The husband and wife team of William E. Clark, Jr. and Evelyn J. Clark formed Realty Income Corporation in 1969 to act as the general partner in a series of partnerships to acquire commercial properties from the Clark’s development company which engaged in land acquisition, building construction, leasing and sales of fast food restaurant properties. The impetus was the California State Legislature’s transfer in 1969 of jurisdiction of small real estate partnerships (less than 100 investors) from the corporation commissioner to the real estate commissioner.
After corporate formation, the Clark’s processed an application and received approval to solicit investors, and formed their first partnership, which acquired a Taco Bell restaurant in early 1970. The Clark’s continued developing and selling commercial properties, but about once a year would form a new California permitted partnership which would acquire one of the developed properties for long term hold.
Banks and savings and loans had no appetite for lending to single purpose, fast-food restaurant operations, so their developments had always been cash transactions, where investors’ money had been used to purchase and hold properties without loans or encumbrances. These properties were leased for 15 to 20 years under triple-net (NNN) lease (net lease) agreements (the tenant paying the property taxes, maintenance costs, and the premiums on insurance). The leases contained percentage rent or cost-of-living adjustment clauses so that rents tended to increase over time. The partnerships received monthly rent from the tenants, deducted a nominal management fee, and distributed the balance to investors in the form of monthly distributions. A small part of the income was tax sheltered by depreciation on the buildings, but the emphasis of the investment was the production of real money returns in the form of increasing cash distributions.
In 1977, based on the trends above, the Clark’s made a stretigic decision to shut down their development company and concentrate 100% on the formation of Realty Income partnerships. The company quickly expanded beyond fast food into larger sit-down service restaurants, and then pre-school day care centers, after-market automotive parts and services, convenience stores, and a verity of other retail tenants.
In 1986, congress passed tax reform legislation (Tax Reform Act of 1986) that eliminated virtually all of the benefits of highly leveraged, tax sheltered partnerships. Realty Income continued to form income producing partnerships; but, by 1989, many tax sheltered partnerships had failed, and the market for organizing any form of partnerships had disappeared. By the early 1990s, it became apparent that the future of real estate capital formation and the expansion of Realty Income would be served by the conversion to a public real estate investment company. In 1994, the consolidation was completed, and Realty Income Corporation, was then listed on the New York Stock Exchange, with the single letter “O” as its stock symbol. The company was managed by an independent company, consisting of the former management team. A year later, the independent management company was absorbed into Realty Income, which was now a fully integrated public real estate investment company.
William E. Clark, Jr. continued as the CEO until retiring from that position in 1997, whereupon, the Board of Directors appointed Thomas A. Lewis as Chief Executive Officer.
Subsequently, Realty Income has become known as The Monthly Dividend Company,
Close Up of Vignette:
Common Stock, specimen, late 1900’sPrinter: American Bank Note Company Dimensions:
8” (h) x 12” (w)State: CA-California Subject Matter: Finance and Related
| Specimen Pieces Vignette Topic(s): Mountain Scene
| Skyline Scene
| Statue of Liberty Featured Condition:
No fold lines, punch hole cancels in signature areas and body, very crisp.