants have agreed to       
develop the properties (with development costs funded by the Company) and to    
begin paying rent when the premises open for business. The New Properties were  
acquired for an aggregate cost of approximately $58.1 million (excluding the    
estimated unfunded development costs totaling $2.4 million on properties under  
construction) at August 31, 1997. The New Properties are located in 20 states,  
will contain approximately 610,100 leasable square feet and are 100% leased     
under net leases, with an average initial lease term of 14.4 years. The weighted
average annual unleveraged return on the cost of the New Properties (including  
the estimated unfunded development cost of properties under construction) is    
estimated to be 10.3%, computed as estimated contractual net operating income   
(which in the case of a net leased property is equal to the base rent or, in the
case of properties under construction, the estimated base rent under the lease) 
for the first year of each lease, divided by total acquisition and estimated    

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development costs. Since it is possible that a tenant could default on the      
payment of contractual rent no assurance can be given that the actual return on 
the cost of the New Properties will not differ from the foregoing percentage.   
During the first eight months of 1997, the Company also invested $3.1 million in
12 development properties acquired in 1996.                                     

ACQUISITION OF 21 PROPERTIES IN SEPTEMBER 1997.  During the month of    
September 1997, the Company acquired 21 properties (the "September Properties"),
all of which were completed and occupied. The September Properties were acquired
for an aggregate cost of approximately $54.4 million. These properties are      
located in 10 states, contain approximately 344,900 leasable square feet and are
100% leased under net leases with an average initial lease term of 15 years. The
September Properties added two new industries to the portfolio, footwear and    
apparel, and are leased to Bob's Stores, Hollywood Video, Jiffy Lube, Just For  
Feet, Linens 'N Things, OfficeMax, and Speedy Brake & Muffler. The weighted     
average annual unleveraged return on the cost of the September Properties is    
estimated to be 10.4%, computed as estimated contractual net operating income,  
which in the case of a net leased property is equal to the base rent for the    
first year of each lease, divided by total acquisition costs. As noted above, no
assurance can be given that the actual return on the cost of the September      
Properties will not differ from the foregoing percentage.                       

   NOTES OFFERING.  On May 6, 1997 Realty Income issued $110 million of 7 3/4%
Notes due 2007. The Notes were sold at 99.929% of par for a yield to the        
investors of 7.76%. After taking into effect the $1.1 million gain realized on a
treasury interest rate lock agreement entered into by the Company, the effective
interest rate to the Company on the Notes is 7.62%. The net proceeds from the   
sale of the Notes were used to repay $93.7 million of outstanding borrowings    
under the Company's Credit Facility and to acquire properties. Currently, there 
is no formal trading market for the Notes and the Company has not listed and    
does not intend to list the Notes on any security exchange.                     

The Company received investment grade credit ratings from Duff & Phelps 
Credit Rating Company, Moody's Investors Service, Inc., and Standard & Poor's   
Rating Group in December 1996. Duff & Phelps assigned a rating of BBB, Moody's  
assigned a rating of Baa3, and Standard & Poor's assigned a rating of BBB- to   
the Company's senior debt. These ratings are subject to change based upon, among
other things, the Company's results of operations and financial condition.      

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NEW PROPERTIES

   The following table sets forth information concerning the New Properties as
of August 31, 1997.                                                             

                                                        [Enlarge/Download Table]

                                                                                                               APPROX.  
                                                                                             INITIAL LEASE    LEASABLE  
PERIOD ACQUIRED         TENANT                 INDUSTRY                  LOCATION            TERM (YEARS)    SQUARE FEET
---------------  --------------------  ------------------------  -------------------------  ---------------  -----------
                                                                                                                        
1st Qtr 1997     Aaron Rents           Home Furnishings          Arlington, TX                      10.0          68,100
1st Qtr 1997     Aaron Rents           Home Furnishings          Cedar Park, TX                     10.0          23,300
1st Qtr 1997     Aaron Rents           Home Furnishings          Houston, TX                        10.0          70,300
1st Qtr 1997     Barnes & Noble        Book Store                Tampa, FL                          14.2          30,000
1st Qtr 1997     Econo Lube            Auto Service              Greensboro, NC                     15.0           2,300
1st Qtr 1997     Econo Lube            Auto Service              Columbia, SC                       15.0           2,800
1st Qtr 1997     Econo Lube            Auto Service              Durham, NC                         15.0           2,800
1st Qtr 1997     Econo Lube            Auto Service              Charleston, SC                     15.0           2,800
1st Qtr 1997     Econo Lube            Auto Service              Greenville, SC                     15.0           2,800
1st Qtr 1997     Jiffy Lube            Auto Service              Springboro, OH                     20.0           2,400
1st Qtr 1997     OfficeMax             Office Supplies           Lakewood, CA                       14.6          28,700
2nd Qtr 1997     Aaron Rents           Home Furnishings          Ridgeland, MS                      10.0          22,300
2nd Qtr 1997     Aaron Rents           Home Furnishings          Memphis, TN                        10.0          51,500
2nd Qtr 1997     Aaron Rents           Home Furnishings          Webster, TX                        10.0          22,500
2nd Qtr 1997     Best Buy              Consumer Electronics      Smyrna, GA                         20.0          46,100
2nd Qtr 1997     Econo Lube(1)         Auto Service              Denver, CO                         15.0           2,800
2nd Qtr 1997     Econo Lube(1)         Auto Service              Duluth, GA                         15.0           2,800
2nd Qtr 1997     Econo Lube(1)         Auto Service              Garner, NC                         15.0           2,800
2nd Qtr 1997     Econo Lube            Auto Service              Pineville, NC                      15.0           2,800
2nd Qtr 1997     Jiffy Lube(1)         Auto Service              Brentwood, TN                      20.0           2,000
2nd Qtr 1997     Linens 'N Things      Home Accessories          Omaha, NE                          15.8          46,600
2nd Qtr 1997     OfficeMax             Office Supplies           Hutchinson, KS                     15.0          23,500
2nd Qtr 1997     OfficeMax             Office Supplies           Salina, KS                         15.0          23,500
2nd Qtr 1997     Petco                 Pet Supplies              Dickson City, PA                   14.7          16,000
2nd Qtr 1997     Quik Trip             Convenience Store         Dunwoody, GA                       11.3           3,200
2nd Qtr 1997     Quik Trip             Convenience Store         Lithonia, GA                       18.3           3,200
2nd Qtr 1997     Quik Trip             Convenience Store         Mableton, GA                       17.4           3,200
2nd Qtr 1997     Quik Trip             Convenience Store         Norcross, GA                       17.4           3,200
2nd Qtr 1997     Quik Trip             Convenience Store         Stone Mountain, GA                 11.3           3,200
2nd Qtr 1997     Quik Trip             Convenience Store         Godfrey, IL                        13.3           3,200
2nd Qtr 1997     Quik Trip             Convenience Store         Granite City, IL                   13.3           3,200
2nd Qtr 1997     Quik Trip             Convenience Store         Madison, IL                        13.3           3,200
2nd Qtr 1997     Quik Trip             Convenience Store         Tulsa, OK                          11.3           3,200
2nd Qtr 1997     Speedy Brake          Auto Service              Southington, CT                    15.1           5,300
2nd Qtr 1997     Speedy Brake          Auto Service              Billerica, MA                      15.0           5,000
2nd Qtr 1997     Staples               Office Supplies           Helena, MT                         14.7          24,600
2nd Qtr 1997     Staples               Office Supplies           New Philadelphia, OH               14.9          24,000
3rd Qtr 1997     East Coast Oil        Convenience Store         Midlothian, VA                     15.0           2,400
3rd Qtr 1997     Econo Lube(1)         Auto Service              Flagstaff, AZ                      15.0           2,800
3rd Qtr 1997     Econo Lube(1)         Auto Service              Midwest City, OK                   15.0           2,800
3rd Qtr 1997     Econo Lube(1)         Auto Service              The Village, OK                    15.0           2,800
3rd Qtr 1997     Econo Lube            Auto Service              Houston, TX                        15.0           2,600
3rd Qtr 1997     Hollywood Video       Video Rental              Lubbock, TX                        15.0           7,500
                                                                                                     ---     -----------
                                                                             Average/Total          14.4         610,100
                                                                                                     ---     -----------
                                                                                                     ---     -----------

------------------------                                                        

(1) The Company acquired these properties as undeveloped land and is funding    
  construction and other costs relating to the development of the properties
by the tenants. The tenants have entered into leases with the Company 
covering these properties and are contractually obligated to complete 
     construction on a timely basis and to pay construction cost overruns to the
 extent they exceed the construction budget by more than a predetermined
percentage.                                                           

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BUSINESS OBJECTIVES AND STRATEGY                                                

GENERAL.  The Company's primary business objective is to generate a     
consistent and predictable level of FFO per share and distributions to          
stockholders. Additionally, the Company generally will seek to increase FFO per 
share and distributions to stockholders through active portfolio management and 
the acquisition of additional properties. The Company also seeks to lower the   
ratio of distributions to stockholders as a percentage of FFO in order to allow 
internal cash flow to be used to fund additional acquisitions and for other     
corporate purposes. The Company's portfolio management focus includes (i)       
contractual rent increases on existing leases; (ii) rental increases at the     
termination of existing leases when market conditions permit; and (iii) the     
active management of the Company's property portfolio, including selective sales
of properties. The Company generally pursues the acquisition of additional      
properties under long-term, net lease agreements with initial contractual base  
rent which, at the time of acquisition and as a percentage of acquisition cost, 
is in excess of the Company's estimated cost of capital.                        

   INVESTMENT PHILOSOPHY.  Realty Income believes that the long-term ownership
of an actively managed, diversified portfolio of retail properties under        
long-term, net lease agreements should produce consistent, predictable income   
and the potential for long-term capital appreciation. Under a net lease         
agreement, the tenant agrees to pay a minimum monthly rent and property expenses
(taxes, maintenance, and insurance) plus, typically, future rent increases      
(typically subject to ceilings) based on increases in the consumer price index  
or, in some cases, additional rent calculated as a percentage of the tenant's   
gross sales above a specified level. The Company believes that long-term leases,
coupled with the tenants assuming responsibility for property expenses, produce 
a more predictable income stream than many other types of real estate           
portfolios, while continuing to offer the opportunity for capital appreciation. 

   INVESTMENT STRATEGY.  In identifying new properties for acquisition, Realty
Income focuses on providing expansion capital to middle market retail chains by 
acquiring, then leasing back, their retail store locations. The Company         
classifies retail tenants into three categories: venture, middle market, and    
upper market. Venture companies are those which typically offer a new retail    
concept in one geographic region of the country and operate between five and 50 
retail outlets. In general, these retail chains are thinly capitalized and are  
in the process of solving distribution, marketing, concept, geographic          
adaptation, and other problems associated with a new, growing company. Middle   
market retail chains are those which typically have 50 to 500 retail outlets,   
operations in more than one geographic region, success through one or more      
economic cycles, a proven, replicable concept, and an objective of further      
expansion. The upper market retail chains typically consist of companies with   
500 or more stores which operate nationally in a mature retail concept. They    
generally have strong operating histories and access to several sources of      
capital.                                                                        

Realty Income focuses on acquiring properties leased to emerging, middle
market retail chains which the Company believes are more attractive for         
investment because: (i) they generally have overcome many of the operational and
managerial obstacles that tend to adversely affect venture retailers; (ii) they 
typically require capital to fund expansion but have more limited financing     
options compared to upper market retailers; (iii) historically, they generally  
have provided attractive risk-adjusted returns to the Company over time, since  
their financial strength has in many cases tended to improve as their businesses
have matured; (iv) their relatively large size compared to venture retailers    
allows them to spread corporate expenses among a greater number of stores; and  
(v) compared to venture retailers, middle market retailers typically have the   
critical mass to survive if a number of locations have to be closed due to      
underperformance.                                                               

   CREDIT STRATEGY.  Realty Income provides sale leaseback financing primarily
to less than investment grade retail chains. Since 1970 and through August 31,  
1997, Realty Income has acquired and leased back to national and regional retail
chains 744 properties (including 31 properties that have been sold) and has     
collected approximately 98% of the original contractual rent obligations on     
those properties. The Company believes that it is within this market that it can
receive a better risk adjusted return on the financing that it provides to      
retailers.                                                                      

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Realty Income believes that the primary financial obligations of middle 
market retailers typically include their bank and other debt, payment           
obligations to suppliers and real estate lease obligations. Because the Company 
owns the land and buildings on which the tenant conducts its retail business,   
the Company believes that the risk of default on the retailers' lease           
obligations is less than the retailers' unsecured general obligations. It has   
been the Company's experience that since retailers must retain their profitable 
retail locations in order to survive, in the event of a Chapter 11              
reorganization they are less likely to reject a lease for a profitable location,
which would terminate their right to use the property. Thus, as the property    
owner, the Company believes it will fare better than unsecured creditors of the 
same retailer in the event of a Chapter 11 reorganization. In addition, Realty  
Income believes that the risk of default on the real estate leases can be       
further mitigated by monitoring the performance of the retailers' individual    
unit locations and selling those units that are weaker performers.              

In order to qualify for inclusion in the Company's portfolio, new       
acquisitions must meet stringent investment and credit requirements. The        
properties must generate attractive current yields, and the tenant must meet the
Company's credit standards and have a proven market concept. The Company has    
established a three part analysis that examines each potential investment based 
on: 1) industry, company, market conditions and credit profile; 2) location     
profitability, if available; and 3) overall real estate characteristics, value, 
and comparative rental rates. Companies that have been approved for acquisitions
are generally those with fifty or more retail stores which are located in highly
visible areas, with easy access to major thoroughfares, attractive demographics,
and acquisition costs at or below appraised value.                              

   ACQUISITION STRATEGY.  Realty Income seeks to invest in industries that are
dominated by independent local operators and in which several well organized    
regional and national chains are capturing market share through service, quality
control, economies of scale, mass media advertising, and selection of prime     
retail locations. The Company executes its acquisition strategy by acting as a  
source of capital to regional and national retail chain stores in a variety of  
industries by acquiring, then leasing back, their retail store locations.       
Relying on executives from its acquisitions, credit underwriting, portfolio     
management, finance, accounting, operations, capital markets, and legal         
departments, the Company undertakes thorough research and analysis in           
identifying appropriate industries, tenants, and property locations for         
investment. In selecting real estate for potential investment, the Company      
generally will seek to acquire properties that have the following               
characteristics:                                                                

- Freestanding, commercially zoned property with a single-tenant;       

  - Properties that are important retail locations for national and regional
retail chains;                                                      

  - Properties that are located within attractive demographic areas relative
     to the business of their tenants, with high visibility and easy access to
major thoroughfares;                                                

- Properties that can be purchased with the simultaneous execution or   
    assumption of long-term, net lease agreements, providing the opportunity
   for both current income and future rent increases (typically subject to
   ceilings) based on increases in the consumer price index or through the
 payment of additional rent calculated as a percentage of the tenant's
gross sales above a specified level; and                            

- Properties that can be acquired at or below their appraised value at  
prices generally ranging from $300,000 to $10 million.              

PORTFOLIO MANAGEMENT STRATEGY.  The active management of the property   
portfolio is an essential component of the Company's long-term strategy. The    
Company continually monitors its portfolio for changes that could affect the    
performance of the industries, tenants, and locations in which it has invested. 
Realty Income's investment committee meets weekly to review industry and tenant 
research and property due diligence, and the executive committee meets at least 
monthly to discuss property operations and portfolio management. This monitoring
typically includes ongoing review and analysis of: (i) the performance of       
various tenant industries; (ii) the operation, management, business planning,   
and financial condition of the tenants; (iii) the health of the individual      
markets in which the Company owns properties, from both an economic and real    
estate standpoint; and (iv) the physical maintenance of the Company's           

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individual properties. The portfolio is analyzed on an ongoing basis with a view
towards optimizing performance and returns.                                     

 While the Company generally intends to hold its net leased properties for
long-term investment, the Company actively manages its portfolio of net leased  
properties. The Company intends to pursue a strategy of identifying properties  
that may be sold at attractive prices, particularly where the Company believes  
reinvestment of the sales proceeds can generate a higher cash flow to the       
Company than the property being sold. While the Company intends to pursue such a
strategy, it will only do so within the constraints of the income tax rules     
regarding REIT status.                                                          

CAPITAL STRATEGY                                                                

   The Company's $130 million revolving, unsecured acquisition Credit Facility
expires in November 1999. As of September 29, 1997, the outstanding balance on  
the Credit Facility was $67.6 million with an effective interest rate of        
approximately 6.9%. A commitment fee of 0.15% per annum accrues on the average  
amount of the unused available credit commitment. The Company is and has been in
compliance with the various leverage and interest coverage ratio limitations    
required by the Credit Facility. The Credit Facility has been and is expected to
be used to acquire additional retail properties leased to national and regional 
retail chains under long term net lease agreements.                             

The Company utilizes its Credit Facility as a vehicle for the short-term
financing of the acquisition of new properties. When outstanding borrowings     
under the Credit Facility reach a certain level (generally in the range of $60  
to $100 million), the Company intends to refinance those borrowings with the net
proceeds of long-term or permanent financing, which may include the issuance of 
Common Stock, preferred stock or convertible preferred stock, debt securities or
convertible debt securities. However, there can be no assurance that the Company
will be able to effect any such refinancing or that market conditions prevailing
at the time of refinancing will enable the Company to issue equity or debt      
securities upon acceptable terms. The Company believes that it is best served by
a conservative capital structure, with a majority of its capital consisting of  
equity. On a pro forma basis assuming issuance of the Common Stock at a public  
offering price per share equal to the last reported sale price of the Common    
Stock on the NYSE set forth on the cover page of this Prospectus Supplement and 
application of the estimated net proceeds therefrom occurring on September 30,  
1997, the Company's total indebtedness would have been approximately 13.7% of   
its total market capitalization (defined as shares of the Company's Common Stock
outstanding multiplied by the last reported sales price of the Common Stock on  
the NYSE set forth on the cover page of the Prospectus Supplement plus total    
indebtedness).                                                                  

 Management believes that the Company's cash and cash equivalents on hand,
cash provided from operating activities and borrowing capacity are sufficient to
meet its liquidity needs other than the repayment of debt for the foreseeable   
future, except that the Company will require additional sources of capital to   
fund property acquisitions.                                                     

The Company received investment grade credit ratings from Duff & Phelps 
Credit Rating Company, Moody's Investors Service, Inc., and Standard & Poor's   
Rating Group in December 1996. Duff & Phelps assigned a rating of BBB, Moody's  
assigned a rating of Baa3, and Standard & Poor's assigned a rating of BBB- to   
the Company's senior debt. These ratings are subject to change based upon, among
other things, the Company's results of operations and financial condition.      

COMPETITIVE ADVANTAGES                                                          

    The Company believes that, to utilize its investment philosophy and strategy
most successfully, it must seek to maintain the following competitive           
advantages:                                                                     

     (i) SIZE AND TYPE OF INVESTMENT PROPERTIES: The Company believes that
   smaller ($300,000 to $10,000,000) retail net leased properties represent an
    attractive investment opportunity in today's real estate environment. Due to
  the complexities of acquiring and managing a large portfolio of relatively
  small assets, the Company believes that these types of properties have not
experienced significant                                                 

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    institutional participation or the corresponding yield reduction experienced
by larger income producing properties. The Company believes the less    
  intensive day to day property management required by net lease agreements,
coupled with the active management of a large portfolio of smaller      
properties by the Company, is an effective investment strategy.         

   In 1969, Realty Income identified a market niche and systematically
  built a portfolio around this niche. Twenty-eight years later, the Company
believes that it is the nation's largest publicly-traded owner of       
  free-standing, single-tenant, retail properties diversified geographically
and by industry and operated under net lease agreements, with over 5.7  
million square feet of leasable space.                                  

     The tenants of Realty Income's freestanding retail properties provide
   goods and services which satisfy basic consumer needs. In order to grow and
    expand, they generally need capital. Since the acquisition of real estate is
typically the single largest capital expenditure of many such retailers,
  Realty Income's method of purchasing the property and then leasing it back
 under a net lease arrangement allows the retail chain to free up capital.

      (ii) INVESTMENT IN NEW INDUSTRIES: While specializing in single-tenant
    properties, the Company will seek to further diversify its portfolio among a
   variety of industries. The Company believes that diversification will allow
it to invest in industries that are currently growing and have          
    characteristics the Company finds attractive. These characteristics include,
but are not limited to, industries dominated by local operators where   
 national and regional chain operators can gain market share and dominance
    through more efficient operations, as well as industries taking advantage of
  major demographic shifts in the population base. For example, in the early
 1970s, Realty Income targeted the fast food industry to take advantage of
the country's increasing desire to dine away from home, and in the early
  1980s, it targeted the child day care industry, responding to the need for
professional child care as more women entered the work force.           

       (iii) DIVERSIFICATION: Diversification of the portfolio by industry type,
tenant and geographic location is key to the Company's objective of     
providing predictable investment results for its stockholders. As the   
Company expands it will seek to further diversify its portfolio. During 
    1997, 1996 and 1995, the Company added the book store, consumer electronics,
convenience store, home furnishings and accessories, office supply, pet 
supply and video rental industries to the portfolio.                    

(iv) MANAGEMENT SPECIALIZATION: The Company believes that its   
management's specialization in single-tenant retail properties operated 
under net lease agreements is important to meeting its objectives. The  
 Company plans to maintain this specialization and will seek to employ and
train high quality professionals in this specialized area of real estate
ownership, finance and management.                                      

(v) TECHNOLOGY: The Company intends to stay at the forefront of 
technology in its efforts to efficiently and economically carry out its 
 operations. The Company maintains a sophisticated information system that
allows it to analyze its portfolio's performance and actively manage its
investments. The Company believes that technology and information based 
  systems will play an increasingly important role in its competitiveness as
  an investment manager and source of capital to a variety of industries and
tenants.                                                                

PROPERTIES                                                                      

As of August 31, 1997, the Company owned a diversified portfolio of 774 
properties in 42 states containing over 5.7 million square feet of leasable     
space. The portfolio consisted of 98 automotive parts and accessories stores, 72
automotive service locations, one book store, 317 child care centers, 37        
consumer electronics stores, 52 convenience stores, 11 home furnishings stores, 
five office supplies stores, one pet supplies store, 167 restaurant facilities, 
one video rental store and 12 other properties. Of the 774 properties, 710 or   
92% were leased to national or regional retail chain operators; 41 or 5% were   
leased to franchisees of retail chain operators; 16 or 2% were leased to other  
tenant types; and seven or less than 1% were available for lease. At August 31, 
1997, over 98% of the properties were under net lease agreements. Net leases    
typically require the tenant to be responsible for property operating costs     
including property taxes, insurance and maintenance.                            

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 The Company's net leased retail properties are retail locations primarily
leased to national and regional retail chain store operators. At August 31,     
1997, the properties averaged approximately 7,500 square feet of leasable retail
space on approximately 44,500 square feet of land. Generally, buildings are     
single-story properties with adequate parking on site to accommodate peak retail
traffic periods. The properties tend to be on major thoroughfares with          
relatively high traffic counts and adequate access, egress and proximity to a   
sufficient population base to constitute a sufficient market or trade area for  
the retailer's business.                                                        

   The following table sets forth certain state-by-state information regarding
the properties owned by the Company as of August 31, 1997.                      

                                                        [Enlarge/Download Table]

                         NUMBER                           APPROX.                   PERCENT OF TOTAL 
                           OF                            LEASABLE     ANNUALIZED       ANNUALIZED    
STATE                  PROPERTIES     PERCENT LEASED    SQUARE FEET  BASE RENT(1)       BASE RENT    
--------------------  -------------  -----------------  -----------  -------------  -----------------
                                                                                                     
Alabama                         6              100%         42,300   $     319,000            0.5%   
Arizona                        27               99         181,200       2,407,000            3.6    
California                     53               92       1,001,900      10,392,000           15.7    
Colorado                       43               98         236,400       3,067,000            4.6    
Connecticut                     5              100          22,500         337,000            0.5    
Florida                        48              100         457,300       4,227,000            6.4    
Georgia                        44              100         252,500       3,480,000            5.3    
Idaho                          11              100          52,000         656,000            1.0    
Illinois                       28              100         192,200       2,389,000            3.6    
Indiana                        22              100         117,600       1,408,000            2.1    
Iowa                            8              100          51,700         456,000            0.7    
Kansas                         17              100         176,000       1,862,000            2.8    
Kentucky                       11              100          33,300         847,000            1.3    
Louisiana                       2              100          10,700         126,000            0.2    
Maryland                        6              100          34,900         505,000            0.8    
Massachusetts                   5              100          25,900         534,000            0.8    
Michigan                        5              100          26,900         355,000            0.5    
Minnesota                      17              100         118,400       1,713,000            2.6    
Mississippi                    12              100         128,900         901,000            1.4    
Missouri                       27              100         163,600       1,908,000            2.9    
Montana                         2              100          30,000         276,000            0.4    
Nebraska                        9              100          93,700       1,071,000            1.6    
Nevada                          5              100          29,100         353,000            0.5    
New Hampshire                   1              100           6,400         122,000            0.2    
New Jersey                      2              100          22,700         346,000            0.5    
New Mexico                      3              100          12,000         103,000            0.2    
New York                        5              100          38,300         539,000            0.8    
North Carolina                 22              100          87,800       1,466,000            2.3    
Ohio                           49              100         234,000       3,668,000            5.6    
Oklahoma                       12              100          69,000         707,000            1.1    
Oregon                         17              100          92,400       1,062,000            1.6    
Pennsylvania                    5              100          44,300         676,000            1.0    
South Carolina                 19              100          75,000       1,152,000            1.7    
South Dakota                    1              100           6,100          79,000            0.1    
Tennessee                      12              100         132,400       1,281,000            1.9    
Texas                         130               99       1,015,300       9,317,000           14.1    
Utah                            7              100          45,400         591,000            0.9    
Virginia                       17              100          81,500       1,323,000            2.0    
Washington                     42               98         249,700       2,959,000            4.5    
West Virginia                   2              100          16,800         147,000            0.2    

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                                                        [Enlarge/Download Table]

                         NUMBER                           APPROX.                   PERCENT OF TOTAL 
                           OF                            LEASABLE     ANNUALIZED       ANNUALIZED    
STATE                  PROPERTIES     PERCENT LEASED    SQUARE FEET  BASE RENT(1)       BASE RENT    
--------------------  -------------  -----------------  -----------  -------------  -----------------
                                                                                                     
Wisconsin                      11              100%         60,500   $     738,000            1.1%   
Wyoming                         4              100          20,100         264,000            0.4    
                              ---              ---      -----------  -------------          -----    
Total/Average                 774               99%      5,788,700   $  66,129,000          100.0%   
                              ---              ---      -----------  -------------          -----    
                              ---              ---      -----------  -------------          -----    

------------------------------                                                  

(1) Annualized base rent is calculated by multiplying the monthly contractual   
base rent as of August 31, 1997 for each of the properties by 12, except
    that, for the properties under construction, estimated contractual base rent
    for the first month of the respective leases is used instead of base rent as
  of August 31, 1997. The estimated contractual base rent for the properties
under construction is based upon the estimated acquisition costs of the 
 properties. Annualized base rent does not include percentage rents (i.e.,
    additional rent calculated as a percentage of the tenant's gross sales above
a specified level), if any, that may be payable under leases covering   
certain of the properties.                                              

  The following table sets forth certain information regarding the Company's
properties as of August 31, 1997, classified according to the business of the   
respective tenants.                                                             

                                                        [Enlarge/Download Table]

                                                                            REALTY                                   
                                                           APPROXIMATE      INCOME       APPROXIMATE     ANNUALIZED  
                                      INDUSTRY                TOTAL          OWNED         LEASABLE         BASE     
TENANT(1)                            SEGMENT(1)           LOCATIONS(2)     LOCATIONS    SQUARE FOOTAGE     RENT(3)   
---------------------------  ---------------------------  -------------  -------------  --------------  -------------
                                                                                                                     
AUTOMOTIVE PARTS & ACCESSORIES                                                                                       
CSK Auto                         Parts & Accessories              580             79          409,200   $   4,192,000
Discount Tire                    Parts & Accessories              310             18          104,900       1,178,000
Other                            Parts & Accessories               --              1            3,400          49,000
                                                                                 ---    --------------  -------------
    TOTAL AUTOMOTIVE PARTS & ACCESSORIES                                          98          517,500       5,419,000

AUTOMOTIVE SERVICE                                                                                                   
Econo Lube 'N Tune                     Service                    210             26           71,800       1,763,000
Jiffy Lube                             Service                  1,400             30           70,200       1,935,000
Q-Lube                                 Service                    490              4            7,600         183,000
R&S Strauss                            Service                    110              2           31,200         431,000
Speedy Brake                           Service                  1,080              9           51,200         722,000
Other                                  Service                     --              1            3,100          41,000
                                                                                 ---    --------------  -------------
    TOTAL AUTOMOTIVE SERVICE                                                      72          235,100       5,075,000

BOOK STORES                                                                                                          
Barnes & Noble                       Book Stores                1,010              1           30,000         450,000
                                                                                 ---    --------------  -------------
    TOTAL BOOK STORES                                                              1           30,000         450,000

CHILD CARE                                                                                                           
Children's World Learning                                                                                            
  Centers                            Child Care                   530            134          964,000      13,612,000
KinderCare Learning Centers          Child Care                 1,150             13           79,800       1,087,000
La Petite Academy                    Child Care                   790            167          959,000       8,738,000
Other                                Child Care                    --              3           13,300          70,000
                                                                                 ---    --------------  -------------
    TOTAL CHILD CARE                                                             317        2,016,100      23,507,000

CONSUMER ELECTRONICS                                                                                                 
Best Buy                        Consumer Electronics              270              3          150,900       1,738,000
Rex Stores                      Consumer Electronics              230             34          408,300       2,694,000
                                                                                 ---    --------------  -------------
  TOTAL CONSUMER ELECTRONICS                                                      37          559,200       4,432,000

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                                                                            REALTY                                   
                                                           APPROXIMATE      INCOME       APPROXIMATE     ANNUALIZED  
                                      INDUSTRY                TOTAL          OWNED         LEASABLE         BASE     
TENANT(1)                            SEGMENT(1)           LOCATIONS(2)     LOCATIONS    SQUARE FOOTAGE     RENT(3)   
---------------------------  ---------------------------  -------------  -------------  --------------  -------------
                                                                                                                     
CONVENIENCE STORES                                                                                                   
7-ELEVEN                         Convenience Stores            20,240              3            9,700   $     235,000
Dairy Mart                       Convenience Stores             1,020             22           66,500       1,522,000
East Coast Oil                   Convenience Stores                40              3            8,800         286,000
Quick Trip                       Convenience Stores               330              9           28,800         924,000
The Pantry                       Convenience Stores               400             14           34,400       1,333,000
Other                            Convenience Stores                --              1            2,100               0
                                                                                 ---    --------------  -------------
    TOTAL CONVENIENCE STORES                                                      52          150,300       4,300,000

HOME FURNISHINGS & ACCESSORIES                                                                                       
Aaron Rents                       Home Furnishings                290              6          258,000         888,000
Levitz Furniture                  Home Furnishings                130              4          376,400       2,502,000
Linens 'N Things                  Home Accessories                170              1           46,600         561,000
                                                                                 ---    --------------  -------------
  TOTAL HOME FURNISHINGS & ACCESSORIES                                            11          681,000       3,951,000

OFFICE SUPPLIES                                                                                                      
OfficeMax                          Office Supplies                560              3           75,700         854,000
Staples                            Office Supplies                560              2           48,600         456,000
                                                                                 ---    --------------  -------------
    TOTAL OFFICE SUPPLIES                                                          5          124,300       1,310,000

PET SUPPLIES                                                                                                         
Petco                               Pet Supplies                  340              1           16,000         253,000
                                                                                 ---    --------------  -------------
    TOTAL PET SUPPLIES                                                             1           16,000         253,000

RESTAURANTS                                                                                                          
Carver's                            Dinner House                   90              3           26,600         495,000
Don Pablo's                         Dinner House                   70              7           60,700         607,000
Other                               Dinner House                   --             12           93,100         887,000
Golden Corral                          Family                     460             85          501,200       6,616,000
Sizzler                                Family                     630              7           37,600         848,000
Other                                  Family                      --              2           11,600         108,000
Hardee's                              Fast Food                 3,100              3           10,300         144,000
Taco Bell                             Fast Food                 4,890             24           54,100       1,502,000
Whataburger                           Fast Food                   520              9           23,000         616,000
Other                                 Fast Food                    --             15           50,000         897,000
                                                                                 ---    --------------  -------------
    TOTAL RESTAURANTS                                                            167          868,200      12,720,000

VIDEO RENTAL                                                                                                         
Hollywood Video                     Video Rental                  660              1            7,500         118,000
                                                                                 ---    --------------  -------------
    TOTAL VIDEO RENTAL                                                             1            7,500         118,000
    TOTAL OTHER                     Miscellaneous                                 12          583,500       4,594,000
                                                                                 ---    --------------  -------------
    TOTAL                                                                        774        5,788,700   $  66,129,000
                                                                                 ---    --------------  -------------
                                                                                 ---    --------------  -------------

------------------------------                                                  

(1) See "Business and Properties--Matters Pertaining to Certain Properties and  
Tenants."                                                               

(2) Approximate total number of retail locations in operation by each tenant    
(including both owned and franchised locations), based on information   
provided to Realty Income by the respective tenants.                    

(3) Annualized base rent is calculated by multiplying the monthly contractual   
   base rent as of August 31, 1997 for each of the properties owned as of that
 date by 12, except that, for the properties under construction, estimated
  contractual base rent for the first month of the respective leases is used
  instead of base rent as of August 31, 1997. The estimated contractual base
rent for the                                                            

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   properties under construction is based upon the estimated acquisition costs
  of the properties. Annualized base rent does not include percentage rents,
    if any, that may be payable under leases covering certain of the properties.

Of the 774 properties in the portfolio at August 31, 1997, 767 were     
single-tenant properties with the remaining being multi-tenant properties. As of
August 31, 1997, 761 or over 99% of the 767 single-tenant properties were net   
leased with an average remaining lease term (excluding extension options) of    
approximately 8.4 years. The following table sets forth certain information     
regarding the timing of the initial lease term expirations (excluding extension 
options) on the Company's 761 net leased, single-tenant retail properties as of 
August 31, 1997.                                                                

                                                                [Download Table]

            NUMBER OF                     PERCENT OF    
             LEASES      ANNUALIZED    TOTAL ANNUALIZED 
 YEAR       EXPIRING    BASE RENT(1)         RENT       
---------  -----------  -------------  -----------------
                                                        
1997                7   $     281,000            0.4%   
1998                5         204,000            0.3    
1999               29       1,283,000            2.0    
2000               34       1,985,000            3.2    
2001               53       3,967,000            6.4    
2002               73       5,874,000            9.4    
2003               67       5,132,000            8.2    
2004              109       8,836,000           14.1    
2005               86       6,049,000            9.7    
2006               29       2,449,000            3.9    
2007               85       5,373,000            8.6    
2008               39       3,174,000            5.1    
2009               12         896,000            1.4    
2010               37       3,037,000            4.9    
2011               31       3,538,000            5.7    
2012               24       2,669,000            4.3    
2013                2         627,000            1.0    
2014                2         265,000            0.4    
2015               25       4,795,000            7.7    
2016                7       1,357,000            2.2    
2017                4         618,000            1.0    
2018                1          39,000            0.1    
                  ---   -------------          -----    
Total             761(2) $  62,448,000         100.0%   
                  ---   -------------          -----    
                  ---   -------------          -----    

------------------------------                                                  

(1) Annualized base rent is calculated by multiplying the monthly contractual   
   base rent as of August 31, 1997 for each of the properties owned as of that
 date by 12, except that, for the properties under construction, estimated
  contractual base rent for the first month of the respective leases is used
  instead of base rent as of August 31, 1997. The estimated contractual base
rent for the properties under construction is based upon the estimated  
  acquisition costs of the properties. Annualized base rent does not include
   percentage rents, if any, that may be payable under leases covering certain
of the properties.                                                      

(2) The table does not include seven multi-tenant properties, one of which is   
vacant, and six vacant, unleased single-tenant properties owned by the  
  Company. The lease expirations for properties under construction are based
on the estimated dates of completion of such properties.                

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  PROPERTY PORTFOLIO.  Set forth below is a list of all 774 properties owned
by the Company as of August 31, 1997, ordered by state:                         

                                                        [Enlarge/Download Table]

                                                                                                                   APPROXIMATE 
                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               

                                                     ALABAMA--6 PROPERTIES                                                     
La Petite Academy                    135 E. Riverchase Pkwy.         Birmingham               AL            1984         5,100 
La Petite Academy                    121 Kohler Rd.                  Huntsville               AL            1982         5,000 
La Petite Academy                    5459 Able Ct.                   Mobile                   AL            1982         5,100 
La Petite Academy                    1512 Shelton Beach Rd.          Mobile                   AL            1985         5,100 
Rex Stores                           1710 Highway 21 South           Oxford                   AL            1996        10,000 
Rex Stores                           4730 McFarland Blvd. East       Tuscaloosa               AL            1996        12,000 
                                                                                                                   ------------
                                                                                                                        42,300 
                                                                                                                   ------------

                                                    ARIZONA--27 PROPERTIES                                                     
Children's World                     1114 W. Elliott Rd.             Chandler                 AZ            1986         7,300 
Children's World                     150 N. Elm St.                  Chandler                 AZ            1987         7,600 
Children's World                     1997 Elliott Rd.                Chandler                 AZ            1987         7,600 
Burger King                          80 W. 16th St.                  Douglas                  AZ            1985         2,700 
Econo Lube 'N Tune                   1830 East Route 66              Flagstaff                AZ            1997         2,800 
Carver's                             8172 West Bell Road             Glendale                 AZ            1996         8,100 
La Petite Academy                    17220 N. 43rd Ave.              Glendale                 AZ            1984         5,100 
Auto Mall                            3944 E. Main St.                Mesa                     AZ            1986        13,900 
Children's World                     2750 S. Dobson Rd.              Mesa                     AZ            1988         7,300 
Children's World                     1236 S. Stapley Dr.             Mesa                     AZ            1988         7,300 
Children's World                     6810 W. Thunderbird Rd.         Peoria                   AZ            1988         7,300 
Auto Mall                            2630 E. Bell Rd.                Phoenix                  AZ            1986        15,300 
Checker Autoworks                    1823 E. McDowell                Phoenix                  AZ            1987         3,100 
Checker Autoworks                    4444 W. Thomas Rd.              Phoenix                  AZ            1987         5,400 
Checker Autoworks                    52 E. Baseline Rd.              Phoenix                  AZ            1989         5,400 
Children's World                     16044 N. 29th Ave.              Phoenix                  AZ            1988         7,300 
KinderCare                           15626 S. 42Nd St.               Phoenix                  AZ            1990         6,100 
KinderCare                           4856 E. Greenway Rd.            Phoenix                  AZ            1990         6,100 
Children's World                     16605 N. 56th St.               Scottsdale               AZ            1987         7,500 
Children's World                     6311 S. Rural Rd.               Tempe                    AZ            1990         7,100 
Children's World                     7570 S. Willow Dr.              Tempe                    AZ            1988         7,500 
Checker Autoworks                    1401 W. Prince Rd.              Tucson                   AZ            1987         5,400 
Children's World                     7770 Wrightstown Rd.            Tucson                   AZ            1988         7,200 
Children's World                     8055 E. 22nd St.                Tucson                   AZ            1988         7,200 
Discount Tire Store                  2106 S. Alvernon Way            Tucson                   AZ            1990         6,600 
Taco Bell                            7140 N. Thornydale Rd.          Tucson                   AZ            1986         2,200 
Discount Tire Store                  780 E. 32nd St.                 Yuma                     AZ            1990         4,800 
                                                                                                                   ------------
                                                                                                                       181,200 
                                                                                                                   ------------

                                                   CALIFORNIA--53 PROPERTIES                                                   
Children's World                     4277 Old Topanga Cyn. Rd.       Calabasas                CA            1985         5,800 
Children's World                     5739 El Camino                  Carmichael               CA            1986         6,100 
Levitz Furniture                     31833 Date Palm Drive           Cathedral City           CA            1995        40,000 
Children's World                     6010 Riverside Dr.              Chino                    CA            1983         7,200 
E.T. Tacos                           12382 Central Ave.              Chino                    CA            1975         1,400 
Regency Realtors                     12360 Central Ave.              Chino                    CA            1975         2,800 
Children's World                     612 Paseo Del Rey               Chula Vista              CA            1987         6,800 
Econo Lube 'N Tune                   3008 N. Second Street           Chula Vista              CA            1996         2,800 
Levitz Furniture                     1695 Willow Pass Road           Concord                  CA            1995       102,900 
Children's World                     510 W. Second St.               Corona                   CA            1984         7,200 
Pizza Hut                            233 S. Gentle Springs Ln.       Diamond Bar              CA            1978         2,300 
Children's World                     1471 Granite Hills Dr.          El Cajon                 CA            1985         6,800 
Children's World                     1578 S. El Camino Real          Encinitas                CA            1987         6,600 
Enterprise Rent-A-Car                175 W. Washington Ave.          Escondido                CA            1992         3,000 

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                                                                                                                   APPROXIMATE 
                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                   CALIFORNIA--53 PROPERTIES                                                   
                                                          (CONTINUED)                                                          
La Petite Academy                    1300 N. Escondido Blvd.         Escondido                CA            1987         6,800 
Vacant                               130 W. Woodward Ave.            Escondido                CA            1984        36,500 
La Petite Academy                    410 Glenn Dr.                   Folsom                   CA            1987         6,800 
Medical 21                           2828 Fresno St.                 Fresno                   CA            1982        24,400 
Alberto's Mexican Food               1974 N. Placentia Ave.          Fullerton                CA            1972         2,600 
Vacant                               1978 N. Palm Ave.               Fullerton                CA            1972         2,100 
Ron's Auto Parts                     1964 N. Placentia Ave.          Fullerton                CA            1972         3,400 
Kragen Autoworks                     10101 Olympia Park Rd.          Grass Valley             CA            1988         5,700 
Vacant                               40844 Florida Ave.              Hemet                    CA            1977         2,100 
Kragen Autoworks                     501 S. Hwy. 49                  Jackson                  CA            1988         5,000 
OfficeMax                            4949 Lakewood Blvd.             Lakewood                 CA            1997        28,700 
La Petite Academy                    23421 Madero St.                Mission Viejo            CA            1993         7,500 
Children's World                     23268 Olivewood Plaza Dr.       Moreno Valley            CA            1987         6,900 
Taco Bell                            18426 Nordhoff St.              Northridge               CA            1970         1,700 
Children's World                     2860 Thunder Dr.                Oceanside                CA            1985         6,800 
La Petite Academy                    1709 E. Palmdale Blvd.          Palmdale                 CA            1988         7,700 
Pay N Play                           15607 Lakewood Blvd.            Paramount                CA            1983         5,700 
La Petite Academy                    11378 Coloma Rd.                Rancho Cordova           CA            1989         7,400 
Children's World                     10110 Church St.                Rancho Cucamonga         CA            1987        10,600 
Sizzler                              9588 Baseline Rd.               Rancho Cucamonga         CA            1981         5,400 
Taco Bell                            9383 Foothill Blvd.             Rancho Cucamonga         CA            1985         1,900 
Golden Corral                        250 Antelope                    Red Bluff                CA            1986         5,500 
Der Wienerschnitzel                  1246 University Ave.            Riverside                CA            1976         1,900 
Vacant                               3630 Park Sierra Drive          Riverside                CA            1981         7,600 
La Petite Academy                    1800 Eureka Rd.                 Roseville                CA            1987         7,500 
Children's World                     2500 Natomas Park Dr.           Sacramento               CA            1987         6,000 
Kragen Autoworks                     3659 Bradshaw Rd.               Sacramento               CA            1987         4,800 
Empire                               7905-65 Silverton Ave.          San Diego                CA            1987       220,100 
Silverton                            7920-60 Silverton Ave.          San Diego                CA            1986       111,700 
Trade Center                         9235-75 Trade Pl.               San Diego                CA            1986       135,500 
Sizzler                              101 N. Village Ct.              San Dimas                CA            1981         5,000 
Boston Market                        2421 San Ramon Valley Blvd.     San Ramon                CA            1983        10,200 
La Petite Academy                    9580 Carlton Hills Blvd.        Santee                   CA            1987         6,600 
Children's World                     5165 Cochran St.                Simi Valley              CA            1985         7,600 
Best Buy                             390 North Moorpark Road         Thousand Oaks            CA            1996        59,200 
Kragen Autoworks                     693 N. Goldenstate Blvd.        Turlock                  CA            1987         5,500 
Taco Bell                            14232 Newport Blvd.             Tustin                   CA            1970         1,100 
La Petite Academy                    24925 Anza Dr.                  Valencia                 CA            1988         8,000 
Children's World                     20121 E. Alisu Ct.              Walnut                   CA            1986        10,700 
                                                                                                                   ------------
                                                                                                                     1,001,900 
                                                                                                                   ------------

                                                    COLORADO--43 PROPERTIES                                                    
Econo Lube                           5425 West 80th Avenue           Arvada                   CO            1996         2,500 
Econo Lube 'N Tune                   Wadsworth & West 54th           Arvada                   CO            1996         2,800 
Children's World                     14551 E. Tennessee Ave.         Aurora                   CO            1989         8,300 
Children's World                     3409 W. Fairplay Way            Aurora                   CO            1986         7,400 
Children's World                     12291 E. Cornell Ave.           Aurora                   CO            1987         7,300 
Discount Tire Store                  1160 S. Chambers Rd.            Aurora                   CO            1990         5,000 
Vacant                               2355 30th St.                   Boulder                  CO            1984         8,500 
Children's World                     805 Burbank St.                 Broomfield               CO            1983         5,000 
Econo Lube 'N Tune                   1020 Highway 287                Broomfield               CO            1996         2,800 
La Petite Academy                    13009 Westlake Dr.              Broomfield               CO            1988         5,500 
Checker Autoworks                    2149 Fremont Dr.                Canon City               CO            1987         3,100 
Children's World                     1470 Chapel Hills Dr.           Colorado Springs         CO            1986         6,200 
Discount Tire Store                  305 N. Academy Blvd.            Colorado Springs         CO            1990         4,400 
Discount Tire Store                  1770 Dublin Blvd.               Colorado Springs         CO            1993         5,000 
Hardee's                             1414 Harrison Rd.               Colorado Springs         CO            1986         3,700 

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                                                                                                                   APPROXIMATE 
                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                    COLORADO--43 PROPERTIES                                                    
                                                          (CONTINUED)                                                          
Hardee's                             1508 N. Academy Blvd.           Colorado Springs         CO            1987         3,300 
La Petite Academy                    2760 Purgatory                  Colorado Springs         CO            1982         5,100 
La Petite Academy                    6625 Delmonico Dr.              Colorado Springs         CO            1983         5,100 
Checker Autoworks                    2887 N. Colorado Blvd.          Denver                   CO            1987         5,900 
Checker Autoworks                    7701 E. Colfax Ave.             Denver                   CO            1988         5,600 
Checker Autoworks                    290 S. Broadway                 Denver                   CO            1988         5,600 
Econo Lube 'N Tune                   700-710 South Broadway          Denver                   CO            1997         2,800 
Jiffy Lube                           5869 Leetsdale Dr.              Denver                   CO            1985         2,000 
Children's World                     6625 S. Dayton St.              Englewood                CO            1986         6,000 
Children's World                     6960 S. Holly Circle            Englewood                CO            1986         7,300 
Children's World                     2140 Valley Forge               Fort Collins             CO            1986         7,400 
Children's World                     1990 S. Lemay                   Fort Collins             CO            1986         7,300 
La Petite Academy                    4525 Boardwalk, Bldg. T         Fort Collins             CO            1982         5,200 
La Petite Academy                    3519 W. 12th St.                Greeley                  CO            1984         5,100 
Checker Autoworks                    6607 S. Broadway                Littleton                CO            1988         5,700 
Children's World                     5104 S. Field St.               Littleton                CO            1988         8,300 
Children's World                     6588 W. Ottawa Ave.             Littleton                CO            1988         8,200 
La Petite Academy                    11550 W. Burgundy               Littleton                CO            1987         5,500 
Children's World                     851 Crisman Dr.                 Longmont                 CO            1986         7,400 
La Petite Academy                    1970 Centennial Dr.             Louisville               CO            1984         5,100 
Golden Corral                        1825 E. Main St.                Montrose                 CO            1987         6,100 
La Petite Academy                    11105 S. Pikes Peak Dr.         Parker                   CO            1987         5,400 
Discount Tire Store                  1010 W. Hwy. 50                 Pueblo                   CO            1990         4,600 
Hardee's                             240 Main St.                    Security                 CO            1986         3,300 
Golden Corral                        102 Hayes Ave.                  Sterling                 CO            1984         5,100 
Econo Lube 'N Tune                   651 E. 120th Avenue             Thornton                 CO            1996         2,900 
Children's World                     8851 Field St.                  Westminster              CO            1989         8,300 
La Estrellita Enterprises,Inc        7617 W. 88th Ave.               Westminster              CO            1984         9,300 
                                                                                                                   ------------
                                                                                                                       236,400 
                                                                                                                   ------------

                                                   CONNECTICUT--5 PROPERTIES                                                   
Speedy Brake & Muffler               902-910 Wethersfield Avenue     Hartford                 CT            1996        10,000 
Dairy Mart                           653 Center Street               Manchester               CT            1995         2,000 
Speedy Brake & Muffler               445 Queen Street                Southington              CT            1997         5,300 
Dairy Mart                           506 Talcotville Road            Vernon                   CT            1995         2,400 
Dairy Mart                           1309 Boston Post Road           Westbrook                CT            1995         2,800 
                                                                                                                   ------------
                                                                                                                        22,500 
                                                                                                                   ------------

                                                    FLORIDA--48 PROPERTIES                                                     
La Petite Academy                    6919 E. State Route 70          Bradenton                FL            1988         5,200 
Rex Stores                           5735 14th Street West           Bradenton                FL            1996         6,300 
Sizzler                              3315 So. U.S. Hwy. 17-92        Casselberry              FL            1989         5,300 
La Petite Academy                    1880 McMullen Booth Rd.         Clearwater               FL            1981         4,600 
Golden Corral                        505 N. Orange Ave.              Green Cove Sprgs         FL            1984         5,100 
Arby's                               9171 Baymeadows Rd.             Jacksonville             FL            1985         3,500 
Arby's                               3939 W. University Blvd.        Jacksonville             FL            1985         3,300 
Jiffy Lube                           2837 Townsend Blvd.             Jacksonville             FL            1985         4,000 
La Petite Academy                    3720 San Jose Pl.               Jacksonville             FL            1981         4,600 
La Petite Academy                    50 St. John's Bluff             Jacksonville             FL            1981         4,600 
La Petite Academy                    6601 Argyle Forest              Jacksonville             FL            1989         5,400 
La Petite Academy                    17265 Central Blvd.             Jupiter                  FL            1985         4,700 
Jiffy Lube                           1950 N. State Rd.               Lauderdale Lakes         FL            1986         1,900 
La Petite Academy                    3228 Holiday Springs            Margate                  FL            1986         5,000 
Rex Stores                           100 Mary Esther Cutoff          MaryEsther               FL            1996         8,200 
La Petite Academy                    8200 Devereux Drive             Melbourne                FL            1993         6,000 
Rex Stores                           4080 W. New Haven Avenue        Melbourne                FL            1996         8,000 

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                                                                                                                   APPROXIMATE 
                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                    FLORIDA--48 PROPERTIES                                                     
                                                          (CONTINUED)                                                          
Rex Stores                           1625 E. Merritt Island          Merritt Island           FL            1996        10,000 
                                     Causeway                                                                                  
La Petite Academy                    4400 Hwy. 20, #710              Niceville                FL            1986         5,000 
Rex Stores                           3055 S.W. College Road          Ocala                    FL            1996        10,000 
La Petite Academy                    7698 Silver Star Rd.            Orlando                  FL            1985         4,700 
La Petite Academy                    6573 Old Wintergarden Rd.       Orlando                  FL            1987         5,400 
La Petite Academy                    3382 Rouse Rd.                  Orlando                  FL            1987         6,600 
La Petite Academy                    12300 Landstar Blvd.            Orlando                  FL            1989         5,400 
Sizzler                              4525 S. Semoran Blvd.           Orlando                  FL            1985         6,200 
Sizzler                              912 W. Colonial Dr.             Orlando                  FL            1986         6,300 
Taco Bell                            9891 International Dr.          Orlando                  FL            1988         3,700 
La Petite Academy                    205 Alexandria Blvd.            Oviedo                   FL            1987         5,300 
Lil Angels                           518 S. Tyndall                  Panama City              FL            1982         4,600 
La Petite Academy                    9601 Pickwood Dr.               Pensacola                FL            1989         5,400 
Rex Stores                           6340 N. Pensacola Blvd.         Pensacola                FL            1996        64,600 
La Petite Academy                    153 Sparrow Dr.                 Royal Palm Beach         FL            1988         5,400 
Jiffy Lube                           7025 Seminole Blvd.             Seminole                 FL            1985         2,400 
La Petite Academy                    1245 Kass Circle                Spring Hill              FL            1987         5,400 
La Petite Academy                    135 Nix Boat Yard Rd.           St. Augustine            FL            1981         4,400 
Jiffy Lube                           4359 N. University Blvd.        Sunrise                  FL            1986         1,800 
La Petite Academy                    4360 Springtree                 Sunrise                  FL            1982         4,600 
La Petite Academy                    13785 N.W. Fifth St.            Sunrise                  FL            1989         5,500 
La Petite Academy                    3472 N. Monroe St.              Tallahassee              FL            1982         4,600 
Rex Stores                           2450 Apalachee Pkwy.            Tallahassee              FL            1996        10,600 
Barnes & Noble                       11802 North Dale Mabry Hwy.     Tampa                    FL            1997        30,000 
Jiffy Lube                           8303 N. Dale Mabry Hwy.         Tampa                    FL            1985         2,400 
Jiffy Lube                           130 S. Dale Mabry Hwy.          Tampa                    FL            1985         2,400 
Jiffy Lube                           7202 W. Hillsborough Ave.       Tampa                    FL            1986         2,000 
La Petite Academy                    13502 S. Village Dr.            Tampa                    FL            1981         4,600 
Rex Stores                           4220 S. Washington Avenue       Titusville               FL            1996        12,000 
Rex Stores                           1860 Tamiami Trail              Venice                   FL            1996         8,200 
Levitz Furniture                     1540 Semoran Blvd.              Winter Park              FL            1995       122,100 
                                                                                                                   ------------
                                                                                                                       457,300 
                                                                                                                   ------------

                                                    GEORGIA--44 PROPERTIES                                                     
Jiffy Lube                           1742 Howell Mill Rd.            Atlanta                  GA            1985         2,000 
Jiffy Lube                           3194 Norcross-Tucker Rd.        Atlanta                  GA            1985         2,000 
Minit Lube                           3745 Hwy. 78                    Bogart                   GA            1985         1,900 
La Petite Academy                    9633-A Hwy. 5                   Douglasville             GA            1984         5,000 
Econo Lube 'N Tune                   Peachtree Industrial Blvd.      Duluth                   GA            1997         2,800 
Children's World                     4630 N. Shallowford             Dunwoody                 GA            1988         8,300 
Quick Trip                           7884 Roswell Road               Dunwoody                 GA            1997         3,200 
La Petite Academy                    300 Fairview Rd.                Ellenwood                GA            1988         5,500 
La Petite Academy                    108 Antioch Rd.                 Fayetteville             GA            1989         5,400 
Minit Lube                           853 S.W. Jesse Jewell Pkwy.     Gainesville              GA            1985         1,900 
Taco Bell                            4624 Augusta Rd.                Garden City              GA            1989         2,400 
Golden Corral                        708 E. Oglethorpe Ave.          Hinesville               GA            1984         5,000 
Taco Bell                            229 General Screven Way         Hinesville               GA            1987         2,400 
La Petite Academy                    1593 S. Hwy. 29                 Lawrenceville            GA            1988         5,400 
Children's World                     917 Killian Hill Rd.            Lilburn                  GA            1986         7,300 
La Petite Academy                    1806 Lee Road                   Lithia Springs           GA            1989         5,500 
Golden Corral                        2950 Woodrow Dr.                Lithonia                 GA            1985         4,800 
La Petite Academy                    474 S. Deshon Rd.               Lithonia                 GA            1991         6,600 
Quick Trip                           7225 Rockbridge Road            Lithonia                 GA            1997         3,200 
Quick Trip                           7130 Mableton Parkway           Mabelton                 GA            1997         3,200 
Children's World                     2566 E. Piedmont Rd.            Marietta                 GA            1988         8,300 
Children's World                     1060 Franklin Rd.               Marietta                 GA            1988         8,400 
Children's World                     2090 Lower Roswell Rd.          Marietta                 GA            1988         8,400 

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                                                                                                                   APPROXIMATE 
                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                    GEORGIA--44 PROPERTIES                                                     
                                                          (CONTINUED)                                                          
Children's World                     3829 Roswell Rd.                Marietta                 GA            1988         7,300 
Children's World                     3899 N.E. Canton Hwy.           Marietta                 GA            1988         7,300 
Jiffy Lube                           688 Powder Springs Rd.          Marietta                 GA            1985         3,400 
Jiffy Lube                           3380 Canton Hwy.                Marietta                 GA            1986         4,000 
La Petite Academy                    1805 Williams Dr.               Marietta                 GA            1988         5,400 
La Petite Academy                    3511 Old Petersburg Rd.         Martinez                 GA            1987         5,400 
Quick Trip                           6065 Singleton Road             Norcross                 GA            1997         3,200 
Minit Lube                           6579 Hwy. 85                    Riverdale                GA            1986         1,900 
Minit Lube                           2301 S.W. Shorter Ave.          Rome                     GA            1985         1,900 
Rex Stores                           2429 Shorter Avenue             Rome                     GA            1996        10,000 
Taco Bell                            2631 Skidaway Rd.               Savannah                 GA            1987         1,600 
Taco Bell                            302 Mall Blvd.                  Savannah                 GA            1987         1,600 
Best Buy                             2460 Cobb Parkway               Smyrna                   GA            1997        46,100 
Children's World                     1635 Cooper Lake Dr.            Smyrna                   GA            1988         8,400 
Taco Bell                            224 S. Main St.                 Statesboro               GA            1989         2,400 
La Petite Academy                    925 W. State Hwy. 138           Stockbridge              GA            1989         5,400 
Children's World                     777 Hambrick Rd.                Stone Mountain           GA            1988         8,300 
Golden Corral                        1273 S. Hairston Rd.            Stone Mountain           GA            1986         6,400 
La Petite Academy                    693 Lauren Pkwy.                Stone Mountain           GA            1985         5,200 
Quick Trip                           3830 Rockbridge Road            Stone Mountain           GA            1997         3,300 
La Petite Academy                    1703 Gornto Rd.                 Valdosta                 GA            1986         5,100 
                                                                                                                   ------------
                                                                                                                       252,500 
                                                                                                                   ------------

                                                     IDAHO--11 PROPERTIES                                                      
Schuck's Autoworks                   4750 Overland Rd.               Boise                    ID            1988         4,800 
Schuck's Autoworks                   1407 W. State St.               Boise                    ID            1988         4,800 
Taco Bell                            6521 Fairview                   Boise                    ID            1988         2,700 
Taco Bell                            3377 W. State St.               Boise                    ID            1988         2,200 
Schuck's Autoworks                   223 Appleway Ave.               Coeur D'Alene            ID            1987         5,700 
Schuck's Autoworks                   1907 W. 19th Ave.               Lewiston                 ID            1987         5,700 
Schuck's Autoworks                   1420 Pullman Rd.                Moscow                   ID            1987         5,000 
Schuck's Autoworks                   156 Caldwell Blvd.              Nampa                    ID            1988         4,800 
Sizzler                              501 Caldwell Blvd.              Nampa                    ID            1986         5,100 
Golden Corral                        240 N.E. Second St.             Rexburg                  ID            1985         4,900 
Schuck's Autoworks                   780 Blue Lakes Blvd.            Twin Falls               ID            1988         6,300 
                                                                                                                   ------------
                                                                                                                        52,000 
                                                                                                                   ------------

                                                    ILLINOIS--28 PROPERTIES                                                    
Children's World                     950 N. Lombard                  Addison                  IL            1986         8,400 
KinderCare                           100 Countryside Dr.             Algonquin                IL            1990         6,300 
Golden Corral                        2723 Corner Ct.                 Alton                    IL            1988         6,800 
La Petite Academy                    4105 Healthway Dr.              Aurora                   IL            1988         5,600 
Children's World                     1050 W. Stearns Rd.             Bartlett                 IL            1986         7,300 
Children's World                     590 Pinecrest Rd.               Bolingbrook              IL            1982         6,400 
Children's World                     140 N. Gary                     Carol Stream             IL            1986         7,300 
Golden Corral                        844 N. Galena                   Dixon                    IL            1987         6,100 
Children's World                     1050 Bonaventure Dr.            Elk Grove Village        IL            1986         7,300 
La Petite Academy                    1030 Nerge Rd.                  Elk Grove Village        IL            1988         7,900 
Children's World                     2264 Bloomingdale               Glendale Heights         IL            1988         8,100 
Quick Trip                           2809 Godfrey Road               Godfrey                  IL            1997         3,200 
Quick Trip                           3120 Namoeki Road               Granite City             IL            1997         3,200 
Children's World                     1275 Jones Rd.                  Hoffman Estates          IL            1989         7,800 
La Petite Academy                    3805 Huntington Blvd.           Hoffman Estates          IL            1989         5,500 
La Petite Academy                    14225 S. Bell Rd.               Lockport                 IL            1987         6,800 
Quick Trip                           608 McCambridge Avenue          Madison                  IL            1997         3,200 
La Petite Academy                    940 W. Hwy. 50                  O'Fallon                 IL            1987         5,500 

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                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                    ILLINOIS--28 PROPERTIES                                                    
                                                          (CONTINUED)                                                          
La Petite Academy                    15851 Park Hill Dr.             Orland Park              IL            1987         5,100 
Children's World                     1653 N. Baldwin Rd.             Palatine                 IL            1986         8,400 
Rex Stores                           3016 N. University Street       Peoria                   IL            1996         8,800 
Rex Stores                           3782 N. Alpine                  Rockford                 IL            1996        10,100 
Children's World                     1080 W. Lake St.                Roselle                  IL            1988         8,400 
Golden Corral                        1517 W. Main St.                Salem                    IL            1987         6,900 
La Petite Academy                    651 Windsor Dr.                 Schaumburg               IL            1987         6,700 
Rex Stores                           One Drawbridge Road             Springfield              IL            1996        10,300 
Children's World                     Five Phillip Rd.                Vernon Hills             IL            1986         7,400 
Children's World                     251 W. 63rd St.                 Westmont                 IL            1986         7,400 
                                                                                                                   ------------
                                                                                                                       192,200 
                                                                                                                   ------------

                                                    INDIANA--22 PROPERTIES                                                     
Rex Stores                           3205 State Road 109 South       Anderson                 IN            1996        15,600 
Taco Bell                            5310 Scatterfield Rd.           Anderson                 IN            1988         2,300 
Golden Corral                        16th Hwy. 37 Bypass             Bedford                  IN            1987         6,900 
KinderCare                           14907 Greyhound Ct.             Carmel                   IN            1990         6,200 
Golden Corral                        1241 N. 13th St.                Decatur                  IN            1987         5,600 
KinderCare                           7255 E. 116th St.               Fishers                  IN            1990         6,600 
Arby's                               1613 Elkhart Rd.                Goshen                   IN            1986         3,200 
KinderCare                           9735 Prairie Ave.               Highland                 IN            1990         6,200 
Car-X Muffler & Brake                5401 E. Thompson Road           Indianapolis             IN            1996         5,300 
KinderCare                           6750 Eagleview Dr.              Indianapolis             IN            1990         6,200 
Burger King                          418 S. Tillotson Ave.           Muncie                   IN            1986         3,300 
Rex Stores                           457 E. McGilliard Road          Muncie                   IN            1996        12,500 
Taco Bell                            2519 S. Madison St.             Muncie                   IN            1988         1,600 
Dairy Mart                           3601 Grant Line Road            New Albany               IN            1995         2,500 
Dairy Mart                           3706 Charlestown Road           New Albany               IN            1995         2,800 
Taco Bell                            1486 Memorial Dr.               New Castle               IN            1987         2,200 
La Petite Academy                    11540 Fishers Dr.               Noblesville              IN            1985         5,100 
Rex Stores                           3014 E. Main Street             Richmond                 IN            1996         6,400 
Golden Corral                        Sw Corner Sr 44 & Amos          Shelbyville              IN            1986         6,000 
Fazoli's Restaurant                  52770 U.S. Route 33             South Bend               IN            1986         3,300 
Taco Bell                            17610 No. U.S. Hwy. 31          Westfield                IN            1989         2,300 
La Petite Academy                    50 N. Ford Rd.                  Zionsville               IN            1987         5,500 
                                                                                                                   ------------
                                                                                                                       117,600 
                                                                                                                   ------------

                                                      IOWA--8 PROPERTIES                                                       
Golden Corral                        301 E. First St.                Ankeny                   IA            1983         5,100 
Golden Corral                        1312 S. Story St.               Boone                    IA            1983         5,100 
La Petite Academy                    1350 Blairs Ferry Rd.           Cedar Rapids             IA            1992         6,100 
Checker Autoworks                    2826 W. Broadway                Council Bluffs           IA            1988         5,600 
Rex Stores                           2210 W. Broadway                Council Bluffs           IA            1996         9,000 
Rex Stores                           2833 Douglas Avenue             Des Moines               IA            1996        10,000 
La Petite Academy                    1504 Mall Drive                 Iowa City                IA            1992         5,200 
La Petite Academy                    5305 Merle Hay Rd.              Johnston                 IA            1991         5,600 
                                                                                                                   ------------
                                                                                                                        51,700 
                                                                                                                   ------------

                                                     KANSAS--17 PROPERTIES                                                     
Golden Corral                        1138 Nelson Dr.                 Derby                    KS            1985         5,200 
Golden Corral                        2521 W. Central Ave.            El Dorado                KS            1986         5,200 
Golden Corral                        4705 Tenth St.                  Great Bend               KS            1984         4,900 
OfficeMax                            1403 East 11th Avenue           Hutchinson               KS            1997        23,500 
Checker Autoworks                    2520 State Ave.                 Kansas City              KS            1988         5,600 
Checker Autoworks                    7524 State Ave.                 Kansas City              KS            1988         5,600 

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                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                     KANSAS--17 PROPERTIES                                                     
                                                          (CONTINUED)                                                          
Children's World                     9740 Rosehill Rd.               Lenexa                   KS            1989         8,100 
Children's World                     2001 E. Crossroads Ln.          Olathe                   KS            1988         8,100 
Econo Lube 'N Tune                   13395 South Blackbob Road       Olathe                   KS            1996         2,900 
Children's World                     11200 Mastin Rd.                Overland Park            KS            1988         8,100 
OfficeMax                            2920 Planet Avenue              Salina                   KS            1997        23,500 
Children's World                     6350 Long Ave.                  Shawnee                  KS            1988         8,100 
Best Buy                             1600 Southwest Wanamaker Road   Topeka                   KS            1996        45,600 
La Petite Academy                    2211 S.E. 29th St.              Topeka                   KS            1985         4,900 
Burger King                          2020 E. 21st St.                Wichita                  KS            1986         3,100 
KinderCare                           11818 W. Central Ave.           Wichita                  KS            1990         6,200 
La Petite Academy                    331 S. Tyler                    Wichita                  KS            1986         7,400 
                                                                                                                   ------------
                                                                                                                       176,000 
                                                                                                                   ------------

                                                    KENTUCKY--11 PROPERTIES                                                    
Dairy Mart                           218 Richmond Road               Berea                    KY            1995         2,700 
Dairy Mart                           1605 N. Dixie Highway           Elizabethtown            KY            1995         2,700 
The Pantry                           197 Garden Mile Road            Henderson                KY            1995         2,400 
Dairy Mart                           Walnut & Depot Streets          Lebanon                  KY            1995         2,700 
La Petite Academy                    3665 Harrodsburg Rd.            Lexington                KY            1991         6,700 
Taco Bell                            2633 Richmond Rd.               Lexington                KY            1986         2,500 
Dairy Mart                           7201 Fegenbush Ln.              Louisville               KY            1995         2,700 
Dairy Mart                           13401 Dixie Highway             Louisville               KY            1995         3,700 
Jiffy Lube                           6508 Preston Hwy.               Louisville               KY            1985         1,900 
Dairy Mart                           10180 Highway 44 East           Mt. Washington           KY            1996         2,800 
The Pantry                           1816 Triplett Street            Owensboro                KY            1995         2,500 
                                                                                                                   ------------
                                                                                                                        33,300 
                                                                                                                   ------------

                                                    LOUISIANA--2 PROPERTIES                                                    
El Chico                             1730 Metro Dr.                  Alexandria               LA            1986         5,500 
Golden Corral                        1403 N. Lake Arthur Ave.        Jennings                 LA            1985         5,200 
                                                                                                                   ------------
                                                                                                                        10,700 
                                                                                                                   ------------

                                                    MARYLAND--6 PROPERTIES                                                     
Jiffy Lube                           6415 Coventry Way               Clinton                  MD            1985         2,500 
La Petite Academy                    10101 Frederick Rd.             Ellicott City            MD            1988         6,700 
Golden Corral                        112 S. Hwy. 301                 La Plata                 MD            1985         4,700 
Children's World                     16910 Georgia Ave.              Olney                    MD            1987         6,700 
Children's World                     3999 St. Marks Dr.              Waldorf                  MD            1984         6,500 
La Petite Academy                    100 Smallwood Dr.               Waldorf                  MD            1987         7,800 
                                                                                                                   ------------
                                                                                                                        34,900 
                                                                                                                   ------------

                                                  MASSACHUSETTS--5 PROPERTIES                                                  
Children's World                     90 Hayward Rd.                  Acton                    MA            1988         6,100 
Speedy Brake & Muffler               726-728 Boston Road             Billerica                MA            1997         5,000 
Children's World                     81 Hosmer St.                   Marlborough              MA            1988         6,100 
Dairy Mart                           1502 Newman Avenue              Seekonk                  MA            1995         2,700 
Children's World                     6 Bellows Rd.                   Westborough              MA            1988         6,000 
                                                                                                                   ------------
                                                                                                                        25,900 
                                                                                                                   ------------

                                                    MICHIGAN--5 PROPERTIES                                                     
Ponderosa                            1521 N. Eaton St.               Albion                   MI            1986         5,300 
Children's World                     211 N. Lilley                   Canton                   MI            1982         5,000 
7-ELEVEN                             5015 Richfield Road             Flint                    MI            1995         3,200 

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-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                    MICHIGAN--5 PROPERTIES                                                     
                                                          (CONTINUED)                                                          
Don Pablo's                          3145 Miller Road                Flint                    MI            1995         7,800 
Golden Corral                        904 S. Centerville Rd.          Sturgis                  MI            1987         5,600 
                                                                                                                   ------------
                                                                                                                        26,900 
                                                                                                                   ------------

                                                   MINNESOTA--17 PROPERTIES                                                    
Golden Corral                        1615 S.E. Marshall St.          Albert Lea               MN            1987         6,600 
Children's World                     7561 142nd St.                  Apple Valley             MN            1986         8,300 
Children's World                     7400 W. 109th St.               Bloomington              MN            1986         7,300 
Children's World                     7660 Kentucky Ave.              Brooklyn Park            MN            1986         8,400 
Children's World                     1604 N. Brookdale Dr.           Brooklyn Park            MN            1986         8,400 
Children's World                     4194 Pilot Knob                 Eagan                    MN            1986         7,300 
Children's World                     8825 Aztec Dr.                  Eden Prairie             MN            1986         7,400 
Children's World                     6249 Hemlock Ln.                Maple Grove              MN            1986         7,300 
KinderCare                           13380 Grove Dr.                 Maple Grove              MN            1990         6,300 
Automax                              520 E. Lake St.                 Minneapolis              MN            1985         3,100 
Children's World                     17710 Excelsior Blvd.           Minnetonka               MN            1986         7,300 
Children's World                     3050 N. Fernbrook Ln.           Plymouth                 MN            1986         7,300 
Golden Corral                        2918 N. Service Dr.             Red Wing                 MN            1987         6,000 
Joe Sensor's Bar & Grill             2350 Cleveland Ave.             Roseville                MN            1984         9,100 
Children's World                     9321 Ensign Ave.                W. Bloomington           MN            1982         6,000 
Children's World                     4465 White Bear Pkwy.           White Bear Lake          MN            1987         7,300 
KinderCare                           1000 Meadowland Drive           White Bear Lake          MN            1990         5,000 
                                                                                                                   ------------
                                                                                                                       118,400 
                                                                                                                   ------------

                                                  MISSISSIPPI--12 PROPERTIES                                                   
Golden Corral                        640 E. Hwy. 80                  Clinton                  MS            1983         4,900 
Rex Stores                           2414 Highway 45 North           Columbus                 MS            1996        10,000 
Rex Stores                           1733 Highway One South          Greenville               MS            1996         9,100 
Rex Stores                           9245 Highway 49 North           Gulfport                 MS            1996        12,000 
Rex Stores                           6552 Highway 49 North           Hattiesburg              MS            1996        12,000 
Rex Stores                           4445 Robinson Road              Jackson                  MS            1996        15,100 
Rex Stores                           2208 S. Frontage Road           Meridian                 MS            1996         9,000 
La Petite Academy                    325 Cross Park Dr.              Pearl                    MS            1988         5,500 
Aaron Rents                          749 Ridgewood Road              Ridgeland                MS            1997        22,300 
Golden Corral                        310 State Line Rd.              Southaven                MS            1987         7,000 
Rex Stores                           1707 S. Gloster Avenue          Tupelo                   MS            1996        12,000 
Rex Stores                           3500 Pemberton Square Blvd.     Vicksburg                MS            1996        10,000 
                                                                                                                   ------------
                                                                                                                       128,900 
                                                                                                                   ------------

                                                    MISSOURI--27 PROPERTIES                                                    
Golden Corral                        1683 E. North Ave.              Belton                   MO            1984         4,800 
Checker Autoworks                    490 S. Hwy. 7                   Blue Springs             MO            1989         5,700 
Golden Corral                        211 N. Seventh St.              Blue Springs             MO            1984         5,100 
Golden Corral                        2323 Fairlawn Ave.              Carthage                 MO            1985         5,200 
Golden Corral                        719 S. Washington St.           Chillicothe              MO            1984         5,100 
Children's World                     11850 W. Florissant Ave.        Florissant               MO            1989         8,200 
La Petite Academy                    15444 New Halls Ferry           Florissant               MO            1989         5,400 
Golden Corral                        825 S. Hwy. 54                  Fulton                   MO            1987         5,200 
Children's World                     7227 N. Euclid Ave.             Gladstone                MO            1988         8,400 
Golden Corral                        3913 McMasters                  Hannibal                 MO            1987         5,200 
Outback                              7900 N. Lindbergh               Hazelwood                MO            1985         6,300 
Checker Autoworks                    11501 E. Hwy. 24                Independence             MO            1989         5,700 
Econo Lube 'N Tune                   4525 South Noland Road          Independence             MO            1996         2,800 
Golden Corral                        1830 E. Hwy. 61                 Jackson                  MO            1987         5,200 
Checker Autoworks                    6234 Paseo Blvd.                Kansas City              MO            1988         5,600 

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                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                    MISSOURI--27 PROPERTIES                                                    
                                                          (CONTINUED)                                                          
Checker Autoworks                    4205 E. Truman Rd.              Kansas City              MO            1988         6,600 
Checker Autoworks                    7640 Wornall Rd.                Kansas City              MO            1988         5,800 
Children's World                     3801 N.E. Independence          Lee's Summit             MO            1989         7,900 
La Petite Academy                    7 Victory Dr.                   Liberty                  MO            1985         4,900 
Children's World                     1021 Howard George Dr.          Manchester               MO            1987         7,300 
Golden Corral                        500 E. Austin Blvd.             Nevada                   MO            1987         5,400 
Golden Corral                        2004 W. Broadway Blvd.          Sedalia                  MO            1989         6,400 
Children's World                     1530 S. First Capital Dr.       St. Charles              MO            1987         7,300 
Golden Corral                        1850 Zumbehl Road               St. Charles              MO            1995        11,400 
Martin & Bayley                      3010 W. Clay St.                St. Charles              MO            1985         6,300 
Golden Corral                        1702 N. Belt Hwy.               St. Joseph               MO            1985         5,200 
Golden Corral                        204 S. Service Rd.              Sullivan                 MO            1984         5,200 
                                                                                                                   ------------
                                                                                                                       163,600 
                                                                                                                   ------------

                                                     MONTANA--2 PROPERTIES                                                     
Staples                              2930 Prospect Avenue            Helena                   MT            1997        24,600 
Checker Autoworks                    3121 Brooks St.                 Missoula                 MT            1987         5,400 
                                                                                                                   ------------
                                                                                                                        30,000 
                                                                                                                   ------------

                                                    NEBRASKA--9 PROPERTIES                                                     
La Petite Academy                    3005 Comstock                   Bellevue                 NE            1986         5,100 
Checker Autoworks                    5001 N. Second Ave.             Kearney                  NE            1990         4,100 
Checker Autoworks                    4405 N. 30th St.                Omaha                    NE            1988         5,500 
Checker Autoworks                    10757 Q St.                     Omaha                    NE            1988         5,700 
Golden Corral                        10803 John Galt Blvd.           Omaha                    NE            1995        11,300 
La Petite Academy                    14406 California Cir.           Omaha                    NE            1984         5,100 
La Petite Academy                    5444 S. 138th St.               Omaha                    NE            1984         5,100 
La Petite Academy                    10707 Birch St.                 Omaha                    NE            1987         5,400 
Linens 'N Things                     3375 Oakview Drive              Omaha                    NE            1997        46,400 
                                                                                                                   ------------
                                                                                                                        93,700 
                                                                                                                   ------------

                                                     NEVADA--5 PROPERTIES                                                      
La Petite Academy                    2560 N. Green Valley Pkwy.      Henderson                NV            1985         5,100 
Checker Autoworks                    1615 N. Nellis Blvd.            Las Vegas                NV            1987         5,400 
KinderCare                           1655 E. Warm Springs Rd.        Las Vegas                NV            1990         6,300 
Checker Autoworks                    3090 S. Virginia St.            Reno                     NV            1988         5,600 
La Petite Academy                    2301 Sparks Blvd.               Sparks                   NV            1988         6,700 
                                                                                                                   ------------
                                                                                                                        29,100 
                                                                                                                   ------------

                                                   NEW HAMPSHIRE--1 PROPERTY                                                   
Children's World                     Ten Mohawk Dr.                  Londonderry              NH            1989         6,400 
                                                                                                                   ------------
                                                                                                                         6,400 
                                                                                                                   ------------

                                                   NEW JERSEY--2 PROPERTIES                                                    
R & S Strauss                        1811 W. Marlton Pike            Cherry Hill              NJ            1995        16,100 
La Petite Academy                    943 Little Gloucester Road      Clementon                NJ            1991         6,600 
                                                                                                                   ------------
                                                                                                                        22,700 
                                                                                                                   ------------

                                                   NEW MEXICO--3 PROPERTIES                                                    
Checker Autoworks                    4710 N.E. San Mateo Blvd.       Albuquerque              NM            1987         3,100 
Checker Autoworks                    2007 Southern Blvd.             Rio Rancho               NM            1988         5,700 

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                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                   NEW MEXICO--3 PROPERTIES                                                    
                                                          (CONTINUED)                                                          
Checker Autoworks                    850 St. Michaels Dr.            Sante Fe                 NM            1987         3,200 
                                                                                                                   ------------
                                                                                                                        12,000 
                                                                                                                   ------------

                                                    NEW YORK--5 PROPERTIES                                                     
Golden Corral                        7800 Transit Road               Amherst                  NY            1995        11,500 
Golden Corral                        600 Block S. Fourth St.         Fulton                   NY            1987         7,300 
Dairy Mart                           380-384 Flatbush Avenue         Kingston                 NY            1995         2,800 
Rex Stores                           110 Mall Blvd.                  Lakewood                 NY            1996        14,100 
Wendy's                              840 Arsenal St.                 Watertown                NY            1986         2,600 
                                                                                                                   ------------
                                                                                                                        38,300 
                                                                                                                   ------------

                                                 NORTH CAROLINA--22 PROPERTIES                                                 
La Petite Academy                    955 W. Chatham St.              Cary                     NC            1984         5,100 
The Pantry                           5900 Tryon Road                 Cary                     NC            1995         2,400 
La Petite Academy                    110 Kingston Dr.                Chapel Hill              NC            1985         5,100 
La Petite Academy                    3132 Tyvola Rd.                 Charlotte                NC            1981         5,000 
La Petite Academy                    9221 York Rd.                   Charlotte                NC            1988         5,400 
La Petite Academy                    3505 S. Ridge Ave.              Concord                  NC            1981         5,000 
Econo Lube 'N Tune                   4615 Highway 55                 Durham                   NC            1997         2,800 
Jiffy Lube                           3915 N. Duke St.                Durham                   NC            1985         1,900 
La Petite Academy                    4022 Wake Forest Hwy.           Durham                   NC            1989         6,800 
La Petite Academy                    4702 Creekstone Dr.             Durham                   NC            1991         6,600 
Golden Corral                        482 N. McPherson Church         Fayetteville             NC            1984         5,100 
Econo Lube 'N Tune                   130 Annaron Court               Garner                   NC            1997         2,800 
Econo Lube 'N Tune                   4407 Landover Road              Greensboro               NC            1997         2,800 
The Pantry                           4000 S. Memorial Drive          Greenville               NC            1995         2,400 
The Pantry                           502 S. Memorial Drive           Greenville               NC            1995         2,400 
La Petite Academy                    1521 Haywood Rd.                Hendersonville           NC            1981         5,000 
The Pantry                           2561 Onslow Drive               Jacksonville             NC            1995         2,600 
La Petite Academy                    1975 W. Mountain St.            Kernersville             NC            1989         5,500 
La Petite Academy                    5115 Highgate Dr.               Morrisville              NC            1989         6,400 
Econo Lube 'N Tune                   Pineville-Matthews Road         Pineville                NC            1997         2,700 
Jiffy Lube                           3925 Western Blvd.              Raleigh                  NC            1985         1,800 
Taco Bell                            U.S. 421 & Winkler Mill         Wilkesboro               NC            1987         2,200 
                                                                                                                   ------------
                                                                                                                        87,800 
                                                                                                                   ------------

                                                      OHIO--49 PROPERTIES                                                      
Don Pablo's                          145 Montrose West Ave.          Akron                    OH            1994         7,800 
Golden Corral                        1616 Claremont Ave.             Ashland                  OH            1986         5,200 
Dairy Mart                           1304 State Road 183             Atwater                  OH            1995         2,500 
Jiffy Lube                           4497 Indian Ripple Road         Beaver Creek             OH            1996         2,300 
Children's World                     2221 N. Fairfield Rd.           Beavercreek              OH            1987         5,000 
Golden Corral                        1401 E. State Route 703         Celina                   OH            1987         5,300 
Children's World                     8150 Garnet Dr.                 Centerville              OH            1987         5,000 
Jiffy Lube                           897 South Main Street           Centerville              OH            1996         2,400 
La Petite Academy                    11945 Mason Rd.                 Cincinnati               OH            1987         5,100 
7-ELEVEN                             2481 Petzinger Road             Columbus                 OH            1995         3,200 
Dairy Mart                           5449 Hall Rd.                   Columbus                 OH            1995         7,200 
Jiffy Lube                           3550 N. High St.                Columbus                 OH            1985         2,600 
Jiffy Lube                           3191 E. Main St.                Columbus                 OH            1985         2,600 
Speedy Brake & Muffler               4978 West Broad Street          Columbus                 OH            1995         5,300 
Dairy Mart                           310 Tallmadge Rd.               Cuyahoga Falls           OH            1995         2,800 
Jiffy Lube                           2520 Wilmington Pike            Dayton                   OH            1985         2,000 
Rex Stores                           955 N. Clinton Street           Defiance                 OH            1996         7,200 
La Petite Academy                    7135 Sawmill Rd.                Dublin                   OH            1985         5,100 

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                                                                                                                   APPROXIMATE 
                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                      OHIO--49 PROPERTIES                                                      
                                                          (CONTINUED)                                                          
Speedy Brake & Muffler               34310 Vine Street               Eastlake                 OH            1995         5,300 
La Petite Academy                    100 W. Wenger Rd.               Englewood                OH            1985         5,100 
Children's World                     2291 Reliance Dr.               Forest Park              OH            1987         5,000 
La Petite Academy                    485 Rocky Fork Blvd.            Gahanna                  OH            1985         5,100 
Dairy Mart                           105 East St.                    Galion                   OH            1995         2,700 
7-ELEVEN                             3700 South Hamilton Road        Groveport                OH            1995         3,200 
Jiffy Lube                           1358 Main Street                Hamilton                 OH            1996         1,800 
Children's World                     7305 Old Troy Pike              Huber Heights            OH            1990         5,000 
Jiffy Lube                           8371 Old Troy Pike              Huber Heights            OH            1996         2,300 
Rex Stores                           2119 E. Dorothy Lane            Kettering                OH            1996        10,600 
Golden Corral                        904 Columbus Ave.               Lebanon                  OH            1987         5,700 
Children's World                     1200 Cottonwood Dr.             Loveland                 OH            1987         4,900 
Children's World                     8520 Landen Dr.                 Maineville               OH            1987         5,000 
Jiffy Lube                           3028 Mall Park Dr.              Miamisburg               OH            1985         2,000 
Staples                              11 Winspear Drive               New Philadelphia         OH            1997        24,000 
Jiffy Lube                           3009 Woodville Rd.              Northwood                OH            1986         2,600 
Dairy Mart                           SR 795 at Oregon Road           Perrysburg               OH            1995         2,700 
La Petite Academy                    12968 N.W. Stonecreek Dr.       Pickerington             OH            1986         5,100 
Jiffy Lube                           560 W. Central Avenue           Springboro               OH            1997         2,400 
Golden Corral                        4360 Kent Rd.                   Stow                     OH            1987         7,100 
Dairy Mart                           SR 14 & Market Square Drive     Streetsboro              OH            1996         3,800 
Dairy Mart                           3519 South County Road 25A      Tipp City                OH            1996         3,800 
Jiffy Lube                           3820 Secor Rd.                  Toledo                   OH            1986         2,600 
Jiffy Lube                           1360 W. Alexis Rd.              Toledo                   OH            1986         2,000 
Dairy Mart                           272 N. Sandusky St.             Triffin                  OH            1995         3,200 
Golden Corral                        1790 W. Main St.                Troy                     OH            1986         5,200 
Dairy Mart                           N. High Street North of I-76    Wadsworth                OH            1996         2,700 
Golden Corral                        1600 Columbus Ave.              Wash. Courthouse         OH            1986         5,100 
Children's World                     72 Westerview Dr.               Westerville              OH            1990         8,400 
La Petite Academy                    4426 S. Valley Quail Blvd.      Westerville              OH            1985         5,000 
Golden Corral                        1587 Rombach Ave.               Wilmington               OH            1986         6,000 
                                                                                                                   ------------
                                                                                                                       234,000 
                                                                                                                   ------------

                                                    OKLAHOMA--12 PROPERTIES                                                    
La Petite Academy                    812 N. 15th St.                 Broken Arrow             OK            1983         5,000 
Econo Lube 'N Tune                   309 South Air Depot Blvd.       Midwest City             OK            1997         2,800 
La Petite Academy                    8821 E. Reno                    Midwest City             OK            1985         4,900 
Don Pablo's                          330 Ed Noble Parkway            Norman                   OK            1995         9,800 
Don Pablo's                          2737 W. Memorial Road           Oklahoma City            OK            1995         9,900 
La Petite Academy                    1532 W. Hefner Rd.              Oklahoma City            OK            1982         5,000 
La Petite Academy                    13200 S. Western                Oklahoma City            OK            1984         7,500 
Golden Corral                        7703 N. Mingo Valley Expwy.     Owasso                   OK            1987         6,400 
Golden Corral                        2300 N. 14th St.                Ponca City               OK            1987         6,900 
Econo Lube 'N Tune                   Hefner Rd. E. of Pennsyl Ave    The Village              OK            1997         2,800 
Quick Trip                           2749 East Admiral Place         Tulsa                    OK            1997         3,200 
La Petite Academy                    11500 W. Reno                   Yukon                    OK            1985         4,800 
                                                                                                                   ------------
                                                                                                                        69,000 
                                                                                                                   ------------

                                                     OREGON--17 PROPERTIES                                                     
Schuck's Autoworks                   2105 Santiam Ave.               Albany                   OR            1987         5,600 
Children's World                     17225 N.W. Corridor Ct.         Beaverton                OR            1986         7,300 
Children's World                     12385 S.W. Longhorn Ln.         Beaverton                OR            1986         7,200 
Schuck's Autoworks                   3050 S.W. Cedar Hills           Beaverton                OR            1987         5,700 
Schuck's Autoworks                   2350 N.W. 9th St.               Corvallis                OR            1987         5,700 
Taco Bell                            2235 N.W. Ninth St.             Corvallis                OR            1987         2,300 
Schuck's Autoworks                   391 Coburg Rd.                  Eugene                   OR            1988         5,500 

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                                                                                                                   APPROXIMATE 
                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                     OREGON--17 PROPERTIES                                                     
                                                          (CONTINUED)                                                          
Golden Corral                        1530 N. First St.               Hermiston                OR            1984         5,100 
The Keg                              4250 S.W. Mercantile Dr.        Lake Oswego              OR            1984         6,800 
The Keg                              13456 S.E. Mcloughlin           Milwaukie                OR            1984         6,700 
Schuck's Autoworks                   15621 S.E. Mclaughlin Blvd.     Oak Grove                OR            1987         5,600 
Schuck's Autoworks                   18120 S.E. Stark St.            Portland                 OR            1987         5,600 
Schuck's Autoworks                   8310 S.E Division               Portland                 OR            1987         5,700 
Schuck's Autoworks                   5915 N.E. Sandy Blvd.           Portland                 OR            1987         4,900 
Schuck's Autoworks                   3863 S.E. Commercial St.        Salem                    OR            1987         5,400 
Taco Bell                            3455 S.E. Commercial St.        Salem                    OR            1989         2,400 
Schuck's Autoworks                   13145 S.W. Pacific Hwy.         Tigard                   OR            1987         4,900 
                                                                                                                   ------------
                                                                                                                        92,400 
                                                                                                                   ------------

                                                  PENNSYLVANIA--5 PROPERTIES                                                   
Golden Corral                        701-719 N. Pittsburgh           Connellsville            PA            1987         5,400 
Petco                                529 Scranton Carbondale Road    Dickson City             PA            1997        16,000 
R & S Strauss                        3366 Grant Avenue               Philadelphia             PA            1994        15,100 
Jiffy Lube                           936 Sproul Rd.                  Springfield Twp.         PA            1986         2,000 
Golden Corral                        684 Elm Dr.                     Waynesburg               PA            1987         5,800 
                                                                                                                   ------------
                                                                                                                        44,300 
                                                                                                                   ------------

                                                 SOUTH CAROLINA--19 PROPERTIES                                                 
Econo Lube 'N Tune                   1745 San Rittenburg Blvd.       Charleston               SC            1997         2,800 
La Petite Academy                    4315 Great Oak Dr.              Charleston               SC            1988         5,500 
La Petite Academy                    902 Nabors Dr.                  Charleston               SC            1989         5,400 
Econo Lube 'N Tune                   183 Harbison Blvd.              Columbia                 SC            1997         2,800 
La Petite Academy                    9223 Two Notch Rd.              Columbia                 SC            1984         5,000 
The Pantry                           3416 Leesburg Road              Columbia                 SC            1995         2,600 
La Petite Academy                    2041 Clemson Rd.                Elgin                    SC            1989         5,500 
La Petite Academy                    502 St. James Ave.              Goose Creek              SC            1981         5,000 
Econo Lube 'N Tune                   1461 North Pleasantburg Drive   Greenville               SC            1997         2,800 
The Pantry                           106 Main Road                   John's Isle              SC            1995         2,500 
La Petite Academy                    573 College Park Rd.            Ladson                   SC            1981         5,100 
La Petite Academy                    5625 Sunset Blvd.               Lexington                SC            1984         5,000 
The Pantry                           5372 Sunset Blvd.               Lexington                SC            1995         2,600 
La Petite Academy                    1058 Johnnie Dodds Blvd.        Mt. Pleasant             SC            1981         5,000 
The Pantry                           4625 Dick Pond Road             Myrtle Beach             SC            1995         2,400 
The Pantry                           2213 Ashley Phosphate           N. Charleston            SC            1995         2,400 
La Petite Academy                    1664 Old Trolley Rd.            Summerville              SC            1981         5,000 
The Pantry                           1397 Boone Hill Road            Summerville              SC            1995         2,500 
La Petite Academy                    15 Pinewood Rd.                 Sumter                   SC            1985         5,100 
                                                                                                                   ------------
                                                                                                                        75,000 
                                                                                                                   ------------

                                                   SOUTH DAKOTA--1 PROPERTY                                                    
Golden Corral                        602 W. Sioux Ave.               Pierre                   SD            1987         6,100 
                                                                                                                   ------------
                                                                                                                         6,100 
                                                                                                                   ------------

                                                   TENNESSEE--12 PROPERTIES                                                    
Jiffy Lube                           Carothers Pkwy S of Moores Ln   Brentwood                TN            1997         2,000 
Rex Stores                           1230 Volunteer Pkwy.            Bristol                  TN            1996        12,400 
Rex Stores                           81 Dover Rd., Hwy 79            Clarksville              TN            1996        10,000 
The Pantry                           5022 Murfreesboro Road          La Vergne                TN            1995         2,400 
Aaron Rents                          4883 American Way               Memphis                  TN            1997        51,500 
Children's World                     5960 Knight Arnold Rd.          Memphis                  TN            1988         8,200 
Children's World                     4984 Raleigh-Lagrange Rd.       Memphis                  TN            1988         8,500 

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                                                                                                                   APPROXIMATE 
                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                   TENNESSEE--12 PROPERTIES                                                    
                                                          (CONTINUED)                                                          
Golden Corral                        2829 Covington Pike             Memphis                  TN            1995        11,300 
KinderCare                           5225 Shady Ridge Dr.            Memphis                  TN            1990         6,300 
Children's World                     Ten Knolls Pl.                  Nashville                TN            1989         7,300 
Sante Fe Cant. & Cattlemans Cl       4285 Sidco Dr.                  Nashville                TN            1983        10,000 
The Pantry                           1316 Madison Street             Shelbyville              TN            1995         2,500 
                                                                                                                   ------------
                                                                                                                       132,400 
                                                                                                                   ------------

                                                     TEXAS--130 PROPERTIES                                                     
La Petite Academy                    103 Fountaingate Dr.            Allen                    TX            1988         6,600 
Checker Autoworks                    1301 N.E. Amarillo Blvd.        Amarillo                 TX            1988         5,700 
Aaron Rents                          2125 E. Division                Arlington                TX            1997        68,100 
Children's World                     1801 E. Mayfield Rd.            Arlington                TX            1984         5,000 
Children's World                     4019 Woodland Park              Arlington                TX            1988         8,200 
Children's World                     1305 W. Arbrook                 Arlington                TX            1989         8,300 
La Petite Academy                    717 W. Stephens St.             Arlington                TX            1985         7,400 
La Petite Academy                    1850 N.E. Green Oaks Blvd.      Arlington                TX            1991         6,600 
Golden Corral                        1112 E. Tyler St.               Athens                   TX            1987         6,900 
Children's World                     12001 Oak Knoll Dr.             Austin                   TX            1988         8,200 
Children's World                     7130 Chimney Corners            Austin                   TX            1989         8,200 
Children's World                     1808 Cedar Bend Dr.             Austin                   TX            1986         7,300 
Discount Tire Store                  1411 W. Ben White Blvd.         Austin                   TX            1990         6,200 
La Petite Academy                    11812 Millwright Pkwy.          Austin                   TX            1982         5,000 
La Petite Academy                    5906 Westcreek Dr.              Austin                   TX            1983         5,000 
La Petite Academy                    8105 Brodie Ln.                 Austin                   TX            1988         5,100 
La Petite Academy                    14611 Wells Port Dr.            Austin                   TX            1989         7,700 
La Petite Academy                    3909 Adelphi Lane               Austin                   TX            1989         6,600 
La Petite Academy                    9315 Chisholm Ln.               Austin                   TX            1988         6,600 
Children's World                     2309 Central Dr.                Bedford                  TX            1989         8,200 
Don Pablo's                          1933 Airport Way                Bedford                  TX            1994         7,000 
Golden Corral                        1912 N. St. Mary'S              Beeville                 TX            1987         5,600 
Golden Corral                        311 E. Commerce St.             Brownwood                TX            1987         6,900 
Children's World                     2804 Keller Springs Rd.         Carrollton               TX            1987         6,100 
Aaron Rents                          1911 South Bell Blvd.           Cedar Park               TX            1997        23,300 
La Petite Academy                    1609 N. Bell Rd.                Cedar Park               TX            1988         6,600 
La Petite Academy                    300 Greenbriar Ln.              Colleyville              TX            1985         5,100 
Children's World                     8110 Lone Shadow                Converse                 TX            1988         8,300 
Children's World                     653 Parkway Blvd.               Coppell                  TX            1986         7,200 
Children's World                     150 N. Moore Rd.                Coppell                  TX            1987         5,000 
Golden Corral                        1155 E. Loop 304                Crockett                 TX            1985         4,900 
Discount Tire Store                  4017 W. Camp Wisdom Rd.         Dallas                   TX            1990         6,000 
Don Pablo's                          9039 Vantage Point Drive        Dallas                   TX            1995         9,800 
Econo Lube 'N Tune                   11632 N Central Expy.           Dallas                   TX            1996         2,700 
Whataburger                          1990 W. Northwest Hwy.          Dallas                   TX            1991         2,700 
La Petite Academy                    1101 E. Pleasant Run            Desoto                   TX            1984         7,400 
La Petite Academy                    107 W. Danieldale Rd.           Duncanville              TX            1985         7,400 
Golden Corral                        1802 N. Mechanic                El Campo                 TX            1985         5,200 
Checker Autoworks                    336 N. Zaragosa Rd.             El Paso                  TX            1987         3,100 
Checker Autoworks                    10730 Pebble Hills Blvd.        El Paso                  TX            1987         2,700 
Kentucky Fried Chicken               901 E. Ennis Ave.               Ennis                    TX            1987         2,100 
Children's World                     2440 Fuller-Wiser Rd.           Euless                   TX            1987         6,100 
Children's World                     2011 Timbercreek Rd.            Flower Mound             TX            1987         5,000 
Children's World                     3312 Park Lake Dr.              Fort Worth               TX            1988         8,200 
La Petite Academy                    1740 W. Everman Pkwy.           Fort Worth               TX            1986         5,000 
La Petite Academy                    6050 Harris Pkwy.               Fort Worth               TX            1990         6,600 
La Petite Academy                    5432 Basswood Blvd.             Fort Worth               TX            1991         6,600 
Whataburger                          901 E. Seminary Dr.             Fort Worth               TX            1991         2,400 
Whataburger                          1425 Eastchase Pky.             Ft. Worth                TX            1995         3,000 

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                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                     TEXAS--130 PROPERTIES                                                     
                                                          (CONTINUED)                                                          
Golden Corral                        903 E. Hwy. 82                  Gainesville              TX            1984         4,800 
Discount Tire Store                  3325 S. Garland Rd.             Garland                  TX            1990         6,500 
La Petite Academy                    2814 Lavon Hwy.                 Garland                  TX            1989         6,600 
La Petite Academy                    4165 Magna Carta Ave.           Grand Prairie            TX            1988         6,800 
Discount Tire Store                  410 Dixieland Rd.               Harlingen                TX            1990         6,000 
Golden Corral                        1501 Corsicana Hwy.             Hillsboro                TX            1984         4,800 
Aaron Rents                          243 Greens Road                 Houston                  TX            1997        70,300 
Children's World                     19823 Younglake Blvd.           Houston                  TX            1988         8,200 
Children's World                     15003 Bellaire Blvd.            Houston                  TX            1988         8,200 
Children's World                     4507 Fountainhead Dr.           Houston                  TX            1989         4,600 
Discount Tire Store                  9402 Stella Link Rd.            Houston                  TX            1990         5,600 
Econo Lube 'N Tune                   4448 West FM 1960               Houston                  TX            1997         2,600 
La Petite Academy                    3435 Spears Rd.                 Houston                  TX            1984         5,000 
La Petite Academy                    620 Maxey Rd.                   Houston                  TX            1985         5,100 
La Petite Academy                    17645 Keith Harrow              Houston                  TX            1987         5,400 
La Petite Academy                    690 Normandy St.                Houston                  TX            1987         5,000 
La Petite Academy                    15203 Bellaire Blvd.            Houston                  TX            1985         7,300 
La Petite Academy                    8385 Antoine Dr.                Houston                  TX            1987         5,400 
Whataburger                          9277 Richmond Ave.              Houston                  TX            1991         2,400 
Whataburger                          11027 Fuqua St.                 Houston                  TX            1991         2,500 
Atascocita Shopping Center           4451 E. Fm 1960                 Humble                   TX            1986        11,100 
Vacant                               3511 N. Country Club Rd.        Irving                   TX            1986         4,200 
Taco Bell                            2103 So. W.S. Young Dr.         Killeen                  TX            1987         3,500 
Golden Corral                        1502 W. Main St.                League City              TX            1986         5,400 
Discount Tire Store                  6221 Bandera Rd.                Leon Valley              TX            1990         6,000 
Children's World                     1439 Moccassin Trail            Lewisville               TX            1987         5,000 
Children's World                     1002 Round Grove Road           Lewisville               TX            1988         5,000 
Econo Lube 'N Tune                   1550 Main Street                Lewisville               TX            1996         2,600 
La Petite Academy                    103 Kathryn Dr.                 Lewisville               TX            1985         7,200 
Checker Autoworks                    5007 34th St.                   Lubbock                  TX            1987         3,100 
Checker Autoworks                    1318 50th St.                   Lubbock                  TX            1987         3,100 
Hollywood Video                      7819 Slide Road                 Lubbock                  TX            1997         7,500 
Golden Corral                        1901 S. First St.               Lufkin                   TX            1985         5,200 
La Petite Academy                    1151 Walnut Creek Dr.           Mansfield                TX            1989         5,400 
Don Pablo's                          3900 Pavillion Court            Mesquite                 TX            1994         8,600 
Golden Corral                        717 N. Bryan-Beltline Rd.       Mesquite                 TX            1986         5,000 
La Petite Academy                    1019 Tripp Rd.                  Mesquite                 TX            1984         7,400 
La Petite Academy                    1615 Oates Drive                Mesquite                 TX            1992         6,700 
Golden Corral                        810 Milam St.                   Mexia                    TX            1985         5,000 
Checker Autoworks                    1111 N. Midkiff                 Midland                  TX            1987         3,300 
La Petite Academy                    1717 Dulles Ave.                Missouri City            TX            1990         6,600 
Children's World                     6709 Meadow Crest N.            N. Richland Hills        TX            1988         8,200 
Taco Bell                            249 N. Loop 337                 New Braunfels            TX            1987         3,000 
Checker Autoworks                    2711 Andrews Hwy.               Odessa                   TX            1987         3,100 
Golden Corral                        3104 Edgar Brown Dr.            Orange                   TX            1985         5,400 
Discount Tire Store                  7304 Spencer Hwy.               Pasadena                 TX            1990         6,000 
La Petite Academy                    821 Fairmont Pkwy.              Pasadena                 TX            1984         5,100 
Golden Corral                        2602 Olton Rd.                  Plainview                TX            1984         5,100 
Children's World                     3401 Silverstone Dr.            Plano                    TX            1987         6,100 
Children's World                     4120 E. 14th St.                Plano                    TX            1987         6,100 
Children's World                     1717 W. Plano Pkwy.             Plano                    TX            1988         8,000 
Discount Tire Store                  209 Coit Road                   Plano                    TX            1990         7,000 
Levitz Furniture                     6400 Avenue K                   Plano                    TX            1995       111,300 
Golden Corral                        915 N. Hwy. 35 Bypass           Port Lavaca              TX            1987         5,400 
Whataburger                          34577 Highway 59 North          Porter                   TX            1995         2,700 
La Petite Academy                    3620 Hillside Dr.               Round Rock               TX            1986         5,000 
La Petite Academy                    1510 Greenlawn Blvd.            Round Rock               TX            1989         6,600 
Golden Corral                        3324 Hwy. 66                    Rowlett                  TX            1985         5,200 

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                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                     TEXAS--130 PROPERTIES                                                     
                                                          (CONTINUED)                                                          
Children's World                     11814 Parliament Dr.            San Antonio              TX            1989         8,400 
Children's World                     8680 Guilbeau Rd.               San Antonio              TX            1986         7,200 
Children's World                     8031 Culebra Rd.                San Antonio              TX            1988         8,300 
Children's World                     14230 Cross Canyon Rd.          San Antonio              TX            1987         7,400 
Discount Tire Store                  2707 N.W. Loop 410              San Antonio              TX            1990         7,600 
Econo Lube 'N Tune                   11902 Perrin Beitel Road        San Antonio              TX            1995         2,800 
La Petite Academy                    3939 Thousand Oaks Dr.          San Antonio              TX            1987         5,100 
La Petite Academy                    5990 Village Pk.                San Antonio              TX            1986         6,500 
La Petite Academy                    16345 Judson Rd.                San Antonio              TX            1986         5,100 
La Petite Academy                    9401 Guilbeau Rd.               San Antonio              TX            1987         6,700 
La Petite Academy                    4820 Brandeis Rd.               San Antonio              TX            1987         5,000 
La Petite Academy                    111 Emerald Glade               San Antonio              TX            1988         6,700 
Whataburger                          2013 Meyers-Sealy               Sealy                    TX            1991         2,600 
La Petite Academy                    1400 W. Southlake Blvd.         Southlake                TX            1993         6,600 
Whataburger                          13030 Murphy Rd.                Stafford                 TX            1991         2,400 
La Petite Academy                    2615 Cordes Plaza               Sugarland                TX            1987         6,800 
Whataburger                          115 N. General Bruce Dr.        Temple                   TX            1995         2,200 
Sonshine Family Children's Ctr       714 N. 14th St.                 Texas City               TX            1982         4,600 
La Petite Academy                    5202 Shadowbend Pl.             The Woodlands            TX            1987         7,500 
Golden Corral                        1240 N. Main                    Vidor                    TX            1984         5,100 
La Petite Academy                    6637 Oaklawn Dr.                Watauga                  TX            1987         6,800 
Golden Corral                        652 N. Hwy. 77                  Waxahachie               TX            1987         7,000 
Aaron Rents                          18215 Highway 3                 Webster                  TX            1997        22,700 
                                                                                                                   ------------
                                                                                                                     1,015,300 
                                                                                                                   ------------

                                                      UTAH--7 PROPERTIES                                                       
Discount Tire Store                  2527 S. Main                    Bountiful                UT            1990         6,200 
Golden Corral                        755 Main St. So.                Cedar City               UT            1983         4,500 
La Petite Academy                    325 West 1550 North             Layton                   UT            1990         5,500 
Carver's                             672 South State Street          Orem                     UT            1995         8,200 
Discount Tire Store                  1380 N. State St.               Provo                    UT            1990         5,300 
Carver's                             10740 South Holiday Park Dr.    Sandy                    UT            1995        10,300 
La Petite Academy                    2105 E. Alta Canyon Dr.         Sandy                    UT            1990         5,400 
                                                                                                                   ------------
                                                                                                                        45,400 
                                                                                                                   ------------

                                                    VIRGINIA--17 PROPERTIES                                                    
Children's World                     5124 Woodmere Dr.               Centreville              VA            1989         6,100 
Color Tile                           1648 S. Military Hwy.           Chesapeake               VA            1986         3,600 
La Petite Academy                    625 Cedar Rd.                   Chesapeake               VA            1989         5,400 
La Petite Academy                    3919 Springfield Rd.            Glen Allen               VA            1984         5,000 
East Coast Oil                       10150 Hull Street               Midlothian               VA            1997         2,400 
Hot N Now                            6049 Virginia Beach Blvd.       Norfolk                  VA            1987         3,600 
La Petite Academy                    3903 Cedar Ln.                  Portsmouth               VA            1988         5,500 
Children's World                     7040 Forest Hill Ave.           Richmond                 VA            1989         7,300 
Econo Lube 'N Tune                   3591 Courthouse Road            Richmond                 VA            1996         2,900 
La Petite Academy                    11449 Robious Rd.               Richmond                 VA            1985         5,100 
East Coast Oil                       488 Garrisonville Road          Stafford                 VA            1996         2,800 
Children's World                     1893 First General Pkwy.        Virginia Beach           VA            1986         7,400 
Econo Lube 'N Tune                   Holland Road & Arthur Avenue    Virginia Beach           VA            1996         2,800 
Golden Corral                        470 Newtown Rd.                 Virginia Beach           VA            1987         7,000 
La Petite Academy                    5355 Lila Ln.                   Virginia Beach           VA            1984         5,000 

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                                                                                                                   APPROXIMATE 
                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                    VIRGINIA--17 PROPERTIES                                                    
                                                          (CONTINUED)                                                          
East Coast Oil                       10007 James Madison Highway     Warrenton                VA            1996         3,600 
Children's World                     12345 Cotton Mill Dr.           Woodbridge               VA            1988         6,000 
                                                                                                                   ------------
                                                                                                                        81,500 
                                                                                                                   ------------

                                                   WASHINGTON--42 PROPERTIES                                                   
Golden Corral                        2040 N. Auburn Way              Auburn                   WA            1987         7,000 
Schuck's Autoworks                   15303 S.E. 37th St.             Bellevue                 WA            1987         5,700 
Schuck's Autoworks                   1929 King St.                   Bellingham               WA            1987         5,600 
Schuck's Autoworks                   7232 N.E. Bothell Way           Bothell                  WA            1987         5,700 
Econo Lube 'N Tune                   Brownsville Highway             Bremerton                WA            1996         2,800 
Children's World                     12812 S.E. Third Ave.           Everett                  WA            1982         6,000 
Schuck's Autoworks                   11020 S.E. 19th Ave.            Everett                  WA            1987         9,500 
Children's World                     32324 S. First Ave.             Federal Way              WA            1986         7,100 
La Petite Academy                    508 S. 348th St.                Federal Way              WA            1988         6,600 
Schuck's Autoworks                   6918 N.E. Hwy. 99               Hazel Dell               WA            1988         5,600 
Schuck's Autoworks                   3801 W. Clearwater              Kennewick                WA            1987         5,700 
Children's World                     10016 S.E. 240th St.            Kent                     WA            1983         6,000 
Children's World                     23921 S.E. 112th Ave.           Kent                     WA            1986         7,300 
Schuck's Autoworks                   10105 S.E. 256th                Kent                     WA            1987         5,700 
Children's World                     14230 N.E. Juanta-Woodinville   Kirkland                 WA            1988         7,300 
Schuck's Autoworks                   4017 S.E. Pacific Ave.          Lacey                    WA            1987         5,700 
Golden Corral                        1065 State St.                  Marysville               WA            1987         6,000 
Schuck's Autoworks                   1105 State Ave.                 Marysville               WA            1987         4,900 
Schuck's Autoworks                   826 Stratford Rd.               Moses Lake               WA            1987         5,700 
Golden Corral                        1493 Midway Blvd.               Oak Harbor               WA            1987         6,100 
Schuck's Autoworks                   2403 W. Court St.               Pasco                    WA            1987         5,700 
La Petite Academy                    1006 S.E. 39th Ave.             Puyallup                 WA            1988         6,700 
Schuck's Autoworks                   12117 S. Meridian St.           Puyallup                 WA            1987         4,900 
Azteca Restaurant                    3040 N.E. 148th Ave.            Redmond                  WA            1982        10,000 
La Petite Academy                    8675 N.E. 161St Ave.            Redmond                  WA            1987         7,700 
Schuck's Autoworks                   15226 Bel-Red Rd.               Redmond                  WA            1987         5,000 
Children's World                     11010 S.E. 176th St.            Renton                   WA            1986         6,400 
Schuck's Autoworks                   3213 N.E. Sunset                Renton                   WA            1987         5,600 
Schuck's Autoworks                   1440 Jadwin Ave.                Richland                 WA            1987         5,600 
Schuck's Autoworks                   2728 N.E. 45th St.              Seattle                  WA            1987         4,800 
Schuck's Autoworks                   1018 N.W. Silverdale Way        Silverdale               WA            1987         4,900 
Schuck's Autoworks                   15027 S. Pacific Ave.           Spanaway                 WA            1987         5,700 
Schuck's Autoworks                   4123 E. Sprague                 Spokane                  WA            1987         3,100 
Discount Tire Store                  2410 S. 84th St.                Tacoma                   WA            1990         6,000 
Vacant                               7325 W. 27th St.                Tacoma                   WA            1984         6,800 
Schuck's Autoworks                   6110 Sixth Ave.                 Tacoma                   WA            1987         5,700 
Schuck's Autoworks                   10915 Bridgeport Way            Tacoma                   WA            1987         5,700 
Sea Galley                           9825 Pacific Ave.               Tacoma                   WA            1984         6,600 
Schuck's Autoworks                   11808 S.E. Millplain            Vancouver                WA            1987         4,900 
Schuck's Autoworks                   410 N. Wilbur                   Walla Walla              WA            1987         5,500 
Schuck's Autoworks                   295 E. Grant Rd.                Wenatchee                WA            1987         5,600 
Schuck's Autoworks                   13706 N.E. 175th St.            Woodinville              WA            1987         4,800 
                                                                                                                   ------------
                                                                                                                       249,700 
                                                                                                                   ------------

                                                  WEST VIRGINIA--2 PROPERTIES                                                  
Golden Corral                        1527 E. Main                    Oak Hill                 WV            1984         4,600 
Rex Stores                           501 Grand Central Avenue        Vienna                   WV            1996        12,200 
                                                                                                                   ------------
                                                                                                                        16,800 
                                                                                                                   ------------

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                                                                                                                   APPROXIMATE 
                                                                                                         YEAR        LEASABLE  
TENANT(1)                                       ADDRESS                      CITY            STATE     ACQUIRED    SQUARE FEET 
-----------------------------------  ------------------------------  --------------------  ---------  -----------  ------------
                                                                                                                               
                                                   WISCONSIN--11 PROPERTIES                                                    
KinderCare                           3036 N. Ballard Rd.             Appleton                 WI            1990         6,200 
La Petite Academy                    20550 W. Watertown Rd.          Brookfield               WI            1990         6,600 
Taco Bell                            588 Falls Rd.                   Grafton                  WI            1987         2,300 
Car-X Muffler & Brake                5930 West Bluemound Road        Milwaukee                WI            1996         5,300 
Car-X Muffler & Brake                6112 South 27th Street          Milwaukee                WI            1995         5,300 
Golden Corral                        145 7-1/2 St.                   Monroe                   WI            1987         5,700 
Car-X Muffler & Brake                15650 West National Ave.        New Berlin               WI            1995         4,200 
Golden Corral                        2756 New Pinery Rd.             Portage                  WI            1987         6,100 
Golden Corral                        1247 E. Green Bay St.           Shawano                  WI            1987         6,100 
Golden Corral                        915 Egg Harbor Rd.              Sturgeon Bay             WI            1987         6,100 
La Petite Academy                    1821 Woodburn Rd.               Waukesha                 WI            1990         6,600 
                                                                                                                   ------------
                                                                                                                        60,500 
                                                                                                                   ------------

                                                     WYOMING--4 PROPERTIES                                                     
La Petite Academy                    3238 Sheridan St.               Cheyenne                 WY            1984         5,100 
Winger's                             3626 Grand Ave.                 Laramie                  WY            1990         4,200 
Golden Corral                        400 N. Federal Blvd.            Riverton                 WY            1987         5,200 
Golden Corral                        927 E. Coffeen Ave.             Sheridan                 WY            1985         5,600 
                                                                                                                   ------------
                                                                                                                        20,100 
                                                                                                                   ------------
Total for 774 properties                                                                                             5,788,700 
                                                                                                                   ------------
                                                                                                                   ------------

------------------------------                                                  

(1) See "--Matters Pertaining to Certain Properties and Tenants."               

DESCRIPTION OF LEASING STRUCTURE.  At August 31, 1997, over 98% of the  
Company's properties were leased pursuant to net leases. In most cases, the     
leases are for initial terms of from 10 to 20 years and the tenant has an option
to extend the initial term. The leases generally provide for a minimum base rent
plus future increases (typically subject to ceilings) based on increases in the 
consumer price index or additional rent based upon the tenant's gross sales     
above a specified level (i.e., percentage rent). Where leases provide for rent  
increases based on increases in the consumer price index, typically such        
increases permanently become part of the base rent. Where leases provide for    
percentage rent, this additional rent is typically payable only if the tenant's 
gross sales for a given period (usually one year) exceed a specified level, and 
then is typically calculated as a percentage of only the amount of gross sales  
in excess of such level. In general, the leases require the tenant to pay       
property taxes, insurance, and expenses of maintaining the property.            

MATTERS PERTAINING TO CERTAIN PROPERTIES AND TENANTS.  Seven of the     
Company's properties were vacant as of August 31, 1997 (one of which is a       
multi-tenant property and six of which are single-tenant properties) and        
available for lease. As of August 31, 1997, 25 of the Company's properties which
were under lease were vacant and available for sublease by the tenant. Of these 
25, 24 had tenants who were current with their rent and other lease obligations.
As of August 31, 1997, 18 of the Company's properties had been sublet to tenants
in different industries than the original tenant. All of these tenants were     
current with their rent and other lease obligations.                            

 See "Risk Factors--Real Estate Investment Risks--Risk of Default by Major
Tenants" for a discussion of certain other matters relating to certain          
properties and tenants that should be carefully considered by prospective       
investors.                                                                      

DEVELOPMENT OF CERTAIN PROPERTIES                                               

Of the 43 New Properties acquired by the Company during the first eight 
months of 1997, 36 were occupied as of September 15, 1997 and the remaining     
seven were pre-leased and under construction pursuant to contracts under which  
the tenants have agreed to develop the properties (with development             

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costs funded by the Company) and to begin paying rent when the premises opens   
for business. In the case of development properties, the Company typically      
enters into an agreement with a tenant pursuant to which the tenant retains a   
contractor to construct the improvements on the property and the Company funds  
the costs of such development. The tenant is contractually obligated to complete
the construction on a timely basis, generally within eight months after the     
Company purchases the land and to pay construction cost overruns to the extent  
they exceed the construction budget by more than a predetermined amount. The    
Company typically also enters into a lease with the tenant at the time the      
Company purchases the land, which generally requires that the tenant begin      
paying base rent, calculated as a percentage of the Company's acquisition cost  
for the property, including construction costs and capitalized interest, when   
the premises opens for business. During 1996, the Company acquired 18           
development properties, all of which have been completed, are operating and     
paying rent. The Company will continue to seek to acquire land for development  
under similar arrangements. During the first eight months of 1997, the Company  
acquired 14 development properties, seven of which have been completed, and were
operating and paying rent as of September 15, 1997.                             

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MANAGEMENT

The following table sets forth the executive officers and members of the
Board of Directors of Realty Income:                                            

                                                        [Enlarge/Download Table]

NAME                                                               TITLE                                             AGE    
--------------------------  -----------------------------------------------------------------------------------  -----------
                                                                                                                            
Thomas A. Lewis...........  Vice Chairman of the Board and Chief Executive Officer; Director                             44 
Richard J. VanDerhoff.....  President and Chief Operating Officer; Director                                              44 
Gary M. Malino............  Senior Vice President, Chief Financial Officer and Treasurer                                 39 
Michael R. Pfeiffer.......  Senior Vice President, General Counsel and Secretary                                         37 
Richard G. Collins........  Senior Vice President, Portfolio Acquisitions                                                49 
Mark G. Selman............  Vice President, Portfolio Management                                                         42 
Teresa H. Miller..........  Vice President, Corporate Communications and Investor Relations                              45 
William E. Clark..........  Chairman of the Board; Director                                                              60 
Donald R. Cameron.........  Director                                                                                     57 
Roger P. Kuppinger........  Director                                                                                     56 
Michael D. McKee..........  Director                                                                                     51 
Willard H. Smith Jr.......  Director                                                                                     60 

   Set forth below is a summary of the business experience of the above-listed
persons.                                                                        

 THOMAS A. LEWIS has been Chief Executive Officer of the Company since May
1997, the Vice Chairman of the Board of Directors and a Director of the Company 
since September 1993 and had been with R.I.C. Advisor from 1987 until the merger
of R.I.C. Advisor with the Company on August 17, 1995 (the "Merger"). From      
September 1993 to May 1997, he served as Vice President, Capital Markets. Prior 
to joining R.I.C. Advisor, he served in various capacities, including Senior    
Vice President with Johnstown Capital, a real estate management and syndication 
company (1982-1987), an Investment Specialist with Sutro & Co., a member of the 
New York Stock Exchange (1979-1982), and was employed by the Procter & Gamble   
Company (1974-1979). He graduated from Chaminade University of Hawaii, B.A.     

RICHARD J. VANDERHOFF has been President and Chief Operating Officer of 
Realty Income since November 1994 and a Director of the Company since July 1996 
and had been with R.I.C. Advisor from 1987 until the Merger. From August 1994 to
November 1994, he served as general counsel of the Company. Prior to 1987, he   
was employed as Vice President, General Counsel and Secretary of FNCO           
Corporation, an owner and operator of community newspaper companies located     
throughout the midwest United States (1984-1987) and was in private law practice
specializing in real property and business law (1980-1984). He graduated from   
Jacksonville University, B.S., and the University of San Diego School of Law,   
J.D.                                                                            

 GARY M. MALINO has been Senior Vice President of the Company since August
1997, the Chief Financial Officer of the Company since August 1994 and the      
Treasurer of the Company since August 1995 and had been with R.I.C. Advisor from
1985 until the Merger. He also held the position of Vice President of the       
Company from August 1995 to August 1997, when his title was changed to Senior   
Vice President. Prior to joining R.I.C. Advisor in 1985, he was a Certified     
Public Accountant with Kendall & Forman, an accountancy corporation (1981-1985) 
and Assistant Controller with McMillin Development Company, a real estate       
development company (1979-1981). He graduated from San Diego State University,  
B.S.                                                                            

MICHAEL R. PFEIFFER has been Senior Vice President of the Company since 
August 1997 and the General Counsel and Secretary of the Company since August   
1995 and had been with R.I.C. Advisor from 1990 until the Merger. He also served
as Vice President of the Company from August 1995 to August 1997, when his title
was changed to Senior Vice President. Prior to joining R.I.C. Advisor he was in 
private practice specializing in real estate transactional law (1987-1990), and 
was employed as Associate Counsel with First American Title Insurance Company   
(1986-1987). He graduated from the University of Rhode Island, B.S., and the    
University of San Diego School of Law, J.D. He is a licensed attorney and member
of the State Bar of California and the State Bar of Florida.                    

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    RICHARD G. COLLINS has been Senior Vice President, Portfolio Acquisitions of
the Company since August 1997 and had been with R.I.C. Advisor from 1990 until  
the Merger. He also served as Vice President, Portfolio Acquisitions from June  
1997 to August 1997, when his title was changed to Senior Vice President,       
Portfolio Acquisitions. From August 1995 to June 1997, he served as Vice        
President, Portfolio Management. Prior to joining R.I.C. Advisor, he was        
involved as a principal in the acquisition and sale of land and commercial real 
estate and a general partner for land and commercial real estate partnerships   
(1979-1990) and a leasing and sales specialist in the Office Properties Division
for Grubb & Ellis Commercial Real Estate Services (1974-1979). He graduated from
San Diego State University, B.S.                                                

   MARK G. SELMAN has been Vice President, Portfolio Management of the Company
since August 1997, and Director, Portfolio Management of the Company since April
1997. Prior to joining Realty Income, he was with the Real Estate Consulting    
Group of KPMG Peat Marwick LLP from September 1989 to April 1997 and was a      
Senior Manager from July 1995 to April 1997. From 1983 to 1988, he was an       
investment advisor and registered representative for the investment firms of    
Wedbush, Noble, Cook (1983-1986) and Kidder Peabody (1986-1988). He graduated   
from San Diego State University with a B.S. in Finance, a B.A. in Psychology,   
and a Masters in Business Administration.                                       

TERESA H. MILLER has been Vice President, Corporate Communications and  
Investor Relations of the Company since August 1997, and Director, Corporate    
Communications and Investors Relations of the Company since June 1997. Prior to 
joining Realty Income, she was a Director of Corporate Communications for       
Mentus, Inc., an advertising and public relations firm, from January 1992 to May
1997. From September 1981 to November 1984, she was an investment advisor and   
registered representative with the investment firm of PaineWebber. She graduated
from Pepperdine University with a B.S. in Finance and Business Administration.  

WILLIAM E. CLARK has been the Chairman of the Board of Directors and a  
Director of the Company since September 1993 and served as Chief Executive      
Officer of the Company from September 1993 to May 1997. He was a co-founder and 
had been a director and an officer of R.I.C. Advisor, Inc. from 1969 until the  
Merger with Realty Income Corporation. He has been involved as a principal in   
commercial real estate acquisition, development, management and sales for over  
30 years. His involvement includes land acquisition, tenant lease negotiations, 
construction and sales of prime commercial properties for regional and national 
fast-food restaurant, automotive and retail chain store operations throughout   
the United States.                                                              

  DONALD R. CAMERON has been a Director of the Company since August 1994 and
is a co-founder and President of Cameron, Murphy & Spangler, Inc., a securities 
broker-dealer firm located in Pasadena, California. He graduated from the       
University of Glasgow, Scotland, B.Sc. Prior to founding Cameron, Murphy &      
Spangler in 1975, he worked at the securities brokerage firm of Glore Forgan    
Staats, Inc. and its successors (1969-1975). He is currently a director of Ayr  
United Football and Athletic Club, Ltd. Mr. Cameron is chairman of the          
Compensation Committee and is a member of the Audit Committee, the Special      
Committee and the Corporate Governance Committee.                               

   ROGER P. KUPPINGER has been a Director of the Company since August 1994 and
is a self-employed investment banker and financial advisor and is an active     
investor in both private and public companies. Prior to March 1994, he was a    
Managing Director at the investment banking firm Sutro & Co. Inc. He graduated  
from Northwestern University, B.S. and M.B.A., and from LaSalle University in   
Chicago, LL.B. Prior to joining Sutro in 1969, he worked at First Interstate    
Bank, formerly named United California Bank (1964-1969). He has served on over  
ten boards of directors for both public and private companies, and currently    
serves on the board of directors of BRE Properties, Inc. Mr. Kuppinger is       
chairman of the Audit Committee and is a member of the Compensation Committee,  
the Special Committee and the Corporate Governance Committee.                   

  MICHAEL D. MCKEE has been a Director of the Company since August 1994, has
been Executive Vice President of The Irvine Company since March 1994 and has    
served as Chief Financial Officer of The Irvine Company since January 1997.     
Prior thereto, he was a partner in the law firm of Latham & Watkins. He         
graduated from Azusa Pacific University, B.A., University of Southern           
California, M.A., and University of                                             

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California at Los Angeles, J.D. His business and legal experience includes      
numerous acquisition and disposition transactions, as well as a variety of      
public and private offerings of equity and debt securities. He is currently a   
member of the board of directors of Health Care Property Investors, Inc., Circus
Circus Enterprises, Inc. and Irvine Apartment Communities, Inc. Mr. McKee is    
chairman of the Special Committee and is a member of the Compensation Committee,
the Audit Committee and the Corporate Governance Committee.                     

  WILLARD H. SMITH JR has been a Director of the Company since July 1996 and
was the Managing Director, Equity Capital Markets Division, of Merrill Lynch &  
Co. from 1983 until his recent retirement. Prior to joining Merrill Lynch in    
1979, he was employed by F. Eberstadt & Co. (1971 - 1979). Mr. Smith also serves
on the board of directors of five investment companies: Cohen & Steers Realty   
Shares; Cohen & Steers Realty Income Fund; Cohen & Steers Total Return Realty   
Fund; Cohen & Steers Special Equity Fund, Inc. and Cohen & Steers Equity Income 
Fund. Additionally, he is a member of the board of directors of Essex Property  
Trust and Highwoods Property Trust, two NYSE-listed REITs, and Willis Lease     
Finance Corporation, a Nasdaq-listed company. Mr. Smith is chairman of the      
Corporate Governance Committee and is a member of the Audit Committee, the      
Special Committee and the Compensation Committee.                               

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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS TO HOLDERS OF COMMON STOCK 

  The following summary of certain U.S. federal income tax considerations to
holders of Common Stock is based on current law, is for general information     
only, and is not tax advice. This discussion does not purport to deal with all  
aspects of taxation that may be relevant to particular stockholders in light of 
their personal investment or tax circumstances, or to certain types of          
stockholders subject to special treatment under the federal income tax laws,    
including, without limitation, insurance companies, tax exempt organizations    
(except to the extent discussed under the heading "--Taxation of Certain        
Tax-Exempt Stockholders"), stockholders holding Common Stock as part of a       
conversion transaction, as part of a hedge or hedging transaction, or as a      
position in a straddle for tax purposes, certain financial institutions,        
broker-dealers, foreign corporations, foreign partnerships and persons who are  
not citizens or residents of the United States (except to the extent discussed  
under the heading "--Taxation of Non-U.S. Stockholders"). This discussion should
be read in conjunction with the discussion under "Certain Federal Income Tax    
Considerations" in the Prospectus. In addition, the summary below does not      
consider the effect of any foreign, state, local or other tax laws that may be  
applicable to prospective purchasers of Common Stock.                           

  This Prospectus Supplement does not address the taxation of the Company or
the impact on the Company of its election to be taxed as a REIT. The federal    
income tax treatment of the Company is set forth in the Prospectus under the    
heading entitled "Certain Federal Income Tax Considerations." The discussion set
forth below assumes that the Company qualifies as a REIT under the Code. If in  
any taxable year the Company were to fail to qualify as a REIT, the Company     
would not be allowed a deduction for dividends paid to stockholders in computing
taxable income and would be subject to federal income tax on its taxable income 
at regular corporate rates. As a result, the funds available for distribution to
the Company's stockholders would be reduced. See "Risk Factors--Risks Relating  
to Qualification and Operations as a REIT" herein and "Certain Federal Income   
Tax Considerations--Failure to Qualify" in the Prospectus.                      

    EACH INVESTOR IS ADVISED TO CONSULT THE PROSPECTUS FOR INFORMATION REGARDING
THE FEDERAL INCOME TAX CONSIDERATIONS TO THE COMPANY OF ITS ELECTION TO BE TAXED
AS A REIT. EACH INVESTOR IS ALSO ADVISED TO CONSULT HIS OR HER OWN TAX ADVISOR  
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE ACQUISITION,       
OWNERSHIP AND SALE OF THE COMMON STOCK OF THE COMPANY. INCLUDING THE FEDERAL,   
STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP 
AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.                       

TAXATION OF TAXABLE U.S. STOCKHOLDERS                                           

As used herein, the term "U.S. Stockholder" means a holder of shares of 
Common Stock who (for United States Federal income tax purposes) (i) is a       
citizen or resident of the United States, (ii) is a corporation, partnership or 
other entity created or organized in or under the laws of the United States or  
of any political subdivision thereof, (iii) is an estate the income of which is 
subject to United States Federal income taxation regardless of its source, or   
(iv) is a trust whose administration is subject to the primary supervision of a 
United States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust. Notwithstanding the
preceding sentence, to the extent provided in regulations, certain trusts in    
existence on August 20, 1996, and treated as United States persons prior to such
date that elect to continue to be treated as United States persons, shall also  
be considered U.S. Stockholders.                                                

As long as the Company qualifies as a REIT, distributions made to the   
Company's taxable U.S. Stockholders out of current or accumulated earnings and  
profits (and not designated as capital gain dividends) will be taxable to them  
as ordinary income and will not be eligible for the dividends received deduction
in the case of taxable U.S. Stockholders that are corporations. Distributions   
that are properly designated as capital gain dividends will be taxable to       
taxable U.S. Stockholders as gain (to the extent they do not exceed the         
Company's actual net capital gain for the taxable year) from the sale or        
disposition of a capital asset held for more than one year, without regard to   
the period for which the U.S. Stockholder has held its Common Stock. It is not  
clear whether such amounts will be taxable at mid-term capital gain rates       

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(applicable to gains from the sale of assets held for more than one year but not
more than eighteen months), long-term capital gain rates (applicable to gains   
from the sale of capital assets held for more than eighteen months), or some    
other rate. This uncertainty may be clarified by future legislation or          
regulations. However, U.S. Stockholders that are corporations may be required to
treat up to 20% of certain capital gain dividends as ordinary income.           
Distributions not designated as capital gain dividends and in excess of current 
or accumulated earnings and profits will not be currently taxable to a U.S.     
Stockholder to the extent that they do not exceed the adjusted tax basis of the 
U.S. Stockholder's shares, but rather will reduce the adjusted basis of such    
shares. To the extent that such distributions exceed the adjusted basis of a    
holder's shares they will be included in income as capital gain (and, in the    
case of a taxable U.S. Stockholder who is an individual, long-term capital gain 
if the shares have been held for more than eighteen months, mid-term capital    
gain if the shares have been held for more than one year but not more than      
eighteen months, or short-term capital gain if the shares have been held for one
year or less) assuming the shares are a capital asset in the hands of the       
holder. In addition, any dividend declared by the Company in October, November  
or December of any year payable to a stockholder of record on a specified date  
in any such month shall be treated as both paid by the Company and received by  
the stockholder on December 31 of such year, provided that the dividend is      
actually paid by the Company during January of the following calendar year.     
Stockholders may not include in their individual income tax returns any net     
operating losses or capital losses of the Company.                              

 If the Company elects to retain, rather than distribute as a capital gain
dividend, its net long-term capital gains, the Company would pay tax on such    
retained net long-term capital gains. In addition, for tax years of the Company 
beginning on or after January 1, 1998, to the extent designated by the Company, 
a taxable U.S. Stockholder generally would (i) include its proportionate share  
of such undistributed long-term capital gains in computing its long-term capital
gains in its return for its taxable year in which the last day of the Company's 
taxable year falls (subject to certain limitations as to the amount so          
includable), (ii) be deemed to have paid the capital gains tax imposed on the   
Company on the designated amounts included in such taxable U.S. Stockholder's   
long-term capital gains, (iii) receive a credit or refund for such amount of tax
deemed paid by it, (iv) increase the adjusted basis of its shares of Common     
Stock by the difference between the amount of such includable gains and the tax 
deemed to have been paid by it, and (v) in the case of a taxable U.S.           
Stockholder that is a corporation, appropriately adjust its earnings and profits
for the retained capital gains in accordance with Treasury Regulations to be    
prescribed by the IRS.                                                          

    Distributions made by the Company and gain arising from the sale or exchange
by a taxable U.S. Stockholder of shares of Common Stock will not be treated as  
passive activity income, and, as a result, such stockholders generally will not 
be able to apply any "passive losses" against such income or gain. Distributions
made by the Company (to the extent they do not constitute a return of capital)  
generally will be treated as investment income for purposes of computing the    
investment income limitation. Gain arising from the sale or other disposition of
Common Stock, however, will not be treated as investment income under certain   
circumstances.                                                                  

  Upon the sale or other disposition of shares of Common Stock, gain or loss
will be recognized by a taxable U.S. Stockholder in an amount equal to the      
difference between (i) the amount of cash and fair market value of any property 
received on such sale or other disposition, and (ii) the taxable U.S.           
Stockholder's adjusted basis in the Common Stock. Such gain or loss will be     
capital gain or loss if the shares of Common Stock have been held by the U.S.   
Stockholder as a capital asset, and, in the case of a taxable U.S. Stockholder  
who is an individual, will be mid-term or long-term gain or loss if such shares 
have been held for more than one year or eighteen months, respectively. In      
general, any loss upon a sale or exchange of shares by a taxable U.S.           
Stockholder who has held such shares for six months or less (after applying     
certain holding period rules) will be treated as a long-term capital loss to the
extent of distributions from the Company required to be treated by such taxable 
U.S. Stockholder as long-term capital gain.                                     

BACK-UP WITHHOLDING                                                             

Information concerning the amount of dividends paid during each calendar
year, and the amount of tax withheld, if any, will be reported to the Company's 
taxable U.S. Stockholders and the IRS. Under the backup withholding rules, a    
taxable U.S. Stockholder may be subject to backup withholding at the rate of 31%
with respect to dividends paid unless such stockholder (a) is a corporation or  
comes within certain                                                            

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other exempt categories and, when required, demonstrates this fact, or (b)      
provides a taxpayer identification number, certifies as to no loss of exemption 
from backup withholding, and otherwise complies with applicable requirements of 
the backup withholding rules. A taxable U.S. Stockholder that does not provide  
his correct taxpayer identification number may also be subject to penalties     
imposed by the IRS. Any amount paid as backup withholding will be creditable    
against the taxable U.S. Stockholder's income tax liability. In addition, the   
Company may be required to withhold a portion of capital gain distributions to  
any taxable U.S. Stockholders who fail to certify their non-foreign status to   
the Company. See "--Taxation of Non-U.S. Stockholders."                         

TAXATION OF CERTAIN TAX-EXEMPT STOCKHOLDERS                                     

  Generally, a tax-exempt investor that is exempt from tax on its investment
income, such as an individual retirement account ("IRA") or a 401(k) plan, that 
holds the Common Stock as an investment will not be subject to tax on           
distributions paid by the Company. However, if such tax-exempt investor is      
treated as having purchased its Common Stock with borrowed funds, some or all of
its distributions from the Common Stock will be subject to tax. In addition,    
under some circumstances certain pension plans (including 401(k) plans but not  
including IRAs and government pension plans) that own more than 10% (by value)  
of the Company's outstanding Common Stock, could be subject to tax on a portion 
of their Common Stock dividends even if their Common Stock is held for          
investment and is not treated as acquired with borrowed funds. The Ownership    
Limit, however, should generally prevent this result (see "Restrictions on      
Ownership and Transfers of Capital Stock" in the Prospectus).                   

TAXATION OF NON-U.S. STOCKHOLDERS                                               

  The rules governing United States federal income taxation of the ownership
and disposition of stock by persons that are, for purposes of such taxation,    
nonresident alien individuals, foreign corporations, foreign partnerships or    
foreign estates or trusts (collectively, "Non-U.S. Stockholders") are complex,  
and no attempt is made herein to provide more than a brief summary of such      
rules. Accordingly, the discussion does not address all aspects of United States
federal income tax and does not address state, local or foreign tax consequences
that may be relevant to a Non-U.S. Stockholder in light of its particular       
circumstances, including, for example, if the investment in the Company is      
connected to the conduct by a Non-U.S. Stockholder of a United States trade or  
business. In addition, this discussion is based on a current law, which is      
subject to change, and assumes that the Company qualifies for taxation as a     
REIT. Prospective Non-U.S. Stockholders should consult with their own tax       
advisers to determine the impact of federal, state, local and foreign income tax
laws with regard to an investment in Common Stock, including any reporting      
requirements.                                                                   

   DISTRIBUTIONS.  Distributions by the Company to a Non-U.S. Stockholder that
are neither attributable to gain from sales or exchanges by the Company of      
United States real property interests nor designated by the Company as capital  
gains dividends will be treated as dividends of ordinary income to the extent   
that they are made out of current or accumulated earnings and profits of the    
Company. Such distributions ordinarily will be subject to withholding of United 
States federal income tax on a gross basis (that is, without allowance of       
deductions) at a 30% rate or such lower rate as may be specified by an          
applicable income tax treaty, unless the dividends are treated as effectively   
connected with the conduct by the Non-U.S. Stockholder of a United States trade 
or business or, if an income tax treaty applies, as attributable to a United    
States permanent establishment of the Non-U.S. Stockholder. Dividends that are  
effectively connected with such a trade or business or are attributable to such 
United States permanent establishment will be subject to tax on a net basis     
(that is, after allowance of deductions) at graduated rates, in the same manner 
as U.S. Stockholders are taxed with respect to such dividends and are generally 
not subject to withholding. Any such dividends received by a Non-U.S.           
Stockholder that is a corporation may also be subject to an additional branch   
profits tax at a 30% rate or such lower rate as may be specified by an          
applicable income tax treaty.                                                   

   Pursuant to current Treasury Regulations, dividends paid to an address in a
country outside the United States are generally presumed to be paid to a        
resident of such country for purposes of determining the applicability of       
withholding discussed above and the applicability of a tax treaty rate. Under   
proposed Treasury Regulations, not currently in effect, however, a Non-U.S.     
Stockholder who wished to claim the                                             

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benefit of an applicable treaty rate would be required to satisfy certain       
certification and other requirements. Under certain treaties, lower withholding 
rates generally applicable to dividends do not apply to dividends from a REIT,  
such as the Company. Certain certification and disclosure requirements must be  
satisfied to be exempt from withholding under the effectively connected income  
and permanent establishment exemptions discussed above.                         

 Distributions in excess of current or accumulated earnings and profits of
the Company will not be taxable to a Non-U.S. Stockholder to the extent that    
they do not exceed the adjusted basis of the stockholder's Common Stock, but    
rather will reduce the adjusted basis of such stock. For FIRPTA withholding     
purposes (discussed below), such distributions (I.E., distributions that are not
made out of earnings and profits) will be treated as consideration for the sale 
or exchange of shares of Common Stock. To the extent that such distributions    
exceed the adjusted basis of a Non-U.S. Stockholder's Common Stock, they will   
give rise to gain from the sale or exchange of his stock, the tax treatment of  
which is described below. For withholding purposes, the Company is required to  
treat all distributions as if made out of current or accumulated earnings and   
profits. However, amounts thus withheld are generally refundable if it is       
subsequently determined that such distribution was, in fact, in excess of       
current or accumulated earnings and profits of the Company. A Non-U.S.          
Stockholder may obtain such a refund by filing the appropriate claim for refund 
with the IRS.                                                                   

  Distributions to a Non-U.S. Stockholder that are designated by the Company
at the time of distribution as capital gains dividends (other than those arising
from the disposition of a United States real property interest) generally will  
not be subject to United States federal income taxation, unless (i) investment  
in the Common Stock is effectively connected with the Non-U.S. Stockholder's    
United States trade or business (or, if an income tax treaty applies, is        
attributable to a United States permanent establishment of the Non-U.S.         
Stockholder), in which case the Non-U.S. Stockholder will be subject to the same
treatment as U.S. Stockholders with respect to such gain (except that a         
stockholder that is a foreign corporation may also be subject to the 30% branch 
profits tax, as discussed above) or (ii) the Non-U.S. Stockholder is a          
nonresident alien individual who is present in the United States for 183 days or
more during the taxable year and has a "tax home" in the United States, in which
case the nonresident alien individual will be subject to a 30% tax on the       
individual's capital gains.                                                     

  Distributions to a Non-U.S. Stockholder that are attributable to gain from
sales or exchanges by the Company of United States real property interests will 
cause the Non-U.S. Stockholder to be treated as recognizing such gain as income 
effectively connected with a United States trade or business. Non-U.S.          
Stockholders would thus generally be entitled to offset its gross income by     
allowable deductions and would pay tax on the resulting taxable income at the   
same rates applicable to domestic stockholders (subject to a special alternative
minimum tax in the case of nonresident alien individuals). Also, such gain may  
be subject to a 30% branch profits tax in the hands of a Non-U.S. Stockholder   
that is a corporation and is not entitled to treaty relief or exemption, as     
discussed above. The Company is required to withhold 35% of any such            
distribution. That amount is creditable against the Non-U.S. Stockholder's      
United States Federal income tax liability. To the extent that such withholding 
exceeds the actual tax owed by the Non-U.S. Stockholder, the Non-U.S.           
Stockholder may claim a refund from the IRS.                                    

 The Company or any nominee (E.G., a broker holding shares in street name)
may rely on a certificate of non-foreign status on Form W-8 or Form W-9 to      
determine whether withholding is required on gains realized from the disposition
of United States real property interests. A domestic person who holds shares of 
Common Stock on behalf of a Non-U.S. Stockholder will bear the burden of        
withholding.                                                                    

 SALE OF COMMON STOCK.  Gain recognized by a Non-U.S. Stockholder upon the
sale or exchange of shares of Common Stock generally will not be subject to     
United States taxation unless such shares constitute a "United States real      
property interest" within the meaning of the Foreign Investment in Real Property
Tax Act of 1980 ("FIRPTA"). The Common Stock will not constitute a "United      
States real property interest" so long as the Company is a "domestically        
controlled REIT." A "domestically controlled REIT" is a REIT in which at all    
times during a specified testing period less than 50% in value of its stock is  
held directly or indirectly by Non-U.S. Stockholders. The Company believes that 
it is a "domestically controlled REIT," and therefore that the sale of shares of
Common Stock are not subject to taxation under FIRPTA. However, because the     
shares of Common Stock are publicly traded, no assurance can be given           

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that the Company will continue to be a "domestically-controlled REIT."          
Notwithstanding the foregoing, gain from the sale or exchange of shares of      
Common Stock not otherwise subject to FIRPTA will be taxable to a Non-U.S.      
Stockholder if (i) investment in the stock is effectively connected with the    
Non-U.S. Stockholder's United States trade or business (or, if an income tax    
treaty applies, is attributable to a United States permanent establishment of   
the Non-U.S. Stockholder), or (ii) the Non-U.S. Stockholder is a nonresident    
alien individual who is present in the United States for 183 days or more during
the taxable year and has a "tax home" in the United States. In such case, the   
nonresident alien individual will be subject to a 30% tax on the amount of such 
individual's gain.                                                              

If the Company does not qualify as or ceases to be a                    
"domestically-controlled REIT," gain arising from the sale or exchange by a     
Non-U.S. Stockholder of shares of Common Stock would be subject to United States
taxation under FIRPTA as a sale of a "United States real property interest"     
unless the shares are "regularly traded" (as defined by applicable Treasury     
Regulations) on an established securities market (E.G., the New York Stock      
Exchange) and the selling Non-U.S. Stockholder held no more than 5% (after      
applying certain constructive ownership rules) of the shares of Common Stock    
during the shorter of (i) the period during which the taxpayer held such shares 
or (ii) the 5-year period ending on the date of the disposition of such shares. 
If gain on the sale or exchange of shares of Common Stock were subject to       
taxation under FIRPTA, the Non-U.S. Stockholder would be subject to regular     
United States income tax with respect to such gain in the same manner as a U.S. 
Stockholder (subject to any applicable alternative minimum tax, a special       
alternative minimum tax in the case of nonresident alien individuals and the    
possible application of the 30% branch profits tax in the case of foreign       
corporations), and the purchaser of the stock would be required to withhold and 
remit to the IRS 10% of the purchase price. The 10% withholding tax will not    
apply if the shares are "regularly traded" in an established securities market. 

 BACKUP WITHHOLDING TAX AND INFORMATION REPORTING.  Backup withholding tax
(which generally is a withholding tax imposed at the rate of 31% on certain     
payments to persons that fail to furnish certain information under the United   
States information reporting requirements) and information reporting will       
generally not apply to distributions paid to Non-U.S. Stockholder outside the   
United States that are treated as (i) dividends subject to the 30% (or lower    
treaty rate) withholding tax discussed above, (ii) capital gains dividends or   
(iii) distributions attributable to gain from the sale or exchange by the       
Company of United States real property interests. As a general matter, backup   
withholding and information reporting will not apply to a payment of the        
proceeds of a sale of Common Stock by or through a foreign office of a foreign  
broker. Information reporting (but not backup withholding) will apply, however, 
to a payment of the proceeds of a sale of Common Stock by a foreign office of a 
broker that (a) is a United States person, (b) derives 50% or more of its gross 
income for certain periods from the conduct of a trade or business in the United
States or (c) is a "controlled foreign corporation" (generally, a foreign       
corporation controlled by United States stockholders) for United States tax     
purposes, unless the broker has documentary evidence in its records that the    
holder is a Non-U.S. Stockholder and certain other conditions are met, or the   
stockholder otherwise establishes an exemption. Payment to or through a United  
States office of a broker of the proceeds of a sale of Common Stock is subject  
to both backup withholding and information reporting unless the stockholder     
certifies under penalty of perjury that the stockholder is a Non-U.S.           
Stockholder, or otherwise establishes an exemption. Backup withholding is not an
additional tax. A Non-U.S. Stockholder may obtain a refund of any amounts       
withheld under the backup withholding rules by filing the appropriate claim for 
refund with the IRS.                                                            

 NEW PROPOSED REGULATIONS.  The United States Treasury has recently issued
proposed Treasury Regulations regarding the withholding and information         
reporting rules discussed above. In general, the proposed Treasury Regulations  
do not alter the substantive withholding and information reporting requirements 
but unify current certification procedures and forms and clarify and modify     
reliance standards. If finalized in their current form, the proposed Treasury   
Regulations would generally be effective for payments made after December 31,   
1997, subject to certain transition rules. IRS officials, however, have stated  
that such Treasury Regulations, when finalized, will be effective for payments  
made after December 31, 1998.                                                   

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UNDERWRITING

  Subject to the terms and conditions set forth in a purchase agreement (the
"U.S. Purchase Agreement"), the Company has agreed to sell to the U.S.          
Underwriters named below (the "U.S. Underwriters"), and the U.S. Underwriters   
have severally agreed to purchase, the number of shares of Common Stock set     
forth opposite their respective names below.                                    

                                                        [Enlarge/Download Table]

                                                                                   NUMBER OF 
                                   UNDERWRITER                                       SHARES  
---------------------------------------------------------------------------------  ----------
                                                                                             
Merrill Lynch, Pierce, Fenner & Smith                                                        
          Incorporated...........................................................            
A.G. Edwards & Sons, Inc.........................................................            
PaineWebber Incorporated.........................................................            
Sutro & Co. Incorporated.........................................................            
Wheat, First Securities, Inc.....................................................            
                                                                                   ----------
          Total..................................................................   2,160,000
                                                                                   ----------
                                                                                   ----------

  The Company has also entered into a purchase agreement (the "International
Purchase Agreement" and, together with the U.S. Purchase Agreement, the         
"Agreements") with Merrill Lynch International, A.G. Edwards & Sons, Inc.,      
PaineWebber International (U.K.) Ltd., Sutro & Co. Incorporated and Wheat, First
Securities, Inc. (the "International Managers"). Subject to the terms and       
conditions set forth in the International Purchase Agreement, the Company has   
agreed to sell to the International Managers, and the International Managers    
have severally agreed to purchase, an aggregate of 540,000 shares of Common     
Stock. The initial public offering price per share and the underwriting discount
per share are identical under the U.S. Purchase Agreement and the International 
Purchase Agreement.                                                             

    In the U.S. Purchase Agreement and the International Purchase Agreement, the
several U.S. Underwriters and the several International Managers (collectively, 
the "Underwriters"), respectively, have agreed, subject to the terms and        
conditions set forth therein, to purchase all of the shares of Common Stock     
being sold pursuant to such Agreement if any of the shares of Common Stock being
sold pursuant to such Agreement are purchased. The U.S. Purchase Agreement      
provides that, in the event of a default by a U.S. Underwriter, the purchase    
commitments of the non-defaulting U.S. Underwriters may in certain circumstances
be increased, and the International Purchase Agreement provides that, in the    
event of a default by an International Manager, the purchase commitments of the 
non-defaulting International Managers may in certain circumstances be increased.
The closing with respect to the sale of the shares of Common Stock pursuant to  
the U.S. Purchase Agreement is a condition to the closing with respect to the   
sale of the shares of Common Stock pursuant to the International Purchase       
Agreement, and the closing with respect to the sale of the shares of Common     
Stock pursuant to the International Purchase Agreement is a condition to the    
closing with respect to the sale of the shares of Common Stock pursuant to the  
U.S. Purchase Agreement.                                                        

 The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") which provides for the
coordination of their activities. Under the terms of the Intersyndicate         
Agreement, the U.S. Underwriters and the International Managers are permitted to
sell shares of Common Stock to each other. Pursuant to the Intersyndicate       
Agreement, sales may be made between the U.S. Underwriters and the International
Managers of such number of shares of Common Stock as may be mutually agreed. The
price of any shares of Common Stock so sold shall be the initial public offering
price, less an amount not greater than the selling concession.                  

  Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and
any dealer to whom they sell shares of Common Stock will agree to offer to sell 
or sell shares of Common Stock only to persons whom they believe are United     
States Persons or Canadian Persons (as defined in the Intersyndicate Agreement) 
or to persons whom they believe intend to reoffer or resell the same to United  
States Persons or Canadian Persons, and the International Managers and any bank,
broker or dealer to whom they sell                                              

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shares of Common Stock will agree not to offer to sell or sell shares of Common 
Stock to persons whom they believe to be United States Persons or Canadian      
Persons or to persons whom they believe intend to reoffer or resell the same to 
United States Persons or Canadian Persons, except in each case for transactions 
pursuant to the Intersyndicate Agreement which, among other things, permits the 
Underwriters to purchase from each other and offer for resale such number of    
shares of Common Stock as the selling Underwriter or Underwriters and the       
purchasing Underwriter or Underwriters may agree.                               

  The U.S. Underwriters have advised the Company that they propose initially
to offer the shares of Common Stock offered hereby to the public at the public  
offering price set forth on the cover page of this Prospectus Supplement and to 
certain dealers at such price less a concession not in excess of $    per share.
The U.S. Underwriters may allow, and such dealers may reallow, a discount not in
excess of $                                                                     
per share on sales to certain other dealers. After the initial public offering, 
the public offering price, concession and discount may be changed.              

   The Company has granted to the U.S. Underwriters an option, exercisable for
30 days after the date hereof, to purchase up to 324,000 additional shares of   
Common Stock and to the International Managers an option, exercisable for 30    
days after the date hereof, to purchase up to 81,000 additional shares of Common
Stock, in each case solely to cover over-allotments, if any, at the initial     
public offering price less the underwriting discount and less an amount per     
share equal to any dividends or distributions payable by the Company on the     
shares offered hereby but not payable on the shares purchased by the U.S.       
Underwriters or the International Managers, as the case may be, upon the        
exercise of such option. To the extent that the U.S. Underwriters exercise this 
option, each of the U.S. Underwriters will be obligated, subject to certain     
conditions, to purchase approximately the same percentage of such shares which  
the number of shares of Common Stock to be purchased by it shown in the         
foregoing table bears to the total number of shares of Common Stock set forth in
such table.                                                                     

The Company has agreed to indemnify the Underwriters against certain    
liabilities, including liabilities under the Securities Act.                    

  The Company has agreed that, for a period of 90 days from the date of this
Prospectus Supplement, the Company will not, without the prior written consent  
of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),        
directly or indirectly (i) offer, pledge, sell, contract to sell, sell any      
option or contract to purchase, purchase any option or contract to sell, grant  
any option, right or warrant to purchase or otherwise transfer or dispose of any
shares of Common Stock or any securities convertible into or exercisable or     
exchangeable for Common Stock or file any registration statement under the      
Securities Act with respect to the foregoing or (ii) enter into any swap or     
other agreement or transaction that transfers, in whole or in part, directly or 
indirectly, the economic consequences of ownership of Common Stock, whether any 
such swap, agreement, or other transaction described in (i) or (ii) above is to 
be settled by delivery of Common Stock, other securities, cash or otherwise. The
foregoing sentence shall not apply to (A) the Common Stock to be sold in the    
Offering, (B) any shares of Common Stock issued by the Company upon the exercise
of any option outstanding on the date of this Prospectus Supplement, (C) any    
shares of Common Stock issued or options to purchase Common Stock granted       
pursuant to existing employee benefit plans or (D) any shares of Common Stock   
issued pursuant to any non-employee director stock plan.                        

Until the distribution of the Common Stock is completed, rules of the   
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an   
exception to these rules, the U.S. Underwriters are permitted to engage in      
certain transactions that stabilize the price of the Common Stock. Such         
transactions consist of bids or purchases for the purpose of pegging, fixing or 
maintaining the price of the Common Stock.                                      

If the Underwriters create a short position in the Common Stock in      
connection with this Offering (I.E., if they sell more shares of Common Stock   
than are set forth on the cover page of this Prospectus Supplement), the U.S.   
Underwriters may reduce that short position by purchasing Common Stock in the   
open market. The U.S. Underwriters may also elect to reduce any short position  
through the exercise of all or part of the over-allotment options described     
above.                                                                          

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  In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than 
it might be in the absence of such purchases.                                   

   Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions 
described above may have on the price of the Common Stock. In addition, neither 
the Company nor any of the Underwriters makes any representation that the U.S.  
Underwriters will engage in such transactions or that such transactions, once   
commenced, will not be discontinued without notice.                             

LEGAL MATTERS 

The validity of the Common Stock to be issued in connection with the    
Offering will be passed upon for the Company by Ballard Spahr Andrews &         
Ingersoll, Baltimore, Maryland. Certain legal matters relating to the Offering  
will be passed upon for the Company by Latham & Watkins, Costa Mesa, California.
Brown & Wood LLP, San Francisco, California will act as counsel for the         
Underwriters.                                                                   

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PROSPECTUS                                                                      

$300,000,000
REALTY INCOME CORPORATION 
DEBT SECURITIES, PREFERRED STOCK AND COMMON STOCK 

------------------------

   Realty Income Corporation, a Maryland corporation (the "Company"), may from
time to time offer in one or more series (i) its debt securities (the "Debt     
Securities"), (ii) shares of its Preferred Stock, $1.00 par value per share (the
"Preferred Stock"), or (iii) shares of its Common Stock, $1.00 par value per    
share (the "Common Stock"), with an aggregate public offering price of up to    
$300,000,000 on terms to be determined at the time of offering. The Debt        
Securities, the Preferred Stock and the Common Stock (collectively, the         
"Securities") may be offered, separately or together, in separate series, in    
amounts, at prices and on terms to be set forth in one or more supplements to   
this Prospectus (each, a "Prospectus Supplement").                              

   The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and   
will include, where applicable: (i) in the case of Debt Securities, the specific
title, aggregate principal amount, currency, form (which may be registered or   
bearer, or certificated or global), authorized denominations, maturity, rate (or
manner of calculation thereof) and time of payment of interest, terms for       
redemption at the Company's option or repayment at the holder's option, terms   
for sinking fund payments, terms for conversion into shares of Preferred Stock  
or Common Stock, covenants and any initial public offering price; (ii) in the   
case of Preferred Stock, the specific designation, preferences, conversion and  
other rights, voting powers, restrictions, limitations as to transferability,   
dividends and other distributions and terms and conditions of redemption and any
initial public offering price; and (iii) in the case of Common Stock, any       
initial public offering price. In addition, such specific terms may include     
limitations on actual, beneficial or constructive ownership and restrictions on 
transfer of the Securities, in each case as may be appropriate to preserve the  
status of the Company as a real estate investment trust ("REIT") for federal    
income tax purposes. See "Restrictions on Ownership and Transfers of Capital    
Stock." The applicable Prospectus Supplement will also contain information,     
where applicable, about certain United States federal income tax considerations 
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.                                                  

   The Securities may be offered directly, through agents designated from time
to time by the Company, or to or through underwriters or dealers. If any agents 
or underwriters are involved in the sale of any of the Securities, their names, 
and any applicable purchase price, fee, commission or discount arrangement      
between or among them, will be set forth, or will be calculable from the        
information set forth, in the applicable Prospectus Supplement. See "Plan of    
Distribution." No Securities may be sold without delivery of the applicable     
Prospectus Supplement describing the method and terms of the offering of such   
Securities.                                                                     

------------------------

    THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES   
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE      
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.                                                               

------------------------

The date of this Prospectus is October 1, 1997. 

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AVAILABLE INFORMATION 

  The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance        
therewith files reports, proxy statements and other information with the        
Securities and Exchange Commission (the "Commission"). The registration         
statement on Form S-3 (of which this Prospectus is a part) (the "Registration   
Statement"), the exhibits and schedules forming a part thereof and the reports, 
proxy statements and other information filed by the Company with the Commission 
in accordance with the Exchange Act can be inspected and copied at the          
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 
20549, and at the following regional offices of the Commission: Seven World     
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained from the Public Reference Section of the Commission, 450 Fifth      
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the     
Common Stock is currently listed on the New York Stock Exchange ("NYSE") and    
similar information concerning the Company can be inspected and copied at the   
offices of the NYSE, 20 Broad Street, New York, New York 10005. Electronic      
filings made through the Commission's EDGAR filing system are publicly available
through the Commission's web site (http://www.sec.gov).                         

  The Company has filed with the Commission the Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to  
the Securities. This Prospectus does not contain all the information set forth  
in the Registration Statement, certain portions of which have been omitted as   
permitted by the Commission's rules and regulations. Statements contained in    
this Prospectus as to the contents of any contract or other document are not    
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed or incorporated by reference as an exhibit to  
the Registration Statement, each such statement being qualified in all respects 
by such reference and the exhibits and schedules thereto. For further           
information regarding the Company and the Securities, reference is hereby made  
to the Registration Statement and such exhibits and schedules, which may be     
obtained from the Commission at its principal office in Washington, D.C. upon   
payment of the fees prescribed by the Commission.                               

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

    The documents listed below have been filed by the Company under the Exchange
Act with the Commission and are incorporated herein by reference:               

      (i) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;                                                      

      (ii) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997;                                                         

   (iii) the Company's Current Report on Form 8-K dated May 5, 1997; and

      (iv) the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997.                                                          

    All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities shall be deemed to be         
incorporated by reference in this Prospectus and to be part hereof from the date
of filing such documents. Any statement contained herein or in a document       
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a  
statement contained herein (or in the applicable Prospectus Supplement) or in   
any other subsequently filed document that also is or is deemed to be           
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified  
or superseded, to constitute a part of this Prospectus. Copies of all documents 
that are incorporated herein by reference (not including the exhibits to such   
documents, unless such exhibits are specifically incorporated by reference into 
the information that this Prospectus incorporates) will be provided without     
charge to each person, including any beneficial owner, to whom this Prospectus  
is delivered, upon written or oral request. Requests should be directed to the  
Corporate Secretary of the Company, 220 West Crest Street, Escondido, California
92025 (telephone number: (760) 741-2111).                                       

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THE COMPANY 

Realty Income Corporation, a Maryland corporation (the "Company"), is a 
fully integrated, self-administered and self-managed real estate investment     
trust ("REIT") that focuses on the acquisition of long-term net lease           
properties. The Company's philosophy is to employ a strategy of acquiring,      
owning and managing properties that are preleased on a long-term net lease basis
to national and regional chain operators in a variety of consumer service and   
retail industries throughout the United States. As of August 19, 1997, the      
Company directly owned controlling interests in 771 properties located          
throughout the United States.                                                   

 The Company commenced operations as a REIT on August 15, 1994 through the
merger and consolidation of 25 public and private real estate limited           
partnerships (the "Consolidation"). From September 1993 until May 28, 1997, the 
Company existed as a corporation formed under the laws of the State of Delaware 
(the "Delaware Company"). In March 1997, the Company formed Realty Income of    
Maryland, Inc., a Maryland corporation and wholly-owned subsidiary of the       
Delaware Company (the "Maryland Company"), specifically for the purpose of      
reincorporating the Company under the laws of the State of Maryland (the        
"Reincorporation"). The Maryland Company conducted no business and had no       
material assets or liabilities prior to May 28, 1997. On May 28, 1997, the      
Delaware Company was merged into the Maryland Company pursuant to an Agreement  
and Plan of Merger approved by the Company's stockholders. Upon completion of   
the merger, the Maryland Company changed its name to Realty Income Corporation. 
The Reincorporation did not result in any change in the Company's business,     
assets or liabilities and did not result in any relocation of management or     
other employees. For a more complete description of the potential effects of the
Reincorporation, reference is hereby made to the section entitled,              
"Reincorporation of the Company in Maryland and Related Changes to the Rights of
Stockholders" of the Company's Proxy Statement filed with the Commission on     
March 28, 1997 in connection with its 1997 Annual Meeting of Stockholders, which
section is incorporated by reference herein.                                    

The Company's executive offices are located at 220 West Crest Street,   
Escondido, California 92025, and the telephone number is (760) 741-2111.        

USE OF PROCEEDS 

Unless otherwise described in the applicable Prospectus Supplement, the 
Company intends to use the net proceeds from the sale of the Securities for     
general corporate purposes, which may include the construction and acquisition  
of additional properties and other acquisition transactions, the expansion and  
improvement of certain properties in the Company's portfolio, and the repayment 
of indebtedness.                                                                

RATIOS OF EARNINGS TO FIXED CHARGES 

  The following table sets forth ratios of earnings to fixed charges for the
periods shown. The years ended December 31, 1996 and 1995 and the six months    
ended June 30, 1997 are for the Company. The results of operations used to      
compute the ratio for the year ended December 31, 1994 are comprised of those of
the combined 10 private and 15 publicly held real estate limited partnerships   
that were included in the Consolidation (collectively, the "Predecessor") from  
January 1, 1994 through August 15, 1994 and those of the Company from August 16,
1994 through December 31, 1994. The ratio shown for the year ended December 31, 
1993 is derived from the combined historical financial information of the       
Predecessor. Ratios are not shown for the year ended December 31, 1992 because  
the Predecessor did not have any                                                
fixed charges for such period.                                                  

                                                                [Download Table]

  SIX MONTHS                          YEAR ENDED DECEMBER 31,                      
ENDED JUNE 30,   ------------------------------------------------------------------
     1997             1996             1995             1994             1993      
---------------  ---------------  ---------------  ---------------  ---------------
                                                                                   
      6x               14x              10x              39x            5,865x     

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  The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of net income before       
extraordinary items plus fixed charges (excluding interest costs capitalized).  
Fixed charges consist of interest expense (including interest costs capitalized)
and the amortization of debt issuance costs. To date, the Company has not issued
any Preferred Stock; therefore, the ratios of earnings to fixed charges and     
preferred share dividends are the same as the ratios presented above.           

DESCRIPTION OF DEBT SECURITIES

GENERAL                                                                         

   The Debt Securities will be direct obligations of the Company, which may be
secured or unsecured, and which may be senior or subordinated indebtedness of   
the Company. The Debt Securities may be issued under one or more indentures,    
each dated as of a date on or before the issuance of the Debt Securities to     
which it relates and in the form that has been filed as an exhibit to the       
Registration Statement of which this Prospectus is a part or incorporated by    
reference herein by means of a post-effective amendment to the Registration     
Statement or a Form 8-K, subject to such amendments or supplements as may be    
adopted from time to time. Each such indenture (collectively, the "Indenture")  
will be entered into between the Company and a trustee (the "Trustee"), which   
may be the same Trustee. The Indenture will be subject to, and governed by, the 
Trust Indenture Act of 1939, as amended. The statements made hereunder relating 
to the Indenture and the Debt Securities are summaries of certain anticipated   
provisions thereof, do not purport to be complete and are subject to, and are   
qualified in their entirety by reference to, all provisions of the Indenture and
such Debt Securities. Capitalized terms used but not defined herein shall have  
the respective meanings set forth in the Indenture.                             

TERMS                                                                           

The particular terms of the Debt Securities offered by a Prospectus     
Supplement will be described in the particular Prospectus Supplement, along with
any applicable modifications of or additions to the general terms of the Debt   
Securities as described herein and in the applicable Indenture. Accordingly, for
a description of the terms of any series of Debt Securities, reference must be  
made to both the Prospectus Supplement relating thereto and the description of  
the Debt Securities set forth in this Prospectus. To the extent that any        
particular terms of the Debt Securities described in a Prospectus Supplement    
differ from any of the terms described herein, then such terms described herein 
shall be deemed to have been superseded by such Prospectus Supplement.          

    Except as set forth in any Prospectus Supplement, the Debt Securities may be
issued without limit as to aggregate principal amount, in one or more series, in
each case as established from time to time by the Company's Board of Directors  
or as set forth in the applicable Indenture or one or more indentures           
supplemental to the Indenture. All Debt Securities of one series need not be    
issued at the same time and, unless otherwise provided, a series may be         
reopened, without the consent of the holders of the Debt Securities of such     
series, for issuances of additional Debt Securities of such series.             

 Each Indenture will provide that the Company may, but need not, designate
more than one Trustee thereunder, each with respect to one or more series of    
Debt Securities. Any Trustee under an Indenture may resign or be removed with   
respect to one or more series of Debt Securities, and a successor Trustee may be
appointed to act with respect to such series. If two or more persons are acting 
as Trustee with respect to different series of Debt Securities, each such       
Trustee shall be a Trustee of a trust under the applicable Indenture separate   
and apart from the trust administered by any other Trustee and, except as       
otherwise indicated herein, any action described herein to be taken by a Trustee
may be taken by each such Trustee with respect to, and only with respect to, the
one or more series of Debt Securities for which it is Trustee under the         
applicable Indenture.                                                           

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 The following summaries set forth certain general terms and provisions of
the Indenture and the Debt Securities. The Prospectus Supplement relating to the
series of Debt Securities being offered will contain further terms of such Debt 
Securities, including the following specific terms:                             

(1) the title of such Debt Securities;                          

        (2) the aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;                                     

(3) the price (expressed as a percentage of the principal amount
    thereof) at which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof   
payable upon declaration of acceleration of the maturity thereof, or (if
    applicable) the portion of the principal amount of such Debt Securities that
   is convertible into Common Stock or Preferred Stock, or the method by which
any such portion shall be determined;                                   

(4) if convertible, the terms on which such Debt Securities are 
  convertible, including the initial conversion price or rate and conversion
    period and, in connection with the preservation of the Company's status as a
   REIT, any applicable limitations on the ownership or transferability of the
Common Stock or the Preferred Stock into which such Debt Securities are 
convertible;                                                            

        (5) the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;         

        (6) the rate or rates (which may be fixed or variable), or the method by
   which such rate or rates shall be determined, at which such Debt Securities
will bear interest, if any;                                             

        (7) the date or dates, or the method for determining such date or dates,
   from which any interest will accrue, the dates upon which any such interest
will be payable, the record dates for payment of such interest, or the  
    method by which any such dates shall be determined, the persons to whom such
interest shall be payable, and the basis upon which interest shall be   
calculated if other than that of a 360-day year of twelve 30-day months;

        (8) the place or places where the principal of (and premium, if any) and
  interest, if any, on such Debt Securities will be payable, where such Debt
   Securities may be surrendered for conversion or registration of transfer or
  exchange and where notices or demands to or upon the Company in respect of
such Debt Securities and the Indenture may be served;                   

       (9) the period or periods, if any, within which, the price or prices at
 which and the terms and conditions upon which such Debt Securities may be
redeemed, as a whole or in part, at the Company's option;               

        (10) the obligation, if any, of the Company to redeem, repay or purchase
   such Debt Securities pursuant to any sinking fund or analogous provision or
  at the option of a holder thereof, and the period or periods within which,
 the price or prices at which and the terms and conditions upon which such
Debt Securities will be redeemed, repaid or purchased, as a whole or in 
part, pursuant to such obligation;                                      

    (11) if other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and payable, which may be a foreign
   currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;           

    (12) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or 
   method may, but need not, be based on a currency, currencies, currency unit
  or units or composite currency or currencies) and the manner in which such
amounts shall be determined;                                            

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       (13) whether such Debt Securities will be issued in certificated and/or
 book-entry form, and, if so, the identity of the depositary for such Debt
Securities;                                                             

      (14) whether such Debt Securities will be in registered or bearer form
  and, if in registered form, the denominations thereof if other than $1,000
   and any integral multiple thereof and, if in bearer form, the denominations
thereof and terms and conditions relating thereto;                      

(15) the applicability, if any, of the defeasance and covenant  
defeasance provisions described herein or set forth in the applicable   
Indenture, or any modification thereof;                                 

       (16) any deletions from, modifications of or additions to the events of
 default or covenants of the Company with respect to such Debt Securities;

  (17) whether and under what circumstances the Company will pay any
    Additional Amounts on such Debt Securities in respect of any tax, assessment
   or governmental charge and, if so, whether the Company will have the option
to redeem such Debt Securities in lieu of making such payment;          

(18) the subordination provisions, if any, relating to such Debt
Securities;                                                             

       (19) the provisions, if any, relating to any security provided for such
Debt Securities; and                                                    

(20) any other terms of such Debt Securities.                   

   If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less   
than the entire principal amount thereof to be payable upon declaration of      
acceleration of the maturity thereof ("Original Issue Discount Securities"). In 
such cases, any material U.S. federal income tax, accounting and other          
considerations applicable to Original Issue Discount Securities will be         
described in the applicable Prospectus Supplement.                              

DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER                              

    Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and        
integral multiples thereof.                                                     

Unless otherwise described in the applicable Prospectus Supplement, the 
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at the applicable Trustee's corporate trust office, the address 
of which will be set forth in the applicable Prospectus Supplement; PROVIDED,   
HOWEVER, that, unless otherwise provided in the applicable Prospectus           
Supplement, at the Company's option, payment of interest may be made by check   
mailed to the address of the person entitled thereto as it appears in the       
applicable register for such Debt Securities or by wire transfer of funds to    
such person at an account maintained within the United States.                  

Subject to certain limitations imposed on Debt Securities issued in     
book-entry form, the Debt Securities of any series will be exchangeable for any 
authorized denomination of other Debt Securities of the same series and of a    
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the office of any transfer agent designated by the Company for such purpose. 
In addition, subject to certain limitations imposed on Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for       
conversion or registration of transfer thereof at the office of any transfer    
agent designated by the Company for such purpose. Every Debt Security           
surrendered for conversion, registration of transfer or exchange shall be duly  
endorsed or accompanied by a written instrument of transfer and the person      
requesting such transfer must provide evidence of title and identity            
satisfactory to the Company and the applicable transfer agent. No service charge
will be made for any registration of transfer or exchange of any Debt           
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. The Company   
may at any time rescind the designation of any transfer agent appointed with    
respect to the Debt Securities of any series or approve a change in the location
through which any such transfer agent acts, except that the Company will be     

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required to maintain a transfer agent in each place of payment for such series. 
The Company may at any time designate additional transfer agents with respect to
any series of Debt Securities.                                                  

    Neither the Company nor any Trustee shall be required to (a) issue, register
the transfer of or exchange Debt Securities of any series if such Debt Security 
may be among those selected for redemption during a period beginning at the     
opening of business 15 days before the mailing or first publication, as the case
may be, of notice of redemption of such Debt Securities and ending at the close 
of business on (i) if the Debt Securities of such series are issuable only in   
registered form, the day of mailing of the relevant notice of redemption or (ii)
if the Debt Securities of such series are issuable in bearer form, the day of   
the first publication of the relevant notice of redemption or, if such Debt     
Securities are also issuable in registered form and there is no such            
publication, the day of mailing of the relevant notice of redemption; (b)       
register the transfer of or exchange any Debt Security in registered form, or   
portion thereof, so selected for redemption, in whole or in part, except the    
unredeemed portion of any Debt Security being redeemed in part; or (c) exchange 
any Debt Security in bearer form so selected for redemption, except in exchange 
for a Debt Security of such series in registered form that is simultaneously    
surrendered for redemption; or (d) issue, register the transfer of or exchange  
any Debt Security that has been surrendered for repayment at the holder's       
option, except the portion, if any, of such Debt Security not to be so repaid.  

MERGER, CONSOLIDATION OR SALE OF ASSETS                                         

  Each Indenture will provide that the Company will not consolidate with, or
sell, lease or convey all or substantially all of its assets to, or merge with  
or into, any person unless (a) either the Company shall be the continuing       
entity, or the successor person (if other than the Company) formed by or        
resulting from any such consolidation or merger or which shall have received the
transfer of such assets shall be a corporation organized and existing under the 
laws of the United States or any State thereof and shall expressly assume the   
Company's obligation to pay the principal of (and premium, if any) and interest 
on all the Debt Securities issued under such Indenture and the due and punctual 
performance and observance of all the covenants and conditions contained in such
Indenture and in such Debt Securities; (b) immediately after giving effect to   
such transaction and treating any indebtedness that becomes an obligation of the
Company or any Subsidiary as a result thereof as having been incurred, and any  
liens on any property or assets of the Company or any Subsidiary that are       
incurred, created or assumed as a result thereof as having been created,        
incurred or assumed, by the Company or such Subsidiary at the time of such      
transaction, no event of default under the Indenture, and no event that, after  
notice or the lapse of time, or both, would become such an event of default,    
shall have occurred and be continuing; and (c) an officers' certificate and     
legal opinion covering such conditions shall be delivered to the Trustee.       

CERTAIN COVENANTS                                                               

 EXISTENCE.  Except as permitted under "--Merger, Consolidation or Sale of
Assets," each Indenture will require the Company to do or cause to be done all  
things necessary to preserve and keep in full force and effect its corporate    
existence, all material rights (by certificate of incorporation, by-laws and    
statute) and all material franchises; PROVIDED, HOWEVER, that the Company shall 
not be required to preserve any right or franchise if its Board of Directors    
determines that the preservation thereof is no longer desirable in the conduct  
of its business.                                                                

    MAINTENANCE OF PROPERTIES.  Each Indenture will require the Company to cause
all of its material properties used or useful in the conduct of its business or 
the business of any Subsidiary to be maintained and kept in good condition,     
repair and working order and supplied with all necessary equipment and to cause 
to be made all necessary repairs, renewals, replacements, betterments and       
improvements thereof, all as in the Company's judgment may be necessary so that 
the business carried on in connection therewith may be properly and             
advantageously conducted at all times; PROVIDED, HOWEVER, that the Company and  
its Subsidiaries shall not be prevented from selling or otherwise disposing of  
their properties for value in the ordinary course of business.                  

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    INSURANCE.  Each Indenture will require the Company to, and to cause each of
its Subsidiaries to, keep in force upon all of its properties and operations    
policies of insurance carried with responsible companies in such amounts and    
covering all such risks as shall be customary in the industry in accordance with
prevailing market conditions and availability.                                  

   PAYMENT OF TAXES AND OTHER CLAIMS.  Each Indenture will require the Company
to pay or discharge or cause to be paid or discharged, before the same shall    
become delinquent, (a) all taxes, assessments and governmental charges levied or
imposed on it or any Subsidiary or on the income, profits or property of the    
Company or any Subsidiary and (b) all lawful claims for labor, materials and    
supplies that, if unpaid, might by law become a lien upon the property of the   
Company or any Subsidiary; PROVIDED, HOWEVER, that the Company shall not be     
required to pay or discharge or cause to be paid or discharged any such tax,    
assessment, charge or claim the amount, applicability or validity of which is   
being contested in good faith by appropriate proceedings.                       

  PROVISION OF FINANCIAL INFORMATION.  Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, each Indenture will require the     
Company, within 15 days after each of the respective dates by which the Company 
would have been required to file annual reports, quarterly reports and other    
documents with the Commission if the Company were so subject, (a) to transmit by
mail to all holders of Debt Securities issued under such Indenture, as their    
names and addresses appear in the applicable register for such Debt Securities, 
without cost to such holders, copies of the annual reports, quarterly reports   
and other documents that the Company would have been required to file with the  
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company   
were subject to such Sections, (b) to file with the applicable Trustee copies of
the annual reports, quarterly reports and other documents that the Company would
have been required to file with the Commission pursuant to Section 13 or 15(d)  
of the Exchange Act if the Company were subject to such Sections, and (c) to    
supply, promptly upon written request and payment of the reasonable cost of     
duplication and delivery, copies of such documents to any prospective holder of 
such Debt Securities.                                                           

    Except as may otherwise be provided in the Prospectus Supplement relating to
any series of Debt Securities, the term "Subsidiary", as used in the Indenture, 
means with respect to the Company, any other Person of which more than 50% of   
(i) the equity or other ownership interests or (ii) the total voting power of   
shares of capital stock or other ownership interests entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,        
managers, trustees or general or managing partners thereof is at the time owned 
by the Company or one or more of the other Subsidiaries of the Company or a     
combination thereof.                                                            

   ADDITIONAL COVENANTS.  Any additional covenants of the Company with respect
to any of the series of Debt Securities will be set forth in the Prospectus     
Supplement relating thereto.                                                    

EVENTS OF DEFAULT, NOTICE AND WAIVER                                            

  Unless otherwise provided in the applicable Indenture, each Indenture will
provide that the following events are "events of default" with respect to any   
series of Debt Securities issued thereunder: (a) default for 30 days in the     
payment of any installment of interest on any Debt Security of such series; (b) 
default in the payment of the principal of (or premium, if any, on) any Debt    
Security of such series when due, whether at stated maturity or by declaration  
of acceleration, notice of redemption, notice of option to elect repayment or   
otherwise; (c) default in making any sinking fund payment as required for any   
Debt Security of such series; (d) default in the performance of any other       
covenant of the Company contained in the Indenture (other than a covenant added 
to the Indenture solely for the benefit of a series of Debt Securities issued   
thereunder other than such series), continued for 60 days after written notice  
to the Company by the Trustee or the holders of at least 25% in principal amount
of the outstanding Debt Securities of such series; (e) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed by the     
Company or any of its Subsidiaries (including obligations under leases required 

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to be capitalized on the balance sheet of the lessee under generally accepted   
accounting principles, but not including any indebtedness or obligations for    
which recourse is limited to property purchased) in an aggregate principal      
amount in excess of $25,000,000 or under any mortgage, indenture or instrument  
under which there may be issued or by which there may be secured or evidenced   
any indebtedness for money borrowed by the Company or any of its Subsidiaries   
(including such leases, but not including such indebtedness or obligations for  
which recourse is limited to property purchased) in an aggregate principal      
amount in excess of $25,000,000, whether such indebtedness exists at the date of
the relevant Indenture or shall thereafter be created, which default shall have 
resulted in such indebtedness becoming or being declared due and payable prior  
to the date on which it would otherwise have become due and payable or such     
obligations being accelerated, without such acceleration having been rescinded  
or annulled; (f) certain events of bankruptcy, insolvency or reorganization, or 
court appointment of a receiver, liquidator or trustee of the Company or any    
Significant Subsidiary of the Company; and (g) any other Event of Default       
provided with respect to a particular series of Debt Securities. The term       
"Significant Subsidiary" has the meaning ascribed to such term in Regulation S-X
promulgated under the Securities Act, as such Regulation was in effect on       
January 1, 1996.                                                                

  If an event of default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every   
such case the applicable Trustee or the holders of not less than 25% in         
principal amount of the outstanding Debt Securities of that series may declare  
the principal amount (or, if the Debt Securities of that series are Original    
Issue Discount Securities or Indexed Securities, such portion of the principal  
amount as may be specified in the terms thereof) of all the Debt Securities of  
that series to be due and payable immediately by written notice thereof to the  
Company (and to the applicable Trustee if given by the holders). However, at any
time after such a declaration of acceleration with respect to Debt Securities of
such series has been made, but before a judgment or decree for payment of the   
money due has been obtained by the applicable Trustee, the holders of not less  
than a majority of the principal amount of the outstanding Debt Securities of   
such series may rescind and annul such declaration and its consequences if (a)  
the Company shall have deposited with the applicable Trustee all required       
payments of the principal of (and premium, if any) and interest on the Debt     
Securities of such series (other than principal and premium, if any, and        
interest which have become due solely as a result of such acceleration), plus   
certain fees, expenses, disbursements and advances of the applicable Trustee and
(b) all events of default, other than the nonpayment of accelerated principal   
(or specified portion thereof), premium, if any, and interest with respect to   
Debt Securities of such series have been cured or waived as provided in the     
Indenture. Each Indenture will also provide that the holders of not less than a 
majority in principal amount of the outstanding Debt Securities of any series   
may waive any past default with respect to such series and its consequences,    
except a default (y) in the payment of the principal of (or premium, if any) or 
interest on any Debt Security of such series or (z) in respect of a covenant or 
provision contained in such Indenture that cannot be modified or amended without
the consent of the holder of each outstanding Debt Security of such series      
affected thereby.                                                               

 Each Indenture will require each Trustee to give notice to the holders of
Debt Securities within 90 days of a default under the Indenture unless such     
default shall have been cured or waived, subject to certain exceptions;         
PROVIDED, HOWEVER, that such Trustee may withhold notice to the holders of any  
series of Debt Securities of any default with respect to such series (except a  
default in the payment of the principal of (or premium, if any) or interest on  
any Debt Security of such series or in the payment of any sinking fund          
installment in respect of any Debt Security of such series) if specified        
Responsible Officers of the Trustee consider such withholding to be in such     
holders' interest.                                                              

    Each Indenture will provide that no holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to the       
Indenture or for any remedy thereunder, except in the case of failure of the    
Trustee, for 60 days, to act after it has received a written request to         
institute proceedings in respect of an event of default from the holders of not 
less than 25% in principal amount of the outstanding Debt Securities of such    
series, as well as an offer of indemnity reasonably satisfactory to it,         

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and no direction inconsistent with such written request has been given to the   
Trustee during such 60-day period by holders of a majority in principal amount  
of the outstanding Debt Securities of such series. This provision will not      
prevent, however, any holder of Debt Securities from instituting suit for the   
enforcement of payment of the principal of (and premium, if any) and interest on
such Debt Securities at the respective due dates thereof.                       

Each Indenture will provide that, subject to provisions in the Trust    
Indenture Act of 1939 relating to its duties in case of default, the Trustee is 
under no obligation to exercise any of its rights or powers under the Indenture 
at the request or direction of any holders of any series of Debt Securities then
outstanding under the Indenture, unless such holders shall have offered to the  
Trustee reasonable security or indemnity. The holders of not less than a        
majority in principal amount of the outstanding Debt Securities of any series   
shall have the right to direct the time, method and place of conducting any     
proceeding for any remedy available to the Trustee, or of exercising any trust  
or power conferred upon the Trustee; provided that such direction shall not     
conflict with any rule of law or the Indenture and the Trustee may refuse to    
follow any direction that may involve the Trustee in personal liability or that 
may be unduly prejudicial to the holders of Debt Securities of such series not  
joining therein.                                                                

Within 120 days after the close of each fiscal year, the Company will be
required to deliver to the Trustee a certificate, signed by one of several      
specified officers, stating whether or not such officer has knowledge of any    
default under the Indenture and, if so, specifying each such default and the    
nature and status thereof.                                                      

MODIFICATION OF THE INDENTURE                                                   

Modifications and amendments of any Indenture will be permitted with the
consent of the holders of not less than a majority in principal amount of all   
outstanding Debt Securities of each series issued under such Indenture affected 
by such modification or amendment; PROVIDED, HOWEVER, that no such modification 
or amendment may, without the consent of the holder of each Debt Security       
affected thereby, (a) change the stated maturity of the principal of, or any    
installment of principal, interest (or premium, if any) on, any such Debt       
Security; (b) reduce the principal amount of, or the rate or amount of interest 
on, or any premium payable on redemption of, any such Debt Security, or reduce  
the amount of principal of an Original Issue Discount Security that would be due
and payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment at the option
of the holder of any Debt Security (or reduce the amount of premium payable upon
any such repayment); (c) change the place of payment, or the coin or currency,  
for payment of principal of (or premium, if any) or interest on any such Debt   
Security; (d) impair the right to institute suit for the enforcement of any     
payment on or with respect to any such Debt Security when due; (e) reduce the   
above-stated percentage of outstanding Debt Securities of any series necessary  
to modify or amend the Indenture, to waive compliance with certain provisions   
thereof or certain defaults and consequences thereunder or to reduce the quorum 
or voting requirements set forth in the Indenture; or (f) modify any of the     
foregoing provisions or any of the provisions relating to the waiver of certain 
past defaults or certain covenants, except to increase the required percentage  
to effect such action or to provide that certain other provisions may not be    
modified or waived without the consent of the holder of each outstanding Debt   
Security affected thereby.                                                      

   The holders of a majority in aggregate principal amount of outstanding Debt
Securities of any series may, on behalf of all holders of Debt Securities of    
that series waive, insofar as that series is concerned, compliance by the       
Company with certain restrictive covenants in the applicable Indenture.         

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    Modifications and amendments of an Indenture will be permitted to be made by
the Company and the Trustee without the consent of any holder of Debt Securities
for any of the following purposes: (a) to evidence the succession of another    
person to the Company as obligor under the Indenture; (b) to add to the         
covenants of the Company for the benefit of the holders of all or any series of 
Debt Securities or to surrender any right or power conferred upon the Company in
the Indenture; (c) to add events of default for the benefit of the holders of   
all or any series of Debt Securities; (d) to add or change any provisions of the
Indenture to facilitate the issuance of, or to liberalize certain terms of, Debt
Securities in bearer form, or to permit or facilitate the issuance of Debt      
Securities in uncertificated form, PROVIDED that such action shall not adversely
affect the interests of the holders of the Debt Securities of any series in any 
material respect; (e) to change or eliminate any provisions of the Indenture,   
PROVIDED that any such change or elimination does not apply to any outstanding  
Debt Securities of a series created prior to the date of such amendment or      
supplement that are entitled to the benefit of such provision; (f) to secure the
Debt Securities; (g) to establish the form or terms of Debt Securities of any   
series, including the provisions and procedures, if applicable, for the         
conversion of such Debt Securities into Common Stock or Preferred Stock; (h) to 
provide for the acceptance of appointment by a successor Trustee or facilitate  
the administration of the trusts under the Indenture by more than one Trustee;  
(i) to cure any ambiguity, defect or inconsistency in the Indenture or to make  
any other provisions with respect to matters or questions arising under the     
Indenture PROVIDED, HOWEVER, that such action shall not adversely affect the    
interests of holders of Debt Securities of any series in any material respect;  
or (j) to supplement any of the provisions of the Indenture to the extent       
necessary to permit or facilitate defeasance, covenant defeasance and discharge 
of any series of such Debt Securities, PROVIDED, HOWEVER, that such action shall
not adversely affect the interests of the holders of the Debt Securities of any 
series in any material respect.                                                 

  Each Indenture will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver        
thereunder or whether a quorum is present at a meeting of holders of Debt       
Securities, (a) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof  
that would be due and payable as of the date of such determination upon         
declaration of acceleration of the maturity thereof, (b) the principal amount of
any Debt Security denominated in a foreign currency that shall be deemed        
outstanding shall be the U.S. dollar equivalent, determined on the issue date   
for such Debt Security, of the principal amount (or, in the case of an Original 
Issue Discount Security, the U.S. dollar equivalent on the issue date of such   
Debt Security of the amount determined as provided in (a) above), (c) the       
principal amount of an Indexed Security that shall be deemed outstanding shall  
be the principal face amount of such Indexed Security at original issuance,     
unless otherwise provided with respect to such Indexed Security in the          
applicable Indenture, and (d) Debt Securities owned by the Company or any other 
obligor upon the Debt Securities or any affiliate of the Company or of such     
other obligor shall be disregarded.                                             

    Each Indenture will contain provisions for convening meetings of the holders
of Debt Securities of a series. A meeting may be permitted to be called at any  
time by the Trustee, and also, upon request, by the Company or the holders of at
least 10% in principal amount of the outstanding Debt Securities of such series,
in any such case upon notice given as provided in the Indenture. Except for any 
consent or waiver that must be given by the holder of each Debt Security        
affected thereby, any resolution presented at a meeting or adjourned meeting    
duly reconvened at which a quorum is present may be adopted by the affirmative  
vote of the holders of a majority in principal amount of the outstanding Debt   
Securities of that series; PROVIDED, HOWEVER, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,   
notice, consent, waiver or other action that may be made, given or taken by the 
holders of a specified percentage, which is less than a majority, in principal  
amount of the outstanding Debt Securities of a series may be adopted at a       
meeting or adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the holders of such specified percentage in principal amount
of the outstanding Debt Securities of that series. Any resolution passed or     
decision taken at any meeting of holders of Debt Securities of any series duly  
held in accordance with the                                                     

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Indenture will be binding on all holders of Debt Securities of that series. The 
persons holding or representing a majority in principal amount of the           
outstanding Debt Securities of a series shall constitute a quorum for a meeting 
of holders of such series; PROVIDED, HOWEVER, that if any action is to be taken 
at such meeting with respect to a consent or waiver that may be given by the    
holders of not less than a specified percentage in principal amount of the      
outstanding Debt Securities of a series, the persons holding or representing    
such specified percentage in principal amount of the outstanding Debt Securities
of such series will constitute a quorum.                                        

  Notwithstanding the foregoing provisions, each Indenture will provide that
if any action is to be taken at a meeting of holders of Debt Securities of any  
series with respect to any request, demand, authorization, direction, notice,   
consent, waiver or other action that the Indenture expressly provides may be    
made, given or taken by the holders of such series and one or more additional   
series: (a) there shall be no minimum quorum requirement for such meeting and   
(b) the principal amount of the outstanding Debt Securities of all such series  
that are entitled to vote in favor of such request, demand, authorization,      
direction, notice, consent, waiver or other action shall be taken into account  
in determining whether such request, demand, authorization, direction, notice,  
consent, waiver or other action has been made, given or taken under the         
Indenture.                                                                      

DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE                                   

Unless otherwise indicated in the applicable Prospectus Supplement, upon
request of the Company any Indenture shall cease to be of further effect with   
respect to any series of Debt Securities issued thereunder specified in such    
Company request (except as to certain limited provisions of such Indenture which
shall survive) when either (i) all Debt Securities of such series have been     
delivered to the Trustee for cancellation or (ii) all Debt Securities of such   
series have become due and payable or will become due and payable within one    
year (or are scheduled for redemption within one year) and the Company has      
irrevocably deposited with the applicable Trustee, in trust, funds in such      
currency or currencies, currency unit or units or composite currency or         
currencies in which such Debt Securities are payable in an amount sufficient to 
pay the entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest to the date of such deposit (if such Debt         
Securities have become due and payable) or to the stated maturity or redemption 
date, as the case may be.                                                       

Each Indenture will provide that, unless otherwise indicated in the     
applicable Prospectus Supplement, the Company may elect either to (a) defease   
and be discharged from any and all obligations with respect to any series of    
Debt Securities (except for the obligation to pay Additional Amounts, if any,   
upon the occurrence of certain events of tax with respect to payments on such   
Debt Securities and the obligations to register the transfer or exchange of such
Debt Securities, to replace temporary or mutilated, destroyed, lost or stolen   
Debt Securities, to maintain an office or agency in respect of such Debt        
Securities and to hold money for payment in trust) ("defeasance") or (b) be     
released from its obligations with respect to certain covenants (which will be  
described in the relevant Prospectus Supplement) applicable to such Debt        
Securities under the applicable Indenture (which may include, subject to a      
limited exception, the covenants described under "--Certain Covenants"), and any
omission to comply with such obligations shall not constitute a default or an   
event of default with respect to such Debt Securities ("covenant defeasance"),  
in either case upon the irrevocable deposit by the Company with the applicable  
Trustee, in trust, of an amount, in such currency or currencies, currency unit  
or units or composite currency or currencies in which such Debt Securities are  
payable at stated maturity, or Government Obligations (as defined below), or    
both, applicable to such Debt Securities that through the scheduled payment of  
principal and interest in accordance with their terms will provide money in an  
amount sufficient to pay the principal of (and premium, if any) and interest on 
such Debt Securities, and any mandatory sinking fund or analogous payments      
thereon, on the scheduled due dates therefor.                                   

    Such a trust may only be established if, among other things, the Company has
delivered to the applicable Trustee an opinion of counsel (as specified in the  
applicable Indenture) to the effect that the                                    

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holders of such Debt Securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such defeasance or covenant          
defeasance and will be subject to U.S. federal income tax on the same amounts,  
in the same manner and at the same times as would have been the case if such    
defeasance or covenant defeasance had not occurred, and such opinion of counsel,
in the case of defeasance, must refer to and be based on a ruling of the        
Internal Revenue Service (the "IRS") or a change in applicable U.S. federal     
income tax law occurring after the date of the applicable Indenture. In the     
event of such defeasance, the holders of such Debt Securities would thereafter  
be able to look only to such trust fund for payment of principal (and premium,  
if any) and interest.                                                           

    "Government Obligations" means securities that are (a) direct obligations of
the United States of America or the government which issued the foreign currency
in which the Debt Securities of a particular series are payable, for the payment
of which its full faith and credit is pledged, or (b) obligations of a person   
controlled or supervised by and acting as an agency or instrumentality of the   
United States of America or such government which issued the foreign currency in
which the Debt Securities of such series are payable, the payment of which is   
unconditionally guaranteed as a full faith and credit obligation by the United  
States of America or such other government, which, in either case, are not      
callable or redeemable at the option of the issuer thereof, and shall also      
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on  
or principal of any such Government Obligation held by such custodian for the   
account of the holder of a depository receipt; PROVIDED, HOWEVER, that (except  
as required by law) such custodian is not authorized to make any deduction from 
the amount payable to the holder of such depository receipt from any amount     
received by the custodian in respect of the Government Obligation or the        
specific payment of interest on or principal of the Government Obligation       
evidenced by such depository receipt.                                           

   Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect         
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to      
receive payment in a currency, currency unit or composite currency other than   
that in which such deposit has been made in respect of such Debt Security or (b)
a Conversion Event (as defined below) occurs in respect of the currency,        
currency unit or composite currency in which such deposit has been made, the    
indebtedness represented by such Debt Security will be deemed to have been, and 
will be, fully discharged and satisfied through the payment of the principal of 
(and premium, if any) and interest on such Debt Security as they become due out 
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which   
such Debt Security becomes payable as a result of such election or Conversion   
Event based on the applicable market exchange rate. "Conversion Event" means the
cessation of use of (i) a currency, currency unit or composite currency both by 
the government of the country which issued such currency and for the settlement 
of transactions by a central bank or other public institution of or within the  
international banking community, (ii) the ECU both within the European Monetary 
System and for the settlement of transactions by public institutions of or      
within the European Communities, or (iii) any currency unit or composite        
currency other than the ECU for the purposes for which it was established.      
Unless otherwise provided in the applicable Prospectus Supplement, all payments 
of principal of (and premium, if any) and interest on any Debt Security that is 
payable in a foreign currency that ceases to be used by its government of       
issuance shall be made in U.S. dollars.                                         

In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any event of default, other than the event of default         
described in clause (d) under "--Events of Default, Notice and Waiver" with     
respect to the specified sections of the applicable Indenture (which sections   
would no longer be applicable to such Debt Securities) or clause (g) thereunder 
with respect to any other covenant as to which there has been covenant          
defeasance, the amount in such currency, currency unit or composite currency in 
which such                                                                      

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Debt Securities are payable, and Government Obligations on deposit with the     
applicable Trustee, may not be sufficient to pay amounts due on such Debt       
Securities at the time of the acceleration resulting from such event of default.
The Company would, however, remain liable to make payment of such amounts due at
the time of acceleration.                                                       

    The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any           
modifications to the provisions described above, with respect to the Debt       
Securities of or within a particular series.                                    

CONVERSION RIGHTS                                                               

The terms and conditions, if any, upon which the Debt Securities are    
convertible into Common Stock or Preferred Stock will be set forth in the       
applicable Prospectus Supplement relating thereto. Such terms will include      
whether such Debt Securities are convertible into Common Stock or Preferred     
Stock, the conversion price (or manner of calculation thereof), the conversion  
period, provisions as to whether conversion will be at the option of the holders
or the Company, the events requiring an adjustment of the conversion price and  
provisions affecting conversion in the event of the redemption of such Debt     
Securities and any restrictions on conversion, including restrictions directed  
at maintaining the Company's REIT status.                                       

UNCLAIMED PAYMENTS                                                              

All amounts paid by the Company to a paying agent or a Trustee for the  
payment of the principal of or any premium or interest on any Debt Security that
remain unclaimed at the end of two years after such principal, premium or       
interest has become due and payable will be repaid to the Company, and the      
holder of such Debt Security thereafter may look only to the Company for payment
thereof.                                                                        

GLOBAL SECURITIES                                                               

The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be    
deposited with, or on behalf of, a depositary identified in the applicable      
Prospectus Supplement relating to such series. Global Securities may be issued  
in either registered or bearer form and in either temporary or permanent form.  
The specific terms of the depositary arrangement with respect to a series of    
Debt Securities will be described in the applicable Prospectus Supplement       
relating to such series.                                                        

DESCRIPTION OF COMMON STOCK 

    The Company has authority to issue 100,000,000 shares of Common Stock, $1.00
par value per share. As of August 19, 1997, the Company had outstanding         
22,994,964 shares of Common Stock.                                              

GENERAL                                                                         

The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus Supplement may 
relate, including a Prospectus Supplement providing that the Common Stock will  
be issuable upon conversion of Debt Securities or Preferred Stock. The          
statements below describing the Common Stock are in all respects subject to and 
qualified in their entirety by reference to the applicable provisions of the    
Company's charter (the "Charter") and Bylaws (the "Bylaws").                    

TERMS                                                                           

 Subject to the preferential rights of any other shares or series of stock
and to the provisions of the Charter regarding the restrictions on transfer of  
stock, holders of Common Stock are entitled to receive dividends when, as and if
authorized and declared by the Company's Board of Directors out of assets       

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legally available therefor. Payment and authorization of dividends on the Common
Stock and purchases of shares thereof by the Company may be subject to certain  
restrictions if the Company fails to pay dividends on the Preferred Stock. See  
"Description of Preferred Stock." Upon any liquidation, dissolution or winding  
up of the Company, holders of Common Stock are entitled to share equally and    
ratably in any assets available for distribution to them, after payment or      
adequate provision for payment of the debts and other liabilities of the Company
and the preferential amounts owing with respect to any outstanding Preferred    
Stock. Subject to the provisions of the Charter regarding the restrictions on   
transfer of stock, each outstanding share of Common Stock entitles the holder to
one vote on all matters submitted to a vote of stockholders, including the      
election of directors and, except as provided with respect to any other class or
series of stock, the holders of such shares will possess the exclusive voting   
power. The Company's Board of Directors is divided into three classes of        
directors. The initial terms of the Class I, Class II and Class III directors   
will expire in 1998, 1999 and 2000, respectively. Beginning in 1998, directors  
of each class will be chosen for three-year terms upon the expiration of their  
current terms and each year one class of directors will be elected by the       
stockholders. The staggered terms of directors may reduce the possibility of a  
tender offer or an attempt to change control of the Company even though a tender
offer or change in control might involve a premium price for the Common Stock or
otherwise be in the best interest of the stockholders. Holders of Common Stock  
do not have cumulative voting rights in the election of directors, which means  
that holders of more than 50% of all the shares of the Company's Common Stock   
voting for the election of directors can elect all the directors of the class   
standing for election at the time if they choose to do so and the holders of the
remaining shares cannot elect any directors of such class. Holders of shares of 
Common Stock do not have preemptive rights, which means they have no right under
the Charter, Bylaws or Maryland law to acquire any additional shares of Common  
Stock that may be issued by the Company at a subsequent date. Holders of shares 
of Common Stock have no preference, conversion, exchange, sinking fund,         
redemption or appraisal rights. All shares of Common Stock now outstanding are, 
and additional shares of Common Stock offered will be when issued, fully paid   
and nonassessable.                                                              

Under the Maryland General Corporation Law (the "MGCL"), a Maryland     
corporation generally cannot dissolve, amend its charter, merge, sell all or    
substantially all of its assets, engage in a share exchange or engage in similar
transactions outside the ordinary course of business unless approved by the     
affirmative vote of stockholders holding at least two thirds of the shares      
entitled to vote on the matter unless a lesser percentage (but not less than a  
majority of all of the votes entitled to be cast on the matter) is set forth in 
the corporation's charter. The Charter provides that any such action shall be   
effective if approved by the affirmative vote of holders of shares entitled to  
cast a majority of all the votes entitled to be cast on the matter.             

The Charter authorizes the Board of Directors to reclassify any unissued
shares of Common Stock into other classes or series of stock and to establish   
the number of shares in each class or series and to set the preferences,        
conversion and other rights, voting powers, restrictions, limitations as to     
transferability, dividends or other distributions, qualifications or terms or   
conditions of redemption for each such class or series.                         

MARYLAND BUSINESS COMBINATION LAW                                               

    Under the MGCL, certain "business combinations" (including certain issuances
of equity securities) between a Maryland corporation and any person who         
beneficially owns ten percent or more of the voting power of the corporation's  
shares (an "Interested Stockholder") or an affiliate thereof are prohibited for 
five years after the most recent date on which the Interested Stockholder       
becomes an Interested Stockholder. Thereafter, any such business combination    
must be approved by two super-majority stockholder votes unless, among other    
conditions, the corporation's common stockholders receive a minimum price (as   
defined in the MGCL) for their shares and the consideration is received in cash 
or in the same form as previously paid by the Interested Stockholder for its    
shares. The business combinations provisions of the MGCL do not apply, however, 
to business combinations that are approved or exempted by the Board of Directors
prior to the time that the Interested Stockholder becomes an Interested         
Stockholder.                                                                    

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These provisions of the MGCL may delay, defer or prevent a transaction or a     
change in control of the Company that might involve a premium price for the     
Common Stock or otherwise be in the best interests of the stockholders.         

MARYLAND CONTROL SHARE ACQUISITIONS LAW                                         

  The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent     
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquiror or by officers or directors who 
are employees of the corporation. "Control Shares" are voting shares of stock   
which, if aggregated with all other such shares of stock previously acquired by 
the acquiror or in respect of which the acquiror is able to exercise or direct  
the exercise of voting power (except solely by virtue of a revocable proxy),    
would entitle the acquiror to exercise voting power in electing directors within
one of the following ranges of voting power: (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority, or (iii) a majority 
or more of all voting power. Control shares do not include shares the acquiring 
person is then entitled to vote as a result of having previously obtained       
stockholder approval. A "control share acquisition" means the acquisition of    
control shares, subject to certain exceptions.                                  

   A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),  
may compel the board of directors of the corporation to call a special meeting  
of stockholders to be held within 50 days of demand to consider the voting      
rights of the shares. If no request for a meeting is made, the corporation may  
itself present the question at any stockholders meeting.                        

   If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously 
been approved) for fair value determined, without regard to the absence of      
voting rights for the control shares, as of the date of the last control share  
acquisition by the acquiror or of any meeting of stockholders at which the      
voting rights of such shares are considered and not approved. If voting rights  
for control shares are approved at a stockholders meeting and the acquiror      
becomes entitled to vote a majority of the shares entitled to vote, all other   
stockholders may exercise appraisal rights. The fair value of the shares as     
determined for purposes of such appraisal rights may not be less than the       
highest price per share paid by the acquiror in the control share acquisition.  

   The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to   
the transaction or (b) to acquisitions approved or exempted by the charter or   
bylaws of the corporation.                                                      

As permitted by the MGCL, the Bylaws contain a provision exempting the  
Company from the control share acquisition statute any and all acquisitions by  
any person of the Company's shares of stock. There can be no assurance that such
provision will not be amended or eliminated by the Board of Directors at any    
time in the future.                                                             

RESTRICTIONS ON OWNERSHIP                                                       

For the Company to qualify as a REIT under the Internal Revenue Code of 
1986, as amended (the "Code"), not more than 50% in value of its outstanding    
capital stock may be owned, actually or constructively, by five or fewer        
individuals (defined in the Code to include certain entities) during the last   
half of a taxable year. To assist the Company in meeting this requirement and   
certain other requirements relating to its tax status as a REIT, the Company may
take certain actions to limit the actual, beneficial or constructive ownership  
by a single person or entity of the Company's outstanding equity securities. See
"Restrictions on Ownership and Transfers of Capital Stock."                     

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TRANSFER AGENT                                                                  

The registrar and transfer agent for the Common Stock is The Bank of New
York.                                                                           

DESCRIPTION OF PREFERRED STOCK

The Company is authorized to issue 20,000,000 shares of Preferred Stock,
$1.00 par value per share, of which no shares were outstanding as of August 19, 
1997.                                                                           

GENERAL                                                                         

   The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement  
may relate. The statements below describing the Preferred Stock are in all      
respects subject to and qualified in their entirety by reference to the         
applicable provisions of the Charter (including any applicable Articles         
Supplementary) and the Bylaws.                                                  

The Charter authorizes the Board of Directors to classify any unissued  
shares of Preferred Stock and to reclassify any previously classified but       
unissued shares of any class or series, as authorized by the Board of Directors.
Prior to issuance of shares of each series, the Board is required by the MGCL   
and the Charter to set, subject to the provisions of the Charter regarding the  
restrictions on transfer of stock, the preferences, conversion or other rights, 
voting powers, restrictions, limitations as to transferability, dividends or    
other distributions, qualifications and terms or conditions of redemption for   
each such series. Thus, the Board could authorize the issuance of shares of     
Preferred Stock with terms and conditions which could have the effect of        
delaying, deferring or preventing a transaction or a change in control of the   
Company that might involve a premium price for holders of Common Stock or       
otherwise be in their best interest. As of the date hereof, no shares of        
Preferred Stock are outstanding and the Company has no present plans to issue   
any Preferred Stock. The Preferred Stock will, when issued, be fully paid and   
nonassessable and will have no preemptive rights.                               

Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms of and other information concerning the
Preferred Stock, including:                                                     

(1) the title of such Preferred Stock;                          

(2) the number of shares of such Preferred Stock offered, the   
 liquidation preference per share and the offering price of such Preferred
Stock;                                                                  

       (3) the dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Stock;              

(4) whether such Preferred Stock is cumulative or not and, if   
cumulative, the date from which dividends on such Preferred Stock shall 
accumulate;                                                             

    (5) the procedures for any auction and remarketing, if any, for such
Preferred Stock;                                                        

       (6) the provision for a sinking fund, if any, for such Preferred Stock;

(7) any voting rights of such Preferred Stock;                  

  (8) the provision for redemption, if applicable, of such Preferred
Stock;                                                                  

   (9) any listing of such Preferred Stock on any securities exchange;

       (10) the terms and conditions, if applicable, upon which such Preferred
   Stock will be convertible into Common Stock, including the conversion price
(or manner of calculation thereof);                                     

    (11) a discussion of federal income tax considerations applicable to
such Preferred Stock;                                                   

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        (12) any limitations on actual, beneficial or constructive ownership and
    restrictions on transfer, in each case as may be appropriate to preserve the
Company's REIT status;                                                  

       (13) the relative ranking and preferences of such Preferred Stock as to
 dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;                                             

        (14) whether liquidation preferences on Preferred Stock shall be counted
    as liabilities of the Company in determining whether distributions to junior
stockholders can be made under the MGCL;                                

    (15) any limitations on issuance of any series or class of Preferred
Stock ranking senior to or on a parity with such series or class of     
Preferred Stock as to dividend rights and rights upon liquidation,      
dissolution or winding up of the affairs of the Company; and            

  (16) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.                                   

RANK                                                                            

Unless otherwise specified in the applicable Prospectus Supplement, the 
Preferred Stock will, with respect to dividend rights and rights upon           
liquidation, dissolution or winding up of the affairs of the Company, rank (a)  
senior to all classes or series of Common Stock and to all equity securities    
ranking junior to such Preferred Stock with respect to dividend rights or rights
upon liquidation, dissolution or winding up of the Company; (b) on a parity with
all equity securities issued by the Company the terms of which specifically     
provide that such equity securities rank on a parity with the Preferred Stock   
with respect to dividend rights or rights upon liquidation, dissolution or      
winding up of the affairs of the Company; and (c) junior to all equity          
securities issued by the Company the terms of which specifically provide that   
such equity securities rank senior to the Preferred Stock with respect to       
dividend rights or rights upon liquidation, dissolution or winding up of the    
affairs of the Company. For these purposes, the term "equity securities" does   
not include convertible debt securities.                                        

DIVIDENDS                                                                       

 Holders of shares of the Preferred Stock of each series or class shall be
entitled to receive, when, as and if authorized and declared by the Company's   
Board of Directors, out of the Company's assets legally available for payment,  
cash dividends at such rates and on such dates as will be set forth in the      
applicable Prospectus Supplement. Each such dividend shall be payable to holders
of record as they appear on the Company's stock transfer books on such record   
dates as shall be fixed by the Company's Board of Directors.                    

Dividends on any series or class of Preferred Stock may be cumulative or
noncumulative, as provided in the applicable Prospectus Supplement. Dividends,  
if cumulative, will be cumulative from and after the date set forth in the      
applicable Prospectus Supplement. If the Company's Board of Directors fails to  
authorize a dividend payable on a dividend payment date on any series or class  
of Preferred Stock for which dividends are noncumulative, then the holders of   
such series or class of Preferred Stock will have no right to receive a dividend
in respect of the dividend period ending on such dividend payment date, and the 
Company will have no obligation to pay the dividend accrued for such period,    
whether or not dividends on such series or class are declared or paid for any   
future period.                                                                  

   If any shares of Preferred Stock of any series or class are outstanding, no
full dividends shall be authorized or paid or set apart for payment on the      
Preferred Stock of any other series or class ranking, as to dividends, on a     
parity with or junior to the Preferred Stock of such series or class for any    
period unless (a) if such series or class of Preferred Stock has a cumulative   
dividend, then full cumulative dividends have been or contemporaneously are     
authorized and paid or authorized and a sum sufficient for the payment thereof  
is set apart for such payment on the Preferred Stock of such series or class for
all past dividend periods and the then current dividend period or (b) if such   
series or class of Preferred Stock does not have                                

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a cumulative dividend, then full dividends for the then current dividend period 
have been or contemporaneously are authorized and paid or authorized and a sum  
sufficient for the payment thereof is set apart for such payment on the         
Preferred Stock of such series or class. When dividends are not paid in full (or
a sum sufficient for such full payment is not so set apart) upon the shares of  
Preferred Stock of any series or class and the shares of any other series or    
class of Preferred Stock ranking on a parity as to dividends with the Preferred 
Stock of such series or class, then all dividends authorized on shares of       
Preferred Stock of such series or class and any other series or class of        
Preferred Stock ranking on a parity as to dividends with such Preferred Stock   
shall be authorized pro rata so that the amount of dividends authorized per     
share on the Preferred Stock of such series or class and such other series or   
class of Preferred Stock shall in all cases bear to each other the same ratio   
that accrued dividends per share on the shares of Preferred Stock of such series
or class (which shall not include any accumulation in respect of unpaid         
dividends for prior dividend periods if such Preferred Stock does not have a    
cumulative dividend) and such other series or class of Preferred Stock bear to  
each other. No interest, or sum of money in lieu of interest, shall be payable  
in respect of any dividend payment or payments on Preferred Stock of such series
or class that may be in arrears.                                                

Except as provided in the immediately preceding paragraph, unless (a) if
such series or class of Preferred Stock has a cumulative dividend, full         
cumulative dividends on the Preferred Stock of such series or class have been or
contemporaneously are authorized and paid or authorized and a sum sufficient for
the payment thereof is set apart for payment for all past dividend periods and  
the then current dividend period and (b) if such series or class of Preferred   
Stock does not have a cumulative dividend, full dividends on the Preferred Stock
of such series or class have been or contemporaneously are authorized and paid  
or authorized and a sum sufficient for the payment thereof is set apart for     
payment for the then current dividend period, then no dividends (other than in  
the Common Stock or other stock of the Company ranking junior to the Preferred  
Stock of such series or class as to dividends and upon liquidation) shall be    
authorized or paid or set aside for payment nor shall any other distribution be 
authorized or made on the Common Stock or any other stock of the Company ranking
junior to or on a parity with the Preferred Stock of such series or class as to 
dividends or upon liquidation, nor shall the Common Stock or any other stock of 
the Company ranking junior to or on a parity with the Preferred Stock of such   
series or class as to dividends or upon liquidation be redeemed, purchased or   
otherwise acquired for any consideration (or any amounts be paid to or made     
available for a sinking fund for the redemption of any shares of any such stock)
by the Company (except by conversion into or exchange for other stock of the    
Company ranking junior to the Preferred Stock of such series or class as to     
dividends and upon liquidation).                                                

   Any dividend payment made on shares of a series or class of Preferred Stock
shall first be credited against the earliest accrued but unpaid dividend due    
with respect to shares of such series or class that remains payable.            

REDEMPTION                                                                      

If so provided in the applicable Prospectus Supplement, the shares of   
Preferred Stock will be subject to mandatory redemption or redemption at the    
Company's option, as a whole or in part, in each case on the terms, at the times
and at the redemption prices set forth in such Prospectus Supplement.           

  The Prospectus Supplement relating to a series or class of Preferred Stock
that is subject to mandatory redemption will specify the number of shares of    
such Preferred Stock that shall be redeemed by the Company in each year         
commencing after a date to be specified, at a redemption price per share to be  
specified, together with an amount equal to all accumulated and unpaid dividends
thereon (which shall not, if such Preferred Stock does not have a cumulative    
dividend, include any accumulation in respect of unpaid dividends for prior     
dividend periods) to the date of redemption. The redemption price may be payable
in cash or other property, as specified in the applicable Prospectus Supplement.
If the redemption price for Preferred Stock of any series or class is payable   
only from the net proceeds of the issuance of stock of the Company, the terms of
such Preferred Stock may provide that, if no such stock shall have been         

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issued or to the extent the net proceeds from any issuance are insufficient to  
pay in full the aggregate redemption price then due, such Preferred Stock shall 
automatically and mandatorily be converted into shares of the applicable stock  
of the Company pursuant to conversion provisions specified in the applicable    
Prospectus Supplement.                                                          

Notwithstanding the foregoing, unless (a) if such series or class of    
Preferred Stock has a cumulative dividend, full cumulative dividends on all     
shares of such series or class of Preferred Stock have been or contemporaneously
are authorized and paid or authorized and a sum sufficient for the payment      
thereof is set apart for payment for all past dividend periods and the then     
current dividend period and (b) if such series or class of Preferred Stock does 
not have a cumulative dividend, full dividends on the Preferred Stock of such   
series or class have been or contemporaneously are authorized and paid or       
authorized and a sum sufficient for the payment thereof is set apart for payment
for the then current dividend period, then no shares of such series or class of 
Preferred Stock shall be redeemed unless all outstanding shares of Preferred    
Stock of such series or class are simultaneously redeemed; PROVIDED, HOWEVER,   
that the foregoing shall not prevent the purchase or acquisition of shares of   
Preferred Stock of such series or class to preserve the Company's REIT status or
pursuant to a purchase or exchange offer made on the same terms to holders of   
all outstanding shares of Preferred Stock of such series or class. In addition, 
unless (i) if such series or class of Preferred Stock has a cumulative dividend,
full cumulative dividends on all outstanding shares of such series or class of  
Preferred Stock have been or contemporaneously are authorized and paid or       
authorized and a sum sufficient for the payment thereof is set apart for payment
for all past dividend periods and the then current dividend period and (ii) if  
such series or class of Preferred Stock does not have a cumulative dividend,    
full dividends on the Preferred Stock of such series or class have been or      
contemporaneously are authorized and paid or authorized and a sum sufficient for
the payment thereof is set apart for payment for the then current dividend      
period, the Company shall not purchase or otherwise acquire directly or         
indirectly any shares of Preferred Stock of such series or class (except by     
conversion into or exchange for stock of the Company ranking junior to the      
Preferred Stock of such series or class as to dividends and upon liquidation);  
PROVIDED, HOWEVER, that the foregoing shall not prevent the purchase or         
acquisition of shares of Preferred Stock of such series or class to preserve the
Company's REIT status or pursuant to a purchase or exchange offer made on the   
same terms to holders of all outstanding shares of Preferred Stock of such      
series or class.                                                                

    If fewer than all the outstanding shares of Preferred Stock of any series or
class are to be redeemed, the number of shares to be redeemed will be determined
by the Company and such shares may be redeemed pro rata from the holders of     
record of such shares in proportion to the number of such shares held by such   
holders (with adjustments to avoid redemption of fractional shares) or any other
equitable method determined by the Company.                                     

   Notice of redemption will be mailed at least 30, but not more than 60, days
before the redemption date to each holder of record of a share of Preferred     
Stock of any series or class to be redeemed at the address shown on the         
Company's stock transfer books. Each notice shall state: (a) the redemption     
date; (b) the number of shares and series or class of the Preferred Stock to be 
redeemed; (c) the redemption price; (d) the place or places where certificates  
for such Preferred Stock are to be surrendered for payment of the redemption    
price; (e) that dividends on the shares to be redeemed will cease to accumulate 
on such redemption date; and (f) the date on which the holder's conversion      
rights, if any, as to such shares shall terminate. If fewer than all the shares 
of Preferred Stock of any series or class are to be redeemed, the notice mailed 
to each such holder thereof shall also specify the number of shares of Preferred
Stock to be redeemed from each such holder and, upon redemption, a new          
certificate shall be issued representing the unredeemed shares without cost to  
the holder thereof. If notice of redemption of any shares of Preferred Stock has
been given and if the funds necessary for such redemption have been set aside by
the Company in trust for the benefit of the holders of any shares of Preferred  
Stock so called for redemption, then from and after the redemption date         
dividends will cease to accrue on such shares of Preferred Stock, such shares of
Preferred Stock shall no longer be deemed outstanding and all rights of the     
holders of such shares will                                                     

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terminate, except the right to receive the redemption price. In order to        
facilitate the redemption of shares of Preferred Stock of any series or class,  
the Board of Directors may fix a record date for the determination of shares of 
such series or class of Preferred Stock to be redeemed.                         

   Subject to applicable law and the limitation on purchases when dividends on
a series or class of Preferred Stock are in arrears, the Company may, at any    
time and from time to time, purchase any shares of such series or class of      
Preferred Stock in the open market, by tender or by private agreement.          

LIQUIDATION PREFERENCE                                                          

   Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be   
made to the holders of the Common Stock or any other series or class of stock of
the Company ranking junior to any series or class of the Preferred Stock in the 
distribution of assets upon any liquidation, dissolution or winding up of the   
affairs of the Company, the holders of such series or class of Preferred Stock  
shall be entitled to receive out of assets of the Company legally available for 
distribution to shareholders liquidating distributions in the amount of the     
liquidation preference per share (set forth in the applicable Prospectus        
Supplement), plus an amount equal to all dividends accrued and unpaid thereon   
(which shall not include any accumulation in respect of unpaid dividends for    
prior dividend periods if such Preferred Stock does not have a cumulative       
dividend). After payment of the full amount of the liquidating distributions to 
which they are entitled, the holders of Preferred Stock will have no right or   
claim to any of the remaining assets of the Company. If, upon any such voluntary
or involuntary liquidation, dissolution or winding up, the legally available    
assets of the Company are insufficient to pay the amount of the liquidating     
distributions on all outstanding shares of any series or class of Preferred     
Stock and the corresponding amounts payable on all shares of other classes or   
series of stock of the Company ranking on a parity with such series or class of 
Preferred Stock in the distribution of assets upon liquidation, dissolution or  
winding up, then the holders of such series or class of Preferred Stock and all 
other such classes or series of capital stock shall share ratably in any such   
distribution of assets in proportion to the full liquidating distributions to   
which they would otherwise be respectively entitled.                            

   If liquidating distributions shall have been made in full to all holders of
any series or class of Preferred Stock, the remaining assets of the Company     
shall be distributed among the holders of any other classes or series of stock  
ranking junior to such series or class of Preferred Stock upon liquidation,     
dissolution or winding up, according to their respective rights and preferences 
and in each case according to their respective number of shares. For such       
purposes, the consolidation or merger of the Company with or into any other     
entity, or the sale, lease, transfer or conveyance of all or substantially all  
of the Company's property or business, shall not be deemed to constitute a      
liquidation, dissolution or winding up of the affairs of the Company.           

VOTING RIGHTS                                                                   

 Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as indicated in the applicable Prospectus Supplement.        

Unless provided otherwise for any series or class of Preferred Stock, so
long as any shares of Preferred Stock of a series or class remain outstanding,  
the Company shall not, without the affirmative vote or consent of the holders of
at least a majority of the shares of such series or class of Preferred Stock    
outstanding at the time, given in person or by proxy, either in writing or at a 
meeting (such series or class voting separately as a class), (a) authorize or   
create, or increase the authorized or issued amount of, any class or series of  
stock ranking prior to such series or class of Preferred Stock with respect to  
payment of dividends or the distribution of assets upon liquidation, dissolution
or winding up or reclassify any authorized stock of the Company into any such   
shares, or create, authorize or issue any obligation or security convertible    
into or evidencing the right to purchase any such shares; or (b) amend, alter or
repeal                                                                          

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the provisions of the Charter or the Articles Supplementary for such series or  
class of Preferred Stock, whether by merger, consolidation or otherwise, so as  
to materially and adversely affect any right, preference, privilege or voting   
power of such series or class of Preferred Stock or the holders thereof;        
PROVIDED, HOWEVER, that any increase in the amount of the authorized Preferred  
Stock or the creation or issuance of any other series or class of Preferred     
Stock, or any increase in the amount of authorized shares of such series or     
class or any other series or class of Preferred Stock, in each case ranking on a
parity with or junior to the Preferred Stock of such series or class with       
respect to payment of dividends or the distribution of assets upon liquidation, 
dissolution or winding up, shall not be deemed to materially and adversely      
affect such rights, preferences, privileges or voting powers.                   

  The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall  
be effected, all outstanding shares of such series or class of Preferred Stock  
shall have been redeemed or called for redemption upon proper notice and        
sufficient funds shall have been deposited in trust to effect such redemption.  

CONVERSION RIGHTS                                                               

  The terms and conditions, if any, upon which shares of any series or class
of Preferred Stock are convertible into shares of Common Stock will be set forth
in the applicable Prospectus Supplement relating thereto. Such terms will       
include the number of shares of Common Stock into which the Preferred Stock is  
convertible, the conversion price (or manner of calculation thereof), the       
conversion period, provisions as to whether conversion will be at the option of 
the holders of the Preferred Stock or the Company, the events requiring an      
adjustment of the conversion price and provisions affecting conversion in the   
event of the redemption of such Preferred Stock.                                

RESTRICTIONS ON OWNERSHIP                                                       

 For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, actually or constructively,
by five or fewer individuals (defined in the Code to include certain entities)  
during the last half of a taxable year. To assist the Company in meeting this   
requirement and certain other requirements relating to its tax status as a REIT,
the Company may take certain actions to limit the actual, beneficial or         
constructive ownership by a single person or entity of the Company's outstanding
equity securities. See "Restrictions on Ownership and Transfers of Capital      
Stock."                                                                         

TRANSFER AGENT                                                                  

   The transfer agent and registrar for any series or class of Preferred Stock
will be set forth in the applicable Prospectus Supplement.                      

RESTRICTIONS ON OWNERSHIP AND TRANSFERS OF CAPITAL STOCK

   The following summary of certain restrictions on the ownership and transfer
of shares of stock of the Company does not purport to be complete and is subject
to, and qualified in its entirety by reference to, the applicable provisions of 
the Charter and Bylaws.                                                         

  In order for the Company to qualify as a REIT under the Code, no more than
50% in value of its outstanding shares of stock may be owned, actually or       
constructively, by five or fewer individuals (as defined in the Code to include 
certain entities) during the last half of a taxable year (other than the first  
year for which an election to be treated as a REIT has been made). In addition, 
if the Company, or an owner of 10% or more of the Company, actually or          
constructively owns 10% or more of a tenant of the Company (or a tenant of any  
partnership in which the Company is a partner), the rent received by the Company
(either directly or through any such partnership) from such tenant will not be  
qualifying income for purposes of the REIT gross income tests of the Code. A    
REIT's stock must also be beneficially owned by 100 or more persons during at   
least 335 days of a taxable year of twelve months or during a                   

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proportionate part of a shorter taxable year (other than the first year for     
which an election to be treated as a REIT has been made).                       

 Because the Company expects to continue to qualify as a REIT, the Charter
contains restrictions on the ownership and transfer of Common Stock which are   
intended to assist the Company in complying with these requirements. The Charter
provides that, subject to certain specified exceptions, no person or entity may 
own, or be deemed to own by virtue of the applicable constructive ownership     
provisions of the Code, more than 9.8% (by number or value, whichever is more   
restrictive) of the outstanding shares of Common Stock (the "Ownership Limit"). 
The constructive ownership rules of the Code are complex, and may cause shares  
of Common Stock owned actually or constructively by a group of related          
individuals and/or entities to be constructively owned by one individual or     
entity. As a result, the acquisition of less than 9.8% of the shares of Common  
Stock (or the acquisition of an interest in an entity that owns, actually or    
constructively, Common Stock) by an individual or entity, could, nevertheless   
cause that individual or entity, or another individual or entity, to own        
constructively in excess of 9.8% of the outstanding Common Stock and thus       
violate the Ownership Limit, or such other limit as permitted by the Board of   
Directors. The Board of Directors may, but in no event is required to, waive the
Ownership Limit with respect to a particular stockholder if it determines that  
such ownership will not jeopardize the Company's status as a REIT. As a         
condition of such waiver, the Board of Directors may require a ruling from the  
Internal Revenue Service or an opinion of counsel satisfactory to it and/or     
undertakings or representations from the applicant with respect to preserving   
the REIT status of the Company.                                                 

    The Charter further prohibits (i) any person from actually or constructively
owning shares of Common Stock of the Company that would result in the Company   
being "closely held" under Section 856(h) of the Code or otherwise cause the    
Company to fail to qualify as a REIT, and (ii) any person from transferring     
shares of Common Stock of the Company if such transfer would result in shares of
stock of the Company being beneficially owned by fewer than 100 persons         
(determined without reference to any rules of attribution).                     

Any person who acquires or attempts to acquire actual or constructive   
ownership of shares of stock of the Company that will violate any of the        
foregoing restrictions on transferability and ownership is required to give     
notice immediately to the Company and provide the Company with such other       
information as the Company may request in order to determine the effect of such 
transfer on the Company's status as a REIT. The foregoing restrictions on       
transferability and ownership will not apply if the Board of Directors          
determines that it is no longer in the best interest of the Company to attempt  
to qualify, or to continue to qualify, as a REIT and such determination is      
approved by a two thirds vote of the Company's stockholders as required by the  
Charter. Except as otherwise described above, any change in the Ownership Limit 
would require an amendment to the Charter.                                      

 Pursuant to the Charter, if any purported transfer of Common Stock or any
other event would otherwise result in any person violating the Ownership Limit  
or such other limit as permitted by the Board of Directors, or result in the    
Company being "closely held" under Section 856(h) of the Code or otherwise cause
the Company to fail to qualify as a REIT, then that number of shares in excess  
of the Ownership Limit or such other limit shall be transferred to a trust for  
the benefit of a charitable beneficiary as described below and the purported    
transferee (the "Prohibited Transferee"), shall acquire no rights (or, in the   
case of any event other than a purported transfer, the person or entity holding 
record title to any such excess shares (the "Prohibited Owner") shall cease to  
have any rights) in such excess shares. Any such excess shares described above  
will be transferred automatically, by operation of law, to a trust, the         
beneficiary of which will be a qualified charitable organization selected by the
Company (the "Beneficiary"). Such automatic transfer shall be deemed to be      
effective as of the close of business on the business day prior to the date of  
such violative transfer. Within 20 days of receiving notice from the Company of 
the transfer of shares to the trust, the trustee of the trust (who shall be     
designated by the Company and be unaffiliated with the Company and any          
Prohibited Transferee or Prohibited Owner) will be required to sell such excess 
shares to a person or entity who could own such shares without violating the    
Ownership Limit,                                                                

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or such other limit as permitted by the Board of Directors, and distribute to   
the Prohibited Transferee or Prohibited Owner, as applicable, an amount equal to
the lesser of the price paid by the Prohibited Transferee or Prohibited Owner   
for such excess shares or the net sales proceeds received by the trust for such 
excess shares. In the case of any excess shares resulting from any event other  
than a transfer, or from a transfer for no consideration (such as a gift), the  
trustee will be required to sell such excess shares to a qualified person or    
entity and distribute to the Prohibited Owner an amount equal to the lesser of  
the Market Price (as defined in the Charter) of such excess shares as of the    
date of such event or the net sales proceeds received by the trust for such     
excess shares. In either case, any proceeds in excess of the amount             
distributable to the Prohibited Transferee or Prohibited Owner, as applicable,  
will be distributed to the Beneficiary. Prior to a sale of any such excess      
shares by the trust, the trustee will be entitled to receive, in trust for the  
Beneficiary, all dividends and other distributions paid by the Company with     
respect to such excess shares, and also will be entitled to exercise all voting 
rights with respect to such excess shares. Subject to Maryland law, effective as
of the date that such shares have been transferred to the trust, the trustee    
shall have the authority (at the trustee's sole discretion) (i) to rescind as   
void any vote cast by a Prohibited Transferee or Prohibited Owner, as           
applicable, prior to the discovery by the Company that such shares have been    
transferred to the trust and (ii) to recast such vote in accordance with the    
desires of the trustee acting for the benefit of the Beneficiary. However, if   
the Company has already taken irreversible corporate action, then the trustee   
shall not have the authority to rescind and recast such vote. Any dividend or   
other distribution paid to the Prohibited Transferee or Prohibited Owner (prior 
to the discovery by the Company that such shares had been automatically         
transferred to a trust as described above) will be required to be repaid to the 
trustee upon demand for distribution to the Beneficiary. In the event that the  
transfer to the trust as described above is not automatically effective (for any
reason) to prevent violation of the Ownership Limit or such other limit as      
permitted by the Board of Directors, then the Charter provides that the transfer
of the excess shares will be void.                                              

In addition, shares of stock of the Company held in the trust shall be  
deemed to have been offered for sale to the Company, or its designee, at a price
per share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the trust (or, in the case of a devise or gift or  
other transaction which does not involve a purchase of stock, the Market Price  
as of the day of the event which resulted in the transfer of such excess shares 
to the trust) and (ii) the Market Price on the date the Company, or its         
designee, accepts such offer. The Company shall have the right to accept such   
offer until the trustee has sold the shares of stock held in the trust. Upon    
such a sale to the Company, the interest of the Beneficiary in the shares sold  
shall terminate and the trustee shall distribute the net proceeds of the sale to
the Prohibited Transferee or Prohibited Owner.                                  

   If any purported transfer of shares of Common Stock would cause the Company
to be beneficially owned by fewer than 100 persons, such transfer will be null  
and void in its entirety and the intended transferee will acquire no rights to  
the stock.                                                                      

All certificates representing shares of Common Stock will bear a legend 
referring to the restrictions described above. The foregoing ownership          
limitations could delay, defer or prevent a transaction or a change in control  
of the Company that might involve a premium price for the Common Stock or       
otherwise be in the best interest of stockholders.                              

Under the Charter, each stockholder shall upon demand be required to    
disclose to the Company in writing such information as the Company may request  
in order to determine the Company's status as a REIT.                           

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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS 

 The following summary of certain federal income tax considerations to the
Company is based on current law, is for general information only, and is not tax
advice. The tax treatment of a holder of any of the Securities will vary        
depending upon the terms of the specific Securities acquired by such holder, as 
well as his particular situation, and this discussion does not attempt to       
address any aspects of federal income taxation relating to holders of           
Securities. Certain federal income tax considerations relevant to holders of the
Securities will be provided in the applicable Prospectus Supplement relating    
thereto.                                                                        

  EACH INVESTOR IS URGED TO CONSULT THE APPLICABLE PROSPECTUS SUPPLEMENT, AS
WELL AS HIS OWN TAX ADVISOR, REGARDING THE TAX CONSEQUENCES TO HIM OF THE       
ACQUISITION, OWNERSHIP AND SALE OF THE SECURITIES, INCLUDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND    
SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.                           

TAXATION OF THE COMPANY AS A REIT                                               

 GENERAL.  The Company has elected to be taxed as a real estate investment
trust under Sections 856 through 860 of the Code, commencing with its taxable   
year ended December 31, 1994. The Company believes that, commencing with its    
taxable year ended December 31, 1994, it has been organized and has operated in 
such a manner as to qualify for taxation as a REIT under the Code, and the      
Company intends to continue to operate in such a manner, but no assurance can be
given that it has operated or will operate in a manner so as to qualify or      
remain qualified.                                                               

  These sections of the Code are highly technical and complex. The following
sets forth the material aspects of the sections that govern the federal income  
tax treatment of a REIT. This summary is qualified in its entirety by the       
applicable Code provisions, rules and regulations promulgated thereunder, and   
administrative and judicial interpretations thereof. Latham & Watkins has acted 
as tax counsel to the Company in connection with this Prospectus and the        
Company's election to be taxed as a REIT.                                       

   Latham & Watkins has rendered an opinion to the Company as of September 12,
1997 to the effect that commencing with the Company's taxable year ended        
December 31, 1994, the Company has been organized in conformity with the        
requirements for qualification as a REIT, and its proposed method of operation  
has enabled and will continue to enable it to meet the requirements for         
qualification and taxation as a REIT under the Code. It must be emphasized that 
this opinion is based on various assumptions and is conditioned upon certain    
representations made by the Company as to factual matters, and that Latham &    
Watkins undertakes no obligation to update this opinion subsequent to such date.
Moreover, such qualification and taxation as a REIT depends upon the Company's  
ability to meet (through actual annual operating results, distribution levels   
and diversity of stock ownership) the various qualification tests imposed under 
the Code discussed below, the results of which have not been and will not be    
reviewed by Latham & Watkins. Accordingly, no assurance can be given that the   
actual results of the Company's operation in any particular taxable year will   
satisfy such requirements. See "--Failure to Qualify."                          

 If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on its net income that is currently   
distributed to stockholders. This treatment substantially eliminates the "double
taxation" (at the corporate and stockholder levels) that generally results from 
investment in a regular corporation. However, the Company will be subject to    
federal income tax as follows: First, the Company will be taxed at regular      
corporate rates on any undistributed real estate investment trust taxable       
income, including undistributed net capital gains. Second, under certain        
circumstances, the Company may be subject to the "alternative minimum tax" on   
its items of tax preference. Third, if Company has (i) net income from the sale 
or other disposition of "foreclosure property" which is held primarily for sale 
to customers in the ordinary course of business or (ii) other non-qualifying    
income from foreclosure property, it will be subject to tax at the highest      
corporate rate on such income. Fourth, if                                       

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the Company has net income from prohibited transactions (which are, in general, 
certain sales or other dispositions of property held primarily for sale to      
customers in the ordinary course of business other than foreclosure property),  
such income will be subject to a 100% tax. Fifth, if the Company should fail to 
satisfy the 75% gross income test or the 95% gross income test (as discussed    
below), but has nonetheless maintained its qualification as a real estate       
investment trust because certain other requirements have been met, it will be   
subject to a 100% tax on an amount equal to (a) the gross income attributable to
the greater of the amount by which the Company fails the 75% or 95% test,       
multiplied by (b) a fraction intended to reflect the Company's profitability.   
Sixth, if the Company should fail to distribute during each calendar year at    
least the sum of (i) 85% of its real estate investment trust ordinary income for
such year, (ii) 95% of its real estate investment trust capital gain net income 
for such year, and (iii) any undistributed taxable income from prior periods,   
the Company would be subject to a 4% excise tax on the excess of such required  
distribution over the amounts actually distributed. Seventh, with respect to any
asset (a "Built-in Gain Asset") acquired by the Company from a corporation which
is or has been a C corporation (i.e., generally a corporation subject to full   
corporate-level tax) in a transaction in which the basis of the Built-in Gain   
Asset in the hands of the Company is determined by reference to the basis of the
asset in the hands of the C corporation, if the Company recognizes gain on the  
disposition of such asset during the 10-year period (the "Recognition Period")  
beginning on the date on which such asset was acquired by the Company, then, to 
the extent of the Built-in Gain (i.e., the excess of (a) the fair market value  
of such asset over (b) the Company's adjusted basis in such asset, determined as
of the beginning of the Recognition Period), such gain will be subject to tax at
the highest regular corporate rate pursuant to Treasury Regulations that have   
not yet been promulgated. The results described above with respect to the       
recognition of Built-in Gain assume that the Company has made an election       
pursuant to IRS Notice 88-19.                                                   

  REQUIREMENTS FOR QUALIFICATION.  The Code defines a REIT as a corporation,
trust or association (1) which is managed by one or more trustees or directors, 
(2) the beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest, (3) which would be taxable as 
a domestic corporation, but for Sections 856 through 859 of the Code, (4) which 
is neither a financial institution nor an insurance company subject to certain  
provisions of the Code, (5) the beneficial ownership of which is held by 100 or 
more persons, (6) during the last half of each taxable year, not more than 50%  
in value of the outstanding stock of which is owned, actually or constructively,
by five or fewer individuals (as defined in the Code to include certain         
entities) and (7) which meets certain other tests, described below, regarding   
the nature of its income and assets and the amount of its distributions. The    
Code provides that conditions (1) to (4) must be met during the entire taxable  
year and that condition (5) must be met during at least 335 days of a taxable   
year of 12 months, or during a proportionate part of a taxable year of less than
12 months. Conditions (5) and (6) will not apply until after the first taxable  
year for which an election is made to be taxed as a real estate investment      
trust.                                                                          

The Company believes that it has satisfied condition (5) and that it has
issued sufficient shares to allow it to satisfy condition (6). In addition, the 
Company's Charter provides for restrictions regarding ownership and transfer of 
the Company's capital stock, which restrictions are intended to assist the      
Company in continuing to satisfy the share ownership requirements described in  
(5) and (6) above. Such ownership and transfer restrictions are described in    
"Restrictions on Ownership and Transfers of Capital Stock." There can be no     
assurance, however, that such transfer and ownership restrictions will, in all  
cases, prevent a violation of the stock ownership provisions described in (5)   
and (6) above. The ownership and transfer restrictions pertaining to a          
particular class or series of capital stock will be described in the applicable 
Prospectus Supplement pertaining to such class or series.                       

  The Company owns, and has owned, interests in various partnerships. In the
case of a REIT that is a partner in a partnership, Treasury Regulations provide 
that the REIT will be deemed to own its proportionate share of the assets of the
partnership and will be deemed to be entitled to the income of the partnership  
attributable to such share. In addition, the character of the assets and gross  
income of the partnership will retain the same character in the hands of the    
real estate investment trust for purposes of                                    

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Section 856 of the Code, including satisfying the gross income tests and the    
asset tests. Thus, the Company's proportionate share of the assets, liabilities 
and items of income of the partnerships in which the Company is a partner will  
be treated as assets, liabilities and items of income of the Company for        
purposes of applying the requirements described herein. See "--Tax Risks        
Associated with the Partnerships."                                              

   The Company owns 100% of the stock of a subsidiary that is a qualified REIT
subsidiary (a "QRS") and may acquire stock of one or more new subsidiaries. A   
corporation will qualify as a QRS if 100% of its stock is held by the Company at
all times during the period such QRS was in existence. A QRS will not be treated
as a separate corporation, and all assets, liabilities, and items of income,    
deduction, and credit of a QRS will be treated as assets, liabilities and such  
items (as the case may be) of the Company for all purposes of the Code including
the REIT qualification tests. For this reason, references under "Certain Federal
Income Tax Considerations" to the income and assets of the Company shall include
the income and assets of any QRS. A QRS will not be subject to federal income   
tax and the Company's ownership of the voting stock of a QRS will not violate   
the restrictions against ownership of securities of any one issuer which        
constitute more than 10% of such issuer's voting securities or more than 5% of  
the value of the Company's total assets, described below under "--Asset Tests." 

INCOME TESTS.  In order to maintain qualification as a REIT, the Company
annually must satisfy three gross income requirements. First, at least 75% of   
the Company's gross income (excluding gross income from prohibited transactions)
for each taxable year must be derived directly or indirectly from investments   
relating to real property or mortgages on real property (including "rents from  
real property" and, in certain circumstances, interest) or from certain types of
temporary investments. Second, at least 95% of the Company's gross income       
(excluding gross income from prohibited transactions) for each taxable year must
be derived from such real property investments, dividends, interest and gain    
from the sale or disposition of stock or securities (or from any combination of 
the foregoing). Third, short-term gain from the sale or other disposition of    
stock or securities, gain from prohibited transactions and gain on the sale or  
other disposition of real property held for less than four years (apart from    
involuntary conversions and sales of foreclosure property) must represent less  
than 30% of the Company's gross income (including gross income from prohibited  
transactions) for each taxable year.                                            

   Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a real estate investment trust     
described above only if several conditions are met. First, the amount of rent   
must not be based in whole or in part on the income or profits of any person.   
However, an amount received or accrued generally will not be excluded from the  
term "rents from real property" solely by reason of being based on a fixed      
percentage or percentages of receipts or sales. Second, the Code provides that  
rents received from a tenant will not qualify as "rents from real property" in  
satisfying the gross income tests if the real estate investment trust, or an    
owner of 10% or more of the real estate investment trust, actually or           
constructively owns 10% or more of such tenant (a "Related Party Tenant").      
Third, if rent attributable to personal property leased in connection with a    
lease of real property is greater than 15% of the total rent received under the 
lease, then the portion of rent attributable to such personal property will not 
qualify as "rents from real property." Finally, for rents received to qualify as
"rents from real property," the real estate investment trust generally must not 
operate or manage the property or furnish or render services to the tenants of  
such property, other than through an independent contractor from whom the real  
estate investment trust derives no revenue; PROVIDED, HOWEVER, the Company may  
directly perform certain services that are "usually or customarily rendered" in 
connection with the rental of space for occupancy only and are not otherwise    
considered "rendered to the occupant" of the property. The Company does not and 
will not (i) charge rent for any property that is based in whole or in part on  
the income or profits of any person (except by reason of being based on a       
percentage of receipts or sales, as described above), (ii) rent any property to 
a Related Party Tenant, (iii) derive rental income attributable to personal     
property (other than personal property leased in connection with the lease of   
real property, the amount of which is less than 15% of the total rent received  
under the lease), or (iv) perform                                               

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services considered to be rendered to the occupant of the property, other than  
through an independent contractor from whom the Company derives no revenue.     
Notwithstanding the foregoing, the Company may take certain of the actions set  
forth in (i) through (iv) above to the extent such actions will not, based on   
the advice of tax counsel to the Company, jeopardize the Company's tax status as
a REIT.                                                                         

The term "interest" generally does not include any amount received or   
accrued (directly or indirectly) if the determination of such amount depends in 
whole or in part on the income or profits of any person. However, an amount     
received or accrued generally will not be excluded from the term "interest"     
solely by reason of being based on a fixed percentage or percentages of receipts
or sales.                                                                       

  If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a real estate        
investment trust for such year if it is entitled to relief under certain        
provisions of the Code. These relief provisions will generally be available if  
the Company's failure to meet such tests was due to reasonable cause and not due
to willful neglect, the Company attaches a schedule of the sources of its income
to its federal income tax return, and any incorrect information on the schedule 
was not due to fraud with intent to evade tax. It is not possible, however, to  
state whether in all circumstances the Company would be entitled to the benefit 
of these relief provisions. As discussed above under "--General," even if these 
relief provisions apply, a tax would be imposed with respect to the excess net  
income.                                                                         

    ASSET TESTS.  The Company, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets. First, at   
least 75% of the value of the Company's total assets must be represented by real
estate assets (including stock or debt instruments held for not more than one   
year purchased with the proceeds of a stock offering or long-term (at least five
years) public debt offering of the Company), cash, cash items and government    
securities. Second, not more than 25% of the Company's total assets may be      
represented by securities other than those in the 75% asset class. Third, of the
investments included in the 25% asset class, the value of any one issuer's      
securities owned by the Company may not exceed 5% of the value of the Company's 
total assets and the Company may not own more than 10% of any one issuer's      
outstanding voting securities.                                                  

ANNUAL DISTRIBUTION REQUIREMENTS.  The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain dividends) to
its stockholders in an amount at least equal to (A) the sum of (i) 95% of the   
Company's "REIT taxable income" (computed without regard to the dividends paid  
deduction and the Company's net capital gain) and (ii) 95% of the net income    
(after tax), if any, from foreclosure property, minus (B) the sum of certain    
items of non-cash income. In addition, if the Company disposes of any asset     
during its Recognition Period, the Company will be required, pursuant to IRS    
regulations which have not yet been promulgated, to distribute at least 95% of  
the Built-in Gain (after tax), if any, recognized on the disposition of such    
asset. Such distributions must be paid in the taxable year to which they relate,
or in the following taxable year if declared before the Company timely files its
tax return for such year and if paid on or before the first regular dividend    
payment after such declaration. To the extent that the Company does not         
distribute all of its net capital gain or distributes at least 95%, but less    
than 100%, of its REIT taxable income, as adjusted, it will be subject to tax   
thereon at regular ordinary and capital gain corporate tax rates.               

   It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement due to     
timing differences between (i) the actual receipt of income and actual payment  
of deductible expenses and (ii) the inclusion of such income and deduction of   
such expenses in arriving at taxable income of the Company. In the event that   
such timing differences occur, in order to meet the 95% distribution            
requirement, the Company may find it necessary to arrange for short-term, or    
possibly long-term, borrowings or to pay dividends in the form of taxable stock 
dividends.                                                                      

    Under certain circumstances, the Company may be able to rectify a failure to
meet the above distribution requirements for a year by paying "deficiency       
dividends" to stockholders in a later year, which                               

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may be included in the Company's deduction for dividends paid for the earlier   
year. Thus, the Company may be able to avoid being taxed on amounts distributed 
as deficiency dividends; however, the Company will be required to pay interest  
based upon the amount of any deduction taken for deficiency dividends.          

  Furthermore, if the Company should fail to distribute during each calendar
year at least the sum of (i) 85% of its real estate investment trust ordinary   
income for such year, (ii) 95% of its real estate investment trust capital gain 
income for such year, and (iii) any undistributed taxable income from prior     
periods, the Company would be subject to a 4% excise tax on the excess of such  
required distribution over the amounts actually distributed. The Company intends
to make timely distributions sufficient to satisfy the annual distribution      
requirements set forth above.                                                   

DISTRIBUTION OF ACQUIRED EARNINGS.  In addition to the above annual     
distribution requirements, a REIT is not allowed to have accumulated earnings   
and profits attributable to non-REIT years. A REIT has until the close of its   
first taxable year in which it has non-REIT earnings and profits to distribute  
any such earnings and profits. In a corporate reorganization qualifying as a    
tax-free statutory merger, the acquired corporation's earnings and profits are  
carried over to the surviving corporation. Any earnings and profits treated as  
having been acquired by a REIT through such a merger will be treated as         
accumulated earnings and profits of the REIT attributable to non-REIT years. On 
August 17, 1995, R.I.C. Advisor, Inc., a California corporation ("R.I.C.        
Advisor"), merged with and into the Company (the "Merger") pursuant to an       
Agreement and Plan of Merger dated as of April 28, 1995, by and among the       
Company, R.I.C. Advisor and the shareholders of R.I.C. Advisor. Accordingly, as 
a result of the Merger, the Company was treated as having acquired the earnings 
and profits (the "Acquired Earnings") of R.I.C. Advisor. The Company was        
required to distribute (or be deemed to distribute) the Acquired Earnings prior 
to the close of 1995. Failure to do so would result in the loss of the Company's
REIT status, which would have a material adverse effect on the financial        
position and results of operations of the Company and its ability to make       
distributions to stockholders and debt service payments. See "--Failure to      
Qualify."                                                                       

    The amount of the Acquired Earnings was based on the earnings and profits of
R.I.C. Advisor immediately prior to the Merger. The Acquired Earnings were      
determined through an earnings and profits study based on the corporate tax     
returns of R.I.C. Advisor for the tax years beginning with R.I.C. Advisor's date
of incorporation through the date of the Merger. The Company requested that KPMG
Peat Marwick LLP perform certain procedures relating to the amount of the       
earnings and profits of R.I.C. Advisor for purposes of the earnings and profits 
distribution requirement. Based on KPMG Peat Marwick LLP's conclusions (which   
were based on R.I.C. Advisor's tax returns as filed with the Internal Revenue   
Service (the "IRS"), certain other information provided by R.I.C. Advisor and   
other assumptions and qualifications set forth in KPMG Peat Marwick LLP's       
report) and other relevant factors, the Company believes that it made (or was   
deemed to make) distributions to its shareholders which were sufficient to      
distribute the Acquired Earnings prior to the close of 1995.                    

  The calculation of the amount of Acquired Earnings is subject to challenge
by the IRS. The IRS may examine R.I.C. Advisor's prior tax returns and propose  
adjustments to increase its taxable income. Because the earnings and profits    
study used to calculate the amount of Acquired Earnings was based on these      
returns, such adjustments may increase the amount of the Acquired Earnings. If  
the IRS determines that the Company did not distribute all of the Acquired      
Earnings prior to the end of 1995, the Company would fail to qualify as a REIT  
for 1995 and perhaps for subsequent years, which would have a material adverse  
effect on the financial position and results of operations of the Company and   
its ability to make distributions to stockholders and debt service payments. See
"--Failure to Qualify." However, the Company may make an additional distribution
within 90 days of such a determination by the IRS to distribute the Acquired    
Earnings and would be required to pay to the IRS an interest charge based on 50%
of the amount not previously distributed. If such additional distribution is    
made, the Company's failure to distribute the Acquired Earnings would not       
prevent it from qualifying as a REIT for years subsequent to 1995.              

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TAX RISKS ASSOCIATED WITH THE PARTNERSHIPS                                      

The Company presently owns an interest in one partnership and previously
owned an interest in other partnerships. The ownership of an interest in a      
partnership may involve special tax risks, including the possible challenge by  
the IRS of (i) allocations of income and expense items, which could affect the  
computation of taxable income of the Company, and (ii) the status of a          
partnership as a partnership (as opposed to an association taxable as a         
corporation) for federal income tax purposes. If the partnership was treated as 
an association taxable as a corporation for federal income tax purposes, the    
partnership would be treated as a taxable entity. In addition, in such a        
situation, (i) if the Company owned more than 10% of the outstanding voting     
securities of such partnership, or the value of such securities exceeded 5% of  
the value of the Company's assets, the Company would fail to satisfy the asset  
tests described above and would therefore fail to qualify as a REIT, (ii)       
distributions from the partnership to the Company would be treated as dividends,
which are not taken into account in satisfying the 75% gross income test        
described above and could, therefore, make it more difficult for the Company to 
satisfy such test, (iii) the interest in the partnership held by the Company    
would not qualify as a "real estate asset," which could make it more difficult  
for the Company to meet the 75% asset test described above, and (iv) the Company
would not be able to deduct its share of any losses generated by the            
partnerships in computing its taxable income. See "--Failure to Qualify" for a  
discussion of the effect of the Company's failure to meet such tests for a      
taxable year. The Company believes that each of the partnerships in which the   
Company owns or has owned an interest have been and will be treated for tax     
purposes as a partnership (rather than an association taxable as a corporation).
The Company's position will not be binding on the IRS and no assurance can be   
given that the IRS will not successfully challenge the status of any partnership
as a partnership for federal income tax purposes.                               

FAILURE TO QUALIFY                                                              

   If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Company will be subject to tax      
(including any applicable alternative minimum tax) on its taxable income at     
regular corporate rates. Such a failure to qualify for taxation as a REIT would 
reduce the cash available for distribution by the Company to stockholders and to
pay debt service and could have an adverse effect on the market value and       
marketability of the Securities. Distributions to stockholders in any year in   
which the Company fails to qualify will not be deductible by the Company nor    
will they be required to be made. In such event, to the extent of current and   
accumulated earnings and profits, all distributions to stockholders will be     
taxable as ordinary income and, subject to certain limitations of the Code,     
corporate distributees may be eligible for the dividends received deduction.    
Unless entitled to relief under specific statutory provisions, the Company will 
also be disqualified from taxation as a REIT for the four taxable years         
following the year during which qualification was lost. It is not possible to   
state whether in all circumstances the Company would be entitled to such        
statutory relief.                                                               

TAXPAYER RELIEF ACT OF 1997                                                     

    On August 5, 1997, President Clinton signed into law the Taxpayer Relief Act
of 1997 (H.R. 2014), which will have the effect of modifying certain            
REIT-related Code provisions for tax years beginning on or after January 1,     
1998. Some of the potentially significant REIT-related changes contained in this
legislation include: (i) the rule disqualifying a REIT for any year in which it 
fails to comply with certain regulations requiring the REIT to monitor its stock
ownership is replaced with an intermediate financial penalty; (ii) the rule     
disqualifying a REIT in any year that it is "closely held" does not apply if    
during such year the REIT complied with certain regulations which require the   
REIT to monitor its stock ownership, and the REIT did not know or have reason to
know that it was closely held; (iii) a REIT is permitted to render a DE MINIMIS 
amount of impermissible services to tenants in connection with the management of
property and still treat amounts received with respect to such property (other  
than certain amounts relating to such services) as qualified rent; (iv) the     
rules regarding attribution to partnerships for purposes of defining            

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qualified rent and independent contractors are modified so that attribution     
occurs only when a partner owns a 25% or greater interest in the partnership;   
(v) the 30% gross income test is repealed; (vi) any corporation wholly-owned by 
a REIT is permitted to be treated as a qualified REIT subsidiary regardless of  
whether such subsidiary has always been owned by the REIT; (vii) the ordering   
rule for purposes of the requirement that newly-electing REITs distribute       
earnings and profits accumulated in non-REIT years is modified; (viii) the class
of excess noncash items for purposes of the REIT distribution requirements is   
expanded; (ix) the rules regarding the treatment of hedges are modified; and (x)
certain other Code provisions relating to REITs are amended. Some or all of the 
provisions could affect both the Company's operations and its ability to        
maintain its REIT status for its taxable years beginning in 1998.               

STATE AND LOCAL TAXES                                                           

 The Company may be subject to state or local taxes in other jurisdictions
such as those in which the Company may be deemed to be engaged in activities or 
own property or other interests. Such tax treatment of the Company in states    
having taxing jurisdiction over it may differ from the federal income tax       
treatment described in this summary.                                            

PLAN OF DISTRIBUTION

  The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly or   
through agents. Any such underwriter or agent involved in the offer and sale of 
the Securities will be named in the applicable Prospectus Supplement.           

  Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, at prices relating to the prevailing market prices at the 
time of sale or at negotiated prices. The Company also may, from time to time,  
authorize underwriters acting as the Company's agents to offer and sell the     
Securities upon the terms and conditions as are set forth in the applicable     
Prospectus Supplement. In connection with the sale of Securities, underwriters  
may be deemed to have received compensation from the Company in the form of     
underwriting discounts or commissions and may also receive commissions from     
purchasers of Securities for whom they may act as agent. Underwriters may sell  
Securities to or through dealers, and such dealers may receive compensation in  
the form of discounts, concessions or commissions from the underwriters and/or  
commissions from the purchasers for whom they may act as agent. Any underwriting
compensation paid by the Company to underwriters or agents in connection with   
the offering of Securities, and any discounts, concessions or commissions       
allowed by underwriters to participating dealers, will be set forth in the      
applicable Prospectus Supplement. Underwriters, dealers and agents participating
in the distribution of the Securities may be deemed to be underwriters, and any 
discounts and commissions received by them and any profit realized by them on   
resale of the Securities may be deemed to be underwriting discounts and         
commissions, under the Securities Act. Any such underwriter or agent will be    
identified, and such compensation received from the Company will be described,  
in the applicable Prospectus Supplement.                                        

  Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company, to indemnification against and contribution toward       
certain civil liabilities, including liabilities under the Securities Act.      

   Certain of the underwriters, dealers and agents and their affiliates may be
customers of, engage in transactions with and perform services for the Company  
and its subsidiaries in the ordinary course of business.                        

    Unless otherwise specified in the related Prospectus Supplement, each series
of Securities will be a new issue with no established trading market, other than
the Common Stock. The Common Stock is currently listed on the NYSE. Unless      
otherwise specified in the related Prospectus Supplement, any shares of Common  
Stock sold pursuant to a Prospectus Supplement will be listed on the NYSE,      
subject to official notice of issuance. The Company may elect to list any series
of Debt Securities or Preferred Stock on an                                     

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exchange or Nasdaq, but is not obligated to do so. It is possible that one or   
more underwriters may make a market in a series of Securities, but will not be  
obligated to do so and may discontinue any market making at any time without    
notice. Therefore, there can be no assurance as to the liquidity of, or the     
trading market for, the Securities.                                             

EXPERTS 

 The consolidated financial statements and financial statement schedule of
Realty Income Corporation as of December 31, 1996 and 1995 and for each of the  
years in the three-year period ended December 31, 1996 included in Realty Income
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 
1996 and incorporated by reference herein have been audited by KPMG Peat Marwick
LLP, independent certified public accountants, and have been incorporated herein
by reference in reliance upon the reports of KPMG Peat Marwick LLP, incorporated
herein by reference, and upon the authority of such firm as experts in          
accounting and auditing.                                                        

LEGAL MATTERS 

The validity of the Securities will be passed upon for the Company by   
Ballard Spahr Andrews & Ingersoll. Certain legal matters will be passed upon for
the Company by Latham & Watkins.                                                

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-------------------------------------------                                     
                                     -------------------------------------------
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  NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR        
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING     
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND  
THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST  
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. 
NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES  
AN OFFER TO SELL, OR A SOLICITATION OR AN OFFER TO BUY, TO ANY PERSON IN ANY    
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE    
DELIVERY OF THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS NOR ANY  
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT 
THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF.                                                             
------------------------

TABLE OF CONTENTS 
PROSPECTUS SUPPLEMENT 

                                                                [Download Table]

                                                   PAGE   
                                                 ---------
                                                          
Prospectus Supplement Summary..................        S-3
Risk Factors...................................       S-13
Use of Proceeds................................       S-18
Distribution Policy............................       S-18
Capitalization.................................       S-19
Price Range of Common Stock and Distribution              
  History......................................       S-20
Business and Properties........................       S-21
Management.....................................       S-50
Certain U.S. Federal Income Tax Considerations            
  to Holders of Common Stock...................       S-53
Underwriting...................................       S-58
Legal Matters..................................       S-60

                        PROSPECTUS                        
Available Information..........................          2
Incorporation of Certain Documents by                     
  Reference....................................          2
The Company....................................          3
Use of Proceeds................................          3
Ratios of Earnings to Fixed Charges............          3
Description of Debt Securities.................          4
Description of Common Stock....................         14
Description of Preferred Stock.................         17
Restrictions on Ownership and Transfers of                
  Capital Stock................................         22
Certain Federal Income Tax Considerations......         25
Plan of Distribution...........................         31
Experts........................................         32
Legal Matters..................................         32

2,700,000 SHARES

[LOGO]

COMMON STOCK

------------------

PROSPECTUS SUPPLEMENT 

------------------------

MERRILL LYNCH & CO. 
A.G. EDWARDS & SONS, INC. 
PAINEWEBBER INCORPORATED
SUTRO & CO. INCORPORATED
WHEAT FIRST BUTCHER SINGER

OCTOBER   , 1997

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Information contained in this prospectus supplement is subject to completion.   
This prospectus supplement and the prospectus shall not constitute an offer to  
sell or the solicitation of an offer to buy nor                                 
shall there be any sale of these securities in any State in which such offer,   
solicitation or sale would be unlawful prior to registration or qualification   
under the securities laws of any such State.                                    

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SUBJECT TO COMPLETION, DATED OCTOBER 1, 1997
PROSPECTUS SUPPLEMENT                                                           
(TO PROSPECTUS DATED OCTOBER 1, 1997)                                           

2,700,000 SHARES

[LOGO]

COMMON STOCK
------------------

   Realty Income Corporation, a Maryland corporation (the "Company" or "Realty
Income"), is a fully integrated, self-administered and self-managed real estate 
investment trust ("REIT") that acquires, owns and manages net leased, retail    
properties. The Company is the nation's largest publicly-traded owner of        
freestanding, single-tenant, retail properties diversified geographically and by
industry and operated under net lease agreements and, through its predecessors, 
has been in the real estate investment business since 1969. As of August 31,    
1997, the Company owned a diversified portfolio of 774 properties located in 42 
states with over 5.7 million square feet of leasable space. Over 99 percent of  
the Company's single-tenant properties were leased as of August 31, 1997        
pursuant to leases with an average remaining term (excluding extension options) 
of approximately 8.4 years.                                                     

  The Company currently pays regular monthly distributions to holders of its
outstanding shares of common stock, par value $1.00 per share ("Common Stock"). 
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under the
symbol "O." On September 30, 1997, the last reported sale price of the Common   
Stock on the NYSE was $26 15/16 per share.                                      

  All of the 2,700,000 shares of Common Stock being offered hereby are being
sold by Realty Income. Of the 2,700,000 shares of Common Stock offered hereby,  
540,000 shares are being offered outside of the United States and Canada by the 
International Managers (the "International Offering") and 2,160,000 shares are  
being offered in a concurrent offering inside the United States and Canada by   
the U.S. Underwriters (the "U.S. Offering" and, together with the International 
Offering, the "Offering"). The price to public and underwriting discount per    
share are identical for the International Offering and the U.S. Offering. See   
"Underwriting."                                                                 

   The shares of Common Stock are subject to certain restrictions on ownership
and transfer designed to preserve the Company's status as a REIT for federal    
income tax purposes. See "Restrictions on Ownership and Transfers of Capital    
Stock" in the accompanying Prospectus.                                          

    SEE "RISK FACTORS" BEGINNING ON PAGE S-13 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.                                                 
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND  
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO 
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL  
OFFENSE.

                                                        [Enlarge/Download Table]

                                                      PRICE TO  UNDERWRITING  PROCEEDS TO
                                                       PUBLIC    DISCOUNT(1)  COMPANY(2) 
                                                                                         
Per Share............................................     $           $            $     
Total(3).............................................     $           $            $     

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as 
amended. See "Underwriting."                                            

(2) Before deducting expenses payable by the Company estimated at $400,000.     

(3) The Company has granted the International Managers and U.S. Underwriters    
(the "Underwriters") options, exercisable within 30 days after the date 
hereof, to purchase up to 81,000 and 324,000 additional shares of Common
  Stock, respectively, in each case to cover over-allotments, if any. If all
   such shares are purchased, the total Price to Public, Underwriting Discount
and Proceeds to Company will be $        , $        and $        ,      
respectively. See "Underwriting."                                       
------------------------------

   The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued by the Company and delivered to and       
accepted by the Underwriters, subject to approval of certain legal matters by   
counsel for the Underwriters and subject to certain other conditions. The       
Underwriters reserve the right to withdraw, cancel or modify such offer and to  
reject orders in whole or in part. It is expected that delivery of the Common   
Stock will be made in New York, New York on or about October  , 1997.           

--------------------------

MERRILL LYNCH INTERNATIONAL                                                     
A.G. EDWARDS & SONS, INC.                                       
PAINEWEBBER INTERNATIONAL               
        SUTRO & CO. INCORPORATED
                                                      WHEAT FIRST BUTCHER SINGER
----------------

The date of this Prospectus Supplement is October   , 1997. 

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UNDERWRITING

  Subject to the terms and conditions set forth in a purchase agreement (the
"International Purchase Agreement"), the Company has agreed to sell to the      
International Managers named below (the "International Managers"), and the      
International Managers have severally agreed to purchase, the number of shares  
of Common Stock set forth opposite their respective names below.                

                                                        [Enlarge/Download Table]

                                                                                    NUMBER OF    
                UNDERWRITER                                                          SHARES      
                --------------------------------------------------------------  -----------------
                                                                                                 
Merrill Lynch International...................................................                   
A.G. Edwards & Sons, Inc......................................................                   
PaineWebber International (U.K.) Ltd..........................................                   
Sutro & Co. Incorporated......................................................                   
Wheat, First Securities, Inc..................................................                   
                                                                                -----------------
                Total.........................................................         540,000   
                                                                                -----------------
                                                                                -----------------

  The Company has also entered into a purchase agreement (the "U.S. Purchase
Agreement" and, together with the International Purchase Agreement, the         
"Agreements") with Merrill Lynch, Pierce, Fenner & Smith Incorporated, A.G.     
Edwards & Sons, Inc., PaineWebber Incorporated, Sutro & Co. Incorporated and    
Wheat, First Securities, Inc. (the "U.S. Underwriters"). Subject to the terms   
and conditions set forth in the U.S. Purchase Agreement, the Company has agreed 
to sell to the U.S. Underwriters, and the U.S. Underwriters have severally      
agreed to purchase, an aggregate of 2,160,000 shares of Common Stock. The       
initial public offering price per share and the underwriting discount per share 
are identical under the International Purchase Agreement and the U.S. Purchase  
Agreement.                                                                      

    In the International Purchase Agreement and the U.S. Purchase Agreement, the
several International Managers and the several U.S. Underwriters (collectively, 
the "Underwriters"), respectively, have agreed, subject to the terms and        
conditions set forth therein, to purchase all of the shares of Common Stock     
being sold pursuant to such Agreement if any of the shares of Common Stock being
sold pursuant to such Agreement are purchased. The International Purchase       
Agreement provides that, in the event of a default by an International Manager, 
the purchase commitments of the non-defaulting International Managers may in    
certain circumstances be increased, and the U.S. Purchase Agreement provides    
that, in the event of a default by a U.S. Underwriter, the purchase commitments 
of the non-defaulting U.S. Underwriters may in certain circumstances be         
increased. The closing with respect to the sale of the shares of Common Stock   
pursuant to the International Purchase Agreement is a condition to the closing  
with respect to the sale of the shares of Common Stock pursuant to the U.S.     
Purchase Agreement, and the closing with respect to the sale of the shares of   
Common Stock pursuant to the U.S. Purchase Agreement is a condition to the      
closing with respect to the sale of the shares of Common Stock pursuant to the  
International Purchase Agreement.                                               

 The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") which provides for the
coordination of their activities. Under the terms of the Intersyndicate         
Agreement, the International Managers and the U.S. Underwriters are permitted to
sell shares of Common Stock to each other. Pursuant to the Intersyndicate       
Agreement, sales may be made between the International Managers and the U.S.    
Underwriters of such number of shares of Common Stock as may be mutually agreed.
The price of any shares of Common Stock so sold shall be the initial public     
offering price, less an amount not greater than the selling concession.         

  Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and
any dealer to whom they sell shares of Common Stock will agree to offer to sell 
or sell shares of Common Stock only to persons whom they believe are United     
States Persons or Canadian Persons (as defined in the Intersyndicate Agreement) 
or to persons whom they believe intend to reoffer or resell the same to United  
States Persons or Canadian Persons, and the International Managers and any bank,
broker or dealer to whom they sell shares of Common Stock will agree not to     
offer to sell or sell shares of Common Stock to persons whom                    

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they believe to be United States Persons or Canadian Persons or to persons whom 
they believe intend to reoffer or resell the same to United States Persons or   
Canadian Persons, except in each case for transactions pursuant to the          
Intersyndicate Agreement which, among other things, permits the Underwriters to 
purchase from each other and offer for resale such number of shares of Common   
Stock as the selling Underwriter or Underwriters and the purchasing Underwriter 
or Underwriters may agree.                                                      

The International Managers have advised the Company that they propose   
initially to offer the shares of Common Stock offered hereby to the public at   
the public offering price set forth on the cover page of this Prospectus        
Supplement and to certain dealers at such price less a concession not in excess 
of $    per share. The International Managers may allow, and such dealers may   
reallow, a discount not in excess of $    per share on sales to certain other   
dealers. After the initial public offering, the public offering price,          
concession and discount may be changed.                                         

    The Company has granted to the International Managers an option, exercisable
for 30 days after the date hereof, to purchase up to 81,000 additional shares of
Common Stock and to the U.S. Underwriters an option, exercisable for 30 days    
after the date hereof, to purchase up to 324,000 additional shares of Common    
Stock, in each case solely to cover over-allotments, if any, at the initial     
public offering price less the underwriting discount and less an amount per     
share equal to any dividends or distributions payable by the Company on the     
shares offered hereby but not payable on the shares purchased by the            
International Managers or the U.S. Underwriters, as the case may be, upon the   
exercise of such option. To the extent that the International Managers exercise 
this option, each of the International Managers will be obligated, subject to   
certain conditions, to purchase approximately the same percentage of such shares
which the number of shares of Common Stock to be purchased by it shown in the   
foregoing table bears to the total number of shares of Common Stock set forth in
such table.                                                                     

The Company has agreed to indemnify the Underwriters against certain    
liabilities, including liabilities under the Securities Act.                    

  The Company has agreed that, for a period of 90 days from the date of this
Prospectus Supplement, the Company will not, without the prior written consent  
of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),        
directly or indirectly (i) offer, pledge, sell, contract to sell, sell any      
option or contract to purchase, purchase any option or contract to sell, grant  
any option, right or warrant to purchase or otherwise transfer or dispose of any
shares of Common Stock or any securities convertible into or exercisable or     
exchangeable for Common Stock or file any registration statement under the      
Securities Act with respect to the foregoing or (ii) enter into any swap,       
agreement or other agreement or transaction that transfers, in whole or in part,
directly or indirectly, the economic consequences of ownership of Common Stock, 
whether any such swap or other transaction described in (i) or (ii) above is to 
be settled by delivery of Common Stock, other securities, cash or otherwise. The
foregoing sentence shall not apply to (A) the Common Stock to be sold in the    
Offering, (B) any shares of Common Stock issued by the Company upon the exercise
of any option outstanding on the date of this Prospectus Supplement, (C) any    
shares of Common Stock issued or options to purchase Common Stock granted       
pursuant to existing employee benefit plans or (D) any shares of Common Stock   
issued pursuant to any non-employee director stock plan.                        

Until the distribution of the Common Stock is completed, rules of the   
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an   
exception to these rules, the U.S. Underwriters are permitted to engage in      
certain transactions that stabilize the price of the Common Stock. Such         
transactions consist of bids or purchases for the purpose of pegging, fixing or 
maintaining the price of the Common Stock.                                      

If the Underwriters create a short position in the Common Stock in      
connection with this Offering (I.E. if they sell more shares of Common Stock    
than are set forth on the cover page of this Prospectus Supplement), the U.S.   
Underwriters may reduce that short position by purchasing Common Stock in the   

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open market. The U.S. Underwriters may also elect to reduce any short position  
through the exercise of all or part of the over-allotment options described     
above.                                                                          

  In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than 
it might be in the absence of such purchases.                                   

   Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions 
described above may have on the price of the Common Stock. In addition, neither 
the Company nor any of the Underwriters makes any representation that the U.S.  
Underwriters will engage in such transactions or that such transactions, once   
commenced, will not be discontinued without notice.                             

 Each International Manager has agreed that (i) it has not offered or sold
and will not offer or sell any shares of Common Stock to persons in the United  
Kingdom except to persons whose ordinary activities involve them in acquiring,  
holding, managing or disposing of investments (as principal or agent) for the   
purposes of their businesses or otherwise in circumstances which have not       
resulted and will not result in an offer to the public in the United Kingdom    
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it 
has only issued or passed on and will only issue or pass on in the United       
Kingdom any document received by it in connection with the issue of the Common  
Stock to a person who is of a kind described in Article 11(3) of the Financial  
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a   
person to whom such document may otherwise lawfully be issued or passed on; and 
(iii) it has complied and will comply with all applicable provisions of the     
Financial Services Act 1986 with respect to anything done by it in relation to  
any shares of Common Stock in, from or otherwise involving the United Kingdom.  

  Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of  
their country of purchase, in addition to the offering price set forth on the   
cover page hereto.                                                              

LEGAL MATTERS 

The validity of the Common Stock to be issued in connection with the    
Offering will be passed upon for the Company by Ballard Spahr Andrews &         
Ingersoll, Baltimore, Maryland. Certain legal matters relating to the Offering  
will be passed upon for the Company by Latham & Watkins, Costa Mesa, California.
Brown & Wood LLP, San Francisco, California will act as counsel for the         
Underwriters.                                                                   

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-------------------------------------------                                     
                                     -------------------------------------------
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  NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR        
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING     
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND  
THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST  
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. 
NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES  
AN OFFER TO SELL, OR A SOLICITATION OR AN OFFER TO BUY, TO ANY PERSON IN ANY    
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE    
DELIVERY OF THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS NOR ANY  
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT 
THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF.                                                             
------------------------

TABLE OF CONTENTS 
PROSPECTUS SUPPLEMENT 

                                                                [Download Table]

                                                   PAGE   
                                                 ---------
                                                          
Prospectus Supplement Summary..................        S-3
Risk Factors...................................       S-13
Use of Proceeds................................       S-18
Distribution Policy............................       S-18
Capitalization.................................       S-19
Price Range of Common Stock and Distribution              
  History......................................       S-20
Business and Properties........................       S-21
Management.....................................       S-50
Certain U.S. Federal Income Tax Considerations            
  to Holders of Common Stock...................       S-53
Underwriting...................................       S-58
Legal Matters..................................       S-60

                        PROSPECTUS                        
Available Information..........................          2
Incorporation of Certain Documents by                     
  Reference....................................          2
The Company....................................          3
Use of Proceeds................................          3
Ratios of Earnings to Fixed Charges............          3
Description of Debt Securities.................          4
Description of Common Stock....................         14
Description of Preferred Stock.................         17
Restrictions on Ownership and Transfers of                
  Capital Stock................................         22
Certain Federal Income Tax Considerations......         25
Plan of Distribution...........................         31
Experts........................................         32
Legal Matters..................................         32

2,700,000 SHARES

[LOGO]

COMMON STOCK

------------------

PROSPECTUS SUPPLEMENT 

------------------------

MERRILL LYNCH INTERNATIONAL 
A.G. EDWARDS & SONS, INC. 
PAINEWEBBER INTERNATIONAL 
SUTRO & CO. INCORPORATED
WHEAT FIRST BUTCHER SINGER

OCTOBER   , 1997

-------------------------------------------                                     
                                     -------------------------------------------
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                                     -------------------------------------------

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B5’ Filing		Date		First		Last			Other Filings
		11/27/99		19
		12/31/98		58					10-K
		1/1/98		55		91
		12/31/97		12		58			10-K
		10/15/97		11		21			8-K
Filed on:		10/3/97
		10/1/97		2		96
		9/30/97		2		96			10-Q,  8-K
		9/29/97		10		27
		9/15/97		5		50
		9/12/97		86
		9/5/97		14
		8/31/97		2		96
		8/19/97		64		78
		8/5/97		91
		6/30/97		11		64			10-Q
		5/28/97		22		64
		5/6/97		5		23
		5/5/97		63					8-K
		3/31/97		11		63			10-Q
		3/28/97		64					DEF 14A
		12/31/96		5		93			10-K
		8/20/96		54
		6/30/96		12					10-Q
		1/1/96		70
		12/31/95		64		93			10-K
		8/17/95		18		90
		4/28/95		90
		12/31/94		13		86
		10/18/94		21
		8/16/94		13		64
		8/15/94		4		64
		1/1/94		13		64
		12/31/93		64
		9/9/93		22
		12/31/92		64
									List all Filings