(cid:1)
(cid:1)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[ X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of l934
For the fiscal year ended December 31, 2007
Or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 001-09279
ONE LIBERTY PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
MARYLAND 13-3147497
60 Cutter Mill Road, Great Neck, New York 11021
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 466-3100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of exchange
on which registered
Common Stock, par value $1.00 New York Stock Exchange
per share
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the
Securities Act.
Yes(cid:1) (cid:2)
No (cid:1)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Act.
Yes(cid:1) (cid:2)
No (cid:1)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes(cid:1) (cid:1)
No (cid:2)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-
accelerated filer, or a small reporting company. See definitions of “large accelerated filer,” “accelerated filer,”
and “small reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:2)
(cid:2)
Non-accelerated filer (cid:2) (Do not check if a small reporting company)
Accelerated filer (cid:1)(cid:2)
Small reporting company (cid:2)
Indicate by check mark whether registrant is a shell company (defined in Rule 12b-2 of the Exchange Act).
Yes(cid:1) (cid:2)
No (cid:1)
As of June 29, 2007 (the last business day of the registrant’s most recently completed second quarter),
the aggregate market value of all common equity held by non-affiliates of the registrant, computed by reference
to the price at which common equity was last sold on said date, was approximately $178.7 million.
As of March 7, 2008, the registrant had 10,185,553 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual meeting of stockholders of One Liberty Properties, Inc., to
be filed pursuant to Regulation 14A not later than April 29, 2008, are incorporated by reference into Part III of
this Form 10-K.
Item 1. Business
General
PART I
We are a self-administered and self-managed real estate investment trust, also known as a REIT. We
were incorporated under the laws of the State of Maryland on December 20, 1982. We acquire, own and
manage a geographically diversified portfolio of retail, industrial, office, health and fitness and other
properties, a substantial portion of which are under long-term leases. Substantially all of our leases are “net
leases,” under which the tenant is typically responsible for real estate taxes, insurance and ordinary
maintenance and repairs. As of December 31, 2007, we owned 65 properties, one of which is held for sale,
held a 50% tenancy in common interest in one property, and participated in five joint ventures that own five
properties (including one vacant property held for sale). Our properties and the properties owned by our joint
ventures are located in 28 states and have an aggregate of approximately 5.9 million square feet of space
(including approximately 106,000 square feet of space at the property in which we own a tenancy in common
interest, 459,000 square feet of space at the property held for sale and approximately 1.6 million square feet
of space at properties owned by the joint ventures in which we participate). We did not acquire any properties
during the year ended December 31, 2007.
Under the terms of our current leases, our 2008 contractual rental income (rental income that is
payable to us in 2008 under leases existing at December 31, 2007, excluding rental income from our property
that is held for sale) will be approximately $35.9 million, including approximately $1.3 million of rental income
payable to us on our tenancy in common interest. In 2008, we expect that our share of the rental income
payable to our five joint ventures which own properties will be approximately $1.4 million, without taking into
consideration any rent that we would receive if the vacant and held for sale property owned by a joint venture
is rented. On December 31, 2007, the occupancy rate of properties owned by us was 100% based on square
footage (including the property in which we own a tenancy in common interest) and the occupancy rate of
properties owned by our joint ventures was 98.9% based on square footage. The weighted average
remaining term of the leases in our portfolio, including our tenancy in common interest, is 10.3 years and 11.3
years for the leases at properties owned by our joint ventures.
Acquisition Strategies
We seek to acquire properties throughout the United States that have locations, demographics and
other investment attributes that we believe to be attractive. We believe that long-term leases provide a
predictable income stream over the term of the lease, making fluctuations in market rental rates and in real
estate values less significant to achieving our overall investment objectives. Our goal is to acquire properties
that are subject to long-term net leases that include periodic contractual rental increases. Periodic
contractual rental increases provide reliable increases in future rent payments, while rent increases based on
the consumer price index provide protection against inflation. Long-term leases also make it easier for us to
obtain longer-term, fixed-rate mortgage financing with principal amortization, thereby moderating the interest
rate risk associated with financing or refinancing our property portfolio by reducing the outstanding principal
balance over time. Although we regard long-term leases as an important element of our acquisition strategy,
we may acquire a property that is subject to a short-term lease where we believe the property represents a
good opportunity for recurring income and residual value.
Generally, we intend to hold the properties we acquire for an extended period of time. Our investment
criteria are intended to identify properties from which increased asset value and overall return can be realized
from an extended period of ownership. Although our investment criteria favor an extended period of
ownership of our properties, we may dispose of a property following a lease termination or expiration or even
during the term of a lease (i) if we regard the disposition of the property as an opportunity to realize the overall
value of the property sooner or (ii) to avoid future risks by achieving a determinable return from the property.
Although we investigated, analyzed and bid on several properties in 2007, due to a variety of factors,
including increased competition and unfavorable prices, we did not acquire any properties in 2007.
We generally identify properties through the network of contacts of our senior management and our
affiliates, which include real estate brokers, private equity firms, banks and law firms. In addition, we
attend industry conferences and engage in direct solicitations.
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There is no limit on the number of properties in which we may invest, the amount or percentage of
our assets that may be invested in any specific property or property type, or on the concentration of
investments in any geographic area in the United States. We do not intend to acquire properties located
outside of the United States. We will continue to form entities to acquire interests in real properties, either
alone or with other investors, and we may acquire interests in joint ventures or other entities that own real
property.
It is our policy, and the policy of our affiliated entities, that any investment opportunity presented to us
or to any of our affiliated entities that involves primarily the acquisition of a net leased property, will first be
offered to us and may not be pursued by any of our affiliated entities unless and until we decline the
opportunity.
Investment Evaluation
In evaluating potential net lease investments, we consider, among other criteria, the following:
• an evaluation of the property and improvements, given its location and use;
the current and projected cash flow of the property;
•
the estimated return on equity to us;
•
local demographics (population and rental trends);
•
the ability of the tenant to meet operational needs and lease obligations;
•
the terms of tenant leases, including the relationship between current rents and market rents;
•
•
the projected residual value of the property;
• potential for income and capital appreciation;
• occupancy of and demand for similar properties in the market area; and
• alternative use for the property at lease termination.
Our Business Objectives and Growth Strategy
Our business objective is to maintain and increase the cash available for distribution to our
stockholders by:
• acquiring a diversified portfolio of net leased properties subject to long-term leases;
• obtaining mortgage indebtedness on favorable terms and increasing access to capital to finance
property acquisitions; and
• managing assets effectively through property acquisitions, lease extensions and opportunistic
property sales.
Our growth strategy includes the following elements:
•
•
•
to maintain, renew and enter into new long-term leases that contain provisions for contractual rent
increases;
to acquire additional properties within the United States that are subject to long-term net leases and
that satisfy our other investment criteria; and
to acquire properties in market or industry sectors that we identify, from time to time, as offering
superior risk-adjusted returns.
Typical Property Attributes
The properties in our portfolio and owned by our joint ventures typically have the following attributes:
• Net leases. Substantially all of the leases are net leases under which the tenant is typically
responsible for real estate taxes, insurance and ordinary maintenance and repairs. We believe that
investments in net leased properties offer more predictable returns than investments in properties that
2
are not net leased;
• Long-term leases. The properties acquired are generally subject to long-term leases. Excluding
leases relating to properties owned by our joint ventures, leases representing approximately 83% of
our 2008 contractual rental income expire after 2013, and leases representing approximately 44% of
our 2008 contractual rental income expire after 2017; and
• Scheduled rent increases. Leases representing approximately 94% of our 2008 contractual rental
income provide for either scheduled rent increases or periodic contractual rent increases based on
the consumer price index. None of the leases on properties owned by our joint ventures provide for
scheduled rent increases.
Our Tenants
The following table sets forth information about the diversification of our tenants (excluding tenants
of our joint ventures) by industry sector as of December 31, 2007:
Type of
Property
Number of
Tenants
Number of
Properties
2008 Contractual
Rental Income (1)
Retail – various (2)
Retail – furniture (3)
Industrial (4)
Office (5)
Flex
Health & fitness
Movie theater (6)
Residential
32
5
8
3
3
3
1
1
56
32
15
8
3
2
3
1
1
65
$11,453,658
7,543,184
6,525,205
4,259,363
2,497,764
1,757,091
1,242,019
650,000
$35,928,284
Percentage of
2008 Contractual
Rental Income
31.9%
21.0
18.2
11.9
6.9
4.9
3.4
1.8
100.0%
(1) 2008 contractual rental income includes rental income that is payable to us during 2008 for properties owned by
us at December 31, 2007, including rental income payable on our tenancy in common interest. Does not
include rent on our property that is held for sale.
(2) Twenty of the retail properties are net leased to single tenants. Four properties are net leased to a total of 11
separate tenants pursuant to separate leases and 8 properties are net leased to one tenant pursuant to a
master lease.
(3) Eleven properties are net leased to Haverty Furniture Companies, Inc. pursuant to a master lease covering all
locations and 4 of the properties are net leased to single tenants.
(4) Does not include one property that is held for sale.
(5)
Includes a property in which we own a 50% tenancy in common interest.
(6) We are the ground lessee of this property under a long-term lease and net lease the movie theater to an
operator.
Although the main focus of our analysis is the intrinsic value of a property, we seek to acquire
properties that we believe will provide attractive current returns from leases with tenants that operate
profitably, even if our tenants are typically not rated or are rated below investment grade. We will acquire a
property if we believe that the quality of the underlying real estate mitigates the risk that may be associated
with any default by the tenant. Most of our retail tenants operate on a national basis and include, among
others, Barnes & Noble, Inc., Walgreen Co., The Sports Authority, Inc., Best Buy Co., Inc., TGI Friday’s Inc.,
Party City Corporation, Circuit City Stores, Inc., Petco Animal Supplies, Inc. and CarMax Auto Superstores,
Inc., and some of our tenants operate on a regional basis, including Haverty’s Furniture Companies, Inc.
Our Leases
Substantially all of our leases are net leases (including the leases entered into by our joint ventures)
under which the tenant, in addition to its rental obligation, typically is responsible for expenses attributable
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to the operation of the property, such as real estate taxes and assessments, water and sewer rents and
other charges. The tenant is also generally responsible for maintaining the property, including non-
structural repairs, and for restoration following a casualty or partial condemnation. The tenant is typically
obligated to indemnify us for claims arising from the property and is responsible for maintaining insurance
coverage for the property it leases. Under some net leases, we are responsible for structural repairs,
including foundation and slab, roof repair or replacement and restoration following a casualty event, and at
several properties we are responsible for certain expenses related to the operation and maintenance of the
property.
Our typical lease provides for contractual rent increases periodically throughout the term of the lease.
Some of our leases provide for rent increases pursuant to a formula based on the consumer price index
and some of our leases provide for minimum rents supplemented by additional payments based on sales
derived from the property subject to the lease. Such additional payments were not a material part of our
2007 rental revenues and are not expected to be a material part of our 2008 rental revenues.
Our policy has been to acquire properties that are subject to existing long-term leases or to enter into
long-term leases with our tenants. Our leases generally provide the tenant with one or more renewal
options.
The following table sets forth scheduled lease expirations of leases for our properties (excluding joint
venture properties) as of December 31, 2007:
% of 2008 Contractual
Approximate Square
Year of Lease
Feet Subject to
Number of
Expiration (1)(2) Expiring Leases Expiring Leases
1
2008
3
2009
3
2010
4
2011
2
2012
6
2013
14
2014
4
2015
4
2016
2017 and
51,351
200,468
19,038
208,428
19,000
117,357
700,200
150,795
182,715
2008 Contractual
Rental Income Under
Expiring Leases (3)
$ 386,160
945,883
349,825
2,087,577
475,903
1,745,035
5,777,024
1,765,765
1,757,996
thereafter
15
2,224,544
20,637,116
56
3,873,896
$35,928,284
Rental Income
Represented by
Expiring Leases
1.1%
2.6
1.0
5.8
1.3
4.9
16.1
4.9
4.9
57.4
100.0%
________________
(1) Lease expirations assume tenants do not exercise existing renewal options.
(2) Includes a property in which we have a tenancy in common interest and excludes our property that is held for
sale.
(3) 2008 contractual rental income includes rental income that is payable to us during 2008 under existing leases
on properties we owned at December 31, 2007 (including rental income payable on our tenancy in common
interest and excluding rental income payable on our property that is held for sale).
Financing, Re-Renting and Disposition of Our Properties
Under our governing documents, there is no limit on the level of debt that we may incur. Our credit
facility is provided by VNB New York Corp., Bank Leumi, USA, Manufacturers and Traders Trust Company
and Israel Discount Bank of New York and is a full recourse obligation. The credit facility limits total
indebtedness that we may incur to an amount equal to 70% of the value (as defined) of our properties,
among other limitations in the credit facility on our ability to incur additional indebtedness. We borrow
funds on a secured and unsecured basis and intend to continue to do so in the future. We mortgage
specific properties on a non-recourse basis (subject to standard carve-outs) to enhance the return on our
investment in a specific property. The proceeds of mortgage loans and amounts drawn on our credit line
may be used for property acquisitions, investments in joint ventures or other entities that own real property,
to reduce bank debt and for working capital purposes.
4
With respect to properties we acquire on a free and clear basis, we usually seek to obtain long-term
fixed-rate mortgage financing shortly after the acquisition of such property to avoid the risk of movement of
interest rates and fluctuating supply and demand in the mortgage markets. We also will acquire a property
that is subject to (and will assume) a fixed-rate mortgage. Substantially all of our mortgages provide for
amortization of part of the principal balance during the term, thereby reducing the refinancing risk at
maturity. Some of our properties may be financed on a cross-defaulted or cross-collateralized basis, and
we may collateralize a single financing with more than one property.
After termination or expiration of any lease relating to any of our properties (either at lease expiration
or early termination), we will seek to re-rent or sell such property in a manner that will maximize the return
to us, considering, among other factors, the income potential and market value of such property. We
acquire properties for long-term investment for income purposes and do not typically engage in the
turnover of investments. We will consider the sale of a property prior to termination or expiration of the
relevant lease if a sale appears advantageous in view of our investment objectives. We may take back a
purchase money mortgage as partial payment in lieu of cash in connection with any sale and may consider
local custom and prevailing market conditions in negotiating the terms of repayment. If there is a
substantial tax gain, we may seek to enter into a tax deferred transaction and reinvest the proceeds in
another property. It is our policy to use any cash realized from the sale of properties, net of any
distributions to stockholders to maintain our REIT status, to pay down amounts due under our line of credit,
if any, and for the acquisition of additional properties.
Our Joint Ventures
As of December 31, 2007, we are a joint venture partner in five joint ventures that own an
aggregate of five properties (including one vacant property held for sale), and have an aggregate of
approximately 1.6 million square feet of space. We own a 50% equity interest in four of the joint ventures
and a 36% equity interest in the fifth joint venture. We are designated as “managing member” or “manager”
under the operating agreements of three of these joint ventures. At December 31, 2007, our investment in
unconsolidated joint ventures was approximately $6.6 million.
We were also a joint venture partner in two other joint ventures, with the same joint venture partner.
Nine of the ten properties held by these two joint ventures were sold in 2006, and the remaining property
was sold on March 14, 2007 for a purchase price of $1.25 million, after it was written down in prior years
on the joint venture’s books to $40,000. Each of our remaining five joint ventures own one property, three
of which are retail properties and two of which are industrial properties.
Based on existing leases, we anticipate that our share of rental income payable to our joint
ventures in 2008 will be approximately $1.4 million. The leases for two properties (each of which is owned
by one of our joint ventures) that are expected to contribute 81% of the aggregate projected rental income
payable to all of our joint ventures in 2008, will expire in 2021 and 2022, respectively.
Other Types of Investments
From time to time we have invested, on a limited basis, in publicly traded shares of other REITs, and
we may make such investments on a limited basis in the future. We also may invest, on a limited basis, in
the shares of entities not involved in real estate investments, provided that no such investment adversely
affects our ability to qualify as a REIT under the Internal Revenue Code of 1986, as amended. We do not
have any plans to invest in or to originate loans to other persons, whether or not secured by real property.
Although we have not done so in the past, we may issue our securities in exchange for properties that fit
our investment criteria. We have not previously invested in the securities of another entity for the purpose
of exercising control over it and we do not have any present plans to invest in the securities of another
entity for such purpose.
Competition
We face competition for the acquisition of net leased properties from a variety of investors including
domestic and foreign corporations and real estate companies, 1031 exchange buyers, financial
institutions, insurance companies, pension funds, investment funds, other REITs and individuals, some of
which have significant advantages over us, including a larger, more diverse group of properties and
5
greater financial and other resources than we have. Although we investigated, analyzed and bid on
several properties in 2007, due to a variety of factors, including increased competition and unfavorable
prices, we did not acquire any properties in 2007.
Our Structure
In 2007, Patrick J. Callan, Jr., our president and chief executive officer, Lawrence G. Ricketts, Jr., our
executive vice president and chief operating officer, and three other employees devoted substantially all of their
business time to our company. Our other executive, administrative, legal, accounting and clerical personnel
shared their services on a part-time basis with us and other affiliated entities that share our executive offices.
We entered into a compensation and services agreement with Majestic Property Management Corp.
effective as of January 1, 2007. Majestic Property Management Corp. is wholly-owned by our chairman of the
board and it provides compensation to certain of our executive officers. Pursuant to the compensation and
services agreement, we pay an annual fee to Majestic Property Management Corp. and Majestic Property
Management Corp. assumes our obligations under a shared services agreement, and provides us with the
services of all affiliated executive, administrative, legal, accounting and clerical personnel that we use on a
part time basis, as well as certain property management services, property acquisition, sales and leasing and
mortgage brokerage services. In 2007, we incurred a fee of $2,125,000 to Majestic Property Management
Corp. Pursuant to the compensation and services agreement, however, we paid $2,113,000 of the fee and the
remainder of the fee, $12,000, was offset by the $12,000 paid to Majestic Property Management Corp. by one
of our joint ventures. In addition, in accordance with the compensation and services agreement, in 2007 we
paid our chairman a fee of $250,000 and made an additional payment to Majestic Property Management Corp.
of $175,000 for our share of all direct office expenses, such as rent, telephone, postage, computer services,
internet usage, etc.
We believe that the compensation and services agreement allows us to benefit from access to, and
from the services of, a group of senior executives with significant knowledge and experience in the real estate
industry and our company and its activities. If not for the compensation and services agreement, we believe
that a company of our size would not have access to the skills and expertise of these executives at the cost that
we have incurred and will incur in the future. For a description of the background of our management, please
see the information under the heading “Executive Officers” in Part I of this Annual Report.
Available Information
Our Internet address is www.onelibertyproperties.com. On the Investor Information page of our web
site, we post the following filings as soon as reasonably practicable after they are electronically filed with or
furnished to the Securities and Exchange Commission: our Annual Report on Form 10-K, our quarterly
reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. All such
filings on our Investor Information Web page, which also includes Forms 3, 4 and 5 filed pursuant to
Section 16(a) of the Securities Exchange Act of 1934, as amended, are available to be viewed free of
charge.
On the Corporate Governance page of our web site, we post the following charters and guidelines:
Audit Committee Charter, Compensation Committee Charter, Nominating and Corporate Governance
Committee Charter, Corporate Governance Guidelines and Code of Business Conduct and Ethics, as
amended and restated. All such documents on our Corporate Governance Web page are available to be
viewed free of charge.
Information contained on our web site is not part of, and is not incorporated by reference into, this
Annual Report on Form 10-K or our other filings with the Securities and Exchange Commission. A copy of
this Annual Report on Form 10-K and those items disclosed on our Investor Information Web page and our
Corporate Governance Web page are available without charge upon written request to: One Liberty
Properties, Inc., 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021, Attention: Secretary.
6
Forward-Looking Statements
This Annual Report on Form 10-K, together with other statements and information publicly
disseminated by One Liberty Properties, Inc., contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe
harbor provision for forward-looking statements contained in the Private Securities Litigation Reform Act of
1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-
looking statements, which are based on certain assumptions and describe our future plans, strategies and
expectations, are generally identifiable by use of the words “may,” “will,” “believe,” “expect,” “intend,”
“anticipate,” “estimate,” “project” or similar expressions or variations thereof. You should not rely on
forward-looking statements since they involve known and unknown risks, uncertainties and other factors
which are, in some cases, beyond our control and which could materially affect actual results, performance
or achievements. Factors which may cause actual results to differ materially from current expectations
include, but are not limited to:
• general economic and business conditions including those currently affecting our nation’s
the level and volatility of interest rates;
the financial condition of our tenants and the performance of their lease obligations;
economy and real estate markets;
• general and local real estate conditions;
•
• changes in governmental laws and regulations relating to real estate and related investments;
•
• competition in our industry;
• accessibility of debt and equity capital markets;
•
•
the availability of and costs associated with sources of liquidity; and
the other risks described under “Risks Related to Our Company” and “Risks Related to the
REIT Industry.”
Any or all of our forward-looking statements in this report, in our Annual Report to Stockholders and
in any other public statements we make may turn out to be incorrect. Actual results may differ from our
forward looking statements because of inaccurate assumptions we might make or because of the
occurrence of known or unknown risks and uncertainties. Many factors mentioned in the discussion below
will be important in determining future results. Consequently, no forward-looking statement can be
guaranteed and you are cautioned not to place undue reliance on these forward-looking statements. Actual
future results may vary materially.
Except as may be required under the United States federal securities laws, we undertake no
obligation to publicly update our forward-looking statements, whether as a result of new information, future
events or otherwise. You are advised, however, to consult any further disclosures we make in our reports
that are filed with or furnished to the Securities and Exchange Commission.
Set forth below is a detailed discussion of certain risks affecting our business. The categorization of
risks set forth below is meant to help you better understand the risks facing our business and is not
intended to limit your consideration of the possible effects of these risks to the listed categories. Any
adverse effects arising from the realization of any of the risks discussed including our financial condition
and results of operation may, and likely will, adversely affect many aspects of our business.
Item 1A. Risk Factors.
In addition to the other information contained or incorporated by reference in this Form 10-K,
readers should carefully consider the following risk factors:
7
Risks Related to Our Business
The financial failure of our tenants would likely cause significant reductions in our revenues, our
equity in earnings of unconsolidated joint ventures and in the value of our real estate portfolio.
Based on 2008 contractual rental income, 88% of our rental revenues are generated from properties
which are leased to single tenants. Accordingly, the financial failure or other default of a tenant in non-
payment of rent or property related expenses or the termination of a lease could cause a significant
reduction in our revenues. Additionally, approximately 52.4% of our rental revenues (excluding rental
revenues from our joint ventures) for the year ended December 31, 2007 was derived from retail tenants
and approximately 52.9% of our 2008 contractual rental income will be derived from retail tenants, including
21% from our tenants engaged in retail furniture operations. As of the date of this annual report, the
national economy is characterized by considerable uncertainty as well as by heightened concern that the
economy has entered, or may be on the verge of entering, a period of sustained economic downturn.
Weakening economic conditions (nationally and/or locally) could result in the financial failure, or other
default, of a significant number of our tenants and the tenants of our joint ventures. In the event of a default
by a tenant, we may experience delays in enforcing our rights as landlord and sustain a loss of revenues
and incur substantial costs in protecting our investment. We may also face liabilities arising from the
tenant’s actions or omissions that would reduce our revenues and the value of our portfolio. Also, if we are
unable to re-rent a property when an existing lease terminates, we receive no revenues from such property
and are required to pay taxes, insurance and other operating expenses during the vacancy period, and
could as a result experience a decline in the value of the property.
A significant portion of our 2007 revenues and our 2008 contractual rental income is derived from
five tenants. The default, financial distress or failure of any of these tenants could significantly
reduce our revenues.
Haverty’s Furniture Companies, Inc., Ferguson Enterprises, Inc., Nutritional Products, Inc., New Flyer
of America, Inc. and L-3 Communications Corp, accounted for approximately 13.2%, 6.3%, 5.6%, 4.8% and
4.7%, respectively, of our rental revenues (excluding rental revenues from our joint ventures) for the year
ended December 31, 2007 and account for 12%, 6.5%, 5.4%, 4.3% and 4.9%, respectively, of our 2008
contractual rental income. The default, financial distress or bankruptcy of any of these tenants could cause
interruptions in the receipt, or the loss, of a significant amount of rental revenues and result in the vacancy
of the property or properties occupied by the defaulting tenant, which would significantly reduce our rental
revenues and net income until the re-rental of the property or properties, and could decrease the ultimate
sale value of the property.
Since the second quarter of calendar 2007, the economy in the United States has faced challenges of
illiquidity in the credit markets, turmoil in the housing and construction sectors, poorer performance in the
retail sector and heightened fears of an overall economic downturn. Were such a sustained economic
downturn to take place, the likelihood of the default, financial distress or bankruptcy of any one or more of
our major tenants would increase, which could have a material adverse effect on our results of operations.
The inability to repay our indebtedness could reduce cash available for distributions and cause
losses.
As of December 31, 2007, we had outstanding approximately $222 million in long-term mortgage and
loan indebtedness, all of which is non-recourse (subject to standard carve-outs). As of December 31, 2007,
our ratio of mortgage and loan debt to total assets was approximately 55%. In addition, as of December 31,
2007, our joint ventures had approximately $18.8 million in total long-term mortgage indebtedness (all of
which is non-recourse subject to standard carve-outs). The risks associated with our debt and the debt of
our joint ventures include the risk that cash flow for the properties securing the mortgage indebtedness will
be insufficient to meet required payments of principal and interest. Further, if a property or properties are
mortgaged to collateralize payment of indebtedness and we or any of our joint ventures are unable to make
mortgage payments on the secured indebtedness, the lender could foreclose upon the property or
properties resulting in a loss of revenues to us and a decline in the value of our portfolio. Even with respect
to our non-recourse indebtedness, the lender may have the right to recover deficiencies from us under
certain circumstances, which could result in a reduction in the amount of cash available to us to meet
8
expenses and to make distributions to our stockholders and in a deterioration of our financial condition.
If we are unable to refinance our borrowings at maturity at favorable rates or otherwise raise funds,
our net income may decline or we may be forced to sell properties on disadvantageous terms,
which would result in the loss of revenues and in a decline in the value of our portfolio.
Only a small portion of the principal of our mortgage indebtedness and the mortgage indebtedness of
our joint ventures will be repaid prior to maturity. Neither we nor our joint ventures plan to retain sufficient cash
to repay such indebtedness at maturity. Accordingly, in order to meet these obligations, we will have to use
funds available under our credit line, if any, to refinance debt or seek to raise funds through the financing of
unencumbered properties, sale of properties or the issuance of additional equity. Between January 2008 and
December 31, 2012, we will need to refinance an aggregate of approximately $61.1 million of maturing debt, of
which approximately $4.2 will have to be refinanced in 2008 and approximately $4.6 million will have to be
refinanced in 2009. Our joint ventures do not have maturing mortgage debt until 2015. In addition, at the
present time there has been a tightening of credit by institutional lenders, which has made it difficult for
borrowers to refinance debt, including mortgage debt. We cannot judge the duration of the current credit crunch
or whether or not the situation may intensify. Accordingly, we can not provide any assurance that we (or our
joint ventures) will be able to refinance this debt or arrange additional debt financing on unencumbered
properties on terms as favorable as the terms of existing indebtedness, or at all. If interest rates or other
factors at the time of refinancing result in interest rates higher than the interest rates currently being paid, our
interest expense would increase, which would adversely affect our net income, financial condition and the
amount of cash available for distribution to stockholders. If we (or our joint ventures) are not successful in
refinancing existing indebtedness or financing unencumbered properties, selling properties on favorable terms
or raising additional equity, our cash flow (or the cash flow of a joint venture) will not be sufficient to repay all
maturing debt when payments become due, and we (or a joint venture) may be forced to dispose of properties
on disadvantageous terms, which would result in the loss of revenues and in a decline in the value of our
portfolio.
As of December 31, 2007 and March 1, 2008, we had no balance outstanding under our revolving
credit facility. Our credit facility expires on March 31, 2010. Depending on our acquisition program, we
could borrow a significant amount under our credit facility in 2008. The facility is guaranteed by all of our
subsidiaries which own unencumbered properties and the shares of stock of all other subsidiaries are
pledged as collateral. The risks associated with our revolving credit facility include the risk that our cash
flow will be insufficient to meet required payments of interest. Also, we may be unable to negotiate a new
facility at the maturity date and may be unable to pay off the amount then outstanding. This could result in a
reduction in the amount of cash available to meet expenses and to make distributions to holders of our
common stock.
Increased borrowings could result in increased risk of default on our repayment obligations and
increased debt service requirements.
Our governing documents do not contain any limitation on the amount of indebtedness we may incur.
However, the terms of our credit facility with VNB New York Corp., Bank Leumi, USA, Manufacturers and
Traders Trust Company and Israel Discount Bank of New York limit the total indebtedness that we may
incur to an amount equal to 70% of the value (as defined in the credit agreement) of our properties, in
addition to other limitations in the credit facility on our ability to incur additional indebtedness. Increased
leverage could result in increased risk of default on our payment obligations related to borrowings and in an
increase in debt service requirements, which could reduce our net income and the amount of cash available
to meet expenses and to make distributions to our stockholders.
If we are unable to re-rent properties upon the expiration of our leases, it could adversely affect our
revenues and ability to make distributions, and could reduce the value of our portfolio.
Substantially all of our revenues are derived from rental income paid by tenants at our properties. We
cannot predict whether current tenants will renew their leases upon the expiration of their terms. In
addition, we cannot predict whether current tenants will attempt to terminate their leases (including taking
advantage of provisions of the federal bankruptcy laws), or whether defaults by tenants may result in
termination of their leases prior to the expiration of their current terms. If tenants terminate or fail to renew
their leases, or if leases terminate due to defaults or in the course of a bankruptcy proceeding, we may not
9
be able to locate qualified replacement tenants and, as a result, we would lose a source of revenue while
remaining responsible for the payment of our mortgage obligations and the expenses related to the
properties, including real estate taxes and insurance. Even if tenants decide to renew their leases or we
find replacement tenants, the terms of renewals or new leases, including the cost of required renovations or
concessions to tenants, or the expense of reconfiguration of a single tenancy property for use by multiple
tenants, may be less favorable than current lease terms and could reduce the amount of cash available to
meet expenses and to make distributions to holders of our common stock.
We are required by certain of our net lease agreements to pay property related expenses that are
not the obligations of our tenants.
Under the terms of substantially all of our net lease agreements, in addition to satisfying their rent
obligations, our tenants are responsible for the payment of real estate taxes, insurance and ordinary
maintenance and repairs. However, in the case of certain leases, we may pay some expenses, such as the
costs of environmental liabilities, roof and structural repairs, insurance and certain non-structural repairs
and repairs and maintenance. If our properties incur significant expenses that must be paid by us under the
terms of our lease agreements, our business, financial condition and results of operations will be adversely
affected and the amount of cash available to meet expenses and to make distributions to holders of our
common stock may be reduced.
Uninsured and underinsured losses may affect the revenues generated by, the value of, and the
return from, a property affected by a casualty or other claim.
Substantially all of our tenants obtain, for our benefit, comprehensive insurance covering our
properties in amounts that are intended to be sufficient to provide for the replacement of the improvements
at each property. However, the amount of insurance coverage maintained for any property may not be
sufficient to pay the full replacement cost of the improvements at the property following a casualty event. In
addition, the rent loss coverage under the policy may not extend for the full period of time that a tenant may
be entitled to a rent abatement as a result of, or that may be required to complete restoration following, a
casualty event. In addition, there are certain types of losses, such as those arising from earthquakes,
floods, hurricanes and terrorist attacks, that may be uninsurable or that may not be economically insurable.
Changes in zoning, building codes and ordinances, environmental considerations and other factors also
may make it impossible or impracticable for us to use insurance proceeds to replace damaged or destroyed
improvements at a property. If restoration is not or cannot be completed to the extent, or within the period
of time specified in certain of our leases, the tenant may have the right to terminate the lease. If any of
these or similar events occur, it may reduce our revenues, or the value of, or our return from, an affected
property.
Our revenues and the value of our portfolio are affected by a number of factors that affect
investments in real estate generally.
We are subject to the general risks of investing in real estate. These include adverse changes in
economic conditions and local conditions such as changing demographics, retailing trends and traffic
patterns, declines in the rental rates, changes in the supply and price of quality properties and the market
supply and demand of competing properties, the impact of environmental laws, security concerns,
prepayment penalties applicable under mortgage financings, changes in tax, zoning, building code, fire
safety and other laws and regulations, the type of insurance coverages available in the market, and
changes in the type, capacity and sophistication of building systems. In particular, approximately 53% of
our 2008 contractual rental income will come from retail tenants and is therefore vulnerable to any
economic decline that negatively impacts the retail sector of the economy. Any of these conditions could
have an adverse effect on our results of operations, liquidity and financial condition.
Our revenues and the value of our portfolio are affected by a number of factors that affect
investments in leased real estate generally.
We are subject to the general risks of investing in leased real estate. These include the non-
performance of lease obligations by tenants, improvements that will be costly or difficult to remove should it
become necessary to re-rent the leased space for other uses, covenants in certain retail leases that limit the
types of tenants to which available space can be rented (which may limit demand or reduce the rents
10
realized on re-renting), rights of termination of leases due to events of casualty or condemnation affecting
the leased space or the property or due to interruption of the tenant’s quiet enjoyment of the leased
premises, and obligations of a landlord to restore the leased premises or the property following events of
casualty or condemnation. Any of these conditions could have an adverse impact on our results of
operations, liquidity and financial condition.
Our real estate investments are relatively illiquid and their values may decline.
Real estate investments are relatively illiquid. Therefore, we will be limited in our ability to reconfigure
our real estate portfolio in response to economic changes. We may encounter difficulty in disposing of
properties when tenants vacate either at the expiration of the applicable lease or otherwise. If we decide to
sell any of our properties, our ability to sell these properties and the prices we receive on their sale may be
affected by many factors, including the number of potential buyers, the number of competing properties on
the market and other market conditions, as well as whether the property is leased and if it is leased, the
terms of the lease. As a result, we may be unable to sell our properties for an extended period of time
without incurring a loss, which would adversely affect our results of operations, liquidity and financial
condition.
The concentration of our properties in certain geographic areas may make our revenues and the
value of our portfolio vulnerable to adverse changes in local economic conditions.
We do not have specific limitations on the total percentage of our real estate properties that may be
located in any one geographic area. Consequently, properties that we own may be located in the same or a
limited number of geographic regions. Approximately 32% of our rental income (excluding our share of the
rental income from our joint ventures) for the year ended December 31, 2007 was, and approximately 33%
of our 2008 contractual rental income will be, derived from properties located in Texas and New York. As a
result, a decline in the economic conditions in these geographic regions, or in geographic regions where our
properties may be concentrated in the future, may have an adverse effect on the rental and occupancy
rates for, and the property values of, these properties, which could lead to a reduction in our rental income
and in the results of operations.
Our inability to control our joint ventures or our tenancy in common arrangement could result in
diversion of time and effort by our management and the inability to achieve the goals of the joint
venture or the tenancy in common arrangement.
We presently are a joint venturer in five joint ventures which own five properties and we own 50% of
another property as tenant in common with a group of investors pursuant to a tenancy in common
agreement. At December 31, 2007, our investment in unconsolidated joint ventures was approximately
$6.6 million and the tenancy in common interest represents a net investment of approximately $569,000 by
us. These investments may involve risks not otherwise present in investments made solely by us, including
that our co-investors may have different interests or goals than we do, or that our co-investors may not be
able or willing to take an action that we desire. Disagreements with or among our co-investors could result
in substantial diversion of time and effort by our management team and the inability of the joint venture or
the tenancy in common to successfully operate, finance, lease or sell properties as intended by our joint
venture agreements or tenancy in common agreement. In addition, we may invest a significant amount of
our funds into joint ventures which ultimately may not be profitable as a result of disagreements with or
among our co-investors.
Competition in the real estate business is intense and could reduce our revenues and harm our
business.
We compete for real estate investments with all types of investors, including domestic and foreign
corporations and real estate companies, 1031 exchange buyers, financial institutions, insurance
companies, pension funds, investment funds, other REITs and individuals. Many of these competitors have
significant advantages over us, including a larger, more diverse group of properties and greater financial
and other resources. We have recently experienced increased competition for the acquisition of net leased
properties. Our failure to compete successfully with these competitors could result in our inability to identify
and acquire valuable properties and to achieve our growth objectives.
11
Compliance with environmental regulations and associated costs could adversely affect our
liquidity.
Under various federal, state and local laws, ordinances and regulations, an owner or operator of real
property may be required to investigate and clean up hazardous or toxic substances or petroleum product
releases at the property and may be held liable to a governmental entity or to third parties for property
damage and for investigation and cleanup costs incurred in connection with contamination. The cost of
investigation, remediation or removal of hazardous or toxic substances may be substantial, and the
presence of such substances, or the failure to properly remediate a property, may adversely affect our
ability to sell or rent the property or to borrow money using the property as collateral. In connection with our
ownership, operation and management of real properties, we may be considered an owner or operator of
the properties and, therefore, potentially liable for removal or remediation costs, as well as certain other
related costs, including governmental fines and liability for injuries to persons and property, not only with
respect to properties we own now or may acquire, but also with respect to properties we have owned in the
past.
We cannot provide any assurance that existing environmental studies with respect to any of our
properties reveal all potential environmental liabilities, that any prior owner of a property did not create any
material environmental condition not known to us, or that a material environmental condition does not
otherwise exist, or may not exist in the future, as to any one or more of our properties. If a material
environmental condition does in fact exist, or exists in the future, it could have a material adverse impact
upon our results of operations, liquidity and financial condition.
Our senior management and other key personnel are critical to our business and our future success
depends on our ability to retain them.
We depend on the services of Fredric H. Gould, chairman of our board of directors, Patrick J. Callan,
Jr., our president and chief executive officer, Lawrence G. Ricketts, Jr., our executive vice president and chief
operating officer, and other members of our senior management to carry out our business and investment
strategies. Only two of our senior officers, Messrs. Callan and Ricketts, devote all of their business time to our
company. The remainder of our senior management provide services to us on a part-time, as needed basis.
As we expand, we will need to attract and retain qualified senior management and other key personnel, both on
a full-time and part-time basis. The loss of the services of any of our senior management or other key
personnel, or our inability to recruit and retain qualified personnel in the future, could impair our ability to carry
out our business and investment strategies. We do not carry key man life insurance on members of our senior
management.
Our transactions with affiliated entities involve conflicts of interest.
From time to time we have entered into transactions with persons and entities affiliated with us and with
certain of our officers and directors. Our policy is (i) to receive terms in transactions with affiliates that are at
least as favorable to us as similar transactions we would enter into with unaffiliated persons and (ii) to have
these transactions approved by our Audit Committee and by a majority of our board of directors, including a
majority of our independent directors. We entered into a compensation and services agreement with Majestic
Property Management Corp. effective as of January 1, 2007. Majestic Property Management Corp. is wholly-
owned by our chairman of the board and it provides compensation to certain of our executive officers. Pursuant
to the compensation and services agreement, we pay an annual fee to Majestic Property Management Corp.
and they assume our obligations under a shared services agreement, and provide us with the services of all
affiliated executive, administrative, legal, accounting and clerical personnel that we use on a part time basis, as
well as certain property management services, property acquisition, sales and leasing and mortgage brokerage
services. In 2007, we paid to Majestic a fee of approximately $2,125,000. In addition, in accordance with the
compensation and services agreement, in 2007 we paid our chairman a fee of $250,000 and made an
additional payment to Majestic Property Management Corp. of $175,000 for our share of all direct office
expenses, such as rent, telephone, postage, computer services, internet usage, etc. Any transactions with
affiliated entities raise the potential that we may not receive terms as favorable as those that we would receive
if the transactions were entered into with unaffiliated entities or that our executive officers might otherwise seek
benefits for affiliated entities at our expense.
12
Compliance with the Americans with Disabilities Act could be costly.
Under the Americans with Disabilities Act of 1990, all public accommodations must meet Federal
requirements for access and use by disabled persons. A determination that our properties do not comply
with the Americans with Disabilities Act could result in liability for both governmental fines and damages. If
we are required to make unanticipated major modifications to any of our properties to comply with the
Americans with Disabilities Act, which are determined not to be the responsibility of our tenants, we could
incur unanticipated expenses that could have an adverse impact upon our results of operations, liquidity
and financial condition.
We cannot assure you of our ability to pay dividends in the future.
We intend to pay quarterly dividends and to make distributions to our stockholders in amounts such
that all or substantially all of our taxable income in each year, subject to certain adjustments, is distributed.
This, along with other factors, should enable us to quality for the tax benefits accorded to a REIT under the
Internal Revenue Code of 1986, as amended. We have not established a minimum dividend payment level
and our ability to pay dividends may be adversely affected by the risk factors described in this Annual
Report. All distributions will be made at the discretion of our board of directors and will depend on our
earnings, our financial condition, maintenance of our REIT status and such other factors as our board of
directors may deem relevant from time to time. We cannot assure you that we will be able to pay dividends
in the future.
Risks Related to the REIT Industry
Failure to qualify as a REIT would result in material adverse tax consequences and would
significantly reduce cash available for distributions.
We believe that we operate so as to qualify as a REIT under the Internal Revenue Code of 1986, as
amended. Qualification as a REIT involves the application of technical and complex legal provisions for
which there are limited judicial and administrative interpretations. The determination of various factual
matters and circumstances not entirely within our control may affect our ability to qualify as a REIT. In
addition, no assurance can be given that legislation, new regulations, administrative interpretations or court
decisions will not significantly change the tax laws with respect to qualification as a REIT or the federal
income tax consequences of such qualification. If we fail to quality as a REIT, we will be subject to federal,
certain additional state and local income tax (including any applicable alternative minimum tax) on our
taxable income at regular corporate rates and would not be allowed a deduction in computing our taxable
income for amounts distributed to stockholders. In addition, unless entitled to relief under certain statutory
provisions, we would be disqualified from treatment as a REIT for the four taxable years following the year
during which qualification is lost. The additional tax would reduce significantly our net income and the cash
available for distributions to stockholders.
We are subject to certain distribution requirements that may result in our having to borrow funds at
unfavorable rates.
To obtain the favorable tax treatment associated with being a REIT, we generally are required, among
other things, to distribute to our stockholders at least 90% of our ordinary taxable income (subject to certain
adjustments) each year. To the extent that we satisfy these distribution requirements, but distribute less
than 100% of our taxable income we will be subject to federal corporate tax on our undistributed taxable
income. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which
certain distributions paid by us with respect to any calendar year are less than the sum of 85% of our
ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.
As a result of differences in timing between the receipt of income and the payment of expenses, and
the inclusion of such income and the deduction of such expenses in arriving at taxable income, and the
effect of nondeductible capital expenditures, the creation of reserves and the timing of required debt service
(including amortization) payments, we may need to borrow funds in order to make the distributions
necessary to retain the tax benefits associated with qualifying as a REIT, even if we believe that then
13
prevailing market conditions are not generally favorable for such borrowings. Such borrowings could
reduce our net income and the cash available for distributions to holders of our common stock.
Compliance with REIT requirements may hinder our ability to maximize profits.
In order to qualify as a REIT for Federal income tax purposes, we must continually satisfy tests
concerning, among other things, our sources of income, the amounts we distribute to our stockholders and
the ownership of our stock. We may also be required to make distributions to stockholders at
disadvantageous times or when we do not have funds readily available for distribution. Accordingly,
compliance with REIT requirements may hinder our ability to operate solely on the basis of maximizing
profits.
In order to qualify as a REIT, we must also ensure that at the end of each calendar quarter, at least
75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real
estate assets. Any investment in securities cannot include more than 10% of the outstanding voting
securities of any one issuer or more than 10% of the total value of the outstanding securities of any one
issuer. In addition, no more than 5% of the value of our assets can consist of the securities of any one
issuer, other than a qualified REIT security. If we fail to comply with these requirements, we must dispose
of such portion of these securities in excess of these percentages within 30 days after the end of the
calendar quarter in order to avoid losing our REIT status and suffering adverse tax consequences. This
requirement could cause us to dispose of assets for consideration that is less than their true value and
could lead to a material adverse impact on our results of operations and financial condition.
Item 1B. Unresolved Staff Comments.
None.
14
EXECUTIVE OFFICERS
Set forth below is a list of our executive officers whose terms expire at our 2008 annual board of
director’s meeting. The business history of our officers who are also directors will be provided in our proxy
statement to be filed pursuant to Regulation 14A not later than April 29, 2008.
NAME
AGE POSITION WITH THE COMPANY
Fredric H. Gould*
Patrick J. Callan, Jr.
72
45
Chairman of the Board
President, Chief Executive Officer, and Director
Lawrence G. Ricketts, Jr.
31
Executive Vice President and Chief Operating Officer
Jeffrey A. Gould*
Matthew J. Gould*
David W. Kalish
Israel Rosenzweig
Simeon Brinberg**
Mark H. Lundy**
Karen Dunleavy
42
48
61
60
74
45
49
Senior Vice President and Director
Senior Vice President and Director
Senior Vice President and Chief Financial Officer
Senior Vice President
Senior Vice President
Senior Vice President and Secretary
Vice President, Financial
* Matthew J. Gould and Jeffrey A. Gould are Fredric H. Gould’s sons.
** Mark H. Lundy is Simeon Brinberg’s son-in-law.
Lawrence G. Ricketts, Jr. Mr. Ricketts has been Chief Operating Officer of One Liberty Properties since
January 2008, and Vice President since December 1999 (Executive Vice President since June 2006), and
has been employed by One Liberty Properties, Inc. since January 1999.
David W. Kalish. Mr. Kalish has served as Senior Vice President and Chief Financial Officer of One
Liberty Properties since June 1990. Mr. Kalish has served as Senior Vice President, Finance of BRT
Realty Trust since August 1998 and Vice President and Chief Financial Officer of the managing general
partner of Gould Investors L.P. since June 1990. Mr. Kalish is a certified public accountant.
Israel Rosenzweig. Mr. Rosenzweig has been a Senior Vice President of One Liberty Properties since
June 1997 and a Senior Vice President of BRT Realty Trust since March 1998. He has been a Vice
President of the managing general partner of Gould Investors L.P. since May 1997 and President of GP
Partners, Inc., a sub-advisor to a registered investment advisor, since 2000.
Simeon Brinberg. Mr. Brinberg has served as a Senior Vice President of One Liberty Properties since
1989. He has been Secretary of BRT Realty Trust since 1983, a Senior Vice President of BRT Realty Trust
since 1988 and a Vice President of the managing general partner of Gould Investors L.P. since 1988. Mr.
Brinberg, is an attorney-at-law and a member of the bar of the State of New York.
Mark H. Lundy. Mr. Lundy has served as the Secretary of One Liberty Properties since June 1993 and a
Vice President since June 2000 (Senior Vice President since June 2006). Mr. Lundy has been a Vice
President of BRT Realty Trust since April 1993 (Senior Vice President since March 2005) and a Vice
President of the managing general partner of Gould Investors L.P. since July 1990. He is an attorney-at-
law and a member of the bars of New York and the District of Columbia.
15
Karen Dunleavy. Ms. Dunleavy has been Vice President, Financial of One Liberty Properties since
August 1994. She has served as Treasurer of the managing general partner of Gould Investors L.P. since
1986. Ms. Dunleavy is a certified public accountant.
Item 2. Properties.
As of December 31, 2007, we owned 65 properties, one of which is held for sale, held a 50% tenancy
in common interest in one property, and participated in five joint ventures that own a total of five properties
(including one vacant property held for sale). The properties owned by us and our joint ventures are
suitable and adequate for their current uses. The tables below set forth information as of December 31,
2007 concerning each property which we own and in which we currently own an equity interest. Except for
one movie theater property, we and our joint ventures own fee title to each property.
Our Properties
Location
Baltimore, MD
Parsippany, NJ
Hauppauge, NY
El Paso, TX
St. Cloud, MN
Plano, TX
Los Angeles, CA (3)
Greensboro, NC
Brooklyn, NY
Knoxville, TN
Columbus, OH
Plano, TX
Philadelphia, PA
Tucker, GA
Ronkonkoma, NY
Lake Charles, LA
Cedar Park, TX
Manhattan, NY
Columbus, OH
Ft. Myers, FL
Type of
Property
Industrial
Office
Flex
Retail
Industrial
Retail (2)
Office
Theater
Office
Retail
Retail (2)
Retail (4)
Industrial
Health & Fitness
Flex
Retail
Retail (2)
Residential
Industrial
Retail
Grand Rapids, MI
Health & Fitness
Newark, DE
Wichita, KS
Atlanta, GA
Saco, ME
Champaign, IL
Athens, GA
Retail
Retail (2)
Retail
Industrial
Retail
Retail
Percentage
of 2008
Contractual
Rental Income (1)
6.5%
Approximate
Building
Square Feet
367,000
106,680
149,870
110,179
338,000
112,389
106,262
61,213
66,000
35,330
96,924
51,018
166,000
58,800
89,500
54,229
50,810
125,000
100,220
29,993
130,000
23,547
88,108
50,400
91,400
50,530
41,280
5.4
4.9
4.4
4.3
3.8
3.5
3.5
3.0
2.8
2.7
2.5
2.5
2.5
2.1
1.9
1.8
1.8
1.6
1.6
1.5
1.5
1.4
1.4
1.3
1.3
1.3
16
Location
Greenwood Village, CO
Type of
Property
Retail
Percentage
of 2008
Contractual
Rental Income (1)
1.2
Approximate
Building
Square Feet
45,000
Tyler, TX
Mesquite, TX
Fayetteville, GA
Onalaska, WI
Melville, NY
Richmond, VA
Amarillo, TX
Virginia Beach, VA
Selden, NY
Lexington, KY
Duluth, GA
Antioch, TN
Retail (2)
Retail (2)
Retail (2)
Retail
Industrial
Retail (2)
Retail (2)
Retail (2)
Retail
Retail (2)
Retail (2)
Retail
Newport News, VA
Retail (2)
Grand Rapids, MI
Health & Fitness
Gurnee, IL
Batavia, NY
St. Louis, MO
Somerville, MA
Hauppauge, NY
Fairview Heights, IL
Bluffton, SC
Houston, TX
Ferguson, MO
Retail
Retail
Retail
Retail
Retail
Retail
Retail (2)
Retail
Retail
New Hyde Park, NY
Industrial
Vicksburg, MS
Florence, KY
Killeen, TX
Flowood, MS
Bastrop, LA
Monroe, LA
D’Iberville, MS
Kentwood, LA
Monroe, LA
Vicksburg, MS
Rosenberg, TX
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
West Palm Beach, FL
Industrial
Seattle, WA
Retail
1.2
1.1
1.1
1.1
1.1
1.0
1.0
1.0
1.0
.9
.9
.9
.9
.9
.8
.7
.7
.7
.7
.7
.7
.6
.6
.6
.5
.5
.5
.4
.4
.4
.4
.4
.4
.4
.3
.3
.2
100%
17
72,000
22,900
65,951
63,919
51,351
38,788
72,227
58,937
14,550
30,173
50,260
34,059
49,865
72,000
22,768
23,483
30,772
12,054
7,000
31,252
35,011
12,000
32,046
89,000
2,790
31,252
8,000
4,505
2,607
2,756
2,650
2,578
2,806
4,505
8,000
10,361
3,038
3,873,896
Properties Owned
by Joint Ventures (5)
Location
Lincoln, NE
Milwaukee, WI
Miami, FL
Savannah, GA
Shreveport, LA (6)
Type of
Property
Retail
Industrial
Industrial
Retail
Retail
Percentage
of Our Share
of Rent Payable
in 2008 to Our
Joint Ventures
41.8%
38.9
10.7
8.6
Vacant
100%
Approximate
Building
Square Feet
112,260
927,685
396,000
101,550
17,108
1,554,603
(1)
(2)
(3)
(4)
(5)
Percentage of 2008 contractual rental income payable to us pursuant to leases as of December 31, 2007,
including rental income payable on our tenancy in common interest and excluding rental income from our
property that is held for sale.
This property is leased to a retail furniture operator.
An undivided 50% interest in this property is owned by us as tenant in common with an unrelated entity.
Percentage of contractual rental income indicated represents our share of the 2008 rental income.
Approximate square footage indicated represents the total rentable square footage of the property.
Property has two tenants, of which approximately 53% is leased to a retail furniture operator.
Each property is owned by a joint venture in which we are a venture partner. Except for the joint venture
which owns the Miami, Florida property, in which we own a 36% economic interest, we own a 50% economic
interest in each joint venture. Approximate square footage indicated represents the total rentable square
footage of the property owned by the joint venture.
(6)
This property was held for sale at December 31, 2007.
The occupancy rate for our properties (including the property in which we own a tenancy in
common interest), based on total rentable square footage, was 100% as of December 31, 2007 and 2006.
The occupancy rate for the properties owned by our joint ventures (except for a property located in
Monroe, New York which was vacant land and was sold by the joint venture in March 2007), based on
total rentable square footage, was approximately 98.9% as of December 31, 2007 and 2006.
As of December 31, 2007, the 66 properties owned by us and the five properties owned by our joint
ventures are located in 28 states. The following tables set forth certain information, presented by state,
related to our properties and properties owned by our joint ventures as of December 31, 2007.
18
Our Properties
State
Texas
New York
Georgia
Maryland
New Jersey
Ohio
Minnesota
Tennessee
Louisiana
California
North Carolina
Other
Properties Owned
by Joint Ventures
State
Nebraska
Wisconsin
Florida
Georgia
Louisiana
Number of
Properties (1)
10
2008 Contractual
Rental Income
$ 6,241,132
Approximate
Building
Square Feet
519,523
9
5
1
1
2
1
2
5
1
1
27
65
5,676,108
2,568,977
2,340,923
1,928,241
1,546,990
1,541,441
1,324,086
1,277,934
1,251,797
1,242,019
615,754
266,691
367,000
106,680
197,144
338,000
69,389
64,976
106,262
61,213
8,988,637
$ 35,928,285
1,161,264
3,873,896
Number of
Properties
1
1
1
1
1 (2)
5
Our Share
of Rent Payable
in 2008 to Our
Joint Ventures
$ 603,594
562,500
154,488
123,750
-
$1,444,332
Approximate
Building
Square Feet
112,260
927,685
396,000
101,550
17,108
1,554,603
(1)
(2)
Excludes a property owned by us, located in Pennsylvania, which is held for sale.
This vacant property was held for sale at December 31, 2007.
At December 31, 2007, we had first mortgages on 57 of the 66 properties we owned as of that date
(including our 50% tenancy in common interest, but excluding properties owned by our joint ventures). At
December 31, 2007, we had approximately $215.5 million of mortgage loans outstanding, bearing interest
at rates ranging from 5.13% to 8.8%. Substantially all of our mortgage loans contain prepayment
penalties. In addition, we had one outstanding loan payable with a balance of approximately $6.5 million at
December 31, 2007, bearing interest at 6.25%. The following table sets forth scheduled principal
mortgage and loan payments due for our properties as of December 31, 2007 (assumes no payment is
made on principal on any outstanding mortgage or loan in advance of its due date):
YEAR
PRINCIPAL PAYMENTS DUE
IN YEAR INDICATED
(Amounts in Thousands)
2008 $ 9,104
2009 10,033
2010 22,313
2011 8,580
2012 37,551
134,454
$222,035
Total
2013 and thereafter
19
At December 31, 2007, our joint ventures had first mortgages on three properties with outstanding
balances of approximately $18.8 million, bearing interest at rates ranging from 5.8% to 6.4%. Substantially all
these mortgages contain prepayment penalties. The following table sets forth the scheduled principal
mortgage payments due for properties owned by our joint ventures as of December 31, 2007 (assumes no
payment is made on principal on any outstanding mortgage in advance of its due date):
YEAR
2008
2009
2010
2011
2012
2013 and thereafter
Total
PRINCIPAL PAYMENTS DUE
IN YEAR INDICATED
(Amounts in Thousands)
$ 410
435
462
490
520
16,434
$18,751
Significant Tenant
As of December 31, 2007, no single property owned by us had a book value equal to or greater than
10% of our total assets or had revenues which accounted for more than 10% of our aggregate annual
gross revenues in the year ended December 31, 2007. However, as of December 31, 2007, we owned a
portfolio of 11 properties, leased under a master lease to Haverty’s Furniture Companies, Inc., which had a
net book value of 13% of our total assets and revenues which accounted for 13.2% of our aggregate
annual gross revenues in the year ended December 31, 2007. Of the eleven properties, three are located
in each of Texas and Virginia, two are located in Georgia, and one is located in each of Kansas, Kentucky
and South Carolina. The properties aggregate approximately 43 acres and contain buildings with an
aggregate of approximately 612,130 square feet.
The properties are net leased pursuant to a master lease, which expires on August 14, 2022.
Haverty’s Furniture Companies, Inc. is a New York Stock Exchange listed company and operates over 100
showrooms in 17 states. The lease provides for a current base rent of $4,310,000 per annum, increasing
on August 15, 2012 and every five years thereafter and provides the tenant with certain renewal options.
Pursuant to the lease, the tenant is responsible for maintenance and repairs, and for real estate taxes and
assessments on the properties. The 2007 annual real estate taxes on the properties aggregated
$756,000. The tenant utilizes approximately 86% of the properties for retail and 14% for warehouse.
The mortgage loan, which our subsidiary assumed when it acquired the properties in 2006, is secured
by mortgages/deeds of trust on all eleven properties in the principal amount of approximately $26 million at
December 31, 2007. The mortgage loan bears interest at 6.87% per annum, matures on September 1,
2012 and is being amortized based on a 25-year amortization schedule. Assuming no additional payments
are made on the principal amount of the mortgage loan in advance of the maturity date, the principal
balance due on the maturity date will be approximately $20 million. Although the mortgage loan provides
for defeasance, it is generally not prepayable until 90 days prior to the maturity date.
Item 3. Legal Proceedings
In July 2005, our former president and chief executive officer, who was also a member of our board of
directors, resigned following the discovery of inappropriate financial dealings by him with a former tenant of a
property owned by a joint venture in which we are a 50% partner and the managing member. We reported this
matter to the Securities and Exchange Commission (the “SEC”) in July 2005. The Audit Committee of our
Board of Directors conducted an investigation of this matter and related matters and retained special counsel to
assist the committee in its investigation. This investigation was completed, and the Audit Committee and its
special counsel, based on the materials gathered and interviews conducted, found no evidence that any officer
or employee of our company (other than the former president and chief executive officer) was aware of, or
knowingly assisted, our former president and chief executive officer’s inappropriate financial dealings.
20
In June 2006, we announced that we had received notification of a formal order of investigation from the
SEC. We believe that the matters being investigated by the SEC focus on the improper payments received by
our president and chief executive officer. The SEC also requested information regarding “related party
transactions” between us and entities affiliated with us and with certain of our officers and directors and
compensation paid to certain of our officers by these affiliates. The SEC and our Audit Committee have
conducted investigations concerning these issues. We believe that these investigations have been substantially
completed.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal
year covered by this Annual Report on Form 10-K.
Part II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase
of Equity Securities.
Our common stock is listed on the New York Stock Exchange. The following table sets forth the high
and low prices for our common stock as reported by the New York Stock Exchange for 2007 and for 2006
and the per share cash distributions paid on our common stock during each quarter of the years ended
December 31, 2007 and 2006.
2007
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
LOW
HIGH
$22.72
$ 26.13
$21.59
$ 24.48
$18.83
$ 23.26
$ 21.97 $17.61
2006
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
HIGH
$21.00
$21.00
$22.40
$25.53
LOW
$18.33
$17.91
$18.66
$22.01
CASH
DISTRIBUTION
PER SHARE
$ .36
$ .36
$1.03*
$ .36
CASH
DISTRIBUTION
PER SHARE
$ .33
$ .33
$ .33
$ .36
* Includes a regular cash dividend of $.36 per share and a special cash distribution of $.67 per share.
As of March 3, 2008, there were 351 common stockholders of record and we estimate that at such
date there were approximately 3,600 beneficial owners of our common stock.
We qualify as a REIT for federal income tax purposes. In order to maintain that status, we are
required to distribute to our shareholders at least 90% of our annual ordinary taxable income. The amount
and timing of future distributions will be at the discretion of the Board of Directors and will depend upon our
financial condition, earnings, business plan, cash flow and other factors. We intend to pay cash
distributions in an amount at least equal to that necessary for us to maintain our status as a real estate
investment trust for Federal income tax purposes.
21
Stock Performance Graph
The following graph compares the performance of our common stock with the Standard and Poor’s
500 Index and a peer group index of publicly traded equity real estate investment trusts prepared by the
National Association of Real Estate Investment Trusts. As indicated, the graph assumes $100 was
invested on December 31, 2002 in our common stock and assumes the reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among One Liberty Properties, Inc., The S&P 500 Index
And The NAREIT Equity Index
$300
$250
$200
$150
$100
$50
$0
12/02
12/03
12/04
12/05
12/06
12/07
One Liberty Properties, Inc.
S&P 500
NAREIT Equity
* $100 invested on 12/31/02 in stock or index-including reinvestment of dividends.
Fiscal year ending December 31.
Copyright © 2008, Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
CUMULATIVE TOTAL RETURN
12/02
12/03
12/04
12/05
12/06
12/07
One Liberty Properties, Inc.
S&P 500
NAREIT Equity
100.00
100.00
100.00
140.01
128.68
137.13
155.53
142.69
180.44
147.76
149.70
202.38
214.62
173.34
273.34
172.92
182.87
230.45
22
Equity Compensation Plan Information
The following table provides information about shares of our common stock that may be issued upon the
exercise of options, warrants, rights and restricted stock under our 2003 Stock Incentive Plan as of December
31, 2007.
Number of
securities
to be issued
upon exercise
of outstanding
options,
warrants and
rights
(a)
Number of securities
remaining available
for future issuance
under equity
compensation
plans (excluding
securities
reflected in
column(a))
(c)
Weighted-
average
exercise price
of outstanding
options, warrants
and rights
(b)
-
-
81,900
-
-
-
-
-
81,900
Plan Category
Equity compensation
plans approved by
security holders (1)
Equity compensation
plans not approved
by security holders
Total
(1) Our 2003 Stock Incentive Plan, which was approved by our stockholders in 2003, is our only equity
compensation plan. Our 2003 Stock Incentive Plan permits us to grant stock options and restricted stock to our
employees, officers, directors and consultants. Currently, there are no options outstanding under our 2003 Stock
Incentive Plan.
Purchase of Securities
On August 7, 2007, our board of directors authorized a program for us to repurchase up to 500,000
shares of our common stock in the open market from time to time. Set forth below is a table which provides the
purchases we made in the fourth quarter of 2007.
Issuer Purchases of Equity Securities
Period
October 1, 2007-
October 31, 2007
November 1, 2007-
November 30, 2007
December 1, 2007-
December 31, 2007
Total Number of
Shares (or Units
Purchased)
Average Price Paid
per Share (or Unit)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs
28,800
$20.26
28,800
401,617
24,500
$20.18
24,500
377,117
35,926
$19.31
35,926
341,191
23
Item 6. Selected Financial Data.
The following table sets forth the selected consolidated statement of operations data for each of the
periods indicated, all of which are derived from our audited consolidated financial statements and related
notes. The selected financial data for each of the three years in the period ended December 31, 2007
should be read together with our consolidated financial statements and related notes appearing elsewhere
in this Annual Report on Form 10-K and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations.”
As of and for the Year Ended
December 31
(Amounts in Thousands, Except Per Share Data)
2007 2006 2005 2004 2003
OPERATING DATA (Note a)
Rental revenues $36,805 $32,048 $25,910 $19,511 $14,850
Equity in earnings (loss) of unconsolidated joint ventures
(Note b)
648 (3,276) 2,102 2,869 2,411
Gain on dispositions of real estate of
unconsolidated joint ventures
Net gain on sale of air rights, other and real estate
Income from continuing operations
Income from discontinued operations
Net income
Calculation of net income
583
-
9,013
1,577
10,590
26,908
413
30,797
5,628
36,425
-
10,248
18,309
2,971
21,280
-
73
7,308
3,666
10,974
-
14
5,995
2,530
8,525
applicable to common stockholders (Note c):
Net income
Less: dividends and accretion on preferred stock
Net income applicable to common stockholders
Weighted average number of common
shares outstanding:
Basic
Diluted
Net income per common share – basic and diluted:
Income from continuing operations
Income from discontinued operations
Net income
Cash distributions per share of:
Common Stock (Note d)
Preferred Stock (Note c)
BALANCE SHEET DATA
Real estate investments, net
Investment in unconsolidated joint ventures
Cash and cash equivalents
Total assets
Mortgages and loan payable
Line of credit
Total liabilities
Total stockholders' equity
OTHER DATA (Note e)
Funds from operations applicable to
common stockholders
Funds from operations per common share:
Basic
Diluted
10,590
-
36,425
-
$10,590 $36,425
21,280
-
8,525
1,037
$21,280 $10,974 $ 7,488
10,974
-
10,069
10,069
$ .89
.16
$1.05
9,931
9,934
$3.10
.57
$3.67
9,838
9,843
$ 1.86
.30
$2.16
9,728
9,744
$ .75
_ .38
$1.13
6,340
6,372
$ .78
_ .40
$1.18
$2.11
-
$1.35
-
$1.32
-
$1.32
-
$1.32
$1.60
27,335
26,749
6,570
25,737
$333,990 $341,652 $258,122 $228,536 $177,316
24,441
45,944
330,583 284,386 259,089
167,472 124,019 106,133
-
175,064 138,271 113,120
155,519 146,115 145,969
7,014
34,013
406,634 422,037
222,035 227,923
-
235,395 241,912
171,239 180,125
37,023
6,051
7,600
-
-
$18,645 $13,707
$26,658 $16,789 $11,776
$1.85
$1.85
$1.38
$1.38
$2.71 $1.73
$2.71 $1.72
$1.86
$1.85
Note a: Certain amounts reported in prior periods have been reclassified to conform to the current
year’s presentation.
Note b: For the year ended December 31, 2006, “Equity in earnings (loss) of unconsolidated joint
ventures” is after giving effect to $5.3 million, our share of the mortgage prepayment premium expense
incurred in connection with dispositions of real estate of unconsolidated joint ventures. This expense is
reflected as interest expense on the books of the joint ventures and is not netted against the gain on
dispositions.
Note c: On December 30, 2003, we redeemed all of our outstanding preferred stock.
24
Note d: 2007 includes a special cash distribution of $.67 per share
Note e: We consider funds from operations (FFO) to be a relevant and meaningful supplemental measure of
the operating performance of an equity REIT, and it should not be deemed to be a measure of liquidity. FFO does
not represent cash generated from operations as defined by generally accepted accounting principles (GAAP) and is
not indicative of cash available to fund all cash needs, including distributions. It should not be considered as an
alternative to net income for the purpose of evaluating our performance or to cash flows as a measure of liquidity.
We compute FFO in accordance with the “White Paper on Funds From Operations” issued in April 2002 by the
National Association of Real Estate Investment Trusts (NAREIT). FFO is defined in the White Paper as “net income
(computed in accordance with generally accepting accounting principles), excluding gains (or losses) from sales of
property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from
operations on the same basis.” In computing FFO, we do not add back to net income the amortization of costs in
connection with our financing activities, or depreciation of non-real estate assets, but those items that are defined as
“extraordinary” under GAAP are added back to net income. Since the NAREIT White Paper only provides guidelines
for computing FFO, the computation of FFO may vary from one REIT to another.
We believe that FFO is a useful and a standard supplemental measure of the operating performance for equity
REITs and is used frequently by securities analysts, investors and other interested parties in evaluating equity REITs,
many of which present FFO when reporting their operating results. FFO is intended to exclude GAAP historical cost
depreciation and amortization of real estate assets, which assures that the value of real estate assets diminish
predictability over time. In fact, real estate values have historically risen and fallen with market conditions. As a
result, we believe that FFO provides a performance measure that when compared year over year, should reflect the
impact to operations from trends in occupancy rates, rental rates, operating costs, interest costs and other matters
without the inclusion of depreciation and amortization, providing a perspective that may not be necessarily apparent
from net income. We also consider FFO to be useful to us in evaluating potential property acquisitions.
FFO does not represent net income or cash flows from operations as defined by GAAP. FFO should not be
considered to be an alternative to net income as a reliable measure of our operating performance; nor should FFO be
considered to be an alternative to cash flows from operating, investing or financing activities (as defined by GAAP) as
measures of liquidity.
FFO does not measure whether cash flow is sufficient to fund all of our cash needs, including principal
amortization, capital improvements and distributions to stockholders. FFO does not represent cash flows from
operating, investing or financing activities as defined by GAAP.
Management recognizes that there are limitations in the use of FFO. In evaluating the performance of our
company, management is careful to examine GAAP measures such as net income and cash flows from operating,
investing and financing activities. Management also reviews the reconciliation of net income to FFO.
The table below provides a reconciliation of net income in accordance with GAAP to FFO, as calculated under
the current NAREIT definition of FFO, for each of the years in the five year period ended December 31, 2007.
Net income (Note 1)
Add: depreciation of properties
Add: our share of depreciation
in unconsolidated joint ventures
Add: amortization of deferred leasing costs
Deduct: gain on sale of real estate
Deduct: gain on dispositions of real estate
of unconsolidated joint ventures
Deduct: preferred distributions
Funds from operations applicable
to common stockholders (Note 1)
2007
2006
$10,590 $36,425
7,091
8,248
2005
2004
$21,280 $10,974
4,758
5,905
2003
$8,525
3,473
329
61
-
716
43
(3,660)
1,277
101
(1,905)
1,075
55
(73)
790
39
(14)
(583)
_____-
(26,908)
_ -
-
__ -
-
__ -
-
(1,037)
$18,645 $13,707
$26,658 $16,789 $11,776
Note 1: For the year ended December 31, 2006, net income and funds from operations applicable to common stockholders
(FFO) is after giving effect to $5.3 million, our share of the mortgage prepayment premium expense incurred in connection with
the dispositions of real estate of unconsolidated joint ventures. This expense is reflected as interest expense on the books of the
joint ventures and not netted against gain on dispositions.
For the year ended December 31, 2005, net income and FFO include $10.2 million from the gain on sale of air rights.
25
The table below provides a reconciliation of net income per common share (on a diluted basis) in
accordance with GAAP to FFO.
2007
2006
2005
2004
2003
Net income (Note 2)
Add: depreciation of properties
Add: our share of depreciation
in unconsolidated joint ventures
Add: amortization of deferred leasing costs
Deduct: gain on sale of real estate
Deduct: gain on dispositions of real estate
of unconsolidated joint ventures
Deduct: preferred distributions
Funds from operations applicable
to common stockholders (Note 2)
$1.05
.82
$3.67
.71
$2.16
$1.13
.49
.60
$1.34
.55
.03
.01
-
.07
.01
(.37)
.13
.01
(.19) (.01)
.11
-
.12
-
-
(.06)
-
(2.71)
-
-
-
-
-
-
(.16)
$1.85
$1.38
$2.71 $1.72
$1.85
Note 2: For the year ended December 31, 2006, net income and FFO is after $.53, our share of the mortgage
prepayment premium expense. See Note 1 above. For the year ended December 31, 2005, net income and FFO include $1.04
from the gain on sale of air rights.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General
We are a self-administered and self-managed REIT and we primarily own real estate that we net
lease to tenants. As of December 31, 2007, we owned 65 properties, one of which is held for sale, held a
50% tenancy in common interest in one property, and participated in five joint ventures that owned a total
of five properties (including one vacant property held for sale). These 71 properties are located in 28
states.
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. To
qualify as a REIT, we must meet a number of organizational and operational requirements, including a
requirement that we currently distribute at least 90% of ordinary taxable income to our stockholders. We
intend to comply with these requirements and to maintain our REIT status.
Our principal business strategy is to acquire improved, commercial properties subject to long-term
net leases. We acquire properties for their value as long-term investments and for their ability to generate
income over an extended period of time. We have borrowed funds in the past to finance the purchase of
real estate and we expect to do so in the future.
Our rental properties are generally leased to corporate tenants under operating leases substantially
all of which are noncancellable. Substantially all of our lease agreements are net lease arrangements that
require the tenant to pay not only rent, but also substantially all of the operating expenses of the leased
property, including maintenance, taxes, utilities and insurance. A majority of our lease agreements provide
for periodic rental increases and certain of our other leases provide for increases based on the consumer
price index.
Although we investigated, analyzed and bid on several properties in 2007, due to a variety of factors,
including increased competition and unfavorable prices, we did not acquire any properties in 2007. In
January and February 2008, we acquired two single retail properties for an aggregate purchase price of
approximately $5.5 million.
Our five joint ventures each held a single-tenant property as of December 31, 2007. At year end, our
equity investment in our joint ventures was $6.6 million, net of distributions.
At December 31, 2007, excluding mortgages payable of our unconsolidated joint ventures, we had 57
outstanding mortgages payable, aggregating $215.5 million in principal amount, all of which are secured by
first liens on individual real estate investments with an aggregate carrying value of approximately $349
26
million before accumulated depreciation. The mortgages bear interest at fixed rates ranging from 5.13% to
8.8%, and mature between 2008 and 2037. In addition, we had one loan payable outstanding with a
principal amount of $6.5 million, bearing interest at 6.25% and maturing in 2018.
Results of Operations
Outlook
We anticipate that in 2008 we will use any available cash (after taking into account required cash
distributions to shareholders), funds derived from the placement of additional mortgages and a credit line
to acquire additional properties, either directly or through joint ventures. As a result, we anticipate that we
will acquire and own additional properties and unless we experience an unexpected number of lease
terminations and/or cancellations in 2008 (taking into consideration the lease expiration we know will occur
in 2008, and without giving effect to any re-letting of such properties), our revenues should increase in
2008.
Comparison of Years Ended December 31, 2007 and December 31, 2006
Rental Revenues
Rental revenues increased by $4.8 million, or 14.8%, to $37 million for the year ended December
31, 2007 from $32 million for the year ended December 31, 2006. The increase in rental revenues is
substantially due to rental revenues earned during the year ended December 31, 2007 on 22 properties
acquired by us between April and December 2006.
Operating Expenses
Depreciation and amortization expense increased by $1.4 million, or 20%, to $8.1 million for the
year ended December 31, 2007 from $6.8 million for the year ended December 31, 2006. The increase in
depreciation and amortization was due to the acquisition of 22 properties between April and December
2006.
General and administrative expenses increased by $1.2 million, or 22.5%, to $6.4 million for the year
ended December 31, 2007 from $5.3 million for the year ended December 31, 2006. The increase is due to a
number of factors including (i) an increase of $135,000 in payroll and payroll related expenses of full-time
employees; (ii) an increase of $310,000 in compensation expenses related to the amortization of restricted
stock awards; (iii) an increase of $200,000 (from $50,000 to $250,000) in the compensation paid to the
chairman of our board; (iv) an increase of $228,000 in professional fees resulting from both the retention by our
Compensation Committee of an independent consultant, and an increase in legal and accounting fees.
Offsetting these increases was a $723,000 decease in professional fees incurred in the prior year in connection
with investigations by the SEC and our Audit Committee and legal fees relating to a civil litigation arising out of
the activities of our former president and chief executive officer.
Included in the increase in general and administrative expenses was $2.29 million of expenses incurred
pursuant to a compensation and services agreement which became effective January 1, 2007. Under the
agreement Majestic Property Management Corp., an affiliated entity, took over our obligations under a shared
services agreement (including our share of direct office overhead) and agreed to continue to provide us with the
services of all affiliated executive, administrative, legal, accounting and clerical personnel that we use on an as
needed, part-time basis. Accordingly, we no longer allocate direct office overhead or allocate payroll expenses.
The agreement also requires Majestic Property Management Corp. to continue to provide us with certain
property management services (including construction supervisory services), property acquisition, sales and
leasing services and mortgage brokerage services and we do not incur any fees or expenses for such services
except for the annual fee referred to below. In consideration of taking over our obligations under the shared
services agreement and providing the services mentioned above, we agreed to pay Majestic Property
Management Corp. a fee in 2007 of $2,125,000 million (before offsets provided for in the agreement) plus
$175,000 as our share of direct office overhead. The following table compares the amounts paid by us in 2007
under the compensation and services agreement and the expenses paid in 2006 which would be included in
the fee paid under such agreement:
27
Years ended December 31,
2007
2006
Compensation and
Services Agreement
Allocated expenses
Mortgage brokerage fees
Sales commissions
Management fees
Supervisory fees
Fees paid by our joint ventures
Total fees
$2,288,000
-
-
-
-
-
2,288,000
6,000
$2,294,000
$
-
1,317,000
100,000 (1)
152,000 (2)
15,000
41,000 (3)
1,625,000
691,000 (4)
$2,316,000
(1) Deferred and written off over term of mortgage.
(2) Reduced net sales proceeds.
(3) Capitalized to improvement account.
(4) Represents our 50% share of fees paid to Majestic Property Management Corp. by our joint ventures. The 2007
amount is for management fees and the 2006 amount is primarily for sales commissions, which reduced the net
sales proceeds from the dispositions of real estate of unconsolidated joint ventures.
Other Income and Expenses
Our equity in earnings of unconsolidated joint ventures increased by $3.9 million to $648,000 for
the year ended December 31, 2007 from a loss of $3.3 million for the year ended December 31, 2006.
The $3.3 million loss for the year ended December 31, 2006 resulted primarily from $10.5 million of
mortgage prepayment premiums, of which 50%, or $5.3 million, was our share, paid by two of our joint
ventures upon the sale of its nine movie theater properties in September and October 2006. Such sales
resulted in a decrease in income producing properties owned by our joint ventures since these properties
generated operating income of $4.6 million, of which 50%, or $2.3 million, was our share in 2006. The
year ended December 31, 2006 also included a $960,000 provision for valuation adjustment by one of our
joint ventures, of which 50%, or $480,000, was our share. Additionally, during the year ended December
31, 2006, one of our movie theater joint ventures recorded a $600,000 provision for valuation adjustment,
of which 50%, or $300,000, was our share. The joint venture sold this property in March 2007. The year
ended December 31, 2007 includes an increase in our equity share of earnings from four of our other
unconsolidated joint ventures, primarily due to our participation in an additional joint venture which
acquired a property in September 2006.
Gain on dispositions of real estate of unconsolidated joint ventures results from sales of real estate
assets owned by our two movie theater joint ventures. The year ended December 31, 2006 reflects the
September 2006 sale by one of the joint ventures of a movie theater property located in Brooklyn, New
York for a consideration of $16 million from which it realized a gain of $6.6 million, of which our share was
$3.3 million. The year ended December 31, 2006 also reflects the October 2006 sale of eight movie
theater properties by both movie theater joint ventures to an unrelated party for an aggregate purchase
price of $136.7 million, from which the joint ventures realized a gain of $49 million, of which $24.5 million
was our share. We wrote off the unamortized premium balance of $924,000 in our investment in one of the
joint ventures against the gain. The year ended December 31, 2007 reflects the sale by one of the movie
theater joint ventures of its last remaining real estate asset, a vacant parcel of land, located in Monroe,
New York, for a consideration of $1.25 million. The joint venture recognized a gain of $1.2 million on this
sale, of which our 50% share is $583,000.
Interest and other income increased by $877,000, or 97.6%, to $1.8 million for the year ended
December 31, 2007 from $899,000 for the year ended December 31, 2006. The increase in interest and
other income for the year ended December 31, 2007 results substantially from our investment in short-term
cash equivalents available primarily from the distributions we received from the movie theater joint
ventures upon the sales of its theater properties in September and October 2006. Also contributing to the
increase in interest and other income in the year ended December 31, 2007 is a $118,000 gain on sale of
available-for-sale securities.
28
Interest expense increased by $2.4 million, or 19.2%, to $14.9 million for the year ended December
31, 2007 from $12.5 million for the year ended December 31, 2006. This increase results primarily from
fixed rate mortgages placed on 10 properties in the year ended December 31, 2006 and the assumption of
a fixed rate mortgage in connection with the purchase of 11 properties in April 2006. The year ended
December 31, 2007 includes a full year of interest expense on these mortgages. In addition, the increase
in interest expense results from interest on a loan payable which was originally a mortgage collateralized
by a movie theater property we sold in October 2006.
Amortization of deferred financing costs increased by $43,000, or 7.2%, to $638,000 for the year
ended December 31, 2007. The increase results from the amortization of deferred mortgage costs during
the year ended December 31, 2007 resulting from mortgages placed on 22 properties between April 2006
and August 2007.
In July 2006, we sold excess acreage at a property we own to an unrelated party and recognized a
$185,000 gain on the sale, and in February 2006, we sold an option to buy an interest in certain property
adjacent to one of our properties and recognized a $228,000 gain on the sale.
Discontinued Operations
Income from discontinued operations decreased by $4.1 million, or 72%, to $1.6 million for the year
ended December 31, 2007 from $5.6 million for the year ended December 31, 2006. This decrease was
primarily due to the $3.7 million gain in the year ended December 31, 2006 on the sale of a movie theater
wholly owned by us that we sold for $15.2 million. This sale was part of a sale which closed in October
2006 pursuant to which an unrelated party purchased one movie theater from us and eight movie theaters
from two of our joint ventures. The year ended December 31, 2006 also includes the net operating income
of $487,000 from this property.
Comparison of Years Ended December 31, 2006 and December 31, 2005
Rental Revenues
Rental revenues increased by $6.1 million, or 23.7%, to $32 million for the year ended December
31, 2006 from $25.9 million for the year ended December 31, 2005. The increase in rental revenues is
substantially due to rental revenues earned during the year ended December 31, 2006 on 30 properties
acquired by us between January 2005 and December 2006.
Operating Expenses
Depreciation and amortization expense increased by $1.6 million, or 30.1%, to $6.8 million for the
year ended December 31, 2006 from $5.2 million for the year ended December 31, 2005. The increase in
depreciation and amortization was due to the acquisition of 30 properties between January 2005 and
December 2006.
General and administrative expenses increased by $1.1 million, or 26.8%, to $5.3 million for the
year ended December 31, 2006 from $4.1 million for the year ended December 31, 2005. The increase
was due to a number of factors, including a $495,000 increase in payroll and payroll related expenses
resulting primarily from compensation paid to our president (elected effective January 1, 2006) for all of
2006, while we did not have any payroll expenses for our president for five months in 2005, as well as from
staff increases. An increase of $166,000 relates to professional fees incurred in connection with an
investigation by the Securities and Exchange Commission (see Part I – Item 3 – Legal Proceedings) and
investigations by our Audit Committee. Similarly, there was an increase of $72,000 in legal fees relating to
a civil litigation arising out of the activities of our former president and chief executive officer. Additionally,
for the year ended December 31, 2006, expenses allocated to us under the Shared Services Agreement
among us and various affiliated companies, increased by $109,000 for executive and support personnel,
primarily legal and accounting services, a significant portion of which relates to the SEC and Audit
Committee investigations, as well as to property acquisitions and the overall increase in the level of our
business activity. Also included in the year ended December 31, 2006, is a $222,000 increase in
compensation expense relating to our restricted stock program. The balance of the increase in general
29
and administrative expenses includes an increase in directors’ fees.
Federal excise tax of $490,000 was accrued at December 31, 2006, based on taxable income
generated but not yet distributed. There was no such tax for the year ended December 31, 2005.
Real estate expenses decreased by $75,000, or 21.9%, to $268,000 for the year ended December
31, 2006, resulting primarily from unusual repair items incurred in the year ended December 31, 2005 at
three properties.
Other Income and Expenses
Our equity in earnings of unconsolidated joint ventures decreased by $5.4 million, or 256%, to a
loss of $3.3 million for the year ended December 31, 2006 from income of $2.1 million for the year ended
December 31, 2005. This decrease resulted primarily from $10.5 million of mortgage prepayment
premiums, of which 50%, or $5.3 million was our share, paid by two of our joint ventures upon the sales of
its nine movie theater properties. Such sales also contributed to an operating income decrease from these
ventures of $1.3 million, of which $646,000 was our share, caused by a decrease in rental income, offset in
part by a decrease in mortgage interest expense and depreciation. The decrease in earnings from
unconsolidated joint ventures also resulted from a $960,000 provision for valuation adjustment, of which
50%, or $480,000 was our share, by one of our joint ventures which owns a vacant property. These
decreases were offset, in part, by a $2.56 million provision for valuation adjustment taken in the year
ended December 31, 2005 by one of our movie theater joint ventures against its vacant parcel of land, of
which 50%, or $1.3 million, was our share. During the year ended December 31, 2006, the joint venture
recorded an additional $600,000 provision against this property, of which $300,000 was our share. The
joint venture sold this property in March 2007 for an aggregate consideration of $1.25 million.
Gain on dispositions of real estate of unconsolidated joint ventures resulted from the sales of nine
movie theater properties by two of our joint ventures. On September 13, 2006, one of our joint ventures
sold a movie theater property located in Brooklyn, New York to an unrelated party for $16 million. The joint
venture recognized a gain of $6.6 million on the sale, of which our share is $3.3 million. On October 5,
2006, two of our joint ventures sold eight movie theater properties to a single unrelated party for an
aggregate of $136.7 million and realized a gain of $49 million on the sale, of which $24.5 million is our
share. We wrote off the unamortized premium balance of $924,000 in our investment in this joint venture
against such gain.
Interest and other income increased by $589,000, or 190%, to $899,000 for the year ended
December 31, 2006. The primary reason for the increase was the investment in short-term cash
equivalents of the distributions we received from the movie theater joint ventures upon the sale of its nine
theater properties.
Interest expense increased by $3 million, or 31.1%, primarily due to an increase of $3 million on our
mortgages payable, principally resulting from mortgages placed on 20 properties between March 2005 and
December 2006 and the assumption of a mortgage in connection with the purchase of 11 properties in
April 2007. The increase was offset by a $215,000 decrease in interest expense related to our line of
credit.
During February 2006, we sold an option to buy an interest in certain property adjacent to one of
our properties and recognized a gain on the sale of $228,000. In June 2005, we closed on the sale of
unused development or “air rights” relating to our property located in Brooklyn, New York for a net gain,
after closing costs, of approximately $10.25 million. These gains are included in “Gain on sale of air rights
and other gains.”
Included in gain on sale of real estate is our sale of excess acreage at a property we own to an
unrelated party. We recognized a gain of $185,000 in July 2006 from this sale.
Discontinued Operations
Income from discontinued operations increased by $2.7 million, or 89.3%, to $5.6 million for the
year ended December 31, 2006. This increase was primarily due to the $3.7 million gain on sale of a
30
movie theater wholly owned by us that we sold for $15.2 million. This sale was part of a sale which closed
on October 5, 2006 pursuant to which an unrelated party purchased one movie theater from us and eight
movie theaters from two of our joint ventures. This increase was offset in part by net gains of $1.9 million
in the year ended December 31, 2005 on the sale of five of our properties. The increase in discontinued
operations also resulted from an increase in income from operations caused by a $469,000 provision for
valuation adjustment that was recorded in the year ended December 31, 2005 against one of the
properties which was sold later in that year.
Liquidity and Capital Resources
Our primary sources of liquidity are cash and cash equivalents, our revolving credit facility and cash
generated from operating activities, including mortgage financings. We are a party to a credit agreement, as
amended, with VNB New York Corp., Bank Leumi, USA, Manufacturers and Traders Trust Company and Israel
Discount Bank of New York which provides for a $62.5 million revolving credit facility. The credit facility is
available to us to pay off existing mortgages, to fund the acquisition of additional properties or to invest in joint
ventures. The facility matures on March 31, 2010. Borrowings under the facility bear interest at the lower of
LIBOR plus 2.15% or the bank’s prime rate and there is an unused facility fee of ¼% per annum. Net proceeds
received from the sale or refinancing of properties are required to be used to repay amounts outstanding under
the facility if proceeds from the facility were used to purchase or refinance the property. The facility is
guaranteed by our subsidiaries that own unencumbered properties and is secured by the outstanding stock of
subsidiary entities. As of December 31, 2007 and March 7, 2008, there is no outstanding balance under the
facility.
We continue to seek additional property acquisitions. We will use our available cash and cash
equivalents, cash provided from operations, cash provided from mortgage financings and funds available
under our credit facility to fund acquisitions.
The following sets forth our contractual cash obligations as of December 31, 2007, which relate to
interest and amortization payments and balances due at maturity under outstanding mortgages secured by
our properties for the periods indicated (amounts in thousands):
Contractual Obligations
Total
Less than
1 Year
Payment due by period
1-3
Years
4-5
Years
More than
5 Years
Mortgages and loan payable –
interest and amortization
Mortgages and loan payable –
balances due at maturity
Total
$139,497
$19,136
$36,547
$32,272
$51,542
172,140
$311,637
4,184
$23,320
21,584
$58,131
35,287
$67,559
111,085
$162,627
As of December 31, 2007, we had outstanding approximately $222 million in long-term mortgage and
loan indebtedness (excluding mortgage indebtedness of our unconsolidated joint ventures), all of which is
non-recourse (subject to standard carve-outs). We expect that debt service payments of approximately
$55.7 million due in the next three years will be paid primarily from cash generated from our operations.
We anticipate that loan maturities of approximately $25.8 million due in the next three years will be paid
primarily from mortgage financings or refinancings. If we are not successful in refinancing our existing
indebtedness or financing our unencumbered properties, our cash flow, funds available under our credit
facility and available cash, if any, may not be sufficient to repay all maturing debt when payments become
due, and we may be forced to sell additional equity or dispose of properties on disadvantageous terms.
In addition, we, as ground lessee, are obligated to pay rent under a ground lease for a property
owned in fee by an unrelated third party. The annual fixed leasehold rent expense is as follows:
Total
2008 2009 2010
2011
2012
More than
5 Years
$3,986,476
$237,500 $262,240 $296,875 $296,875 $296,875 $2,596,111
31
We had no outstanding contingent commitments, such as guarantees of indebtedness, or any other
contractual cash obligations at December 31, 2007.
Cash Distribution Policy
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. To
qualify as a REIT, we must meet a number of organizational and operational requirements, including a
requirement that we distribute currently at least 90% of our ordinary taxable income to our stockholders. It
is our current intention to comply with these requirements and maintain our REIT status. As a REIT, we
generally will not be subject to corporate federal, state or local income taxes on taxable income we
distribute currently (in accordance with the Internal Revenue Code and applicable regulations) to our
stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal, state and
local income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent
tax years. Even if we qualify for federal taxation as a REIT, we may be subject to certain state and local
taxes on our income and to federal income taxes on our undistributed taxable income (i.e., taxable income
not distributed in the amounts and in the time frames prescribed by the Internal Revenue Code and
applicable regulations thereunder) and are subject to federal excise taxes on our undistributed taxable
income.
It is our intention to pay to our stockholders within the time periods prescribed by the Internal
Revenue Code no less than 90%, and, if possible, 100% of our annual taxable income, including taxable
gains from the sale of real estate and recognized gains on the sale of securities. It will continue to be our
policy to make sufficient cash distributions to stockholders in order for us to maintain our REIT status
under the Internal Revenue Code.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Significant Accounting Policies
Our significant accounting policies are more fully described in Note 2 to our consolidated financial
statements. Certain of our accounting policies are particularly important to an understanding of our
financial position and results of operations and require the application of significant judgment by our
management; as a result they are subject to a degree of uncertainty. These significant accounting policies
include:
Purchase Accounting for Acquisition of Real Estate
The fair value of the real estate acquired is allocated to the acquired tangible assets, consisting of
land and building, and identified intangible assets and liabilities, consisting of the value of above-market
and below-market leases and other value of in-place leases based in each case on their fair values. The
fair value of the tangible assets of an acquired property (which includes land and building) is determined by
valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land and building
based on management’s determination of relative fair values of these assets. The allocation made by
management may have a positive or negative effect on net income and may have an effect on the assets
and liabilities on the balance sheet.
Revenues
Our revenues, which are substantially derived from rental income, include rental income that our
tenants pay in accordance with the terms of their respective leases reported on a straight line basis over
the initial term of each lease. Since many of our leases provide for rental increases at specified intervals,
straight line basis accounting requires us to record as an asset and include in revenues, unbilled rent
receivables which we will only receive if the tenant makes all rent payments required through the expiration
of the initial term of the lease. Accordingly, our management must determine, in its judgment, that the
unbilled rent receivable applicable to each specific tenant is collectible. We review unbilled rent
32
receivables on a quarterly basis and take into consideration the tenant’s payment history, the financial
condition of the tenant, business conditions in the industry in which the tenant is engaged and economic
conditions in the area in which the property is located. In the event that the collectability of an unbilled rent
receivable is in doubt, we would be required to take a reserve against the receivable or a direct write off of
the receivable, which would have an adverse affect on net income for the year in which the reserve or
direct write off is taken and would decrease total assets and stockholders’ equity.
Value of Real Estate Portfolio
We review our real estate portfolio on a quarterly basis to ascertain if there has been any impairment
in the value of any of our real estate assets, including deferred costs and intangibles, in order to determine
if there is any need for a provision for valuation adjustment. In reviewing the portfolio, we examine the type
of asset, the economic situation in the area in which the asset is located, the economic situation in the
industry in which the tenant is involved and the timeliness of the payments made by the tenant under its
lease, as well as any current correspondence that may have been had with the tenant, including property
inspection reports. For each real estate asset owned for which indicators of impairment exist, recognition
of impairment is required if the calculated value is less than the asset’s carrying amount. We generally do
not obtain any independent appraisals in determining value but rely on our own analysis and valuations.
Any provision taken with respect to any part of our real estate portfolio will reduce our net income and
reduce assets and stockholders’ equity to the extent of the amount of the valuation adjustment, but it will
not affect our cash flow until such time as the property is sold.
Item 7A. Qualitative and Quantitative Disclosures About Market Risk.
All of our long-term mortgage debt bears interest at fixed rates and accordingly, the effect of
changes in interest rates would not impact the amount of interest expense that we incur under these
mortgages. Our credit line is a variable rate facility which is sensitive to interest rates. Therefore, our
primary market risk exposure is the effect of changes in interest rates on the interest cost of draws on our
line of credit. Under current market conditions, we do not believe that our risk of material potential losses
in future earnings, fair values and/or cash flows from near-term changes in market rates that we consider
reasonably possible is material.
The fair market value (FMV) of our long term debt is estimated based on discounting future cash
flows at interest rates that our management believes reflect the risks associated with long term debt of
similar risk and duration.
The following table sets forth our long-term debt obligations by scheduled principal cash flow
payments and maturity date, weighted average interest rates and estimated FMV at December 31, 2007
(amounts in thousands):
For the Year Ended December 31
2008
2009 2010
2011
2012
after
Total
FMV
There-
Long term debt
$9,104
$10,033
$22,313
$8,580
$ 37,551
$134,454 $222,035 $219,532
Fixed rate
weighted
average
interest rate
6.49%
6.49%
6.38%
6.33%
6.32%
6.24%
6.30%
6.75%
Variable rate
-
-
-
-
-
-
-
-
Item 8. Financial Statements and Supplementary Data.
This information appears in Item 15(a) of this Annual Report on Form 10-K.
33
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
A review and evaluation was performed by our management, including our Chief Executive Officer
(CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on that
review and evaluation, the CEO and CFO have concluded that our current disclosure controls and procedures,
as designed and implemented, were effective. There have been no significant changes in our internal controls
or in other factors that could significantly affect our internal controls subsequent to the date of their evaluation.
There were no significant material weaknesses identified in the course of such review and evaluation and,
therefore, we took no corrective measures.
Management Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under
the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, a
company’s principal executive and principal financial officers and effected by a company’s board, management
and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with GAAP and includes those policies
and procedures that:
• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of a company;
• provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, and that receipts and expenditures of a company are
being made only in accordance with authorizations of management and directors of a company; and
• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of a company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that
controls may become inadequate because of changes in conditions or that the degree of compliance with the
policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of
December 31, 2007. In making this assessment, our management used criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on its assessment, our management believes that, as of December 31, 2007, our internal control
over financial reporting was effective based on those criteria.
Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on
management’s assessment of our internal control over financial reporting. This report appears on page F1 of
this Annual Report on Form 10-K.
Item 9B. Other Information.
None.
34
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
We have an amended and restated Code of Business Conduct and Ethics that applies to all directors,
officers and employees, including our principal executive officer, principal financial officer and principal
accounting officer. You can find our Code of Business Conduct and Ethics on our web site by going to the
following address: www.onelibertyproperties.com. We will post any amendments to our amended and restated
Business Code of Conduct and Ethics as well as any waivers that are required to be disclosed by the rules of
either the Securities and Exchange Commission or The New York Stock Exchange, on our web site.
Our Board of Directors has adopted Corporate Governance Guidelines and Charters for the Audit,
Compensation and Nominating and Corporate Governance Committees of the Board of Directors. You can find
these documents on our web site by going to the following address: www.onelibertyproperties.com.
You can also obtain a printed copy of any of the materials referred to above by contacting us at the
following address: One Liberty Properties, Inc., 60 Cutter Mill Road, Great Neck, New York 11021, Attention:
Secretary, telephone number (1-800-450-5816).
The Audit Committee of our Board of Directors is an “Audit Committee” for the purposes of Section 3(a)
(58) of the Securities Exchange Act of 1934, as amended. The members of that Committee are Charles
Biederman, Chairman, Joseph A. DeLuca and James J. Burns.
Apart from certain information concerning our executive officers which is set forth in Part I of this Annual
Report, the other information required by this Item is incorporated herein by reference to the applicable
information in the proxy statement for our 2008 Annual Meeting of Stockholders including the information set
forth under the captions “Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance” and
“Governance of the Company.”
Item 11. Executive Compensation.
The information concerning our executive compensation required by Item 11 shall be included in the
Proxy Statement to be filed relating to our 2008 Annual Meeting of Stockholders and is incorporated herein by
reference, including the information set forth under the caption “Executive Compensation,” “Compensation of
Directors,” “Compensation Committee Interlocks and Insider Participation” and “Report of Compensation
Committee.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information concerning our beneficial owners and management required by Item 12 shall be
included in the Proxy Statement to be filed relating to our 2008 Annual Meeting of Stockholders and is
incorporated herein by reference, including the information set forth under the caption “Stock Ownership of
Certain Beneficial Owners, Directors and Officers.”
Equity compensation plan information is incorporated by reference from Part II, Item 5, “Market For
Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities,” of this
report.
Item 13. Certain Relationships and Related Transactions.
The information concerning certain relationships, related transactions and director independence
required by Item 13 shall be included in the Proxy Statement to be filed relating to our 2008 Annual Meeting of
Stockholders and is incorporated herein by reference, including the information set forth under the caption
“Certain Relationships and Related Transactions,” and “Governance of the Company.”
Item 14. Principal Accountant Fees and Services.
The information concerning our principal accounting fees required by Item 14 shall be included in the
Proxy Statement to be filed relating to our 2008 Annual Meeting of Stockholders and is incorporated herein by
reference, including the information set forth under the caption “Independent Registered Public Accounting
Firm.”
35
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)
Documents filed as part of this Report:
(1) The following financial statements of the Company are included in this Report on Form 10-K:
- Reports of Independent Registered
Public Accounting Firm
- Statements:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
- Schedule III-Real Estate
and Accumulated Depreciation
F-1 through F-2
F-3
F-4
F-5
F-6 through F-7
F-8 through F-24
F-25 through F-26
All other schedules are omitted because they are not applicable or the required information is shown in
the consolidated financial statements or the notes thereto.
(3) Exhibits:
3.1
3.2
3.3
3.4
4.1
4.2
4.3
Articles of Amendment and Restatement of One Liberty Properties, Inc., dated July 20, 2004
(incorporated by reference to Exhibit 3.1 to One Liberty Properties, Inc.'s Quarterly Report on Form
10-Q for the quarter ended June 30, 2004).
Articles of Amendment to Restated Articles of Incorporation of One Liberty Properties, Inc. filed with
the State of Assessments and Taxation of Maryland on June 17, 2005 (incorporated by reference
to Exhibit 3.1 to One Liberty Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2005).
Articles of Amendment to Restated Articles of Incorporation of One Liberty Properties, Inc. filed with
the State of Assessments and Taxation of Maryland on June 21, 2005 (incorporated by reference
to Exhibit 3.2 to One Liberty Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2005).
By-Laws of One Liberty Properties, Inc., as amended (incorporated by reference to Exhibit 3.1 to
One Liberty Properties, Inc.'s Current Report on Form 8-K filed on December 12, 2007).
One Liberty Properties, Inc. 1996 Stock Option Plan (incorporated by reference to Exhibit 10.5 to
One Liberty Properties, Inc.'s Registration Statement on Form S-2, Registration No. 333-86850,
filed on April 24, 2002 and declared effective on May 24, 2002).
One Liberty Properties, Inc. 2003 Incentive Plan (incorporated by reference to Exhibit 4.1 to One
Liberty Properties, Inc.'s Registration Statement on Form S-8 filed on July 15, 2003).
Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to One Liberty
Properties, Inc.'s Registration Statement on Form S-2, Registration No. 333-86850, filed on April
24, 2002 and declared effective on May 24, 2002).
10.1 Amended and Restated Loan Agreement, dated as of June 4, 2004, by and among One Liberty
Properties, Inc., Valley National Bank, Merchants Bank Division, Bank Leumi USA, Israel Discount
Bank of New York and Manufacturers and Traders Trust Company (incorporated by reference to
the Exhibit to One Liberty Properties, Inc.'s Current Report on Form 8-K filed on June 8, 2004).
36
10.2 First Amendment to Amended and Restated Loan Agreement, dated as of March 15, 2007,
between VNB New York Corp. as assignee of Valley National Bank, Merchants Bank Division,
Bank Leumi, USA, Manufacturers and Traders Trust Company, Israel Discount Bank of New York,
and One Liberty Properties, Inc. (incorporated by reference to Exhibit 10.1 to One Liberty
Properties, Inc.’s Current Report on Form 8-K filed on March 15, 2007).
10.3 Second Amendment to Amended and Restated Loan Agreement effective as of September 30,
2007, between VNB New York Corp., as assignee, of Valley National Bank, Merchants Bank
Division, Bank Leumi USA, Israel Discount Bank of New York, Manufacturers and Traders Trust
Company and One Liberty Properties, Inc.
10.4 Compensation and Services and Agreement effective as of January 1, 2007 between One Liberty
Properties Inc. and Majestic Property Management Corp. (incorporated by reference to One Liberty
Properties Inc.’s Current Report on Form 8-K filed March 14,2007).
14.1 Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to One Liberty
Properties, Inc.’s Form Current Report on Form 8-K filed on March 14, 2006).
21.1 Subsidiaries of Registrant*
23.1 Consent of Ernst & Young LLP*
31.1 Certification of President and Chief Executive Officer*
31.2 Certification of Senior Vice President and Chief Financial Officer*
32.1 Certification of President and Chief Executive Officer *
32.2 Certification of Senior Vice President and Chief Financial Officer*
* Filed herewith
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.
ONE LIBERTY PROPERTIES, INC.
By: /s/ Patrick J. Callan, Jr.
Patrick J. Callan, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant in the capacities indicated on the dates indicated.
Signature Title
Date
/s/ Fredric H. Gould
Fredric H. Gould
Chairman of the
Board of Directors
March 13, 2008
/s/ Patrick J. Callan, Jr.
Patrick J. Callan, Jr Chief Executive Officer and
.
Director
President,
March 13, 2008
/s/ Joseph A. Amato
Joseph A. Amato
Director
March 13, 2008
/s/ Charles Biederman
Charles Biederman
Director
March 13, 2008
/s/ James J. Burns
James J. Burns
/s/ Jeffrey A. Gould
Jeffrey A. Gould
/s/ Matthew J. Gould
Matthew J. Gould
/s/ Joseph De Luca
Joseph De Luca
/s/ J. Robert Lovejoy
J. Robert Lovejoy
/s/ Eugene I. Zuriff
Eugene I. Zuriff
/s/ David W. Kalish
David W. Kalish
Director
March 13, 2008
Director
Director
March 13, 2008
March 13, 2008
Director
March 13, 2008
Director
March 13, 2008
Director
March 13, 2008
Senior Vice President and
Chief Financial Officer
March 13, 2008
38
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
One Liberty Properties, Inc. and Subsidiaries
We have audited One Liberty Properties, Inc. and Subsidiaries’ (the “Company”) internal control over financial
reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The
Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and (3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2007, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of One Liberty Properties, Inc. and Subsidiaries as of
December 31, 2007 and 2006, and the related consolidated statements of income, stockholders’ equity, and
cash flows for each of the three years in the period ended December 31, 2007 of the Company and our report
dated March 13, 2008 expressed an unqualified opinion thereon.
New York, New York
March 13, 2008
/s/ Ernst & Young LLP
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
One Liberty Properties, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of One Liberty Properties, Inc. and
Subsidiaries (the "Company") as of December 31, 2007 and 2006, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2007.
Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial
statements and schedule are the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of One Liberty Properties, Inc. and Subsidiaries at December 31, 2007 and 2006, and the
consolidated results of their operations and their cash flows for each of the three years in the period ended
December 31, 2007, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), One Liberty Properties, Inc. and Subsidiaries’ internal control over financial reporting as of
December 31, 2007, based on criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2008
expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
New York, New York
March 13, 2008
F-2
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in Thousands, Except Per Share Data)
ASSETS
Real estate investments, at cost
Land
Buildings and improvements
Less accumulated depreciation
Investment in unconsolidated joint ventures
Cash and cash equivalents
Restricted cash
Unbilled rent receivable
Property held for sale
Escrow, deposits and other receivables
Investment in BRT Realty Trust at market (related party)
Deferred financing costs
Other assets (including available-for-sale securities at market
of $1,024 and $1,372)
Unamortized intangible lease assets
December 31,
2007
2006
$ 70,032
298,470
368,502
34,512
333,990
6,570
25,737
7,742
9,893
10,052
2,465
459
3,119
$ 70,078
298,265
368,343
26,691
341,652
7,014
34,013
7,409
8,218
10,189
2,251
831
3,062
1,672
4,935
$406,634
2,145
5,253
$422,037
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages and loan payable
Dividends payable
Accrued expenses and other liabilities
Unamortized intangible lease liabilities
Total liabilities
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value; 12,500 shares authorized;
none issued
Common stock, $1 par value; 25,000 shares authorized;
9,906 and 9,823 shares issued and outstanding
Paid-in capital
Accumulated other comprehensive income – net unrealized
gain on available-for-sale securities
Accumulated undistributed net income
Total stockholders' equity
$222,035
3,638
4,252
5,470
235,395
$227,923
3,587
4,391
6,011
241,912
-
-
-
-
9,906
137,076
9,823
134,826
344
23,913
935
34,541
171,239
180,125
Total liabilities and stockholders’ equity
$406,634
$422,037
See accompanying notes.
F-3
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Amounts in Thousands, Except Per Share Data)
Year Ended December 31,
2006
2007
2005
Revenues:
Rental income
Operating expenses:
Depreciation and amortization
General and administrative (including $2,290, $1,317
and $1,208, respectively, to related parties)
Federal excise tax
Real estate expenses
Leasehold rent
Total operating expenses
Operating income
Other income and expenses:
Equity in earnings (loss) of unconsolidated joint ventures
Gain on dispositions of real estate - unconsolidated
joint ventures
Interest and other income
Interest:
Expense
Amortization of deferred financing costs
Gain on sale of air rights and other gains
Gain on sale of real estate
$36,805
$32,048
$25,910
8,111
6,760
5,197
6,430
91
290
308
15,230
5,250
490
268
308
13,076
4,140
-
342
308
9,987
21,575
18,972
15,923
648
(3,276)
2,102
583
1,776
26,908
899
(14,931)
(638)
-
-
(12,524)
(595)
228
185
-
311
(9,555)
(720)
10,248
-
Income from continuing operations
9,013
30,797
18,309
Discontinued operations:
Income from operations
Net gain on sale
1,577
-
1,968
3,660
1,066
1,905
Income from discontinued operations
1,577
5,628
2,971
Net income
$10,590
$36,425
$21,280
Weighted average number of common shares outstanding:
Basic
Diluted
10,069
10,069
9,931
9,934
9,838
9,843
Net income per common share – basic and diluted:
Income from continuing operations
Income from discontinued operations
Net income per common share
Cash distributions per share of common stock
$ .89
.16
$1.05
$2.11
$3.10
.57
$3.67
$1.86
.30
$2.16
$1.35
$1.32
See accompanying notes.
F-4
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the Three Years Ended December 31, 2007
(Amounts in Thousands, Except Per Share Data)
Common
Stock
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
Unearned
Compen-
sation
Accumulated
Undistributed
Net Income
Total
Balances, December 31, 2004
$ 9,728
$133,350
$ 717
$ (926)
$ 3,246
$146,115
Distributions – common stock
($1.32 per share)
Exercise of options
Shares issued through
dividend reinvestment plan
Issuance of restricted stock
Compensation expense –
restricted stock
Net income
Other comprehensive income –
net unrealized gain on
available-for-sale securities
Comprehensive income
-
11
31
-
-
-
-
-
109
569
617
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(617)
293
-
(12,990)
-
(12,990)
120
-
-
600
-
-
21,280
293
21,280
101
-
-
-
101
-
-
21,381
Balances, December 31, 2005
9,770
134,645
818
(1,250)
11,536
155,519
_______
_______
_______
_______
_______
Reclassification upon the adoption
of FASB No. 123 (R)
Distributions –
common stock ($1.35 per share)
Exercise of options
Shares issued through
dividend reinvestment plan
Compensation expense –
restricted stock
Net income
Other comprehensive income –
net unrealized gain on
available-for-sale securities
Comprehensive income
-
-
9
44
-
-
-
(1,250)
-
101
815
515
-
-
-
-
-
-
-
-
117
Balances, December 31, 2006
9,823
134,826
935
Distributions –
common stock ($2.11 per share)
Repurchase of common stock
Shares issued through
dividend reinvestment plan
Restricted stock vesting
Compensation expense –
restricted stock
Net income
Other comprehensive income-
net unrealized loss on
available-for-sale securities
Comprehensive income
-
(159)
-
(3,053)
4,482
(5)
826
-
237
5
-
-
-
-
-
-
-
-
-
1,250
-
-
-
-
-
-
-
-
(13,420)
-
(13,420)
110
-
859
-
36,425
515
36,425
-
117
36,542
-
-
-
-
-
-
-
-
34,541
180,125
(21,218)
-
-
-
(21,218)
(3,212)
4,719
-
-
10,590
826
10,590
-
__(591)
_______
_______
_______
_______
_______
_9,999
-
(591)
Balances, December 31, 2007
$ 9,906
$137,076
$ 344
$ -
$ 23,913
$171,239
See accompanying notes.
F-5
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in Thousands)
Year Ended December 31,
2006
2005
2007
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on sale of real estate, air rights and other
Increase in rental income from straight-lining of rent
(Increase) decrease in rental income from amortization
of intangibles relating to leases
Provision for valuation adjustment
Amortization of restricted stock expense
Gain on dispositions of real estate related to unconsolidated
joint ventures
Equity in (earnings) loss of unconsolidated joint ventures
Distributions of earnings from unconsolidated joint ventures
Depreciation and amortization
Amortization of financing costs
Changes in assets and liabilities:
Increase in escrow, deposits and other receivables
(Decrease) increase in accrued expenses and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of real estate and improvements
Net proceeds from sale of real estate, air rights and other
Investment in unconsolidated joint ventures
Distributions of return of capital from unconsolidated
joint ventures
Net proceeds from sale of available-for-sale securities
Purchase of available-for-sale securities
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Repayment of bank line of credit
Proceeds from mortgages payable
Payment of financing costs
Repayment of mortgages payable
Increase in restricted cash
Cash distributions - common stock
Exercise of stock options
Repurchase of common stock
Issuance of shares through dividend reinvestment plan
Net cash (used in) provided by financing activities
$10,590
$36,425
$21,280
(122)
(1,674)
(4,181)
(1,763)
(12,152)
(1,311)
(250)
-
826
(583)
(648)
1,089
8,248
638
(92)
(138)
17,884
(423)
4
(8)
551
843
(551)
416
-
2,700
(695)
(8,588)
(333)
(21,167)
-
(3,212)
4,719
(26,576)
(187)
-
515
(26,908)
3,276
24,165
7,091
600
(945)
839
38,927
(79,636)
16,228
(1,553)
21,264
348
(1,364)
(44,713)
-
37,564
(916)
(4,070)
(7,409)
(13,088)
110
-
859
13,050
29
469
293
-
(2,102)
3,108
5,905
758
(1,640)
132
14,769
(59,427)
34,114
(282)
9,084
5
-
(16,506)
(7,600)
64,706
(1,172)
(21,253)
-
(12,966)
120
-
600
22,435
Net (decrease) increase in cash and cash equivalents
(8,276)
7,264
20,698
Cash and cash equivalents at beginning of year
34,013
26,749
6,051
Cash and cash equivalents at end of year
$25,737
$34,013
$26,749
Continued on next page
F-6
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Amounts in Thousands)
Year Ended December 31,
2006
2005
2007
Supplemental disclosures of cash flow information:
Cash paid during the year for interest expense
Cash paid during the year for income taxes
$14,812
35
$12,576
16
$10,150
15
Supplemental schedule of non-cash investing and financing
activities:
Assumption of mortgages payable in connection with
purchase of real estate
Purchase accounting allocations
Reclassification of 2005 deposit in connection with
purchase of real estate
$ -
-
$26,957
(3,346)
$ -
1,655
-
2,525
-
See accompanying notes.
F-7
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2007
NOTE 1 - ORGANIZATION AND BACKGROUND
One Liberty Properties, Inc. (“OLP”) was incorporated in 1982 in the state of Maryland. OLP is a self-
administered and self-managed real estate investment trust ("REIT"). OLP acquires, owns and manages a
geographically diversified portfolio of retail, including retail furniture stores, industrial, office, health and fitness
and other properties, a substantial portion of which are under long-term net leases. As of December 31, 2007,
the Company owned sixty-five properties, one of which was held for sale, and held a 50% tenancy in common
interest in one property. OLP’s joint ventures owned a total of five properties, including one vacant property that
was held for sale. The seventy-one properties are located in twenty-eight states.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts and operations of OLP and its wholly-owned
subsidiaries. OLP and its subsidiaries are hereinafter referred to as the Company. Material intercompany items
and transactions have been eliminated.
Investment in Unconsolidated Joint Ventures
The Company accounts for its investments in unconsolidated joint ventures under the equity method of
accounting as the Company (1) is primarily the managing member but does not exercise substantial operating
control over these entities pursuant to EITF 04-05, and (2) such entities are not variable-interest entities pursuant
to FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities”. These investments are recorded
initially at cost, as investments in unconsolidated joint ventures, and subsequently adjusted for equity in earnings
and cash contributions and distributions. None of the joint venture debt is recourse to the Company.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Management believes that the estimates and assumptions that are most important to the portrayal of the
Company’s financial condition and results of operations, in that they require management’s most difficult,
subjective or complex judgments, form the basis of the accounting policies deemed to be most significant to the
Company. These significant accounting policies relate to revenues and the value of the Company’s real estate
portfolio. Management believes its estimates and assumptions related to these significant accounting policies are
appropriate under the circumstances; however, should future events or occurrences result in unanticipated
consequences, there could be a material impact on the Company’s future financial condition or results of
operations.
Revenue Recognition
Rental income includes the base rent that each tenant is required to pay in accordance with the terms of their
respective leases reported on a straight-line basis over the term of the lease. In order for management to
determine, in its judgment, that the unbilled rent receivable applicable to each specific property is collectible,
management reviews unbilled rent receivables on a quarterly basis and takes into consideration the tenant’s
payment history, the financial condition of the tenant, business conditions in the industry in which the tenant is
engaged and economic conditions in the area in which the property is located. Some of the leases provide for
F-8
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
additional contingent rental revenue in the form of percentage rents and increases based on the consumer
price index. The percentage rents are based upon the level of sales achieved by the lessee and are recorded
once the required sales levels are reached.
Gains or losses on disposition of properties are recorded when the criteria for recognizing such gains or losses
under generally accepted accounting principles have been met.
Purchase Accounting for Acquisition of Real Estate
In accordance with Statement of Financial Accounting Standards No. 141, or SFAS 141, “Business
Combinations,” the Company allocates the purchase price of real estate to land and building and intangibles, such
as the value of above, below and at-market leases and origination costs associated with in-place leases. The
Company depreciates the amount allocated to building and intangible assets or liabilities over their estimated
useful lives, which generally range from two to forty years. The values of the above and below market leases are
amortized and recorded as either an increase (in the case of below market leases) or a decrease (in the case of
above market leases) to rental income over the remaining minimum term of the associated lease. The tenant
improvements and origination costs are amortized as an expense over the remaining minimum term of the lease.
The Company assesses fair value of the leases based on estimated cash flow projections that utilize appropriate
discount rates and available market information.
As a result of its evaluation under SFAS 141 of the acquisitions made, the Company recorded additional deferred
intangible lease assets of $2,210,000, representing the value of the acquired above market leases and assumed
lease origination costs during the year ended December 31, 2006. The Company also recorded additional
deferred intangible lease liabilities of $5,556,000, representing the value of the acquired below market leases
during the year ended December 31, 2006. With respect to the Company’s acquisition of a property in December
2006, the initial fair value of its in-place lease and other intangibles were allocated on a preliminary basis and was
subject to change. In 2007, the fair value of the in-place lease was changed from a deferred intangible lease
liability of $110,000 to a deferred intangible lease asset of $153,000. The Company did not acquire any
properties during the year ended December 31, 2007. The Company recognized a net increase in rental revenue
of $250,000 and $187,000 for the amortization of the above/below market leases for the years ended 2007 and
2006, respectively. For the years ended 2007 and 2006, the Company recognized amortization expense of
$290,000 and $233,000, respectively, relating to lease origination costs resulting from the reallocation of the
purchase price of acquired properties. At December 31, 2007 and 2006, accumulated amortization of intangible
lease assets was $1,228,000 and $758,000, respectively. At December 31, 2007 and 2006, accumulated
amortization of intangible lease liabilities was $878,000 and $448,000, respectively.
The unamortized balance of intangible lease assets at December 31, 2007 will be deducted from future
operations through 2025 as follows:
2008
2009
2010
2011
2012
Thereafter
$ 463,000
451,000
451,000
451,000
451,000
2,668,000
$4,935,000
F-9
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
The unamortized balance of intangible lease liabilities at December 31, 2007 will be added to future operations
through 2022 as follows:
2008
2009
2010
2011
2012
Thereafter
$ 397,000
397,000
397,000
397,000
397,000
3,485,000
$5,470,000
Accounting for Long-Lived Assets and Impairment of Real Estate Owned
The Company reviews its real estate portfolio on a quarterly basis to ascertain if there has been any impairment in
the value of any of its real estate assets, including deferred costs and intangibles, in order to determine if there is
any need for a provision for valuation adjustment. In reviewing the portfolio, the Company examines the type of
asset, the economic situation in the area in which the asset is located, the economic situation in the industry in
which the tenant is involved and the timeliness of the payments made by the tenant under its lease, as well as any
current correspondence that may have been had with the tenant, including property inspection reports. For each
real estate asset owned for which indicators of impairment exist, recognition of impairment is required if the
calculated value is less than the asset’s carrying amount. Real estate assets that are expected to be disposed of
are valued at the lower of carrying amount or fair value less costs to sell on an individual asset basis.
During the years ended December 31, 2006 and 2005, one of the Company’s joint ventures determined that the
fair value of one of the five properties owned by it was lower than its carrying value and recorded provisions for
valuation adjustment totaling $3,162,000, of which the Company’s share was $1,581,000. The provisions were
based on an evaluation of market conditions in the geographic area in which the property is located, and were
recorded as direct write downs on the balance sheet of the joint venture. The joint venture sold this property in
March 2007 and realized a gain on sale of this property of $1,166,000, of which the Company’s share was
$583,000.
During the year ended December 31, 2006, another of the Company’s joint ventures determined that the fair value
of a vacant property owned by it was lower than its carrying value and recorded a provision for valuation
adjustment of $960,000, of which the Company’s share was $480,000. The provision was based on an
evaluation of market conditions in the area in which the property is located, and was recorded as a direct write
down on the balance sheet of the joint venture.
In accordance with FIN 47, “Accounting for Conditional Asset Retirement Obligations”, the Company records a
conditional asset retirement obligation (“CARO”) if the liability can be reasonable estimated. A CARO is an
obligation that is settled at the time the asset is retired or disposed of and for which the timing and/or method of
settlement are conditional on future events. The Company currently is not aware of any conditional asset
retirement obligations that would require remediation.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with maturities of three months or less when purchased.
Restricted Cash
Restricted cash consists of a cash deposit as required by a certain loan payable agreement for collateral. (See
Note 5.)
F-10
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Escrow, Deposits and Other Receivables
Includes $839,000 and $815,000 at December 31, 2007 and 2006, respectively, of restricted cash relating to real
estate taxes, insurance and other escrows.
Depreciation and Amortization
Depreciation of buildings and improvements is computed on the straight-line method over an estimated useful life
of 40 years for commercial properties and 27 1/2 years for the Company’s residential property. Depreciation
ceases when a property is deemed “held for sale”. Leasehold interest is amortized over the initial lease term of
the leasehold position. Depreciation expense, including amortization of the leasehold position, amounted to
$7,821,000, $6,527,000 and $5,047,000 for the three years ended December 31, 2007, 2006 and 2005,
respectively.
Leasehold Rent
Ground lease payments on a leasehold position are computed on the straight line method.
Deferred Financing Costs
Mortgage and credit line costs are deferred and amortized on a straight-line basis over the terms of the respective
debt obligations, which approximates the effective interest method. At December 31, 2007 and 2006,
accumulated amortization of such costs was $2,464,000 and $1,939,000, respectively.
Federal Income Taxes
The Company has qualified as a real estate investment trust under the applicable provisions of the Internal
Revenue Code. Under these provisions, the Company will not be subject to federal income taxes on amounts
distributed to stockholders providing it distributes substantially all of its taxable income and meets certain other
conditions.
Distributions made during 2007 and 2006 included 82% and 67%, respectively, to be treated by the stockholders
as capital gain distributions, with the balance to be treated as ordinary income.
Investment in Equity Securities
The Company determines the appropriate classification of equity securities at the time of purchase and
reassesses the appropriateness of the classification at each reporting date. At December 31, 2007, all
marketable securities have been classified as available-for-sale and, as a result, are stated at fair value.
Unrealized gains and losses on available-for-sale securities are recorded as accumulated other comprehensive
income in the stockholders' equity section.
The Company's investment in 30,048 common shares of BRT Realty Trust ("BRT"), a related party of the
Company, (accounting for less than 1% of the total voting power of BRT), purchased at a cost of $97,000, has a
fair market value at December 31, 2007 of $459,000. At December 31, 2007, the total cumulative unrealized gain
of $344,000 on all investments in equity securities is reported as accumulated other comprehensive income in the
stockholders' equity section.
F-11
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Realized gains and losses are determined using the average cost method and is included in “Interest and other
income” on the income statement. During 2007, 2006 and 2005, sales proceeds and gross realized gains and
losses on securities classified as available-for-sale were:
Sales proceeds
Gross realized losses
Gross realized gains
Fair Value of Financial Instruments
2007
2006
2005
$161,000
$ -
$118,000
$348,000
$ 3,000
$111,000
$5,000
$1,000
$ -
The following methods and assumptions were used to estimate the fair value of each class of financial
instruments:
Cash and cash equivalents: The carrying amounts reported in the balance sheet for these instruments
approximate their fair values.
Restricted cash: The carrying amount reported in the balance sheet for this instrument approximates its fair
value.
Investment in equity securities: Since these investments are considered "available-for-sale", they are reported in
the balance sheet based upon quoted market prices.
Mortgages and loan payable: At December 31, 2007, the estimated fair value of the Company's mortgages and
loan payable is less than their carrying value by approximately $2,503,000, assuming a market interest rate of
6.75%.
Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of
different market assumptions and/or estimation methodologies may have a material effect on the estimated fair
value amounts.
Concentration of Credit Risk
The Company maintains accounts at various financial institutions. While the Company attempts to limit any
financial exposure, its deposit balances exceed federally insured limits. The Company has not experienced any
losses on such accounts.
While the Company’s properties are located in twenty-eight states, 16.0%, 17.9% and 17.6% of the Company’s
rental revenues were attributable to properties located in Texas and 15.1%, 17.2% and 20.2% of the Company’s
rental revenues were attributable to properties located in New York for the years ended December 31, 2007, 2006
and 2005, respectively. No other state contributed over 10% to the Company’s rental revenues.
In April 2006, the Company acquired eleven retail furniture stores, located in six states, net leased to a single
tenant pursuant to a master lease. The basic term of the net lease expires August 2022, with several renewal
options. These properties which represented 16.1% of the depreciated book value of real estate investments at
December 31, 2007 and 2006, generated rental revenues of $4,845,000 and $3,559,000, or 13.2% and 11.1%, of
the Company’s total revenues for the years ended December 31, 2007 and 2006, respectively. No tenant
contributed over 10% of the Company’s rental revenues for the year ended December 31, 2005.
Earnings Per Common Share
Basic earnings per share was determined by dividing net income applicable to common stockholders for each
year by the weighted average number of shares of common stock outstanding, which includes unvested restricted
F-12
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
stock during each year.
Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts
exercisable for or convertible into common stock were exercised or converted or resulted in the issuance of
common stock that then shared in the earnings of the Company. Diluted earnings per share was determined by
dividing net income applicable to common stockholders for each year by the total of the weighted average number
of shares of common stock outstanding plus the dilutive effect of the Company’s outstanding options (2,315 and
4,738 shares for the years ended 2006 and 2005, respectively) using the treasury stock method. There were no
outstanding options in 2007.
Segment Reporting
Virtually all of the Company's real estate assets are comprised of real estate owned that is net leased to tenants
on a long-term basis. Therefore, the Company operates predominantly in one industry segment.
Consolidation of Variable Interest Entities
In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, “Consolidation
of Variable Interest Entities”, which explains how to identify variable interest entities (“VIE”) and how to assess
whether to consolidate such entities. In December 2003, a revision was issued (46R) to clarify some of the
original provisions. Management has reviewed its unconsolidated joint venture arrangements and determined
that none represent variable interest entities which would require consolidation by the Company pursuant to the
interpretation.
Share Based Compensation
The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123R,
“Share-Based Payments”, effective January 1, 2006. SFAS No. 123R established financial accounting and
reporting standards for stock-based employee compensation plans, including all arrangements by which
employees and others receive shares of stock or other equity instruments of the Company, or the Company incurs
liabilities to employees in amounts based on the price of the employer’s stock. The statement also defined a fair
value based method of accounting for an employee stock option or similar equity instrument whereby the fair-
value is recorded based on the market value of the common stock on the grant date and is amortized to general
and administrative expense over the respective vesting periods.
New Accounting Pronouncements
In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS
No. 157 provides guidance for using fair value to measure certain assets and liabilities. This statement clarifies
the principle that fair value should be based on the assumptions that market participants would use when pricing
the asset or liability. SFAS No.157 establishes a fair value hierarchy, giving the highest priority to quoted prices
in active markets and the lowest priority to unobservable data. SFAS No. 157 applies whenever other standards
require assets or liabilities to be measured at fair value. This statement is effective for fiscal years beginning
after November 15, 2007. The Company believes that the adoption of this statement on January 1, 2008 will not
have a material effect on its consolidated financial statements.
In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities” ("SFAS No. 159"). SFAS No. 159 provides companies with an option to report selected
financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce both complexity in
accounting for financial instruments and the volatility in earnings caused by measuring related assets and
liabilities differently. The FASB believes that SFAS No. 159 helps to mitigate this type of accounting-induced
volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the
need for companies to comply with detailed rules for hedge accounting. SFAS No. 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons between companies that choose
F-13
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
different measurement attributes for similar types of assets and liabilities. This statement is effective for fiscal
years beginning after November 15, 2007. The Company believes that the adoption of this statement on
January 1, 2008 will not have a material effect on its consolidated financial statements.
Reclassification
Certain amounts reported in previous financial statements have been reclassified in the accompanying financial
statements to conform to the current year’s presentation, primarily to present discontinued operations for a
property held for sale in 2007.
NOTE 3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS
During the year ended December 31, 2006, the Company purchased twenty-two single tenant properties in eleven
states for a total consideration of $111,872,000. There were no property acquisitions during the year ended
December 31, 2007.
The rental properties owned at December 31, 2007 are leased under noncancellable operating leases to
corporate tenants with current expirations ranging from 2008 to 2038, with certain tenant renewal rights. Virtually
all of the lease agreements are net lease arrangements which require the tenant to pay not only rent but all the
expenses of the leased property including maintenance, taxes, utilities and insurance. Certain lease agreements
provide for periodic rental increases and others provide for increases based on the consumer price index.
The minimum future rentals to be received over the next five years and thereafter on the operating leases in effect
at December 31, 2007 are as follows:
Year Ending
December 31,
2008
2009
2010
2011
2012
Thereafter
Total
(In Thousands)
$ 37,318
37,105
37,382
36,212
35,472
228,415
$411,904
Included in the minimum future rentals are rentals from a property not owned in fee (ground lease) by an
unrelated third party. The Company pays annual fixed leasehold rent of $237,500 through July 2009 with 25%
increases every five years through March 3, 2020 and has a right to extend the lease for up to five 5-year and one
7 month renewal options.
At December 31, 2007, the Company has recorded an unbilled rent receivable aggregating $9,893,000,
representing rent reported on a straight-line basis in excess of rental payments required under the term of the
respective leases. This amount is to be billed and received pursuant to the lease terms during the next eighteen
years.
In December 2006, the Company acquired an industrial property located in Baltimore, Maryland, leased to a
single tenant. The basic term of the net lease expires March 2022, with several renewal options. The property
was acquired for a purchase price of approximately $32,200,000, and the seller of the property posted a rental
reserve for the Company’s benefit in the amount of $416,500, since the property was not producing sufficient rent
at the time of the acquisition. The Company received this rental reserve through July 2007 and recorded it as a
reduction to land, building and improvements rather than rental income in accordance with Emerging Issues Task
Force (“EITF”) Issue 85-27, “Recognition of Receipts from Made-Up Rental Shortfalls”.
F-14
NOTE 3 – REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued)
Sales of Air Rights, Other and Real Estate
In July 2006, the Company sold excess acreage to an unrelated third party for a sales price of $975,000 and
realized a gain of $185,000.
In February 2006, the Company sold an option it owned to buy an interest in certain property adjacent to one of
the Company’s properties and realized a gain of $228,000.
In June 2005, the Company sold the unused development or “air” rights relating to a property located in Brooklyn,
New York for a sales price of approximately $11,000,000, which resulted in a gain after closing costs of
$10,248,000 for financial statement purposes. This gain has been deferred for federal tax purposes in
accordance with Section 1031 of the Internal Revenue Code of 1986, as amended. (See Note 6 for the related
party fee paid as a result of this sale.)
NOTE 4 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
At December 31, 2007, the Company is a member in seven unconsolidated joint ventures which own and operate
five properties. The two joint ventures which do not currently own any real estate assets are between the
Company and MTC Investors LLC, an unrelated party. In September and October 2006, these two joint ventures
sold their portfolio of nine movie theater properties to a single unrelated purchaser for an aggregate sales price of
$152,658,000 and realized a gain, for book purposes, after expenses, fees and brokerage commissions, of
$55,665,000, of which the Company’s 50% share was $27,832,000. The joint ventures paid a prepayment
premium of $10,538,000, of which the Company’s 50% share was $5,269,000, on the outstanding mortgage loans
secured by the properties which were sold, which was considered as interest expense on the books of the joint
ventures and was not netted against the gain recognized on the sale. In connection with this sale, a brokerage
commission totaling $1,277,000 was paid to Majestic Property Management Corp. (“Majestic”), a company wholly
owned by the Chairman of the Board of Directors and Chief Executive Officer and in which certain executive
officers of the Company are officers and from which such officers receive compensation. In addition, the joint
ventures paid an aggregate bonus of $90,000 to two other officers of the Company (neither of whom are officers
of Majestic) for their efforts in connection with this sale. The one remaining real estate asset of these two joint
ventures at December 31, 2006 was a vacant parcel of land located in Monroe, New York, which was sold on
March 14, 2007 for a consideration of $1,250,000 to a former tenant of the joint venture. This property had a net
book value of $40,000 after direct write downs totaling $3,162,000 taken in prior years by the joint venture. The
joint venture realized a gain on sale of this property of $1,166,000, of which the Company’s 50% share was
$583,000. As of December 31, 2007 and 2006, the Company’s equity investment in these two joint ventures
totaled $75,000 and $284,000, respectively, and in addition to the gain on sale of properties of $583,000 and
$26,908,000, respectively, they contributed $90,000 in equity earnings for the year ended December 31, 2007
and $3,278,000 in equity losses for the year ended December 31, 2006. The $3,278,000 equity loss in 2006 is
net of $5,269,000 mortgage prepayment premiums discussed above. The 2006 gain on sale of $26,908,000 is
net of a $924,000 unamortized premium balance which represented the difference between the carrying amount
of the Company’s investment in one of the joint ventures and the underlying equity in net assets. This premium
was being amortized as an adjustment to equity in earnings of unconsolidated joint ventures over 40 years.
The remaining five unconsolidated joint ventures each own one property, including one vacant property which is
held for sale. At December 31, 2007 and 2006, the Company’s equity investment in these five joint ventures
totaled $6,495,000 and $6,730,000, respectively. These balances are net of distributions, including distributions
of $793,000 and $1,823,000 received in 2007 and 2006, respectively, from these five joint ventures, including a
$1,061,000 distribution of financing proceeds the Company received in 2006 from one of its joint ventures. These
five unconsolidated joint ventures contributed $558,000 and $2,000 in equity earnings for the years ended
December 31, 2007 and 2006, respectively. The $2,000 equity in earnings for the year ended December 31,
2006 is net of a $960,000 provision for valuation adjustment, of which the Company’s share was $480,000,
recorded by the joint venture against its vacant property. The joint venture had determined that the fair value of
this vacant property was lower than its carrying value based on an evaluation of market conditions in the area in
which the property is located.
F-15
NOTE 4 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)
One of these joint ventures paid Majestic $12,000 in management fees for each of the years ended December 31,
2007 and 2006. In addition, for the year ended December 31, 2006, the two movie theater joint ventures paid
Majestic management fees of $52,000 and a fee of $8,000 for supervision of improvements to a property.
NOTE 5 – DEBT OBLIGATIONS
Mortgages Payable
At December 31, 2007, there are thirty-six outstanding mortgages payable, all of which are secured by first liens
on individual real estate investments with an aggregate carrying value before accumulated depreciation of
$349,210,000. The mortgages bear interest at fixed rates ranging from 5.13% to 8.8%, and mature between 2008
and 2037. The weighted average interest rate was 6.30% and 6.36% for the years ended December 31, 2007
and 2006, respectively.
Scheduled principal repayments during the next five years and thereafter are as follows:
Year Ending
December 31,
2008
2009
2010
2011
2012
Thereafter
Total
(In Thousands)
$ 8,951
9,870
22,138
8,394
37,354
128,825
$215,532
Loan Payable
At December 31, 2007, there is one outstanding loan payable with a balance of $6,503,000, which is
collateralized by cash held in escrow and shown on the balance sheet as restricted cash. The loan bears
interest at a fixed rate of 6.25% and matures December 1, 2018. The loan was originally a mortgage
collateralized by a movie theater property the Company owned in California. During 2006, the property was sold
and cash was substituted for collateral at 110% of the principal balance at the date of sale. The mortgagee will
place the loan on a suitable replacement property for a 2% fee on the then principal balance. The Company still
retains the right to prepay the loan and pay the normal prepayment penalty but has determined not to do so at
this time.
Scheduled principal repayments during the next five years and thereafter are as follows:
Year Ending
December 31,
2008
2009
2010
2011
2012
Thereafter
Total
(In Thousands)
$ 154
164
174
185
197
5,629
$6,503
Line of Credit
On March 15, 2007, the Company consummated an amendment to its existing $62,500,000 revolving credit
facility (“Facility”) with VNB New York Corp., Bank Leumi USA, Israel Discount Bank of New York and
Manufacturers and Traders Trust Company. The amendment extended the maturity date of the Facility from
F-16
NOTE 5 – DEBT OBLIGATIONS (Continued)
March 31, 2007 to March 31, 2010 and reduced the interest rate to the lower of LIBOR plus 2.15% (formerly
2.5%) or the bank’s prime rate on funds borrowed. The Facility provides for an unused facility fee of ¼%. In
connection with the amendment, the Company paid $640,000 in fees and closing costs which are being amortized
over the term of the Facility. There is no balance outstanding under the Facility at December 31, 2007.
The Facility is guaranteed by all of the Company’s subsidiaries which own unencumbered properties and is
secured by the outstanding stock of subsidiary entities. The Facility is available to pay off existing mortgages, to
fund the acquisition of additional properties, or to invest in joint ventures. The Company is required to comply with
certain covenants. Net proceeds received from the sale or refinancing of properties are required to be used to
repay amounts outstanding under the Facility if proceeds from the Facility were used to purchase or refinance
the property.
NOTE 6 – RELATED PARTY TRANSACTIONS
At December 31, 2007 and 2006, Gould Investors L.P. (“Gould”), a related party, owned 913,241 and 830,911
shares of the common stock of the Company or approximately 9% and 8%, respectively, of the equity interest.
During 2007 and 2006, Gould purchased 82,330 and 12,232 shares, respectively, of the Company through the
Company’s dividend reinvestment plan.
Effective as of January 1, 2007, the Company entered into a compensation and services agreement with
Majestic Property Management Corp., a company wholly-owned by our Chairman and in which certain of the
Company’s executive officers are officers and from which they receive compensation. Under the terms of the
agreement, Majestic took over the Company’s obligations to make payments to Gould (and other affiliated
entities) under a shared services agreement and agreed to provide to the Company the services of all affiliated
executive, administrative, legal, accounting and clerical personnel that the Company has heretofore utilized on
an as needed, part time basis and for which the Company had paid, as a reimbursement, an allocated portion of
the payroll expenses of such personnel in accordance with the shared services agreement. Accordingly, the
Company, no longer incurs any allocated payroll expenses. Under the terms of the agreement, Majestic (or its
affiliates) continues to provide to the Company certain property management services (including construction
supervisory services), property acquisition, sales and leasing services and mortgage brokerage services that it
has provided to the Company in the past, some of which were capitalized, deferred or reduced net sales
proceeds in prior years. The Company does not incur any fees or expenses for such services except for the
annual fees described below. As consideration for providing to the Company the services described above, the
Company paid Majestic an annual fee of $2,125,000 in 2007, in equal monthly installments. Majestic credits
against the fee payments due to it under the agreement any management or other fees received by it from any
joint venture in which the Company is a joint venture partner (exclusive of fees paid by the tenant in common on
a property located in Los Angeles, California). The agreement also provides for an additional payment to
Majestic of $175,000 in 2007 for the Company’s share of all direct office expenses, such as rent, telephone,
postage, computer services, internet usage, etc., previously allocated to the Company under the shared services
agreement. The annual payments the Company makes to Majestic will be negotiated each year by the Company
and Majestic, and will be approved by the Company’s Audit Committee and the Company’s independent
directors. The Company also agreed to pay compensation to the Company’s Chairman of $250,000 per annum
effective January 2007. Previously, the Company’s Chairman was paid $50,000 per annum.
For the years ended December 31, 2006 and 2005, the Company reimbursed Gould for allocated expenses and
paid fees to companies wholly owned by the Chairman of the Board of Directors and in which certain executive
officers of the Company are officers and from which such officers receive compensation (“Majestic Entities”). The
Company’s policy had been to receive terms in transactions with affiliates that are at least as favorable to the
Company as similar transactions the Company would enter into with unaffiliated persons. Such fees and costs
paid directly by the Company are as follows:
F-17
NOTE 6 – RELATED PARTY TRANSACTIONS (Continued)
Years Ended December 31,
Compensation and services agreement
Allocated expenses (A)
Mortgage brokerage fees (B)
Sales commissions (C)
Management fees (D)
Supervisory fees (E)
Total fees
2007
$2,288,000
-
-
-
-
-
$2,288,000
2006
$ -
1,317,000
100,000
152,000
15,000
41,000
$1,625,000
2005
$ -
1,208,000
543,000
404,000
42,000
37,000
$2,234,000
The Company’s unconsolidated joint ventures paid the following fees to Majestic Property Management Corp.
(“Majestic”), one of the Majestic Entities. Such amounts represent 100% of the fees paid by the joint ventures, of
which the Company’s share is 50%:
Mortgage brokerage fees (F)
Sales commissions (G)
Management fees (H)
Supervisory fees (I)
Total fees
Years Ended December 31,
2007
$ -
-
12,000
-
$ 12,000
2006
$ -
1,277,000
97,000
8,000
$1,382,000
2005
$ 156,000
-
131,000
-
$ 287,000
(A) The Company reimbursed Gould for allocated general and administrative expenses and payroll based on
estimated time incurred by various employees pursuant to a Shared Services Agreement. At December 31, 2006,
$241,000 remained unpaid and is reflected in accrued expenses on the balance sheet. This does not include
payments under a direct lease, effective July 2005, with a subsidiary of Gould, for approximately 1,200 square
feet, expiring in 2011, at an annual rent of $42,000, increasing 3% per year.
(B) Fees paid to Majestic relating to mortgages placed on nine and eleven of the Company’s properties for the
years ended December 31, 2006 and 2005, for mortgages in the aggregate amounts of $12,900,000 and
$57,706,000, respectively. Except for one of the mortgages, where the fee was .8% of the principal balance, all
fees were 1% of the principal balances of the mortgages. These fees were deferred and are being amortized
over the life of the respective mortgages.
(C) Fees paid to Majestic Entities relating to the sales of one property and two properties and air rights, for the
years ended December 31, 2006 and 2005, respectively, for aggregate sales prices of $15,227,000 and
$30,524,000, respectively. Such fees were based on 1% of the sales price in 2006 and 1% to 2% of the sales
price in 2005 and reduced the net sales proceeds.
(D) Fees paid to Majestic relating to management of one and two of the Company’s properties for the years ended
December 31, 2006 and 2005, respectively. Such fees were based on 2% to 4% of rent collections and were
charged to operations.
(E) Fees paid to Majestic for supervision of improvements to properties. Such fees are generally based on 8% of
the cost of the improvements and were capitalized.
F-18
NOTE 6 – RELATED PARTY TRANSACTIONS (Continued)
(F) Fees paid to Majestic relating to mortgages placed on two joint venture properties for mortgages in the
aggregate amount of $17,500,000. These fees, ranging from .8% to 1% of the principal balance of the
mortgages, were deferred and are being amortized over the life of the respective mortgages.
(G) Fee paid to Majestic relating to the sale by two of the Company’s joint ventures of eight movie theater
properties at approximately 1% of the aggregate sales price. These fees reduced the net sales proceeds from the
dispositions of real estate of unconsolidated joint ventures.
(H) Fees paid to Majestic for the management of various joint venture properties at 1% of rent collections for the
years ended December 31, 2007, 2006 and 2005, respectively and were charged to operations.
(I) Fee paid to Majestic for supervision of improvements to a property at 8% of the cost of the improvements and
was capitalized.
See Note 4 for further information regarding the Company’s unconsolidated joint ventures.
NOTE 7 - STOCK OPTIONS AND RESTRICTED STOCK
Stock Options
On December 6, 1996, the directors of the Company adopted the 1996 Stock Option Plan (Incentive/Nonstatutory
Stock Option Plan), which was approved by the Company’s stockholders in June 1997. The options granted
under the Plan were granted prior to 2002 at per share amounts at least equal to their fair market value at the
date of grant, were cumulatively exercisable at a rate of 25% per annum, commencing six months after the date of
grant, and expired five years after the date of grant. A maximum of 225,000 shares of common stock of the
Company were reserved for issuance to employees, officers, directors, consultants and advisors to the Company,
of which none are available for grant at December 31, 2007.
Changes in the number of common shares under all option arrangements are summarized as follows:
Outstanding at beginning of period
Exercised
Outstanding at end of period
Exercisable at end of period
Option price per share outstanding
2007
-
-
-
-
-
Years Ended December 31,
2006
9,000
(9,000)
-
-
-
2005
19,500
(10,500)
9,000
9,000
$12.19
Pro forma information regarding net income and earnings per share is required by FASB No. 123, and has been
determined as if the Company had accounted for its employee stock options under the fair value method. The
fair value for the outstanding options was estimated at the date of the grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for these options which were granted in 2001: risk free
interest rate of 4.06%, dividend yield of 10.07%, volatility factor of the expected market price of the Company’s
Common Stock based on historical results of .141; and expected life of 5 years.
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options
which have no vesting restrictions and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including expected stock price volatility. Because the Company’s
employee stock options have characteristics significantly different from those of traded options, and changes in
the subjective input assumptions can materially affect the fair value estimate, management believes the existing
models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The
Company has elected not to present pro forma information for 2006 and 2005 because the impact on the
reported net income and earnings per share is immaterial.
F-19
NOTE 7 - STOCK OPTIONS AND RESTRICTED STOCK (Continued)
Restricted Stock
The Company’s 2003 Stock Incentive Plan (the “Incentive Plan”), approved by the Company’s stockholders in
June 2003, provides for the granting of restricted shares. The maximum number of shares of the Company’s
common stock that may be issued pursuant to the Incentive Plan is 275,000. The restricted stock grants are
valued at the fair value as of the date of the grant and all restricted share awards made to date provide for
vesting upon the fifth anniversary of the date of grant and under certain circumstances may vest earlier. For
accounting purposes, the restricted stock is not included in the outstanding shares shown on the balance sheet
until they vest, however dividends are paid on the unvested shares. The value of such grants are initially
deferred, and amortization of amounts deferred is being charged to operations over the respective vesting
periods.
Restricted share grants
Average per share grant price
Recorded as deferred compensation
Total charge to operations, all outstanding
restricted grants
Non-vested shares:
Non-vested beginning of period
Grants
Vested during period
Forfeitures
Non-vested end of period
2007
Years Ended December 31,
2006
50,050
$ 20.66
$1,034,000
2005
40,750
$ 19.05
$776,000
51,225
$ 24.50
$1,255,000
$ 826,000
$515,000
$293,000
140,175
51,225
(5,050)
(50)
186,300
92,725
50,050
-
(2,600)
140,175
60,300
40,750
-
(8,325)
92,725
Through December 31, 2007, a total of 193,100 shares were issued and 81,900 shares remain available for grant
pursuant to the Incentive Plan, and approximately $2,179,000 remains as deferred compensation and will be
charged to expense over the remaining weighted average vesting period of approximately 2.6 years. Included in
the 2007 compensation expense is $76,000 related to the accelerated vesting of 5,000 shares of restricted stock
that had been awarded to a board member who retired in 2007. On February 29, 2008, 50,550 shares were
issued as restricted share grants having an aggregate value of approximately $885,000.
NOTE 8 - DISTRIBUTION REINVESTMENT PLAN
In June 2007, the Company implemented a new Dividend Reinvestment Plan (the “Plan”), replacing a similar plan
which was established in May 1996 and terminated simultaneously with the filing of a Registration Statement with
the Securities and Exchange Commission on June 1, 2007 relating to the Plan. The Plan provides owners of
record the opportunity to reinvest cash dividends paid on the Company’s common stock in additional shares of its
common stock, at a discount of 0% to 5% from the market price. The discount is determined at the Company’s
sole discretion. The Company is currently offering a 5% discount from market. During the year ended December
31, 2007, the Company issued 195,289 common shares under the Plan. In connection with the filing of the
Registration Statement, the Company paid $70,000 for legal and accounting fees, which have been offset against
additions to Paid-in Capital on the Company’s balance sheet.
NOTE 9 – STOCK REPURCHASE PROGRAM
In August 2007, the Company announced that its Board of Directors had authorized a stock repurchase program
of up to 500,000 shares of the Company’s common stock in open market transactions. (All purchases will be
executed in accordance with applicable federal securities laws.) The timing and exact number of shares
purchased will be determined at the Company’s discretion and will depend upon market conditions. The stock
repurchase program will continue for twelve months and may be suspended or terminated by the Company at any
F-20
NOTE 9 – STOCK REPURCHASE PROGRAM (Continued)
time. Through December 31, 2007, the Company repurchased 159,000 shares of common stock for a
consideration of $3,212,000 offset against additional paid-in capital. The Company did not repurchase any
additional shares subsequent to December 31, 2007.
NOTE 10 – DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
In accordance with SFAS No. 144, “Accounting for Impairment or Disposal of Long Lived Assets,” the Company
reports as discontinued operations assets held for sale (as defined by SFAS No. 144) as of the end of the
current period and assets sold subsequent to the adoption of SFAS No. 144. All results of these discontinued
operations are included in a separate component of income on the Consolidated Statements of Income under
the caption Discontinued Operations. This has resulted in certain reclassification of 2007, 2006 and 2005
financial statement amounts.
The components of income from discontinued operations for each of the three years in the period ended
December 31, 2007, are shown below. These include the results of operations through the date of each
respective sale for one property sold during 2006, five properties sold during 2005 and a full year of operations for
the property classified as held for sale as of December 31, 2007. It also includes settlements relating to
properties sold in a prior year (amounts in thousands):
Years Ended December 31,
2006
2007
2005
Revenues, primarily rental income
$ 1,750
$ 2,683
$ 3,712
Depreciation and amortization
Real estate expenses
Interest expense
Provision for valuation adjustment of real estate
Total expenses
137
36
-
-
173
332
49
334
-
715
709
700
768
469
2,646
Income from discontinued operations before gain on sale
1,577
1,968
1,066
Net gain on sale of discontinued operations
-
3,660 (A)
1,905
Income from discontinued operations
$1,577
$5,628
$2,971
(A)
The $3,660 gain has been deferred for federal tax purposes in accordance with Section 1031 of the
Internal Revenue Code of 1986, as amended.
NOTE 11 - FORMER PRESIDENT RESIGNATION AND CONTINGENCIES
In July 2005, the Company’s former president and chief executive officer, who was also a member of its board
of directors, resigned following the discovery of inappropriate financial dealings by him with a former tenant of a
property owned by a joint venture in which the Company is a 50% partner and the managing member. The
Company reported this matter to the Securities and Exchange Commission (the “SEC”) in July 2005. The Audit
Committee of the Board of Directors conducted an investigation of this matter and related matters and retained
special counsel to assist the committee in the investigation. The investigation was completed, and the Audit
Committee and its special counsel, based on the materials gathered and interviews conducted, found no
evidence that any other officer or employee of the Company (other than the former president and chief
executive officer) was aware of, or knowingly assisted, our former president and chief executive officer’s
inappropriate financial dealings.
In June 2006, the Company announced that it had received notification of a formal order of investigation from
the SEC. Management believes that the matters being investigated by the SEC focus on the improper
payments received by the Company’s former president and chief executive officer. The SEC also requested
F-21
NOTE 11 - FORMER PRESIDENT RESIGNATION AND CONTINGENCIES (Continued)
information regarding “related party transactions” between the Company and entities affiliated with it and with
certain of the Company’s officers and directors and compensation paid to certain of the Company’s officers by
these affiliates. The SEC and the Company’s Audit Committee have conducted investigations concerning these
issues. The Company believes that these investigations have been substantially completed. The Company’s
direct legal expenses related to these investigations totaled $93,000, $726,000 and $560,000 in the years
ended December 31, 2007, 2006 and 2005, respectively.
NOTE 12 – COMMITMENTS AND CONTINGENCIES
The Company maintains a non-contributory defined contribution pension plan covering eligible employees and
officers. Contributions by the Company are made through a money purchase plan, based upon a percent of
qualified employees’ total salary as defined. Pension expense approximated $100,000, $90,000 and $60,000
for the years ended December 31, 2007, 2006 and 2005, respectively.
In the ordinary course of business the Company is party to various legal actions which management believes
are routine in nature and incidental to the operation of the Company’s business. Management believes that the
outcome of the proceedings will not have a material adverse effect upon the Company’s consolidated
statements taken as a whole.
NOTE 13 – TAXES
The Company elected to be taxed as a real estate investment trust (REIT) under the Internal Revenue Code,
commencing with its taxable year ended December 31, 1983. To qualify as a REIT, the Company must meet a
number of organizational and operational requirements, including a requirement that it currently distribute at least
90% of its adjusted taxable income to its stockholders. It is management’s current intention to adhere to these
requirements and maintain the Company’s REIT status. As a REIT, the Company generally will not be subject to
corporate level federal, state and local income tax on taxable income it distributes currently to its stockholders. If
the Company fails to qualify as a REIT in any taxable year, it will be subject to federal, state and local income
taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify
as a REIT for four subsequent taxable years. Even though the Company qualifies for taxation as a REIT, the
Company is subject to certain state and local taxes on its income and property, and to federal income and excise
taxes on its undistributed taxable income.
On January 1, 2007, the Company adopted the provisions of Interpretation No. 48, “Accounting for Uncertainty
in Income Taxes” (“FIN 48”). This interpretation, among other things, creates a two step approach for
evaluating uncertain tax positions. Recognition (step one) occurs when an enterprise concludes that a tax
position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination.
Measurement (step two) determines the amount of benefit that more-likely-than-not will be realized upon
settlement. Derecognition of a tax position that was previously recognized would occur when a company
subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being
sustained. FIN 48 specifically prohibits the use of a valuation allowance as a substitute for derecognition of tax
positions, and it has expanded disclosure requirements. The adoption of FIN 48 had no material effect on the
Company’s consolidated financial statements.
The Company recorded $91,000 and $490,000 of Federal excise tax which is based on taxable income
generated but not yet distributed for the years ended December 31, 2007 and 2006, respectively. There was no
Federal excise tax for 2005. Included in general and administrative expenses for the years ended December 31,
2007, 2006 and 2005 are state tax expense of $226,000, $143,000 and $140,000, respectively.
F-22
NOTE 13 – TAXES (Continued)
Reconciliation between Financial Statement Net Income and Federal Taxable Income:
The following unaudited table reconciles financial statement net income to federal taxable income for the years
ended December 31, 2007, 2006 and 2005 (amounts in thousands):
Net income
Straight line rent adjustments
Financial statement gain on sale in excess of tax gain (A)
Rent received in advance, net
Financial statement provisions for valuation adjustment
Federal excise tax, non-deductible
Financial statement adjustment for above/below market leases
Restricted stock expense, non-deductible
Financial statement depreciation in excess of tax depreciation
Other adjustments
2007
Estimate
$10,590
(1,604)
(705)
96
-
91
(285)
710
855
(117)
2006
Actual
$36,425
(269)
(3,976)
(33)
780
490
(223)
515
773
(83)
2005
Actual
$21,280
(1,602)
(11,287)
(590)
1,751
-
(118)
294
537
59
Federal taxable income
$ 9,631
$34,399
$10,324
(A) Amounts include $3,660 GAAP gain on sale of real estate and $10,248 GAAP gain on sale of air rights for the
years ended December 31, 2006 and 2005, respectively, which were deferred for federal tax purposes in
accordance with Section 1031 of the Internal Revenue Code of 1986, as amended.
Reconciliation between Cash Dividends Paid and Dividends Paid Deduction:
The following unaudited table reconciles cash dividends paid with the dividends paid deduction for the years
ended December 31, 2007, 2006 and 2005 (amounts in thousands):
Cash dividends paid
Dividend reinvestment plan (B)
Less: Spillover dividends designated to following year (C)
Less: Return of capital
Less: Spillover dividends designated to previous year (D)
Plus: Spillover dividends designated from prior year
Plus: Dividends designated from following year (D)
Dividends paid deduction (E)
2007
Estimate
$21,218
268
21,486
-
-
(17,705)
-
5,900
$ 9,681
2006
Actual
$13,420
59
13,479
-
-
-
3,265
17,705
$34,449
2005
Actual
$12,990
37
13,027
(3,265)
(2,623)
-
3,235
-
$10,374
(B) Amount reflects the 5% discount on the Company's common shares purchased through the dividend
reinvestment plan.
(C) The entire dividend paid in January 2006 was considered a 2006 dividend, as it was in excess of the
Company's accumulated earnings and profits through 2005.
(D) Includes a special dividend paid on October 2, 2007 of $.67 per share or $6,731, which represents the
remaining undistributed portion of the taxable income recognized by the Company in 2006 primarily from gains on
sale by two of its 50% owned joint ventures of their portfolio of movie theater properties.
(E) Dividends paid deduction is slightly higher than federal taxable income in 2007, 2006 and 2005 so as to
account for adjustments made to federal taxable income as a result of the impact of the alternative minimum tax.
F-23
NOTE 14 - QUARTERLY FINANCIAL DATA (Unaudited):
(In Thousands, Except Per Share Data)
Quarter Ended
2007
Rental revenues as previously reported
Revenues from discontinued operations (A)
Revenues (B)
March 31
$9,593
(330)
$9,263
June 30
$9,642
(331)
$9,311
Income from continuing operations
Income from discontinued operations
Net income
$2,769
377
$3,146
$2,265
267
$2,532
September 30 December 31
$9,238
-
$9,238
$2,154
425
$2,579
$8,993
-
$8,993
$1,825
508
$2,333
Total
For Year
$37,466
(661)
$36,805
$ 9,013
1,577
$10,590
Weighted average number of common
shares outstanding:
Basic
Diluted
10,001
10,001
10,055
10,055
10,078
10,078
10,140
10,140
10,069
10,069
Net income per common share – basic and diluted:
Income from continuing operations
Income from discontinued operations
Net income
$ .27
.04
$ .31
$ .22
.03
$ .25
$ .22
.04
$ .26
$ .18
.05
$ .23
$ .89 (C)
.16 (C)
$1.05 (C)
(A) Excludes revenues from discontinued operations which were previously excluded from total revenues as
previously reported in the September and December 2007 quarters.
(B) Amounts have been adjusted to give effect to the Company’s discontinued operations in accordance with
Statement No. 144.
(C) Calculated on weighted average shares outstanding for the year.
Quarter Ended
September 30 December 31
2006
Rental revenues as previously reported
Revenues from discontinued operations (D)
Revenues (E)
March 31
$7,281
(331)
$6,950
June 30
$8,562
(330)
$8,232
Income from continuing operations
Income from discontinued operations
Net income
$2,661
409
$3,070
$2,368
824
$3,192
Weighted average number of common
shares outstanding:
Basic
Diluted
9,894
9,897
9,930
9,934
Net income per common share – basic and diluted:
Income from continuing operations
Income from discontinued operations
Net income
$ .27
.04
$ .31
$ .24
.08
$ .32
$8,615
(330)
$8,285
$5,263
472
$5,735
9,937
9,940
$ .53
.05
$ .58
Total
For Year
$33,370
(1,322)
$32,048
$30,797
5,628
$36,425
$ 8,912
(331)
$ 8,581
$20,505
3,923
$24,428
9,963
9,963
9,931
9,934
$ 2.06
.40
$ 2.46
$3.10 (F)
.57 (F)
$3.67 (F)
(D)
Excludes revenues from discontinued operations which were previously excluded from total revenues as
previously reported.
Amounts have been adjusted to give effect to the Company’s discontinued operations in accordance with
Statement No. 144.
Calculated on weighted average shares outstanding for the year.
(E)
(F)
F-24
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Schedule III - Consolidated Real Estate and Accumulated Depreciation
December 31, 2007
(Amounts in Thousands)
Initial Cost To Company
Cost Capitalized
Subsequent
to Acquisition
Gross Amount at Which Carried at
December 31, 2007
Buildings and
Encumbrances
Land Buildings
Improvements
Land Improvements Total
Accumulated
Depreciation
Date of
Construction
Date
Acquired
Free Standing
Retail Locations:
11 Properties –
Note 1
Miscellaneous
Flex Buildings:
Miscellaneous
Office Buildings:
Parsippany, NJ
Miscellaneous
$25,999
$10,286
$45,414
$ -
$10,286
$45,414
$55,700
$ 1,940
Various
04/07/06
79,097
29,161
115,461
1,010
29,161
116,471
145,632
16,737
Various
Various
12,116
3,780
15,125
958
3,780
16,083
19,863
2,694
Various
Various
16,354
16,834
6,055
3,537
23,300
13,688
-
2,524
6,055
3,537
23,300
16,212
29,355
19,749
1,335
2,495
1997
Various
09/16/05
Various
Life on Which
Depreciation
in Latest
Income
Statement is
Computed
(Years)
40
40
40
40
40
Apartment Building:
Miscellaneous
4,300
1,110
4,439
1,110
4,439
5,549
2,186
1910
06/14/94
27.5
Industrial:
Baltimore, MD -
Note 2
Miscellaneous
Theater:
Miscellaneous
Health Clubs:
Miscellaneous
23,000
6,474
25,282
6,474
25,282
31,756
659
1960
12/20/06
21,859
7,396
31,415
66
7,396
31,481
38,877
2,913
Various
Various
40
40
6,197
-
8,328
-
-
8,328
8,328
1,826
2000
08/10/04
15.6
9,776
2,233
8,729
2,731
2,233
11,460
13,693
1,727
Various
Various
40
$215,532
$70,032
$291,181
$7,289
$70,032
$298,470
$368,502
$34,512
-
-
Note 1 – These 11 properties are retail furniture stores covered by one master lease and one loan that is secured by crossed mortgages. They are located in
six states (Georgia, Kansas, Kentucky, South Carolina, Texas and Virginia) and no individual property is greater than 5% of the Company’s total assets.
Note 2 – Upon purchase of the property in December 2006, a $416,000 rental reserve was posted for the Company’s benefit, since the property was not
producing sufficient rent at the time of acquisition. The Company recorded the receipt of this rental reserve as a reduction to land and building.
F-25
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes to Schedule III
Consolidated Real Estate and Accumulated Depreciation
(a) Reconciliation of "Real Estate and Accumulated Depreciation"
(Amounts In Thousands)
Year Ended December 31,
2007
2006
2005
Investment in real estate:
Balance, beginning of year
$368,343
$268,279
$247,183
Addition: Land, buildings and improvements
576
112,462
57,772
Deductions:
Cost of properties sold
Valuation allowance (c)
Rental reserve received (see Note 2 above)
Property held for sale
(1)
-
(416)
-
(12,398)
-
-
-
(24,440)
(469)
-
(11,767)
Balance, end of year
$368,502
$368,343
$268,279
Accumulated depreciation:
Balance, beginning of year
$26,691
$20,581
$ 18,647
Addition: depreciation
7,958
6,857
5,755
Deductions:
Accumulated depreciation related to property
held for sale
Depreciation expense related to property
held for sale
Accumulated depreciation related to properties sold
-
-
(1,108)
(137)
-
(235)
(512)
(235)
(2,478)
Balance, end of year
$ 34,512
$ 26,691
$ 20,581
(b)
The aggregate cost of the properties is approximately $18,618 lower for federal income tax
purposes at December 31, 2007.
(c) During the year ended December 31, 2005, the Company recorded a provision for valuation
adjustment of real estate totaling $469.
F-26
Exhibit 10.3
SECOND AMENDMENT TO AMENDED
AND RESTATED LOAN AGREEMENT
This is a Second Amendment to Amended and Restated Loan Agreement (this "Second
Amendment") effective as of the 30th day of September, 2007, between VNB New York Corp., as
assignee of Valley National Bank, Merchants Bank Division ("Valley"), a New York corporation
having an office at 275 Madison Avenue, New York, NY 10016, Bank Leumi USA ("Leumi"),
having an office at 562 Fifth Avenue, New York, New York 10036, Israel Discount Bank of New
York ("IDB"), having an office at 511 Fifth Avenue, New York, New York 10017, Manufacturers and
Traders Trust Company ("M&T"), having an office at 350 Park Avenue, New York, New York
10017 and One Liberty Properties, Inc., a Maryland corporation, having its principal place of
business at 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021 (the "Borrower").
Capitalized terms not otherwise defined in this Second Amendment shall have the meanings
ascribed to them in the Loan Agreement (as defined below).
WHEREAS, Lender and Borrower entered into a certain Amended and Restated Loan
Agreement made as of the 4th day of June, 2004 (the "Loan Agreement") as amended from time
to time;
WHEREAS, Lender and Borrower wish to supplement and amend the Loan Agreement as
of the date set forth above upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, it is agreed as follows:
1.
Section 5.03 "Financial Requirements", subsection "Fixed Charge Coverage Ratio"
of the Loan Agreement is amended by deleting the numbers and words "1.35 to 1.00" and
inserting in its place and stead the numbers and words "1.20 to 1.00".
2.
All terms and conditions of the Loan Agreement, except as modified by this
agreement are hereby affirmed and ratified.
3.
Borrower hereby represents and warrants that:
(a)
(b)
(c)
Except as set forth on the attached schedules, any and all of the
representations, warranties and schedules contained in the Loan Agreement
or any of the other Loan Documents are true and correct in all material
respects on and as of the date hereof as though made on and as of such
date;
Except as otherwise expressly disclosed to Lender in writing by Borrower, no
event has occurred and is continuing which constitutes an Event of Default
under the Loan Agreement or under any of the other Loan Documents or
which upon the giving of notice or the lapse of time or both would constitute
an Event of Default;
As of the date hereof it is legally, validly and enforceably indebted to Valley
under its Revolving Credit Note in the principal amount
of $0, to M&T under its Revolving Credit Note in the principal amount of SO,
to Leumi under its Revolving Credit Note in the principal amount of $0, to IDB
under its Revolving Credit Note in the principal amount of $0, all of which
amounts are due without offset; claim, defense, counterclaim or right of
recoupment; and
(d) Borrower and each Guarantor hereby release and discharge Lender from all
claims or liabilities in any way arising from or in any way connected with the
Loan Agreement or the Loan Documents to the extent arising through the date
of execution hereof.
4.
This Second Amendment shall be governed and construed in accordance with the
laws of the State of New York.
5.
No modification or waiver of or with respect to any provisions of this Second
Amendment and all other agreements, instruments and documents delivered pursuant hereto or
thereto, nor consent to any departure by the Lender from any of the terms or conditions thereof,
shall in any event be effective unless it shall be in writing and executed in accordance with the
provisions of the Loan Agreement, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No consent to or demand on the Borrower or
any Guarantor in any case shall, of itself, entitle it, him or her to any other or further notice or
demand in similar or other circumstances.
6.
The provisions of this Second Amendment are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or provision, or part thereof; in such
jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision in the Second Amendment in any jurisdiction.
7.
This Second Amendment may be signed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same instrument.
8.
This Second Amendment shall be binding upon and inure to the benefit of the
Borrower and its successors and to the benefit of the Lender and its successors and assigns. The
rights and obligations of the Borrower under this Second Amendment shall not be assigned or
delegated without the prior written consent of the Lender, and any purported assignment or
delegation without such consent shall be void.
[Signature pages to follow.]
IN WITNESS WHEREOF, the parties have set their hands hereto effective on September
30, 2007.
VNB NEW YORK CORP.
ONE LIBERTY PROPERTIES, INC.
By: ___________________
Name: Andrew S. Baron
By: ___________________
By: Mark H. Lundy, Senior Vice President
BANK LEUMI USA
OLP CHATTANOOGA, INC.
By: ___________________
Name: Cynthia C. Wilbur
Title: Vice President
By: ___________________
Mark H. Lundy, Senior Vice President
ISRAEL DISCOUNT BANK OF NEW YORK OLP PALM BEACH, INC.
By: ___________________
Name: Marc Cooper
Title: First Vice President
By: ___________________
Mark H. Lundy, Senior Vice President
OLP TEXAS, INC.
By: ___________________
Mark H. Lundy, Senior Vice President
MANUFACTURERS AND TRADERS
OLP HAMILTON, INC. TRUST COMPANY
By: ___________________
Name: Daniel Parente
Title: Banking Officer
By: ___________________
Mark H. Lundy, Senior Vice President
OLP CHULA VISTA CORP.
By: ___________________
Mark H. Lundy, Senior Vice President
SCHEDULE 1.01
GUARANTORS
JURISDICTION
Tennessee
TYPE OF ENTITY
Corporation
Florida
Corporation
Texas
Corporation
New York
Corporation
California
Corporation
Delaware
Limited Liability Company
Delaware
Limited Liability Company
Georgia
Limited Liability Company
Florida
Limited Liability Company
Delaware
Limited Liability Company
Georgia
Limited Liability Company
Pennsylvania
Limited Liability Company
Pennsylvania
Corporation
Massachusetts
Limited Liability Company
New York
Limited Liability Company
NAME
OLP CHATTANOOGA, INC,
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP PALM BEACH, INC.
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP TEXAS, INC.
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP HAMILTON, INC.
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP CHULA VISTA CORP.
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP THEATRES LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP MOVIES LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP TUCKER LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP LAKE WORTH LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP-NNN MANAGER LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP ATHENS LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP HANOVER I LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP HANOVER PA, INC.
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP SOMERVILLE LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP VETERANS HIGHWAY
LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
Delaware
Michigan
New York
Iowa
OLP GURNEE LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP IOWA, INC.
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP SAGINAW INC.
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP CENTERREACH, LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP DIXIE DRIVE HOUSTON, Texas
INC.
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP SOUTH MILWAUKEE
MANAGER LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
OLP SAVANNAH LLC
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
Delaware
Delaware
Limited Liability Company
Corporation
Corporation
Limited Liability Company
Corporation
Limited Liability Company
Limited Liability Company
SCHEDULE 4.01(a)
Subsidiaries
Name
OLP BATAVIA, INC.
OLP IOWA, INC.
OLP TEXAS, INC.
OLP TSA GEORGIA, INC.
OLP DIXIE DRIVE HOUSTON, INC.
OLP GREENWOOD VILLAGE, COLORADO, INC.
OLP FT. MYERS, INC.
OLP RABRO DRIVE CORP.
OLP CHATTANOOGA, INC.
OLP COLUMBUS, INC.
OLP MESQUITE, INC.
OLP SOUTH HIGHWAY HOUSTON, INC.
OLP SELDEN, INC.
OLP PALM BEACH, INC.
OLP NEW HYDE PARK, INC.
OLP CHAMPAIGN, INC.
OLP EL PASO, INC.
OLP HAMILTON, INC.
OLP PLANO, INC.
OLP HANOVER PA, INC.
OLP GRAND RAPIDS, INC.
OLP PLANO I, L.P.
OLP EL PASO I, L.P.
OLP HANOVER I LLC
OLP PLANO LLC
OLP EL PASO I LLC
OLP THEATRES LLC
OLP RONKONKOMA LLC
OLP HAUPPAUGE, LLC
OLP LAKE CHARLES LLC
OLP MOVIES LLC
OLP TUCKER LLC
OLP LAKE WORTH LLC
OLP SOMMERVILLE LLC
OLP MARCUS DRIVE LLC
OLP LOS ANGELES, INC.
OLP NEWARK LLC
OLP GP INC.
OLP TEXAS I, LP
OLP KNOXVILLE LLC
OLP SAGINAW INC.
OLP CENTERREACH, LLC
OLP-NNN MANAGER LLC
OLP ATHENS LLC
OLP TEXAS LLC
OLP VETERANS HIGHWAY LLC
OLP GURNEE LCC
OLP GREENSBORO LLC
OLP ONALASKA LLC
OLP ST. CLOUD LLC
OLP CCANTIOCH LLC
OLP CCFERGUSON LLC
OLP CCST. LOUIS LLC
OLP CCFLORENCE LLC
OLP CCFAIRVIEW HEIGHTS LLC
OLP TOMLINSON LLC
OLP PARSPPANY LLC
OLP HAVERTPORTFOLIO
OLP HAVERTY'S LLX
OLP HAVERTPORTFOLIO GP LLC
OLP MAINE LLC
OLP LA-MS LLC
OLP BALTIMORE LLC
OLP IOWA, INC.
OLP CHULA VISTA CORP.
OLP SOUTH MILWAUKEE MANAGER LLC
OLP SAVANNAH LLC
Exhibit 21.1
SUBSIDIARIES OF THE COMPANY
Company
State of Organization
OLP Texas, Inc.
OLP-TSA Georgia, Inc.
OLP Dixie Drive Houston, Inc.
OLP Greenwood Village, Colorado, Inc.
OLP Ft. Myers, Inc.
OLP Rabro Drive Corp.
OLP Columbus, Inc.
OLP Mesquite, Inc.
OLP South Highway Houston, Inc.
OLP Selden, Inc.
OLP Palm Beach, Inc.
OLP New Hyde Park, Inc.
OLP Champaign, Inc.
OLP Batavia, Inc.
OLP Hanover PA, Inc.
OLP Grand Rapids, Inc.
OLP El Paso, Inc.
OLP Plano, Inc.
OLP Baltimore, MD, Inc.
OLP Hauppauge, LLC
OLP Ronkonkoma, LLC
OLP Plano 1, L.P.
OLP El Paso 1, L.P.
OLP Plano, LLC
OLP El Paso 1, LLC
OLP Hanover 1, LLC
OLP Theaters, LLC
OLP Movies, LLC
OLP Tucker, LLC
OLP Lake Charles, LLC
OLP Marcus Drive, LLC
OLP Sommerville, LLC
OLP Newark, LLC
OLP Texas, LLC
OLP GP Inc.
OLP Texas 1, L.P.
OLP Los Angeles, Inc.
OLP Chula Vista Corp.
OLP Knoxville LLC
OLP Athens LLC
OLP NNN Manager LLC
OLP Greensboro LLC
OLP South Milwaukee Manager LLC
OLP Onalaska LLC
OLP Saint Cloud LLC
OLP CC Antioch LLC
Texas
Georgia
Texas
Colorado
Florida
New York
Ohio
Texas
Texas
New York
Florida
New York
Illinois
New York
Pennsylvania
Michigan
Texas
Texas
Maryland
New York
New York
Texas
Texas
Delaware
Delaware
Pennsylvania
Delaware
Delaware
Georgia
Louisiana
New York
Massachusetts
Delaware
Delaware
Texas
Texas
California
California
Tennessee
Delaware
Delaware
Delaware
Delaware
Delaware
Minnesota
Tennessee
Company
State of Organization
OLP CC Fairview Heights LLC
OLP CC Ferguson LLC
OLP CC St. Louis LLC
OLP CC Florence LLC
OLP Tomlinson LLC
OLP Parsippany LLC
OLP Veterans Highway LLC
OLP Haverty’s LLC
OLP Havertportfolio L.P.
OLP Havertportfolio GP LLC
OLP Maine LLC
OLP 6609 Grand LLC
OLP Savannah LLC
OLP Baltimore LLC
OLP LA-MS LLC
Illinois
Missouri
Missouri
Kentucky
Pennsylvania
Delaware
New York
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements (i) on Form S-3 (No. 333-
108765) and in the related Prospectus; (ii) on Form S-8 (No. 333-101681) pertaining to the 1996 Stock
Option Plan; and (iii) on Form S-8 (No. 333-104461) pertaining to the 2003 Incentive Plan of One Liberty
Properties, Inc., of our reports dated March 13, 2008, with respect to the consolidated financial statements
and schedule of One Liberty Properties, Inc. and the effectiveness of internal control over financial
reporting of One Liberty Properties, Inc., included in this Annual Report (Form 10-K) for the year ended
December 31, 2007.
/s/ Ernst & Young LLP
New York, New York
March 13, 2008
I, Patrick J. Callan, Jr., certify that:
Exhibit 31.1
CERTIFICATION
1.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2007 of One
Liberty Properties, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of
internal controls over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant’s internal control over financial reporting.
Date: March 13, 2008
/s/ Patrick J. Callan, Jr.
Patrick J. Callan, Jr.
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, David W. Kalish, certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2007 of One
Liberty Properties, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of
internal controls over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant’s internal control over financial reporting.
Date: March 13, 2008
/s/ David W. Kalish
David W. Kalish
Senior Vice President and
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
The undersigned, Patrick J. Callan, Jr., does hereby certify to his knowledge, pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based upon a review of the Annual
Report on Form 10-K for the year ended December 31, 2007 of One Liberty Properties, Inc. (“the Registrant”), as
filed with the Securities and Exchange Commission on the date hereof (the "Report"):
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Registrant.
Date: March 13, 2008
/s/ Patrick J. Callan, Jr.
Patrick J. Callan, Jr.
President and Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION OF SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
The undersigned, David W. Kalish, does hereby certify to his knowledge, pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based upon a review of the Annual
Report on Form 10-K for the year ended December 31, 2007 of One Liberty Properties, Inc. (“the Registrant”), as
filed with the Securities and Exchange Commission on the date hereof (the "Report"):
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Registrant.
Date: March 13, 2008
/s/ David W. Kalish
David W. Kalish
Senior Vice President and
Chief Financial Officer
(cid:1)