2 0 0 9 A N N U A L R E P O R T
2 0 0 9
ONE LIBERTY PROPERTIES, INC. is a self-administered and self-managed real estate investment trust incorporated
under the laws of Maryland on December 20, 1982. The primary business of the company is to acquire, own and manage a
geographically diversified portfolio of retail, industrial, office, and other properties under long term leases. Substantially
all of our leases are “net leases” and ground leases under which the tenant is responsible for real estate taxes, insurance and
ordinary maintenance and repairs.
We acquired our portfolio of properties by balancing fundamental real estate analysis with tenant credit evaluation. Our
analysis focuses primarily on the intrinsic value of a property, determined primarily by its location and by local demographics.
We also evaluate a tenant’s financial ability to meet operational needs and lease obligations.
FINANCIAL HIGHLIGHTS
(Amounts in Thousands, Except Per Share Data)
Total revenues
Depreciation and amortization
Other expenses
Total operating expenses
Operating income
Income from continuing operations
Income (loss) from discontinued operations
Net income
Net income per common share-diluted:
Income from continuing operations
Income (loss) from discontinued operations
Net income
Weighted average number of common shares-diluted
Real estate investments, net
Properties held for sale and related assets
Investment in unconsolidated joint ventures
Cash and cash equivalents
Total assets
Mortgages payable
Mortgages payable-properties held for sale
Line of credit
Total liabilities
Stockholders’ equity
Year Ended December 31,
2009
2008
$ 40,800
$ 36,031
8,527
7,532
7,838
7,160
16,059
14,998
$ 24,741
$ 21,033
$ 12,320
$ 9,943
7,321
(5,051)(a)
$ 19,641
$ 4,892
$
1.14
$
.98
.68
(.50)(a)
$
1.82
$
.48
10,812
10,183
December 31,
2009
2008
$345,693
$353,113
—
5,839
28,036
408,686
190,518
—
27,000
228,558
180,128
36,472
5,857
10,947
429,105
207,553
17,961
27,000
265,130
163,975
(a) Includes impairment charges of $5,983 (or $.59 per share) relating to four properties which were disposed of in the year ended December 31, 2009.
The common stock of One Liberty trades on the New York Stock Exchange, under the symbol OLP. As of April 16, 2010, there were 11,453,162 common shares
outstanding in the hands of approximately 5,000 stockholders.
TO OUR STOCKHOLDERS:
As we reported in last year’s letter to our stockholders, 2008 was a disastrous year for the financial community, which
seriously affected commercial real estate values. In addition, the United States economy was in a serious recession
with universal concerns about credit, the economy and prospects for the retail industry. We agreed with these concerns
and determined to conserve cash by paying our quarterly dividends with a combination of cash and stock. During
2009 we closely monitored our portfolio and disposed of assets which were not considered long term holds. These
policies enabled us to significantly increase our liquidity and put us in a strong position to be able to handle problems
that could come about if we experienced significant tenant defaults. Fortunately, during the year we experienced only a
few tenant issues and entered 2010 in a strong position to take advantage of opportunities that we believe will be
available in 2010 and 2011.
We are pleased to report on our 2009 operations as follows:
• Rental income increased to $39 million in 2009 from $36 million in 2008, an 8.3% increase year over year. Receipt of
a $1.8 million lease termination fee in 2009 contributed to a 13.3% increase of total revenues to $40.8 million in 2009
from $36 million in 2008.
• Operating income increased from $21 million in 2008 to $24.7 million in 2009, a 17.6% increase.
• In the course of working our portfolio, we decided that two assets were not long term holds and sold these two
properties at competitive prices, producing gains of $5.8 million.
• Net income increased by 300% from $4.9 million in 2008 to $19.6 million in 2009. Net income in 2008 was adversely
affected by $6 million of impairment charges and 2009 benefited from a $5.8 million net gain on real estate sales.
• Funds from operations (FFO) increased to $23.3 million ($2.15 per share) in 2009 from $14 million ($1.37 per share)
in 2008, or a 66.4% increase year over year. FFO in 2008 was adversely affected by impairment charges of $6 million
($0.59 per share). FFO is used as a common barometer of operating results for real estate investment trusts and we
therefore include FFO information in the financial information which we disseminate. We also calculate adjusted
funds from operations (AFFO), which deducts from our FFO calculation straight line rent accruals and amortization of
lease intangibles and deducts our share of these items taken by our unconsolidated joint ventures. Adjusted FFO for
2009 was $22.1 million ($2.04 per share) compared to $12.5 million ($1.22 per share) in 2008, a 76.8% increase.
• At December 31, 2009 our available liquidity was $34.8 million, including $28 million of cash and cash equivalents
and $6.8 million of marketable securities.
• Stockholders’ equity increased by 9.8% year over year from $164 million in 2008 to $180 million 2009. Our per share
book value as of December 31, 2009 is $16.03 per share.
• Our tenant occupancy was 98.6% at December 31, 2009 and 97.5% at December 31, 2008.
For a number of years we limited our investments in net leased properties as we felt that yields available on the type of
net leased properties that would be of interest to us were too low based on a “risk/reward” scenario. This turned out to
be prudent as cap rates have increased. To date in 2010, we have seen a significant improvement in the number and
quality of acquisition opportunities that have been presented to us. At the end of February 2010, we made our first
acquisition in over a year; a 194,000 sq. ft. retail shopping center located in Royersford, PA (a suburb of Philadelphia)
which we acquired for $23.5 million. The property is co-anchored by a supermarket operated by Giant Food Stores and
a Kohl’s Department Store. Other tenants in the shopping center include TD Bank, KFC, Marshall’s and Wawa.
Approximately $17.65 million of the purchase price was paid by the assumption of an existing first mortgage encumbering
the property and the balance in cash. This acquisition fits in with our overall investment strategy in that long term
ground leases represent a significant portion of the shopping center. We are actively pursuing additional acquisitions
and, hopefully, over the next few months we will announce the completion of additional transactions.
We are pleased with the confidence that our lending group has shown in our company. We have reached agreement in
principal with the lending group to continue our credit line, which expired on March 31, 2010. An amendment to the
credit line will extend the expiration date by two years and reduce the availability to $40 million. The credit line, as
reduced and amended, will satisfy our short term needs.
Our Board of Directors, after analyzing our results in 2009 and evaluating the current environment and our business
prospects, decided to reinstate an all cash dividend and on March 9, 2010 we declared a $.30 cash dividend which was
paid on April 6th, 2010. This dividend represents a 36% increase over the level of the quarterly dividends that we
declared in 2009, which was at the annual rate of $.88 per share, payable 10% in cash and 90% in our common stock.
We believe that the U.S. economy is improving and, although we remain cautious, we are looking to the future
with optimism.
We are most thankful to our Board of Directors for the time and effort they devote to our activities and for their advice
and guidance. We thank our staff for their continued efforts on behalf of our company and we appreciate the confidence
and support of our stockholders.
Sincerely yours,
Fredric H. Gould
Chairman
April 20, 2010
Patrick J. Callan, Jr.
President and Chief Executive Officer
Certain statements contained in this letter are “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that
could cause actual results to differ materially from future results expressed or implied by such forward-looking state-
ments. For additional information about the company, please see the company’s most recent Annual Report on Form
10-K, as filed with the Securities and Exchange Commission on March 12, 2010 and other documents filed by the com-
pany with the Securities and Exchange Commission.
In 2009, our chief executive officer’s certification regarding the New York Stock Exchange’s corporate governance list-
ing standards was filed with the New York Stock Exchange without qualification and in a timely fashion. In addition, the
certifications of our chief executive officer and chief financial officer, filed with the Securities and Exchange Commission
under Section 302 of the Sarbanes-Oxley Act with respect to the quality of our public disclosure, have been filed as
exhibits to our most recently filed Annual Report on Form 10-K.
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, 2009
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)
MARYLAND
(State or other jurisdiction of
incorporation or organization)
60 Cutter Mill Road, Great Neck, New York
(Address of principal executive offices)
13-3147497
(I.R.S. employer
identification number)
11021
(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 per share
New York Stock Exchange
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
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act.
Yes
No
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
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes
No
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.
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
Non-accelerated filer
(Do not check if a small reporting company)
Accelerated filer
Small reporting company
Indicate by check mark whether registrant is a shell company (defined in Rule 12b-2 of the Exchange Act).
Yes
No
As of June 30, 2009 (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 $46.2 million.
As of March 9, 2010, the registrant had 11,380,887 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the 2010 annual meeting of stockholders of One Liberty Properties,
Inc., to be filed pursuant to Regulation 14A not later than April 30, 2010, are incorporated by reference
into Part III of this Annual Report on Form 10-K.
2
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 (including furniture and office supply stores),
industrial, office, flex, health and fitness and other properties, a substantial portion of which are under
long-term leases. Substantially all of our leases are “net leases” and ground leases under which the tenant
is typically responsible for real estate taxes, insurance and ordinary maintenance and repairs. As of
December 31, 2009 (giving effect to our acquisition of a community shopping center on February 24,
2010), we owned 72 properties, one of which is vacant, and one of which is a 50% tenancy in common
interest, and participated in five joint ventures that own five properties. Our properties and the
properties owned by our joint ventures are located in 27 states and have an aggregate of approximately
5.4 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 and approximately 1.5 million square feet of space at
properties owned by the joint ventures in which we participate).
Our 2010 contractual rental income will be approximately $39.8 million. Our 2010 contractual
rental income includes (i) rental income that is payable to us in 2010 under leases existing at December
31, 2009, (ii) rental income that is payable to us in 2010 on our tenancy in common interest, and (iii)
rental income of approximately $1.6 million, representing approximately ten months of rental payments,
that is payable to us in 2010 under leases at a community shopping center we acquired on February 24,
2010.
In 2010, we expect that our share of the rental income payable to our five joint ventures will be
approximately $1.3 million. On December 31, 2009, the occupancy rate of properties owned by us was
98.6% 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 100% based on square footage.
The occupancy rate of the community shopping center we acquired on February 24, 2010 for $23.5
million was 99% as of the acquisition date. The weighted average remaining term of the leases in our
portfolio, including our tenancy in common interest and the community shopping center we acquired on
February 24, 2010, is 8.4 years and 10.5 years for the leases at properties owned by our joint ventures.
As a result of the national economic recession, consumer confidence and retail spending declined,
which negatively impacted certain of our retail tenants. For example, Circuit City Stores, Inc., which
previously leased five of our properties, filed for protection under the Federal bankruptcy laws in 2008 and
thereafter rejected our leases and closed all their stores. Other retail tenants have requested rent relief,
lease amendments, and other financial concessions from us due to the deterioration of their financial
condition in the present economic environment. We agreed to some of these requests. Our rental income
from our retail tenants will account for 59% of our 2010 contractual rental income. One retail tenant in the
office supply business and one retail tenant in the furniture business represent an aggregate of 11.1% and
10.8%, respectively, of our 2010 contractual rental income. No other single tenant accounts for more than
5.9% of our 2010 contractual rental income. To the extent that our retail tenants are adversely affected by
the recession and reduced consumer spending, our portfolio may be adversely affected.
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
3
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 or ground 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. Historically,
long-term leases have made 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 when we believe the property represents a good opportunity for recurring
income and residual value. Although we regard the acquisition of properties subject to net and ground
leases as an important aspect of our investment strategy, we have expanded our focus and are also
seeking to acquire community shopping centers anchored by national or regional tenants. Typically, we
would pay substantially all operating expenses at these community shopping centers, a significant
portion of which will be reimbursed by the tenants pursuant to their leases.
Generally, we 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, we will dispose of a property if we regard the disposition of the property as an
opportunity to realize the overall value of the property sooner or to avoid future risks by achieving a
determinable return from the property.
Historically, we identify properties through the network of contacts of our senior management
and our affiliates, which includes real estate brokers, private equity firms, banks and law firms. In
addition, we attend industry conferences and engage in direct solicitations.
Although we investigated, analyzed and bid on several properties in 2009, due to a variety of
factors, including unfavorable prices and a lack of available traditional mortgage financing, we did not
acquire any properties in 2009. On February 24, 2010, we acquired, for $23.5 million, a community
shopping center with approximately 194,000 square feet of space, of which 67% are subject to ground
leases.
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, a ground lease or a community shopping center, will first be offered to us and may not be
pursued by any of our affiliated entities unless we decline the opportunity.
Investment Evaluation
In evaluating potential investments, we consider, among other criteria, the following:
•
the ability of a tenant, if a net leased property, or major tenants, if a shopping center, to meet
operational needs and lease obligations recognizing the current economic climate;
4
•
•
•
•
•
•
•
•
•
the current and projected cash flow of the property;
the estimated return on equity to us;
an evaluation of the property and improvements, given its location and use;
local demographics (population and rental trends);
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
alternate use for the property at lease termination.
Our Business Objective
Our business objective is to maintain and increase the cash available for distribution to our
stockholders by:
• monitoring and maintaining our portfolio, including tenant negotiations and lease amendments
•
•
with tenants having financial difficulty;
obtaining mortgage indebtedness on favorable terms and maintaining access to capital to finance
property acquisitions;
identifying opportunistic property acquisitions consistent with our portfolio and our objectives;
and
• managing assets effectively, including lease extensions and opportunistic property sales.
Typical Property Attributes
The properties in our portfolio and owned by our joint ventures typically have the following
attributes:
• Net or ground leases. Substantially all of the leases are net and ground leases under which the
tenant is typically responsible for real estate taxes, insurance and ordinary maintenance and
repairs. We believe that investments in net and ground leased properties offer more predictable
returns than investments in properties that are not net or ground leased;
•
•
Long-term leases. Substantially all of our leases are long-term leases. Excluding leases relating
to properties owned by our joint ventures, leases representing approximately 70% of our 2010
contractual rental income expire after 2015, and leases representing approximately 42% of our
2010 contractual rental income expire after 2019; and
Scheduled rent increases. Leases representing approximately 95% of our 2010 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 by industry
sector as of December 31, 2009 (giving effect to a community shopping center we acquired on February
24, 2010):
5
Type of
Property
Number of
Tenants
Number of
Properties
2010 Contractual
Rental Income (1)
Percentage of
2010 Contractual
Rental Income
Retail – various (2)
Retail – furniture (3)
Industrial (4)
Retail – office supply (5)
Office (6)
Flex
Health & fitness
Movie theater (7)
Residential
36
5
7
12
3
3
3
1
1
71
27
15
8
12
3
2
3
1
1
72
$ 10,994,550
7,325,227
5,362,762
5,188,383
4,490,385
2,596,846
1,783,128
1,384,267
700,000
$39,825,548
27.6%
18.4
13.5
13.0
11.3
6.5
4.5
3.5
1.7
100.0%
(1) Our 2010 contractual rental income includes (a) rental income that is payable to us in 2010
under leases existing at December 31, 2009, (b) rental income that is payable to us in 2010 on
our tenancy in common interest, and (c) rental income that is payable to us in 2010 under leases
at a community shopping center we acquired on February 24, 2010.
(2)
Fourteen of the retail properties are net leased to single tenants. Five properties are net leased
to a total of 21 separate tenants pursuant to separate leases and eight 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. Four of the properties are net leased to single tenants.
(4)
Includes one vacant property.
(5)
Includes ten properties which are net leased to one tenant pursuant to ten separate leases. Eight
of these leases contain cross-default provisions.
(6)
Includes a property in which we own a 50% tenancy in common interest.
(7) We are the ground lessee of this property under a long-term lease and net lease the movie
theater to an operator.
Most of our retail tenants operate on a national basis and include, among others, Barnes &
Noble, Best Buy, CarMax, CVS, Kohl’s, Marshalls, Office Depot, Office Max, Party City, Petco, The
Sports Authority, and Walgreens, and some of our tenants operate on a regional basis, including Giant
Food Stores and Haverty Furniture Companies.
Our Leases
Substantially all of our leases are net or ground 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 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 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
6
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 2009 rental revenues and are not expected to be a material part of our 2010
contractual rental income. Additionally, all of the leases for the community shopping center we
acquired on February 24, 2010 provide for the reimbursement to us by the tenants of a significant
portion of the property’s operating expenses.
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, 2009 and includes the lease expiration of
leases for the community shopping center we acquired on February 24, 2010:
Year of Lease
Expiration (1)
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019 and
Thereafter
Number of
Expiring Leases
2
8
3
5
11
4
4
4 (2)
12
Approximate Square
Feet Subject to
Expiring Leases
16,000
246,744
20,650
120,790
652,287
127,240
163,849
209,605
303,172
2010 Contractual
Rental Income Under
Expiring Leases
170,377
$
2,658,542
508,362
1,356,441
5,638,747
1,423,207
1,258,619
3,125,998
6,004,051
18
71
1,906,225
3,766,562
17,681,204
$39,825,548
________________
(1) Lease expirations assume tenants do not exercise existing renewal options.
(2) Includes a property in which we have a tenancy in common interest.
Financing, Re-Renting and Disposition of Our Properties
% of 2010 Contractual
Rental Income
Represented by
Expiring Leases
.4%
6.7
1.3
3.4
14.1
3.6
3.2
7.8
15.1
44.4
100.0%
Under our governing documents, there is no limit on the level of debt that we may incur. Our
credit facility, which matures on March 31, 2010, 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. We have negotiated a modification and extension of our credit facility with our
lending syndicate and have agreed to all of the material terms (although there can be no assurance that
7
it will be consummated). The proposed modification and extension agreement would reduce
permitted borrowings from $62.5 million to $40 million, expire on March 31, 2012, and increase the
interest rate from the lower of LIBOR plus 2.15% or the bank’s prime rate to 90 day LIBOR plus 3%
with a minimum interest rate of 6% per annum. Among other limitations in our credit facility is our
ability to incur additional indebtedness. Our current credit facility limits total indebtedness that we
may incur to an amount equal to 70% of the value (as defined) of our properties and the negotiated
modification and extension agreement would limit total indebtedness that we may incur to an amount
equal to 65% of the value (as defined) of our properties. We borrow funds on a secured and
unsecured basis and intend to continue to do so in the future.
We also 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 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. The proceeds of our credit facility may be used to
payoff existing mortgages, fund the acquisition of additional properties, or to invest in joint ventures.
Net proceeds received from refinancing of properties are required to be used to repay amounts
outstanding under our credit facility if proceeds from the credit facility were used to purchase or
refinance the property.
With respect to properties we acquire on a free and clear basis, we usually seek to obtain long-
term fixed-rate mortgage financing, when available at acceptable terms, 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.
Due to lending freezes, the imposition of more stringent lending standards and dislocations in the
mortgage securitization markets, we have been limited in our ability to obtain mortgage financing on
acceptable terms. However, in March 2009 we refinanced one mortgage and we secured floating rate
mortgages for two properties, one in November 2008 and one in March 2009. In order to eliminate our
interest rate risk under these floating rate mortgages, we entered into interest rate swap agreements. Under
the interest rate swap agreements, we make fixed rate monthly payments to our counterparty, thereby
satisfying all of our interest payments. In October 2009, in connection with the sale of the property
securing the mortgage, we paid off the mortgage obtained in November 2008 and the related interest rate
swap agreement was terminated.
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, 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 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 pay down amounts due under our credit facility,
8
if any, and for the acquisition of additional properties.
Our Joint Ventures
As of December 31, 2009, we are a joint venture partner in five joint ventures that own an
aggregate of five properties, and have an aggregate of approximately 1.5 million rentable square feet
of space. Three of the properties are retail properties and two are industrial properties. 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; however, we do not exercise substantial operating control over these entities. At
December 31, 2009, our investment in unconsolidated joint ventures was approximately $6 million.
Based on existing leases, we anticipate that our share of rental income payable to our joint
ventures in 2010 will be approximately $1.3 million. The leases for two properties (each of which is
owned by one of our joint ventures), which are expected to contribute 88.5% of the aggregate
projected rental income payable to all of our joint ventures in 2010, will expire in 2021 and 2022.
Competition
We face competition for the acquisition of properties from a variety of investors, including
domestic and foreign corporations and real estate companies, 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 greater
financial and other resources than we have.
Our Structure
Five employees, Patrick J. Callan, Jr., our president and chief executive officer, Lawrence G.
Ricketts, Jr., our executive vice president and chief operating officer, and three others, devote all of their
business time to our company. Our other executive, administrative, legal, accounting and clerical
personnel share 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. The annual fees we pay to Majestic
Property Management Corp. are negotiated each year by us and Majestic Property Management Corp., and
are approved by our audit committee and independent directors.
In 2009, we incurred a fee of $2,025,000 to Majestic Property Management Corp. under the
compensation and services agreement. Pursuant to the compensation and services agreement, we paid
$2,013,000 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, we made a payment to Majestic
Property Management Corp. of $175,000 for our share of all direct office expenses, including, among
9
other expenses, rent, telephone, postage, computer services and internet usage. We also paid our chairman
a fee of $250,000 in 2009 in accordance with the compensation and services agreement.
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 (the “SEC”): 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 SEC. 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.
Forward-Looking Statements
This Annual Report on Form 10-K, together with other statements and information publicly
disseminated by us, 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,” “could,” “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:
10
•
•
•
•
•
the financial condition of our tenants and the performance of their lease obligations;
general economic and business conditions, including those currently affecting our
nation’s economy and real estate markets;
the availability of and costs associated with sources of liquidity;
accessibility of debt and equity capital markets;
general and local real estate conditions, including any changes in the value of our real
estate;
breach of credit facility covenants;
•
• more competition for leasing of vacant space due to current economic conditions;
•
changes in governmental laws and regulations relating to real estate and related
investments;
the level and volatility of interest rates;
competition in our industry; 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 2010 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 SEC.
Item 1A. Risk Factors.
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.
In addition to the other information contained or incorporated by reference in this Form 10-K,
readers should carefully consider the following risk factors:
Risks Related to Our Business
If our tenants default, if we are unable to re-rent properties upon the expiration of our leases, or
if a significant number of tenants are granted rent relief, our revenues will be reduced and we
would incur additional costs.
Substantially all of our revenues are derived from rental income paid by tenants at our
properties. The current economic crisis and recession has effected a number of our tenants. A
11
deterioration of economic conditions could result in tenants defaulting on their obligations, fewer
tenants renewing their leases upon the expiration of their terms or tenants seeking rent relief or other
accommodations or renegotiation of their leases. As a result of any of these events, our revenues
would decline. At the same time, we would remain responsible for the payment of our mortgage
obligations and would become responsible for the operating expenses related to our properties,
including, among other things, real estate taxes, maintenance and insurance. In addition, we would
incur expenses for enforcing our rights as landlord. Even if we find replacement tenants or renegotiate
leases with current tenants, the terms of the new or renegotiated leases, including the cost of required
renovations or concessions to tenants, or the expense of the 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.
Approximately 60% of our rental revenue is derived from tenants operating in the retail
industry, which has been particularly weakened in the current recession, and the inability of
those tenants to pay rent would significantly reduce our revenues.
Approximately 60% of our rental revenues (excluding rental revenues from our joint ventures)
for the year ended December 31, 2009 was derived from retail tenants and approximately 59% of our
2010 contractual rental income is expected to be derived from retail tenants, including 18.4% and
13%, from tenants engaged in retail furniture and office supply operations, respectively. The current
economic crisis and recession has caused a significant decline in consumer spending on retail goods.
If the recession continues, it could cause our retail tenants to fail to meet their lease obligations,
including rental payment delinquencies, which would have an adverse effect on our results of
operations, liquidity and financial condition, including making it more difficult for us to satisfy our
operating and debt service requirements, make capital expenditures and make distributions to our
stockholders.
A significant portion of our 2009 revenues and our 2010 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 Furniture Companies, Inc., Office Depot, Inc., Ferguson Enterprises, Inc., DSM
Nutritional Products, Inc., and L-3 Communications Corp., accounted for approximately 11.9%,
10.9%, 5.6%, 5.1% and 4.3%, respectively, of our rental revenues (excluding rental revenues from our
joint ventures) for the year ended December 31, 2009, and account for 10.8%, 11.1%, 5.9%, 5.1% and
4.6%, respectively, of our 2010 contractual rental income. The default, financial distress or
bankruptcy of any of these tenants would cause interruptions in the receipt of, or the loss of, a
significant amount of rental revenues and would require us to pay operating expenses currently paid by
the tenant. This could also 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.
The current recession and its consequences present a challenge to our present acquisition
strategy.
Our present acquisition strategy relies, to a large extent, on the acquisition of additional
properties that are located in market or industry sectors that we identify, from time to time, as offering
superior risk-adjusted returns. Although we acquired a community shopping center on February 24,
2010, we did not acquire any properties in 2009 due to, among other issues, the economic recession and
12
the difficulty in obtaining satisfactory mortgage financing, even though we investigated, analyzed and
bid on several properties. If we continue to be hampered in our ability to acquire additional properties in
the near term, our growth strategy will be significantly curtailed.
In order to fund acquisitions, our business model generally prescribes that we initially use funds
borrowed under our credit facility and then seek mortgage indebtedness for the purchased properties
on a non-recourse basis, repaying the amount borrowed under the credit facility. We have negotiated
a modification and extension of our credit facility, which will reduce permitted borrowings from
$62.5 million to $40 million. Institutions have significantly curtailed their lending activities and it
has become increasingly challenging to identify and secure mortgage indebtedness. Additionally,
although we have negotiated a modification and extension of our credit facility with our current
lenders, our current credit facility expires on March 31, 2010, and, although we are confident that the
modification and extension will be documented substantially in accordance with the agreed upon
terms, there is no guaranty that the modification and extension agreement will be concluded. If the
modification and extension agreement is not concluded and mortgage financing does not become
more available property acquisitions may be limited.
Declines in the value of our properties could result in additional impairment charges.
The recent economic downturn has caused a decline in real estate values generally throughout
the country. If we are presented with indications of an impairment in the value of a particular property
or group of properties, we will be required to evaluate any such property or properties. If we
determine that the undiscounted cash flows have declined to a level which results in the fair value of
any of our properties having a value which is below the net book value, we will be required to
recognize an impairment charge for the difference between the fair value and the book value during the
quarter in which we make such determination. In addition, we may incur losses from time to time if
we dispose of properties for sales prices that are less than our book value.
If we are unable to refinance our mortgage loans at maturity, we may be forced to sell
properties at disadvantageous terms, which would result in the loss of revenues and in a decline
in the value of our portfolio.
As of December 31, 2009, we had outstanding approximately $190.5 million in mortgage
indebtedness, all of which is non-recourse (subject to standard carve-outs). In connection with the
acquisition of a community shopping center on February 24, 2010, we assumed a $17.7 million
mortgage, maturing in 2014, which is non-recourse, subject to standard carve-outs. As of December
31, 2009 (not including the mortgage we assumed in connection with the community shopping center),
our ratio of mortgage debt to total assets was approximately 46.6%. In addition, as of December 31,
2009, our joint ventures had approximately $17.9 million in total mortgage indebtedness (all of which
is non-recourse subject to standard carve-outs). The risks associated with our mortgage debt and the
mortgage debt of our joint ventures include the risk that cash flow from properties securing the
mortgage indebtedness and our available cash and cash equivalents and short-term investments will be
insufficient to meet required payments of principal and interest.
Only a small portion of the principal of our mortgage indebtedness will be repaid prior to maturity.
We do not plan to retain sufficient cash to repay such indebtedness at maturity. Accordingly, in order to
meet these obligations if they cannot be refinanced at maturity, we will have to use funds available under
our credit facility, if any, and our available cash and cash equivalents and short-term investments to pay
our mortgage debt or seek to raise funds through the financing of unencumbered properties, sale of
properties or the issuance of additional equity. Between January 2010 and December 31, 2014,
13
approximately $64.9 million of our mortgage debt matures (excluding mortgage debt of our joint ventures).
In January 2010 we paid off one mortgage with a balance of $2.4 million. A $4.5 million mortgage loan
matured on March 1, 2010, which we have not paid off, on which we continue to pay debt service on a
current basis, and with respect to which we have commenced discussions with representatives of the
mortgagee. Approximately $9 million of our mortgage debt will mature in April 2010, $979,000 of our
mortgage debt will mature in September 2010 and approximately $3 million of our mortgage debt will
mature in 2011. In addition one mortgage loan with an outstanding balance of $1.7 million has been
callable since October, 2009 on ninety days notice by the mortgagee. With respect to our joint ventures,
approximately $13.4 million and $1.6 million of mortgage debt matures in 2015 and 2016, respectively. If
we (or our joint ventures) are not successful in refinancing or extending existing mortgage 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 mortgage debt
when payments become due, and we (or a joint venture) may be forced to dispose of properties on
disadvantageous terms or convey properties secured by mortgages to the mortgagees, which would lower
our revenues and the value of our portfolio.
Additionally, with the national economic recession and the reductions in real estate values,
we may find that the value of a property could be less than the mortgage secured by such property. In
such instance, we may seek to renegotiate the terms of the mortgage, or to the extent that our loan is
non-recourse and it cannot be satisfactorily renegotiated, forfeit the property by conveying it to the
mortgagee and writing off our investment.
If we are unable to extend our current credit facility or secure a new credit facility at maturity
of our current facility on March 31, 2010 at favorable rates, our net income may decline or we
may be forced to sell properties at disadvantageous terms, which would result in the loss of
revenues and in a decline in the value of our portfolio.
As of December 31, 2009 and March 10, 2010, we had $27 million outstanding under our
revolving credit facility. 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. Our credit facility
expires on March 31, 2010. We have negotiated a modification and extension of our credit facility with
our lending syndicate and have come to agreement on all material terms. The proposed modification and
extension would reduce our permitted borrowings from $62.5 million to $40 million, expire on March 31,
2012, and increase the interest rate from the lower of LIBOR plus 2.15% or the bank’s prime rate to 90 day
LIBOR plus 3% with a minimum interest rate of 6%. Although we are confident that the modification and
extension will be documented in accordance with the agreed upon terms, there can be no assurance that it
will be consummated. Between March 1, 2010 and April 30, 2010, approximately $13.5 million of our
mortgage debt matures. If we are not successful in modifying or otherwise amending our current credit
facility, securing a new credit facility, financing unencumbered properties, selling properties on favorable
terms, or raising additional equity, our cash and short term investments may not be sufficient to repay all
amounts outstanding under our credit facility when it matures on March 31, 2010 and all outstanding
amounts due under our mortgages maturing in 2010, and we may be forced to dispose of properties on
disadvantageous terms, which would lower our revenues and the value of our portfolio.
The United States’ credit markets continue to experience significant price volatility and liquidity
disruptions, which thus far has caused market prices of many stocks to plummet and terms for financings
to be less attractive, and in many cases unavailable. Continued uncertainty in the credit markets could
negatively impact our ability to refinance the amount outstanding under our revolving credit facility at
favorable terms or at all, if the modification and extension of the credit agreement is not finalized.
14
If our borrowings increase, the risk of default on our repayment obligations and our debt
service requirements will also increase.
Our governing documents do not contain any limitation on the amount of indebtedness we may
incur. However, the terms of our existing credit facility with VNB New York Corp., Bank Leumi,
USA, Manufacturers and Traders Trust Company and Israel Discount Bank of New York limit our
ability to incur indebtedness, including limiting 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. Similarly, the
proposed modification and extension of our credit facility will limit our ability to incur indebtedness,
including limiting the total indebtedness that we may incur to an amount equal to 65% of the value (as
defined) of our properties. 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 a significant number of our tenants default or fail to renew expiring leases, or we take
impairment charges against our properties, a breach of our revolving credit facility could occur.
Our revolving credit facility includes, and the proposed modification and extension of our credit
facility that we have negotiated will include, financial covenants that require us to maintain certain
financial ratios and requirements. If our tenants default under their leases with us or fail to renew
expiring leases, generally accepted accounting principles may require us to recognize impairment
charges against our properties, and our financial position could be adversely affected causing us to be
in breach of the financial covenants contained in our credit facility.
Failure to meet interest and other payment obligations under our revolving credit facility or a
breach by us of the covenants to maintain the financial ratios would place us in default under our credit
facility, and, if the banks called a default and required us to repay the full amount outstanding under
the credit facility, we might be required to rapidly dispose of our properties, which could have an
adverse impact on the amounts we receive on such disposition. If we are unable to dispose of our
properties in a timely fashion to the satisfaction of the banks, the banks could foreclose on that portion
of our collateral pledged to the banks, which could result in the disposition of our properties at below
market values. The disposition of our properties at below our carrying value would adversely affect our
net income, reduce our stockholders’ equity and adversely affect our ability to pay distributions to our
stockholders.
Impairment charges against owned real estate may not be adequate to cover actual losses.
Impairment charges are based on an evaluation of known risks and economic factors. The
determination of an appropriate level of impairment charges is an inherently difficult process and is
based on numerous assumptions. The amount of impairment charges of real estate is susceptible to
changes in economic, operating and other conditions that are largely beyond our control. Any
impairment charges that we may take may not be adequate to cover actual losses and we may need to
take additional impairment charges in the future. Actual losses and additional impairment charges in
the future could materially affect our results of operations.
The tightening of the credit markets have made it difficult for us to secure financing, which
may limit our ability to finance or refinance our real estate properties, reduce the number of
properties we can acquire, and adversely affect your investment.
15
Due to the national economic recession and credit crisis and the resulting caution by lenders
in evaluating and underwriting new transactions, there has been a significant tightening of the credit
markets. The tightening of the credit markets make it difficult for us to secure mortgage debt, thereby
limiting the mortgage debt available on real estate properties we wish to acquire, and even reducing
the number of properties we can acquire. Even in the event that we are able to secure mortgage debt
on, or otherwise finance our real estate properties, due to increased costs associated with securing
financing and other factors beyond our control, we run the risk of being unable to refinance the entire
outstanding loan balance or being subject to unfavorable terms (such as higher loan fees, interest rates
and periodic payments) if we do refinance the loan balance. Either of these results could reduce any
income from those properties and reduce cash available for distribution, which may adversely affect
your investment.
Our net leases and our ground leases require us to pay property related expenses that are not
the obligations of our tenants.
Under the terms of substantially all of our net leases, in addition to satisfying their rent
obligations, our tenants are responsible for the payment of real estate taxes, insurance and ordinary
maintenance and repairs. Similarly, pursuant to the terms of all of our leases at the community
shopping center we acquired on February 24, 2010, our tenants are required to reimburse us for a
significant portion of the property’s operating expenses. However, under the provisions of certain net
and shopping center leases, we are required to pay some expenses, such as the costs of environmental
liabilities, roof and structural repairs, insurance, certain non-structural repairs and maintenance. If our
properties incur significant expenses that must be paid by us under the terms of our leases, 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, 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
16
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 coverage available in the market,
and changes in the type, capacity and sophistication of building systems. Approximately 59%, 13.5%
and 11.3% of our 2010 contractual rental income is expected to come from retail, industrial, and office
tenants, respectively, and we are vulnerable to economic declines that negatively impact these sectors
of the economy, which 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, leasehold 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 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. The occurrence of any of these events could
adversely impact our results of operations, liquidity and financial condition.
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 31% of our rental income (excluding
our share of rental income from our joint ventures) for the year ended December 31, 2009 was, and
approximately 30% of our 2010 contractual rental income will be, derived from properties located in
Texas and New York. At December 31, 2009, 27% of the depreciated book value of our real estate
investments (excluding our share of the assets from our joint ventures) were 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.
17
We may pay our stockholder distributions in shares of our common stock, thereby reducing the
cash a stockholder would have otherwise received from us.
Effective with respect to distributions declared on or after January 1, 2008, and applicable to
REIT distributions with respect to taxable income from years ending on or before December 31, 2011,
the Internal Revenue Service has issued Revenue Procedures in order to assist REITs in retaining cash,
while simultaneously satisfying their tax distribution requirements. Pursuant to these Revenue
Procedures, REITs may temporarily satisfy the distribution requirements for their taxable income from
2009, 2010 and 2011 by offering their stockholders the option to receive the distribution in cash or the
REIT’s stock. If too many of a REIT’s stockholders elect to receive only cash, each such stockholder
may receive up to 90% of the distribution in shares of stock, thereby reducing the cash such
stockholder would have otherwise received from such REIT. We have elected to take advantage of
these Revenue Procedures, and the distributions we paid on April 27, 2009, July 21, 2009, October 30,
2009 and January 25, 2010, consisted of 90% stock and 10% cash. On March 9, 2010, our board of
directors declared a distribution of $.30 per share to be paid on April 6, 2010, which will consist of all
cash. For any other distributions we declare applicable to 2009, 2010 or 2011 taxable income, we may
provide our stockholders with the option of receiving such distribution in cash or shares of our
common stock to be determined by our board of directors. A distribution which consists of cash and
stock may negatively impact the market price of our common stock.
If we reduce our dividend, the market value of our common stock may decline.
The level of our common stock dividend is established by our board of directors from time to
time based on a variety of factors, including our cash available for distribution, our funds from
operations and our maintenance of REIT status. Various factors could cause our board of directors to
decrease our dividend level, including tenant defaults or bankruptcies resulting in a material reduction
in our funds from operations or a material loss resulting from an adverse change in the value of one or
more of our properties. If our board determines to reduce our common stock dividend, the market
value of our common stock could be adversely affected.
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, will enable us to quality for the tax benefits accorded to a
REIT under the Code. 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 on Form
10-K. 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. If the economic crisis and recession continues, our
tenants may be further affected, which could likely cause a decline in our revenues, and may reduce or
eliminate our profitability and result in the reduction or elimination of our dividends.
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, financial institutions, insurance companies, pension
funds, investment funds, other REITs and individuals. Many of these competitors have significant
18
advantages over us, including a larger, more diverse group of properties and greater financial and other
resources.
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, the
remediation of costs could have a material adverse impact upon our results of operations, liquidity and
financial condition.
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.
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. 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 would need to attract and retain qualified senior
management and other key personnel, both on a full-time and part-time basis.
19
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 for transactions with affiliates is 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 the chairman of our Board of Directors and it provides compensation to certain
of our senior 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 2009, we paid to Majestic a
fee of approximately $2,025,000 under the compensation and services agreement. In addition, in
accordance with the compensation and services agreement, in 2009 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, including rent, telephone, postage, computer services, and internet
usage.
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 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 may 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.
20
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 or make distributions in
stock during 2010, in order to make the distributions necessary to retain the tax benefits associated
with qualifying as a REIT, even if we believe that then prevailing market conditions are not generally
favorable for such borrowings, such as currently is the case. 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 an adverse impact on our results of operations and financial
condition.
Item 1B. Unresolved Staff Comments.
None.
21
EXECUTIVE OFFICERS
Set forth below is a list of our executive officers whose terms expire at our 2010 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 30, 2010.
NAME
AGE
POSITION WITH THE COMPANY
Fredric H. Gould*
Patrick J. Callan, Jr.
Lawrence G. Ricketts, Jr.
Jeffrey A. Gould*
Matthew J. Gould*
David W. Kalish
Israel Rosenzweig
Mark H. Lundy**
Simeon Brinberg**
Karen Dunleavy
Alysa Block
74
47
33
44
50
62
62
47
76
51
49
Chairman of the Board
President, Chief Executive Officer, and Director
Executive Vice President and Chief Operating Officer
Senior Vice President and Director
Senior Vice President and Director
Senior Vice President and Chief Financial Officer
Senior Vice President
Senior Vice President and Secretary
Senior Vice President
Vice President, Financial
Treasurer
* 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 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 was
President of GP Partners, Inc., a sub-advisor to a registered investment advisor, from 2000 to March
2009.
22
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.
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.
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.
Alysa Block. Ms. Block has been Treasurer of One Liberty Properties since June 2007, and served as
Assistant Treasurer from June 1997 to June 2007. Ms. Block also serves as the Treasurer of BRT
Realty Trust since March 2008, and served as its Assistant Treasurer from March 1997 to March
2008.
23
Item 2.
Properties.
As of December 31, 2009 (giving effect to a community shopping center we acquired on February
24, 2010), we owned 72 properties, one of which is vacant and one of which is a 50% tenancy in common
interest, and participated in five joint ventures that own five properties. The properties owned by us and
our joint ventures are suitable and adequate for their current uses. The aggregate net book value of our
71 properties as of December 31, 2009 (excluding the community shopping center we acquired on
February 24, 2010), was $345.7 million.
The tables below set forth information as of December 31, 2009 (giving effect to a community
shopping center we acquired on February 24, 2010) 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
Royersford, PA
El Paso, TX
Greensboro, NC
Los Angeles, CA
Plano, TX
Brooklyn, NY
Knoxville, TN
Columbus, OH
Philadelphia, PA
Plano, TX
East Palo Alto, CA
Type of
Property
Industrial
Office
Flex
Retail (2)
Retail
Theater
Office (3)
Retail (4)
Office
Retail
Retail (4)
Industrial
Retail (5)
Retail (6)
Tucker, GA
Health & Fitness
Ronkonkoma, NY
Flex
Manhattan, NY
Residential
Lake Charles, LA
Cedar Park, TX
Columbus, OH
Retail (7)
Retail (4)
Industrial
Grand Rapids, MI
Health & Fitness
Percentage
of 2010
Contractual
Rental Income (1)
5.9%
Approximate
Building
Square Feet
367,000
106,680
149,870
194,451
110,179
61,213
106,262
112,389
66,000
35,330
96,924
166,000
51,018
30,978
58,800
89,500
125,000
54,229
50,810
100,220
130,000
5.1
4.6
4.1
3.9
3.5
3.3
3.0
2.8
2.7
2.6
2.3
2.3
2.3
2.2
1.9
1.8
1.7
1.7
1.5
1.4
24
Location
Ft. Myers, FL
Atlanta, GA
Chicago, IL
Miami Springs, FL
Kennesaw, GA
Wichita, KS
Athens, GA
Naples, FL
Saco, ME
New Hyde Park, NY
Champaign, IL
Greenwood Village, CO
Tyler, TX
Onalaska, WI
Melville, NY
Cary, NC
Fayetteville, GA
Richmond, VA
Amarillo, TX
Virginia Beach, VA
Eugene, OR
Selden, NY
Pensacola, FL
Lexington, KY
El Paso, TX
Type of
Property
Retail
Retail
Retail (6)
Retail (6)
Retail (6)
Retail (4)
Retail (8)
Retail (6)
Industrial
Industrial
Retail
Retail
Retail (4)
Retail
Industrial
Retail (6)
Retail (4)
Retail (4)
Retail (4)
Retail (4)
Retail (6)
Retail
Retail (6)
Retail (4)
Retail (6)
Percentage
of 2010
Contractual
Rental Income (1)
1.4
Approximate
Building
Square Feet
29,993
50,400
23,939
25,000
32,052
88,108
41,280
15,912
91,400
38,000
50,530
45,000
72,000
63,919
51,351
33,490
65,951
38,788
72,227
58,937
24,978
14,550
22,700
30,173
25,000
1.4
1.3
1.3
1.3
1.2
1.2
1.2
1.2
1.2
1.2
1.1
1.1
1.1
1.1
1.1
1.0
.9
.9
.9
.9
.9
.9
.8
.8
25
Location
Duluth, GA
Type of
Property
Retail (4)
Percentage
of 2010
Contractual
Rental Income (1)
.8
Approximate
Building
Square Feet
50,260
Grand Rapids, MI
Health & Fitness
.8
Newport News, VA
Retail (4)
Hyannis, MA
Batavia, NY
Gurnee, IL
Somerville, MA
Hauppauge, NY
Bluffton, SC
Houston, TX
Vicksburg, MS
Everett, MA
Flowood, MS
Bastrop, LA
Monroe, LA
Marston Mills, MA
D’Iberville, MS
Kentwood, LA
Monroe, LA
Vicksburg, MS
Newark, DE
Retail
Retail (6)
Retail (4)
Retail
Retail
Retail (4)
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
West Palm Beach, FL
Industrial
Killeen, TX
Seattle, WA
Rosenberg, TX
Retail
Retail
Retail
New Hyde Park, NY
Industrial (9)
.8
.7
.7
.7
.6
.6
.6
.6
.5
.4
.4
.4
.4
.4
.4
.4
.4
.4
.3
.3
.2
.1
.1
72,000
49,865
9,750
23,483
22,768
12,054
7,000
35,011
12,000
2,790
18,572
4,505
2,607
2,756
8,775
2,650
2,578
2,806
4,505
23,547
10,361
8,000
3,038
8,000
-
100%
51,000
3,819,212
26
Properties Owned by Joint Ventures (10)
Location
Lincoln, NE
Milwaukee, WI
Savannah, GA
Miami, FL
Savannah, GA
Type of
Property
Retail
Industrial
Retail
Industrial
Retail
Percentage
of Our Share
of Rent Payable
in 2010 to Our
Joint Ventures
45.8%
42.7
5.5
3.9
2.1
Approximate
Building
Square Feet
112,260
927,685
101,550
396,000
7,959
100%
1,545,454
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
Percentage of 2010 contractual rental income payable to us in 2010 (a) under leases existing at
December 31, 2009, (b) on our tenancy in common interest, and (c) under leases at a community
shopping center we acquired on February 24, 2010.
Property is a community shopping center we acquired on February 24, 2010 and is leased to
ten tenants.
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
2010 rental income. Approximate square footage indicated represents the total rentable
square footage of the property.
This property is leased to a retail furniture operator.
Property has two tenants, of which approximately 53% is leased to a retail furniture operator.
This property is leased to a retail office supply operator.
Property has three tenants, of which approximately 43% is leased to a retail office supply
operator.
Property has two tenants, of which approximately 48% is leased to a retail office supply
operator.
Vacant property.
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.
The occupancy rate for our properties (including the property in which we own a tenancy in
common interest and the community shopping center we acquired on February 24, 2010) based on
total rentable square footage, was 98.6% and 97.5% as of December 31, 2009 and 2008, respectively.
The occupancy rate for the community shopping center we acquired on February 24, 2010 was 99%
as of the acquisition date. The occupancy rate for the properties owned by our joint ventures, based
on total rentable square footage, was 100% and 99.5% as of December 31, 2009 and 2008,
respectively.
27
As of December 31, 2009 (giving effect to the community shopping center we acquired on
February 24, 2010), the 72 properties owned by us and the five properties owned by our joint
ventures are located in 27 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, 2009 (giving effect to the community
shopping center we acquired on February 24, 2010).
Our Properties
State
New York
Texas
Georgia
Pennsylvania
Maryland
California
New Jersey
Florida
North Carolina
Ohio
Louisiana
Illinois
Tennessee
Virginia
Other
Number of
Properties
10
10
6
2
1
2
1
5
2
2
5
3
1
3
19
72
2010 Contractual
Rental Income
$ 6,191,264
Approximate
Building
Square Feet
615,754
5,773,100
3,150,157
2,553,724
2,340,923
2,223,556
2,034,921
2,015,585
1,810,259
1,651,084
1,321,204
1,258,630
1,079,367
1,036,044
5,385,730
521,623
298,743
360,451
367,000
137,240
106,680
103,966
94,703
197,144
64,976
97,237
35,330
147,590
670,775
$ 39,825,548
3,819,212
Properties Owned by Joint Ventures
State
Nebraska
Wisconsin
Georgia
Florida
Number of
Properties
1
1
2
1
5
Our Share
of Rent Payable
in 2010 to Our
Joint Ventures
$
603,594
562,500
99,318
51,496
Approximate
Building
Square Feet
112,260
927,685
109,509
396,000
$1,316,908
1,545,454
28
At December 31, 2009 (excluding the community shopping center we acquired on February
24, 2010), we had first mortgages on 52 of the 71 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, 2009, we had approximately $190.5 million of mortgage loans outstanding, bearing
interest at rates ranging from 5.4% to 8.8%. Upon the acquisition of the community shopping center
on February 24, 2010, we assumed a $17.7 million mortgage loan, bearing interest at 5.67%.
Substantially all of our mortgage loans contain prepayment penalties. The following table sets forth
scheduled principal mortgage payments due for our properties as of December 31, 2009 (excluding
the community shopping center we acquired on February 24, 2010), and assumes no payment is made
on principal on any outstanding mortgage in advance of its due date:
YEAR
2010
2011
2012
2013
2014
Thereafter
Total
PRINCIPAL PAYMENTS DUE
IN YEAR INDICATED
(Amounts in Thousands)
$
23,259 (a)
8,061
36,994
8,999
19,356
93,849
$ 190,518
(a)
Includes a $4.5 million mortgage loan which matured on March 1, 2010 which we have
not paid off and are currently in discussions with representatives of the mortgagee. In addition, three other
mortgages mature during 2010, which require balloon payments aggregating approximately $12.4 million
at maturity, including a $2.4 million mortgage loan we paid off in January 2010. Also included is a $1.7
million mortgage loan which the lender can call on 90 days notice and the scheduled amortization of
principal balances in the amount of $4.7 million.
At December 31, 2009, our joint ventures had first mortgages on three properties with
outstanding balances of approximately $17.9 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, 2009, and assumes no payment is made on principal on any outstanding mortgage in advance of its
due date:
YEAR
2010
2011
2012
2013
2014
Thereafter
Total
PRINCIPAL PAYMENTS DUE
IN YEAR INDICATED
(Amounts in Thousands)
$
$
462
490
520
552
586
15,296
17,906
29
Significant Tenants
As of December 31, 2009, 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, 2009.
Haverty Furniture Companies, Inc.
As of December 31, 2009, we owned a portfolio of eleven properties leased under a master
lease to Haverty Furniture Companies, Inc., which properties had a net book value equal to 14.9% of
our depreciated book value of real estate investments, and revenues which accounted for 11.9% of our
aggregate annual gross revenues in the year ended December 31, 2009. 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 contain buildings with an aggregate of
approximately 612,130 square feet.
The properties are net leased to Haverty Furniture Companies, Inc. pursuant to a master lease,
which expires on August 14, 2022. Haverty Furniture Companies, Inc. is a New York Stock
Exchange listed company and operates over 100 showrooms in 17 states. The master lease provides
for a current base rent of $4,310,000 per annum (which accounts for 10.8% of our 2010 contractual
rental income), increasing on August 15, 2012 and every five years thereafter and provides the tenant
with certain renewal options. Pursuant to the master lease, the tenant is responsible for maintenance
and repairs, and for real estate taxes and assessments on the properties. The 2009 annual real estate
taxes on the properties aggregated $856,000. The tenant utilizes approximately 86% of the properties
for retail and 14% for warehouse.
The mortgage loan, which our subsidiary, OLP Havertportfolio L.P., assumed when it acquired
these eleven properties in 2006, is secured by mortgages/deeds of trust on all such properties in the
principal amount of approximately $24.7 million at December 31, 2009. 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 only contractual payments are made on the principal amount of the
mortgage loan, the principal balance due on the maturity date will be approximately $23 million.
Although the mortgage loan provides for defeasance, it is generally not prepayable until 90 days prior
to the maturity date.
Office Depot, Inc.
As of December 31, 2009, we owned a portfolio of ten properties, each of which is subject to a
lease with Office Depot, Inc. The ten Office Depot, Inc. properties have a net book value equal to
13.9% of our depreciated book value of real estate investments, accounted for 10.9% of our 2009
rental income and will account for 11.1% of our 2010 contractual rental income. Of the ten
properties, two are located in each of Florida and Georgia, and one is located in each of California,
Illinois, Louisiana, North Carolina, Oregon and Texas. The properties contain buildings with an
aggregate of approximately 261,678 square feet.
Each property is subject to a separate lease. Eight of the leases contain cross-default
provisions, expire on September 30, 2018, and provide the tenant with four five-year renewal options.
One lease expires on June 30, 2013 and provides the tenant with three five-year renewal options, and
one lease expires on February 28, 2014 and provides the tenant with four five-year renewal options.
Office Depot, Inc. is a New York Stock Exchange listed company and operates over 1,500 worldwide
30
retail stores. The ten leases provide for an aggregate current base rent of $4,439,000. The rent for
eight of the properties increases every five years by 10%. The rent for one property increases by 5%
every five years and the rent for one property increases by $20,000 every five years. Pursuant to the
leases, the tenant is responsible for maintenance and repairs, and for real estate taxes and assessments
on the properties. The 2009 annual real estate taxes on the properties aggregated $696,000.
Item 3. Legal Proceedings
None.
Item 4.
Reserved.
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 2009
and for 2008 and the per share distributions declared on our common stock during each quarter of the
years ended December 31, 2009 and 2008.
2009
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
HIGH
$10.28
$ 6.90
$ 9.89
$ 9.40
LOW
$2.48
$3.21
$5.30
$7.92
DISTRIBUTION
PER SHARE(1)
$.22(2)
$.22(3)
$.22(4)
$.22(5)
(1)
The provisions of Internal Revenue Service Revenue Procedures related to REITs permits public
REITs to distribute a dividend with respect to the 2009, 2010 and 2011 taxable income by issuing shares
of common stock; provided that at least 10% of the dividend amount is paid in cash. We elected to use
these provisions for each dividend we declared in 2009. For each dividend we declared in 2009 the cash
amount was allocated pro rata among all stockholders who elected to receive cash. Since any stockholder
electing cash could not receive the entire dividend in cash, the remainder of the dividend was paid in
shares of our common stock. Stockholders who did not elect to receive cash received the entire dividend
in shares of our common stock.
This dividend was distributed on April 27, 2009 and consisted of an aggregate of 529,000 shares
(2)
of our common stock and approximately $223,000 in cash.
This dividend was distributed on July 21, 2009 and consisted of an aggregate of 376,000 shares
(3)
of our common stock and approximately $234,000 in cash.
This dividend was distributed on October 30, 2009 and consisted of an aggregate of 255,000
(4)
shares of our common stock and approximately $240,000 in cash.
This dividend was distributed on January 25, 2010 and consisted of an aggregate of 216,000
(5)
shares of our common stock and approximately $246,000 in cash.
31
2008
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
HIGH
$18.73
$17.95
$19.32
$18.15
LOW
$15.45
$16.01
$15.20
$ 6.35
CASH
DISTRIBUTION
PER SHARE
$.36
$.36
$.36
$.22
As of March 5, 2010, there were 331 common stockholders of record and we estimate that at such date there
were approximately 3,700 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 stockholders at least 90% of our annual ordinary taxable income. The
amount and timing of future distributions will be at the discretion of our board of directors and will
depend upon our financial condition, earnings, business plan, cash flow and other factors. We intend
to make 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.
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, 2004 in our common stock and assumes the
reinvestment of dividends.
Total Return Performance
175
150
125
100
75
50
25
e
u
l
a
V
x
e
d
n
I
One Liberty Properties, Inc.
S&P 500
NAREIT Equity Index
12/31/04
12/31/05
12/31/06
12/31/07
12/31/08
12/31/09
32
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 2009 Stock Incentive Plan as of
December 31, 2009:
Number of
securities
to be issued
upon exercise
of outstanding
options,
warrants and
rights
(a)
Weighted-
average
exercise price
of outstanding
options, warrants
and rights
(b)
Number of
securities
remaining available
for future issuance
under equity
compensation
plans (excluding
securities
reflected in
column(a))
(c)
-
-
-
-
-
-
456,900
-
456,900
Plan Category
Equity compensation
plans approved by
security holders (1)
Equity compensation
plans not approved
by security holders
Total
(1) Our 2009 Stock Incentive Plan, which was approved by our stockholders in 2009, is our only
equity compensation plan. Our 2009 Stock Incentive Plan permits us to grant stock options,
restricted stock and performance based awards to our employees, officers, directors and
consultants. There are no options outstanding under our 2009 Stock Incentive Plan. See Note 10
to our Consolidated Financial Statements for a description of our 2009 Stock Incentive Plan.
Issuer Purchases of Equity Securities
We did not repurchase any shares of our outstanding common stock in October, November or
December 2009.
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, 2009 should be read
together with our consolidated financial statements and related notes appearing elsewhere in this Annual
Report on Form 10-K and in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” below, where this data is discussed in more detail.
33
As of and for the Year Ended
December 31
(Amounts in Thousands, Except Per Share Data)
2009
2008
2007
2006
2005
OPERATING DATA (Note a)
Rental revenues
Equity in earnings (loss) of unconsolidated
joint ventures (Note b)
Gain on dispositions of real estate of
unconsolidated joint ventures
Net gain on sale of unimproved land,
air rights and other gains
Income from continuing operations
Income (loss) from discontinued operations
Net income
Weighted average number of common
shares outstanding:
Basic
Diluted
Net income per common share – basic
Income from continuing operations
Income (loss) from discontinued operations
Net income
Net income per common share – diluted
Income from continuing operations
Income (loss) from discontinued operations
Net income
Cash distributions per share of
common stock (Note c)
Stock distributions per share of
common stock
BALANCE SHEET DATA
Real estate investments, net
Investment in unconsolidated
joint ventures
Cash and cash equivalents
Available-for-sale securities
Total assets
Mortgages and loan payable
Line of credit
Total liabilities
Total stockholders' equity
$39,016
$36,031
$33,439
$38,109
$31,942
559
-
-
12,320
7,321
19,641
622
297
1,830
9,943
(5,051)
4,892
648
583
-
7,685
2,905
10,590
(3,276)
2,102
26,908
413
29,254
7,171
36,425
-
10,248
16,832
4,448
21,280
10,651
10,812
10,183
10,183
10,069
10,069
9,931
9,934
$1.15
.69
$1.84
$1.14
.68
$1.82
$ .98
(.50)
$ .48
$ .98
(.50)
$ .48
$.76
.29
$1.05
$ .76
.29
$1.05
$2.95
.72
$3.67
$2.95
.72
$3.67
9,838
9,843
$1.71
.45
$2.16
$1.71
.45
$2.16
$ .08
$1.30
$2.11
$1.35
$1.32
$ .80
-
-
-
-
$345,693
$353,113
$344,042
$351,841
$258,122
5,839
28,036
6,762
408,686
190,518
27,000
228,558
180,128
5,857
10,947
297
429,105
225,514
27,000
265,130
163,975
6,570
25,737
1,024
406,634
222,035
-
235,395
171,239
7,014
34,013
1,372
422,037
227,923
-
241,912
180,125
27,335
26,749
163
330,583
167,472
-
175,064
155,519
34
OTHER DATA (Note d)
Funds from operations
Funds from operations per common share:
Basic
Diluted
Adjusted funds from operations
Adjusted funds from operations per common
share:
Basic
Diluted
As of and for the Year Ended
December 31
(Amounts in Thousands, Except Per Share Data)
2009
2008
2007
2006
2005
$23,272
$13,952
$18,645
$13,707
$26,658
$2.19
$2.15
$22,064
$1.37
$1.37
$12,458
$1.85
$1.85
$16,621
$1.38
$1.38
$11,594
$2.71
$2.71
$25,093
$2.07
$2.04
$1.22
$1.22
$1.65
$1.65
$1.17
$1.17
$2.55
$2.55
Note a: Certain amounts reported in prior periods have been reclassified to conform to the current
year’s presentation, primarily the restatement of prior periods for discontinued operations.
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 $26.9 million
gain on dispositions.
Note c: 2007 includes a special cash distribution of $.67 per share.
Note d: We consider funds from operations (FFO) and adjusted funds from operations (AFFO) to
be relevant and meaningful supplemental measures of the operating performance of an equity REIT,
and they should not be deemed to be a measure of liquidity. FFO and AFFO do 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. They 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. Since the NAREIT White Paper only
provides guidelines for computing FFO, the computation of FFO may vary from one REIT to another.
We compute AFFO by deducting from FFO our straightline rent accruals and amortization of lease
intangibles (including our share of our unconsolidated joint ventures).
We believe that FFO and AFFO are useful and standard supplemental measures of the
operating performance for equity REITs and are used frequently by securities analysts, investors and
35
other interested parties in evaluating equity REITs, many of which present FFO and AFFO when
reporting their operating results. FFO and AFFO are 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 and AFFO provide 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 and AFFO to be useful to us in evaluating potential property acquisitions.
FFO and AFFO do not represent net income or cash flows from operations as defined by
GAAP. FFO and AFFO should not be considered to be an alternative to net income as a reliable
measure of our operating performance; nor should FFO and AFFO be considered an alternative to
cash flows from operating, investing or financing activities (as defined by GAAP) as measures of
liquidity.
FFO and AFFO do not measure whether cash flow is sufficient to fund all of our cash needs,
including principal amortization, capital improvements and distributions to stockholders. FFO and
AFFO do 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 and AFFO. 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 and AFFO.
The table below provides a reconciliation of net income in accordance with GAAP to FFO and
AFFO, as calculated under the current NAREIT definition of FFO, for each of the years in the five
year period ended December 31, 2009 (amounts in thousands):
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 sales of real estate
Deduct: gain on dispositions of real
estate of unconsolidated joint
ventures
Funds from operations (Note 1)
Deduct: straight line rent accruals and
amortization of lease intangibles
Deduct: our share of straight line rent
accruals and amortization of lease
intangibles of unconsolidated joint
ventures
Adjusted funds from operations (Note 1)
2009
$19,641
9,001
2008
$ 4,892
8,971
2007
$10,590
8,248
2006
$36,425
7,091
2005
$21,280
5,905
323
322
64
(5,757)
64
-
329
61
-
716
1,277
43
(3,660)
101
(1,905)
-
23,272
(297)
13,952
(583)
18,645
(26,908)
13,707
-
26,658
(1,151)
(1,394)
(1,924)
(1,950)
(1,282)
(57)
$22,064
(100)
$12,458
(100)
$16,621
(163)
$11,594
(283)
$25,093
36
Note 1: For the year ended December 31, 2008, net income FFO and AFFO are after $6 million
of impairment charges. For the year ended December 31, 2006, net income, FFO and AFFO are 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, FFO and AFFO include $10.2
million from the gain on sale of air rights.
The table below provides a reconciliation of net income per common share (on a diluted basis) in
accordance with GAAP to FFO and AFFO.
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 sales of real estate
Deduct: gain on dispositions of real
estate of unconsolidated joint
ventures
Funds from operations (Note 2)
Deduct: straight line rent accruals and
amortization of lease intangibles
Deduct: our share of straight line rent
accruals and amortization of lease
intangibles of unconsolidated joint
ventures
Adjusted funds from operations (Note 2)
2009
$ 1.82
.83
2008
$ .48
.88
2007
$1.05
.82
2006
$3.67
.71
.03
-
(.53)
.03
.01
-
-
2.15
(.03)
1.37
(.11)
(.14)
.03
.01
-
(.06)
1.85
(.19)
2005
$2.16
.60
.13
.01
(.19)
.07
.01
(.37)
(2.71)
1.38
-
2.71
(.20)
(.13)
-
$2.04
(.01)
$1.22
(.01)
$1.65
(.01)
$1.17
(.03)
$2.55
Note 2: For the year ended December 31, 2008, net income, FFO and AFFO is after $.59 of
impairment charges. For the year ended December 31, 2006, net income, FFO and AFFO is after
$.53, our share of the mortgage prepayment premium expense. For the year ended December 31,
2005, net income, FFO and AFFO include $1.04 from the gain on sale of air rights. See Note 1
above.
37
Item 7.
Operations.
Management’s Discussion and Analysis of Financial Condition and Results of
Comparison of Years Ended December 31, 2009 and December 31, 2008
Rental Revenues
Rental income. Rental income increased by $3 million, or 8.3%, to $39 million for the year
ended December 31, 2009, from $36 million for the year ended December 31, 2008. The increase in
rental revenues is primarily due to rental revenues of $3.4 million earned during the year ended
December 31, 2009 on twelve properties acquired by us during 2008. The increase in rental income
was offset by a decrease in rent payments from two tenants adversely affected by the recession and by
a lease termination in June 2009, for which we received the lease termination fee referred to below.
Lease termination fee. The lease termination fee income received in 2009 resulted from a
$1,905,000 lease termination payment from a retail tenant that had been paying its rent on a current
basis, but had vacated the property in March 2009, offset by the write off of the entire balance of the
unbilled rent receivable and intangible lease asset related to this property, aggregating $121,000.
There was no comparable fee income in 2008. This property was released effective November 9,
2009.
Operating Expenses
Depreciation and amortization expense. Depreciation and amortization expense increased by
$689,000, or 8.8%, to $8.5 million for the year ended December 31, 2009, from $7.8 million for the
year ended December 31, 2008. The increase was primarily due to depreciation and amortization
increases of $660,000 on twelve properties acquired during 2008, as well as from an increase in
depreciation expense of building improvements.
Real estate expenses. Real estate expenses increased by $340,000, or 98.8%, to $684,000 for
the year ended December 31, 2009, from $344,000 for the year ended December 31, 2008, resulting
primarily from real estate taxes and utilities related to our vacant property. In addition, the year ended
December 31, 2009 includes real estate taxes for another property which became subject to a lease
with a new tenant under which we are responsible for the real estate taxes, and an increase in repairs,
maintenance and other operating expenses at several properties.
Other Income and Expenses
Gain on dispositions of real estate of unconsolidated joint ventures. In the year ended
December 31, 2008, we recognized a net gain of $297,000 on the sale by a joint venture of a vacant
property. There was no comparable gain in the year ended December 31, 2009.
Interest and other income. Interest and other income decreased by $175,000, or 32.8%, to
$358,000 for the year ended December 31, 2009, from $533,000 for the year ended December 31,
2008. The decrease resulted primarily because we had less cash available for investment as we
applied available cash to purchase nine properties in September 2008. In addition, interest rates
earned on short-term cash equivalents declined significantly. Offsetting the decrease in interest
income was $110,000 of consulting fee income and $37,000 received for granting an easement at one
of our properties, both recorded in 2009.
38
Interest expense. Interest expense decreased by $229,000, or 1.7%, to $13.6 million for the
year ended December 31, 2009, from $13.8 million for the year ended December 31, 2008. This
decrease resulted from the payoff in full of two mortgage loans during the year, as well as from the
monthly principal amortization of other mortgages. These decreases were offset by interest expense
on fixed rate mortgages placed on three properties between September 2008 and March 2009. In
addition, at the end of September 2008, we borrowed $34 million under our line of credit which was
applied to the purchase of eight properties, of which $7 million was repaid in November 2008 with a
portion of the proceeds from a mortgage financing of one of our properties. Accordingly, interest
expense relating to our line of credit increased by $297,000 during the year ended December 31,
2009.
Amortization of deferred financing costs. Amortization of deferred financing costs increased
by $146,000, or 25.1%, to $728,000 for the year ended December 31, 2009, from $582,000 for the
year ended December 31, 2008. The increase results primarily from accelerated amortization of
deferred financing costs of $118,000 relating to a mortgage loan that was refinanced during 2009 and
from $37,000 relating to a mortgage loan that was repaid in full during 2009.
Income from settlement with former president. In November 2009, civil litigations
commenced by us as plaintiff, against our former president and chief executive officer, arising out of
his inappropriate financial dealings, were settled, and we received $900,000 in cash and 5,641 shares
of our common stock valued at $51,000 (based on the November 23, 2009 closing price). We were
also assigned an interest in a real estate consulting venture, the value of which was fully reserved
against.
Gain on sale of excess unimproved land. During the year ended December 31, 2008, we sold
five acres of excess unimproved land that we acquired as part of the purchase of a flex building in
2000 and recognized a gain of $1.8 million. There was no such gain in the year ended December 31,
2009.
Discontinued Operations
Income from discontinued operations increased by $12.4 million, or 245%, to $7.3 million for the
year ended December 31, 2009 from a loss of $5.1 million for the year ended December 31, 2008 and
includes the operations of eight of our properties, five of which were conveyed to the mortgagee and three
of which were sold during the year ended December 31, 2009.
In July 2009, non-recourse mortgages, secured and cross collateralized by five of our properties
that had formerly been leased to Circuit City Stores Inc., had an outstanding balance of $8,706,000.
Circuit City Stores, Inc. filed for protection under the federal bankruptcy laws in November 2008 and
rejected leases for two of our properties in December 2008 and rejected leases for the remaining three
properties in March 2009. No payments were made on these mortgages from December 1, 2008 and a
letter of default was received on March 16, 2009. In July 2009, these properties were conveyed to the
mortgagee by deeds-in-lieu of foreclosure and we and our five wholly-owned subsidiaries which owned the
Circuit City properties were released from all obligations, including principal, interest and real estate taxes
due. We had accrued mortgage interest expense totaling $297,000 for the period December 2008 through
July 7, 2009 and accrued real estate tax expense totaling $246,000 on these five properties. The carrying
value of the portfolio of the properties transferred of $8,075,000, net of the $5,231,000 of impairment
charges taken at December 31, 2008, approximated their fair value at the time of transfer. During the year
ended December 31, 2009, we recognized an $897,000 gain based on the excess of the carrying amount of
39
the payables (mortgage, real estate taxes and mortgage interest) over the fair value of the portfolio of
properties transferred. The gain also reflects the write off of deferred costs and escrows relating to these
mortgages totaling $277,000.
In addition to the $5,231,000 impairment charge taken during the year ended December 31,
2008 against the Circuit City properties discussed above, an impairment charge of $752,000 was taken
against another property in 2008, where a retail tenant that had been paying its rent on a current basis
had vacated the property in 2006. In March 2009, we sold this property and recorded an impairment
charge of $229,000 to recognize the loss.
In October 2009, in unrelated transactions, we sold two properties and recognized gains for
accounting purposes totaling $5,757,000. There were no comparable gains in the year ended December
31, 2008.
Comparison of Years Ended December 31, 2008 and December 31, 2007
Rental Revenues
Rental revenues. Rental revenues increased by $2.6 million, or 7.8%, to $36 million for the
year ended December 31, 2008, from $33.4 million for the year ended December 31, 2007. The
increase in rental revenues is substantially due to rental revenues of $1.7 million earned during the
year ended December 31, 2008 on twelve properties acquired by us during 2008. The increase in
2008 rental income as compared to 2007 also resulted from a $253,000 write off of the intangible
lease liability related to a property where we directly assumed in December 2008 the sublease for a
property leased by us to Circuit City and subleased by Circuit City to a furniture retailer.
Additionally, in 2008 and 2007, we wrote off the entire balance of unbilled rent receivable relating to
several properties.
Operating Expenses
Depreciation and amortization expense. Depreciation and amortization expense increased by
$402,000, or 5.4%, to $7.8 million for the year ended December 31, 2008, from $7.4 million for the
year ended December 31, 2007. The increase was primarily due to depreciation and amortization of
$370,000 on twelve properties acquired between January and September 2008.
General and administrative expenses. General and administrative expenses decreased by
$13,000, or .2%, to $6.508 million for the year ended December 31, 2008, from $6.521 million for
the year ended December 31, 2007. The decrease is due to a number of factors, including: (a) a
$100,000 decrease paid under the Compensation and Services Agreement; (b) a $91,000 decrease in
Federal excise tax expense; and (c) a $64,000 decrease in state tax expense. These decreases were
offset by several factors, including: (i) a $133,000 increase in payroll and payroll related expenses for
full-time employees; and (ii) a $105,000 increase in professional fees incurred in connection with
civil litigations commenced by us as plaintiff, arising out of the activities of our former president and
chief executive officer.
Real estate expenses. Real estate expenses increased by $135,000, or 64.6%, to $344,000 for
the year ended December 31, 2008, from $209,000 for the year ended December 31, 2007, resulting
primarily from real estate taxes for three of our properties, including one vacant property and a
property which became subject to a lease with a new tenant under which we are responsible for the
real estate taxes.
40
Other Income and Expenses
Gain on dispositions of real estate of unconsolidated joint ventures. In the years ended
December 31, 2008 and 2007, two of our joint ventures each sold a vacant property and we
recognized gains on sale of $297,000 and $583,000, respectively.
Interest and other income. Interest and other income decreased by $1.2 million, or 70%, to
$533,000 for the year ended December 31, 2008, from $1.8 million for the year ended December 31,
2007. Due to the credit crisis, interest rates steadily declined over the past several quarters resulting
in a decrease in the income we earn on our investment in short-term cash equivalents. In addition, we
had less cash available for investment after we paid a special distribution of $6.7 million to our
stockholders in October 2007 and purchased nine properties in September 2008. Also contributing to
the decrease in interest and other income was the inclusion of a $118,000 gain on the sale of
available-for-sale securities in the year ended December 31, 2007. We did not have a similar sale of
securities in 2008.
Interest expense. Interest expense increased by $99,000, or .7%, to $13.8 million for the year
ended December 31, 2008, from $13.7 million for the year ended December 31, 2007. At the end of
September 2008, we borrowed $34 million under our credit facility which was applied to the purchase
of eight Office Depot properties, of which $7 million was repaid in November 2008 with a portion of
the proceeds from a mortgage financing of one of our properties. Accordingly, interest expense
relating to our credit facility increased by $360,000 during the year ended December 31, 2008. The
increase was also due to interest expense on fixed rate mortgages placed on three properties between
August 2007 and September 2008, and the assumption of two fixed rate mortgages in connection with
the purchase of two properties in January and February 2008. These increases were offset from the
payoff in full of two mortgage loans, as well as from the monthly principal amortization of other
mortgages.
Gain on sale of excess unimproved land. During the year ended December 31, 2008, we sold
five acres of excess land that we acquired as part of the purchase of a flex building in 2000 and
recognized a gain of $1.8 million. There was no such gain in the year ended December 31, 2007.
Discontinued Operations
Income from discontinued operations decreased by $8 million, or 274%, to a loss of $5.1
million for the year ended December 31, 2008 from income of $2.9 million for the year ended
December 31, 2007 and includes the operations of eight of our properties, five of which were
conveyed to the mortgagee (Circuit City properties) during the year ended December 31, 2009 and
three of which were sold during the year ended December 31, 2009. The decrease in discontinued
operations results substantially from $6 million of impairment charges we recorded during the year
ended December 31, 2008 relating to four of these properties. An impairment charge of $5.2 million
was recorded relating to three of our Circuit City properties and $752,000 was related to a retail
furniture property. Circuit City rejected leases for two of the properties in December 2008 and
rejected the lease for the third property in March 2009. Our analysis determined that the other two
properties leased to Circuit City which were rejected in March 2009, did not require an impairment
charge. Although the retail furniture property has been vacant, the tenant is current in its rent
payments. There was no impairment charge recorded in the year ended December 31, 2007.
41
Liquidity and Capital Resources
Our capital sources include income from our operating activities, cash and cash equivalents,
available-for-sale securities, borrowings under a revolving credit facility, refinancing existing mortgage
loans and obtaining mortgage loans secured by our unencumbered properties. Our available liquidity at
December 31, 2009 was approximately $34.8 million, including $28 million of cash and cash equivalents
and $6.8 million of marketable securities. Our available liquidity as of March 8, 2010 (giving effect to the
acquisition by us of a community shopping center on February 24, 2010) was approximately $30 million,
including cash and available-for-sale securities.
Liquidity and Financing
We expect to meet all of our capital needs with cash flow generated by our operating activities,
primarily, rental income. To the extent that cash provided by our operations is not adequate to cover all of
our capital needs (which we do not anticipate), we will be required to use our available cash and cash
equivalents and/or sell our marketable securities to pay our capital needs.
Mortgage loans aggregating $18.6 million in principal amount mature in 2010, of which a $2.4
million mortgage loan was repaid in January 2010, a $4.5 million mortgage loan matured on March 1,
2010 and a $9 million mortgage loan is due on April 1, 2010. Additionally, one mortgage loan, with an
outstanding principal amount of $1.7 million, has been, since October, 2009, callable on ninety days notice
by the mortgagee. We are seeking to refinance or extend the mortgage loans which have or will become
due in 2010, as well as the mortgage loan due upon demand, and we intend to repay the amount not
refinanced or extended from our existing cash position, including our marketable securities. In addition, at
December 31, 2009, we owned unencumbered income producing real estate with an aggregate carrying
value, before accumulated depreciation, of $74.3 million, which we may seek to finance if we determine
we need additional liquidity.
We continually seek to refinance existing mortgage loans on terms we deem acceptable, in order to
generate additional liquidity. Additionally, in the normal course of our business, we sell properties when
we determine that it is in our best interests, which also generates additional liquidity. Further, since each of
our encumbered properties is subject to a non-recourse mortgage (with standard carve outs), if our in-house
evaluation of the market value of such property is substantially less than the principal balance outstanding
on the mortgage loan, we may determine to convey such property to the mortgagee in order to terminate
our mortgage obligations, including payment of interest, principal and real estate taxes, with respect to
such property.
Our credit facility expires on March 31, 2010. Currently, there is $27 million outstanding under
our credit facility. We have negotiated a modification and extension of our credit facility with our lending
syndicate and have reached an understanding on all material terms, including among other items, a two
year extension. For a discussion of all of the material terms of the proposed modification and extension of
the credit facility, see "Credit Facility" below. We are confident the modification and extension of the
credit facility will be consummated, and that our lending syndicate will continue our current credit facility
until the modification and extension is consummated. In the event that we do not consummate the
modification and extension, our lending syndicate may demand prompt re-payment of the $27 million
outstanding under the credit facility. If that occurs and we are unable to fully repay the $27 million
outstanding as we have been unable to (i) obtain a new credit facility, (ii) secure adequate funds by
refinancing existing mortgages and/or mortgaging unencumbered properties, or (iii) unable to raise funds
by other means (whether by equity or debt offerings or securing short term financing, etc.), we will be
required to sell certain of our properties at prices we may deem inadequate in order to secure funds to
42
repay all amounts outstanding under our credit facility.
Typically, we utilize funds from a credit facility to acquire a property and, thereafter secure long
term, fixed rate mortgage debt on such property. We apply the proceeds from the mortgage loan to repay
borrowings under the credit facility, thus providing us with the ability to re-borrow under the credit facility
for the acquisition of additional properties. As a result, in order to grow our business, it is important to
have a credit facility in place in order for us to pursue an active acquisition program. If we are unable to
consummate the modification and extension of our credit facility or obtain a new credit facility, then unless
we can raise additional equity or long term debt, of which there is no assurance, we will be significantly
constrained in our ability to acquire properties. In addition, in the current credit environment, borrowers
are limited in their ability to obtain mortgage financing. If we continue to be limited in obtaining mortgage
financing (either for acquisitions or with respect to our properties), it will also adversely affect our ability
to acquire additional properties. Accordingly, our long term liquidity is dependent (i) upon our ability to
document the modification and extension of our credit facility or obtain a new credit facility, (ii) the
increased availability of long term, institutional mortgage financing, or (iii) our ability to raise additional
equity or long term debt.
Credit Facility
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 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, 2009 and March 10, 2010, there was $27 million outstanding under the
facility.
We have negotiated a modification and extension of our credit facility with our lending syndicate
and have agreed on all of the material terms. The proposed modification and extension will reduce the
availability under the facility from $62.5 million to $40 million, extend the expiration date from March 31,
2010 to March 31, 2012, increase the interest rate from the lower of LIBOR plus 2.15% or the banks prime
rate to 90 day LIBOR plus 3%, with a minimum interest rate of 6% per annum. Until we have executed
the modification and extension, our lending syndicate has advised us that our current credit facility will
remain in place, but we will not be permitted to draw down any additional funds under our credit facility.
Although, we are confident that the modification and extension will be documented substantially in
accordance with the agreed upon terms, there can be no assurance that it will be consummated. In the
event, that the modification and extension is not consummated, we expect to have sufficient liquidity
available to us to fully repay the $27 million outstanding under our credit facility. As a result, we will be
required to seek liquidity from other sources, including refinancing mortgages, financing unencumbered
properties, selling assets, raising equity or obtaining short or long term debt.
Contractual Obligations
The following sets forth our contractual cash obligations as of December 31, 2009, which
relate to interest and amortization payments and balances due at maturity under outstanding
mortgages secured by our properties for the periods indicated. It also includes the amount due at
43
maturity under our credit facility and does not include the $17.7 million mortgage we assumed in
connection with the purchase of a community shopping center we acquired on February 24, 2010
(amounts in thousands):
Contractual Obligations
Mortgages payable –
Payment due by period
Total
Less than
1 Year
1-3
Years
4-5
Years
More than
5 Years
interest and amortization
$ 92,011
$16,220
$32,158
$29,871
$ 13,762
Mortgages payable –
balances due at maturity
154,335
18,591
35,287
11,040
89,417
Credit facility
Total
27,000
$273,346
27,000
$61,811
-
$67,445
-
$40,911
-
$103,179
As of December 31, 2009, we had outstanding approximately $190.5 million in mortgage
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 $48.4 million due in the next three years will be paid primarily from cash generated
from our operations. We anticipate that loan maturities of approximately $80.9 million, including
$27 million due under our credit facility, due in the next three years will be paid primarily from cash
and cash equivalents and mortgage financings and 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, obtain
long or short term debt, 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
(amounts in thousands):
Total
$3,487
2010
$297
2011
$297
2012
$297
2013
$297
2014
$328
More than
5 years
$1,971
We had no outstanding contingent commitments, such as guarantees of indebtedness, or any
other contractual cash obligations at December 31, 2009.
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 (pursuant to Internal Revenue Procedures). 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
44
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 distributions to stockholders in order for us to maintain
our REIT status under the Internal Revenue Code.
In 2008, our board determined that, in view of the economic environment, we should
conserve our capital. As a result, all of our dividends declared in 2009 consisted of 90% stock and
10% cash, pursuant to Revenue Procedures issued by the Internal Revenue Service. On March 9,
2010, our board of directors declared a quarterly dividend of $.30 per share payable in cash on April
6, 2010 to record holders on March 26, 2010. Our board of directors reviews the dividend policy at
each regularly scheduled quarterly board meeting to determine if any changes to our dividend should
be made and whether the distribution should consist of all cash or a combination of cash and stock.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies
Our significant accounting policies are more fully described in Note 2 to our Consolidated
Financial Statements, provided in this annual report on Form 10-K. 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 critical accounting policies include the following, discussed
below.
Purchase Accounting for Acquisition of Real Estate
The fair value of real estate acquired is allocated to 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. We assess fair value of the lease intangibles based on estimated cash flow projections
that utilize appropriate discount rates and available market information. 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
45
our tenants pay in accordance with the terms of their respective leases reported on a straight line basis
over the term of each lease. It is our policy not to record straight-line rent beyond the expected useful
life of a building. 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 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 receivables on a quarterly basis and take into consideration the tenant’s payment history and the
financial condition of the tenant. In the event that the collectability of an unbilled rent receivable is in
doubt, we are required to take a reserve against the receivable or a direct write off of the receivable,
which has an adverse affect on net income for the year in which the reserve or direct write off is
taken, and will 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 are any indicators of
impairment to the value of any of our real estate assets, including deferred costs and intangibles, in order
to determine if there is any need for an impairment charge. In reviewing the portfolio, we examine the
type of asset, the current financial statements or other available financial information of the tenant, 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, if the
undiscounted cash flow analysis yields an amount which is less than the asset’s carrying amount, an
impairment loss is recorded to the extent that the estimated fair value is less than the asset’s carrying
amount. The estimated fair value is determined using a discounted cash flow model of the expected
future cash flows through the useful life of the property. 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. We generally do not obtain any independent appraisals in determining value but rely on our
own analysis and valuations. Any impairment charge 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 any impairment charge, but it will not affect our cash flow or our distributions until such time
as we dispose of the property.
Item 7A. Qualitative and Quantitative Disclosures About Market Risk.
Our primary market risk exposure is the effect of changes in interest rates on the interest cost of
draws on our revolving variable rate credit facility and the effect of changes in the fair value of our interest
rate swap agreement. Interest rates are highly sensitive to many factors, including governmental monetary
and tax policies, domestic and international economic and political considerations and other factors beyond
our control.
At December 31, 2009, we had one interest rate swap agreement outstanding that was entered into
March 2009. The fair market value of the interest rate swap is dependent upon existing market interest
rates and swap spreads, which change over time. As of December 31, 2009, if there had been a 1%
increase in forward interest rates, the fair market value of the interest rate swap and net unrealized gain on
derivative instruments would have increased by approximately $394,000. If there were a 1% decrease in
forward interest rates, the fair market value of the interest rate swap and net unrealized gain on derivative
instruments would have decreased by approximately $440,000. These changes would not have any impact
on our net income or cash.
46
We utilize interest rate swaps to limit interest rate risk. Derivatives are used for hedging purposes
rather than speculation. We do not enter into financial instruments for trading purposes.
In connection with our mortgage debt (excluding our mortgage subject to the interest swap
agreement), it 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 facility is a
revolving variable rate facility which is sensitive to interest rates. 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.
We assessed the market risk for our revolving variable rate credit facility and believe that a 1%
increase in interest rates would cause a decrease in net income and cash of $270,000 and a 1% decrease
would cause an increase in net income and cash of $270,000 based on the $27 million outstanding on our
credit facility at December 31, 2009.
The fair market value 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 debt obligations by scheduled principal cash flow payments
and maturity date, weighted average interest rates and estimated fair market value at December 31,
2009 (excluding a community shopping center we acquired on February 24, 2010):
For the Year Ended December 31
(amounts in thousands)
2010
2011
2012
2013
2014
There-
after
Total
Fair
Market
Value
$23,259
$ 8,061
$36,994 $ 8,999
$19,356
$93,849 $190,518
$184,443
6.35%
6.29% 6.29% 6.20%
6.18%
6.09%
6.19%
7.00%
$27,000
-
-
-
-
-
$27,000
$26,681
Fixed rate:
Long term
debt
Weighted
average
interest rate
Variable rate:
Long term
debt (Note 1)
Note 1: Our credit line facility matures on March 31, 2010 and bears interest at the lower of LIBOR plus
2.15% or the respective bank’s prime rate.
Item 8. Financial Statements and Supplementary Data.
This information appears in Item 15(a) of this Annual Report on Form 10-K, and is incorporated
47
into this Item 8 by reference thereto.
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 (the “Exchange
Act”), 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, 2009. In making this assessment, our management used criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-
48
Integrated Framework.
Based on its assessment, our management believes that, as of December 31, 2009, 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 F-1 of this Annual Report on Form 10-K.
Item 9B. Other Information.
None.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
We have adopted an amended and restated business code of 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 business code of 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 SEC 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 our 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 for free 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 Exchange Act. 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, additional information required by this Item 10 shall be included in our proxy
statement for our 2010 annual meeting of stockholders, to be filed with the SEC not later than April
30, 2010, and is incorporated herein by reference thereto, 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 this Item 11 shall be
included in our proxy statement for our 2010 annual meeting of stockholders, to be filed with the
SEC not later than April 30, 2010, and is incorporated herein by reference thereto, including the
49
information set forth under the captions “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 this Item 12
shall be included in our proxy statement for our 2010 annual meeting of stockholders, to be filed with
the SEC not later than April 30, 2010 and is incorporated herein by reference thereto, including the
information set forth under the caption “Stock Ownership of Certain Beneficial Owners, Directors
and Officers.”
Equity compensation plan information is incorporated herein by reference to Part II, Item 4,
“Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities,” of this annual report.
Item 13. Certain Relationships and Related Transactions.
The information concerning certain relationships, related transactions and director
independence required by this Item 13 shall be included in our proxy statement for our 2010 annual
meeting of stockholders, to be filed with the SEC not later than April 30, 2010 and is incorporated
herein by reference thereto, including the information set forth under the captions “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 this Item 14 shall be
included in our proxy statement for our 2010 annual meeting of stockholders, to be filed with the
SEC not later than April 30, 2010, and is incorporated herein by reference thereto, including the
information set forth under the caption “Independent Registered Public Accounting Firm.”
50
Item 15. Exhibits and Financial Statement Schedules
PART IV
(a)
(1)
Documents filed as part of this Report:
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-30
F-31 through F-33
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
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. 2009 Incentive Plan (incorporated by reference to Exhibit A to
One Liberty Properties, Inc.'s Proxy Statement on Schedule 14A filed on April 29, 2009).
51
4.2
10.1
10.2
10.3
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).
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).
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).
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. (incorporated by reference to
Exhibit 10.3 to One Liberty Properties, Inc.’s Annual Report on Form 10-K filed on March
13, 2008).
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 on March 14, 2007).
14.1
Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to One
Liberty Properties, Inc.’s 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
52
Pursuant to the requirements of Section 13 or 15(d) of the Exchange, the Registrant has duly
caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.
SIGNATURES
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 Exchange Act, 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
/s/ Patrick J. Callan, Jr.
Patrick J. Callan, Jr
/s/ Joseph A. Amato
Joseph A. Amato
/s/ Charles Biederman
Charles Biederman
/s/ James J. Burns
James J. Burns
/s/ Jeffrey A. Gould
Jeffrey A. Gould
/s/ Matthew J. Gould
Matthew J. Gould
/s/ Joseph DeLuca
Joseph DeLuca
/s/ J. Robert Lovejoy
J. Robert Lovejoy
/s/ David W. Kalish
David W. Kalish
Chairman of the
Board of Directors
March 12, 2010
President, Director and
Chief Executive Officer
March 12, 2010
Director
Director
Director
Director
Director
Director
Director
March 12, 2010
March 12, 2010
March 12, 2010
March 12, 2010
March 12, 2010
March 12, 2010
March 12, 2010
Senior Vice President and
Chief Financial Officer
March 12, 2010
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, 2009, 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, One Liberty Properties, Inc. and Subsidiaries maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2009, 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, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity and
cash flows for each of the three years in the period ended December 31, 2009 of the Company and our report
dated March 12, 2010 expressed an unqualified opinion thereon.
New York, New York
March 12, 2010
/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, 2009 and 2008, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the three years in the period ended December 31,
2009. 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, 2009 and
2008, and the consolidated results of their operations and their cash flows for each of the three years in the
period ended December 31, 2009, 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, 2009, 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 12, 2010
expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
New York, New York
March 12, 2010
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
Properties held for sale
Assets related to properties held for sale
Investment in unconsolidated joint ventures
Cash and cash equivalents
Available-for-sale securities (including treasury bills of $3,999 in 2009)
Unbilled rent receivable
Unamortized intangible lease assets
Escrow, deposits and other assets and receivables
Investment in BRT Realty Trust at market (related party)
Unamortized deferred financing costs
December 31,
2009
2008
$ 88,050
305,017
393,067
47,374
345,693
-
-
5,839
28,036
6,762
10,706
7,157
2,471
189
1,833
$408,686
$ 88,050
304,441
392,491
39,378
353,113
34,343
2,129
5,857
10,947
297
9,623
8,018
2,055
111
2,612
$429,105
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable
Mortgages payable – properties held for sale
Line of credit
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;
10,879 and 9,962 shares issued and outstanding
Paid-in capital
Accumulated other comprehensive income (loss)
Accumulated undistributed net income
Total stockholders' equity
Total liabilities and stockholders’ equity
$190,518
$207,553
-
27,000
2,456
3,757
4,827
228,558
-
-
17,961
27,000
2,239
5,143
5,234
265,130
-
-
10,879
143,272
191
25,786
9,962
138,688
(239)
15,564
180,128
163,975
$408,686
$429,105
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,
2008
2009
2007
Revenues:
Rental income
Lease termination fee
Total revenues
Operating expenses:
Depreciation and amortization
General and administrative (including $2,188, $2,188
and $2,290, respectively, to related party)
Real estate expenses
Leasehold rent
Total operating expenses
Operating income
Other income and expenses:
Equity in earnings of unconsolidated joint ventures
Gain on dispositions of real estate - unconsolidated
joint ventures
Interest and other income
Interest:
Expense
Amortization of deferred financing costs
Income from settlement with former president
Gain on sale of excess unimproved land
$39,016
1,784
40,800
$36,031
-
36,031
$33,439
-
33,439
8,527
7,838
7,436
6,540
684
308
16,059
6,508
344
308
14,998
6,521
209
308
14,474
24,741
21,033
18,965
559
-
358
(13,561)
(728)
951
-
622
297
533
(13,790)
(582)
-
1,830
648
583
1,776
(13,691)
(596)
-
-
Income from continuing operations
12,320
9,943
7,685
Discontinued operations:
Income from operations
Impairment charges
Gain on troubled mortgage restructuring, as a result of
conveyance to mortgagee
Net gain on sales
Income (loss) from discontinued operations
896
(229)
897
5,757
7,321
932
(5,983)
-
-
2,905
-
-
-
(5,051)
2,905
Net income
$19,641
$ 4,892
$10,590
Weighted average number of common shares outstanding:
Basic
Diluted
Net income per common share – basic:
Income from continuing operations
Income (loss) from discontinued operations
Net income per common share
Net income per common share – diluted:
Income from continuing operations
Income (loss) from discontinued operations
Net income per common share
Cash distributions per share of common stock
Stock distributions per share of common stock
10,651
10,812
10,183
10,183
10,069
10,069
$ 1.15
.69
$ 1.84
$ 1.14
.68
$ 1.82
$ .08
$ .80
$
$
$
$
.98
(.50)
.48
.98
(.50)
.48
$ 1.30
-
$
$ .76
.29
$ 1.05
$ .76
.29
$ 1.05
$ 2.11
-
$
See accompanying notes.
F-4
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the Three Years Ended December 31, 2009
(Amounts in Thousands, Except Per Share Data)
Common
Stock
$9,823
Paid-in
Capital
$134,826
Accumulated
Other
Comprehensive
Income (Loss)
$ 935
Accumulated
Undistributed
Net Income
$ 34,541
Total
$180,125
Balances, December 31, 2006
Cash 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)
237
5
-
(3,053)
4,482
(5)
-
-
-
-
826
-
-
-
Balances, December 31, 2007
9,906
137,076
Cash distributions –
common stock ($1.30 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
-
(125)
158
23
-
(1,702)
2,449
(23)
-
-
-
-
888
-
-
-
Balances, December 31, 2008
9,962
138,688
Distributions – common stock
cash - $.08 per share
stock - $.80 per share
Repurchase of common stock
Retirement of common stock
Restricted stock vesting
Compensation expense –
restricted stock
Net income
Other comprehensive income -
Net unrealized gain on
available-for-sale securities
Net unrealized gain on
derivative instruments
Comprehensive income
-
1,160
(268)
(6)
31
-
-
-
-
-
-
4,955
(1,148)
(45)
(31)
853
-
-
-
-
-
-
-
-
-
-
(591)
-
344
-
-
-
-
-
-
(583)
-
(239)
-
-
-
-
-
-
-
319
111
-
(21,218)
-
(21,218)
(3,212)
-
-
-
10,590
4,719
-
826
10,590
-
______-
__(591)
_9,999
23,913
171,239
(13,241)
-
(13,241)
(1,827)
-
-
-
4,892
2,607
-
888
4,892
-
-
(583)
4,309
15,564
163,975
(948)
(8,471)
-
-
-
-
19,641
-
-
-
(948)
(2,356)
(1,416)
(51)
-
853
19,641
319
111
20,071
Balances, December 31, 2009
$10,879
$143,272
$ 191
$25,786
$180,128
See accompanying notes.
F-5
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in Thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on sale of excess unimproved land, real estate and other
Gain on troubled mortgage restructuring, as a result of
conveyance to mortgagee
Increase in rental income from straight-lining of rent
Decrease in rental income resulting from bad debt expense
Decrease (increase) in rental income from amortization of
intangibles relating to leases
Impairment charges
Amortization of restricted stock expense
Retirement of common stock
Change in fair value of non-qualifying interest rate swap
Gain on dispositions of real estate related to unconsolidated
joint ventures
Equity in earnings of unconsolidated joint ventures
Distributions of earnings from unconsolidated joint ventures
Depreciation and amortization
Amortization of financing costs
Changes in assets and liabilities:
(Increase) decrease in escrow, deposits, other assets and
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 and excess unimproved land
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:
Borrowing on bank line of credit, net
Proceeds from mortgage financings
Payment of financing costs
Repayment of mortgages and loan payable
Change in restricted cash
Cash distributions - common stock
Repurchase of common stock
Expenses associated with stock issuance
Issuance of shares through dividend reinvestment plan
Net cash (used in) provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Year Ended December 31,
2009
2008
2007
$19,641
$ 4,892
$10,590
(5,757)
(897)
(1,336)
619
23
229
853
(51)
-
-
(559)
507
9,066
1,012
(976)
(682)
21,692
(576)
24,014
(7)
86
4,495
(10,683)
17,329
-
2,559
(208)
(19,780)
-
(2,939)
(1,416)
(148)
-
(21,932)
17,089
10,947
(1,830)
-
(1,201)
356
(371)
5,983
888
-
650
(297)
(622)
535
9,035
631
695
93
19,437
(60,009)
2,976
(379)
1,435
525
-
(55,452)
27,000
14,185
(366)
(13,476)
7,742
(14,640)
(1,827)
-
2,607
21,225
(122)
-
(1,996)
322
(250)
-
826
-
-
(583)
(648)
1,089
8,309
638
(153)
(138)
17,884
(423)
4
(8)
551
843
(551)
416
-
2,700
(695)
(8,588)
(333)
(21,167)
(3,212)
-
4,719
(26,576)
(14,790)
(8,276)
25,737
34,013
Cash and cash equivalents at end of year
$28,036
$10,947
$25,737
Continued on next page
F-6
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Amounts in Thousands)
Supplemental disclosures of cash flow information:
Cash paid during the year for interest expense
Cash paid during the year for income taxes
Supplemental schedule of non-cash investing and financing
activities:
Reclassification of real estate owned to properties held for sale
Reclassification of assets related to properties held for sale
Reclassification of mortgages payable to mortgages payable-
properties held for sale
Mortgage debt extinguished upon conveyance of properties to
mortgagee by deeds-in-lieu of foreclosure
Properties conveyed to mortgagee
Liabilities extinguished upon transfer to mortgagee
Common stock dividend – portion paid in shares of Company’s
common stock
Assumption of mortgages payable in connection with (sale)
purchase of real estate
Purchase accounting allocations – intangible lease assets
Purchase accounting allocations – intangible lease liabilities
Purchase accounting allocations – mortgage payable discount
Year Ended December 31,
2009
2008
2007
$15,287
67
$14,908
81
$14,812
35
$
-
-
-
8,706
8,075
543
6,263
(9,069)
-
-
-
$
$34,343
2,129
17,961
-
-
-
-
2,771
4,362
(451)
(40)
-
-
-
-
-
-
-
-
-
-
-
See accompanying notes.
F-7
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2009
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 furniture and office supply stores),
industrial, office, flex, health and fitness and other properties, a substantial portion of which are
under long-term net leases. As of December 31, 2009, OLP owned 71 properties, one of which is
vacant, and one of which is a 50% tenancy in common interest. OLP’s joint ventures owned a total
of five properties. The 76 properties are located in 27 states.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
On July 1, 2009, OLP adopted the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) as the exclusive source of authoritative U.S. generally accepted
accounting principles (“GAAP”), to be applied by non-government entities, except for Securities and
Exchange Commission (“SEC”) rules and interpretive releases, which are also authoritative GAAP
for U.S. registrants. Upon adoption, the FASB ASC superseded all then existing non-SEC
accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not
included in the FASB ASC became non-authoritative. The FASB ASC does not change U.S. GAAP,
but is intended to simplify user access to all authoritative U.S. GAAP by providing all the
authoritative literature related to a particular topic in one place. The Company’s conversion to FASB
ASC, which was effective for financial statements issued for interim and annual periods ending after
September 15, 2009, did not have any effect on the Company’s consolidated financial position,
results of operations, or cash flows.
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. Although the Company is the managing member, it does not exercise substantial
operating control over these entities, and such entities are not variable-interest entities. These
investments are recorded initially at cost, as investments in unconsolidated joint ventures, and
subsequently adjusted for its share of equity in earnings, cash contributions and distributions. None
of the joint venture debt is recourse to the Company.
The Company has elected to follow the cumulative earnings approach when assessing, for the
statement of cash flows, whether the distribution from the investee is a return of the investor’s
investment as compared to a return on its investment. The source of the cash generated by the
investee to fund the distribution is not a factor in the analysis (that is, it does not matter whether the
cash was generated through investee refinancing, sale of assets or operating results).
Consequently, the investor only considers the relationship between the cash received from the
investee to its equity in the undistributed earnings of the investee, on a cumulative basis, in
assessing whether the distribution from the investee is a return on or return of its investment. Cash
received from the unconsolidated entity is presumed to be a return on the investment to the extent
F-8
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
that, on a cumulative basis, distributions received by the investor are less than its share of the
equity in the undistributed earnings of the entity.
Use of Estimates
The preparation of
the consolidated financial statements in conformity with GAAP 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. It is the
Company’s policy not to record straight-line rent beyond the expected useful life of a building. 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 and the financial condition of the
tenant. Some of the leases provide for 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
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 origination costs are amortized as an
expense over the remaining minimum term of the lease. The Company assesses fair value of the
lease intangibles based on estimated cash flow projections that utilize appropriate discount rates
and available market information.
As a result of the acquisitions made during the year ending December 31, 2008, the Company
recorded additional deferred intangible lease assets of $4,362,000, representing the value of the
acquired above market leases and assumed lease origination costs. The Company also recorded
F-9
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
during the year ending December 31, 2008 additional deferred intangible lease liabilities of
$451,000, representing the value of the acquired below market leases. The Company did not
acquire any properties during the year ended December 31, 2009. The Company recognized a net
(decrease) increase in rental revenue of ($23,000), $371,000 and $250,000 for the amortization of
the above/below market leases for the years ended 2009, 2008 and 2007, respectively. For the
years ended 2009, 2008 and 2007, the Company recognized amortization expense of $534,000,
$499,000 and $290,000, respectively, relating to the amortization of the assumed lease origination
costs. The years ended 2009 and 2008 include a decline in rental revenue of $170,000 and
respectively, and additional amortization expense of $323,000 and $161,000,
$180,000,
respectively, resulting from the accelerated expiration of certain leases.
In 2007, there was no
decline in revenue or additional amortization expense resulting from the accelerated expiration of
rents and leases. At December 31, 2009 and 2008, accumulated amortization of intangible lease
assets was $2,188,000 and $1,813,000, respectively and accumulated amortization of intangible
lease liabilities was $1,562,000 and $1,155,000, respectively.
The unamortized balance of intangible lease assets as a result of acquired above market leases at
December 31, 2009 will be deducted from rental income through 2025 as follows:
2010
2011
2012
2013
2014
Thereafter
$ 375,000
375,000
375,000
376,000
369,000
1,320,000
$3,190,000
The unamortized balance of intangible lease liabilities as a result of acquired below market leases at
December 31, 2009 will be added to rental income through 2022 as follows:
2010
2011
2012
2013
2014
Thereafter
$ 407,000
407,000
407,000
407,000
407,000
2,792,000
$4,827,000
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 are any
indicators of impairment to the value of any of its real estate assets, including deferred costs and
intangibles, in order to determine if there is any need for an impairment charge.
In reviewing the
portfolio, the Company examines the type of asset, the current financial statements or other
available financial information of the tenant, 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, if the undiscounted cash flow analysis yields an
amount which is less than the asset’s carrying amount, an impairment loss is recorded to the extent
that the estimated fair value is less than the asset’s carrying amount. The estimated fair value is
determined using a discounted cash flow model of the expected future cash flows through the useful
F-10
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
life of the property. Real estate assets that are classified as held for sale are valued at the lower of
carrying amount or fair value less costs to sell on an individual asset basis.
A conditional asset retirement obligation (“CARO”) is a legal obligation to perform an asset
retirement activity in which the timing and/or method of settlement is conditional on a future event
that may or may not be within the control of the Company. The Company would record a liability for
a CARO if the fair value of the obligation can be reasonably estimated. There were no CARO’s
recorded by the Company during the three years ended December 31, 2009.
Cash and Cash Equivalents
All highly liquid investments with original maturities of three months or less when purchased are
considered to be cash equivalents. The Company places its cash and cash equivalents in high
quality financial institutions.
Escrow, Deposits and Other Assets and Receivables
Escrow, deposits and other assets and receivables include $738,000 and $866,000 at December
31, 2009 and 2008, respectively, of restricted cash relating to real estate taxes, insurance and other
escrows.
Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the
inability of our tenants to make required rent payments. If the financial condition of a specific tenant
were to deteriorate, resulting in an impairment of its ability to make payments, additional allowances
may be required. At December 31, 2009 and 2008, the balance in allowance for doubtful accounts
was $472,000 and $160,000, respectively, recorded as a reduction to accounts receivable. The
Company records bad debt expense as a reduction of rental income. For the years ended December
31, 2009, 2008 and 2007, the Company recorded bad debt expense of $619,000, $356,000 and
$322,000, respectively. Of these amounts, $58,000 and $277,000 were recorded in discontinued
operations for the years ended December 31, 2009 and 2008. For 2007, discontinued operations did
not include any bad debt expense.
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”. If a property
which was deemed “held for sale” is reclassified to a “held and used” property, “catch-up”
depreciation is recorded. Leasehold interest and the related ground lease payments are amortized
over the initial lease term of the leasehold position. Depreciation expense, including amortization of
a leasehold position, lease origination costs, and capitalized lease commissions amounted to
$8,527,000, $7,838,000 and $7,436,000 for the three years ended December 31, 2009, 2008 and
2007, respectively.
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,
2009 and 2008, accumulated amortization of such costs was $2,943,000 and $3,069,000,
respectively.
F-11
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 at least 90% of its taxable
income and meets certain other conditions.
All distributions made during 2009 were attributable to ordinary income. Distributions made during
2008 included 3% treated as capital gain distributions, with the balance treated as ordinary income.
The Company follows 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. The use of a
valuation allowance as a substitute for derecognition of tax positions is prohibited. The Company
has not identified any uncertain tax positions requiring accrual.
Investment in Available-For-Sale Securities
The Company determines the appropriate classification of equity and debt securities at the time of
purchase and reassesses the appropriateness of the classification at each reporting date. At
December 31, 2009, all marketable securities have been classified as available-for-sale and
recorded at fair value. The fair value of the Company’s equity and debt investment in publicly-traded
companies is determined based upon the closing trading price of the equity and debt securities as of
the balance sheet date and unrealized gains and losses on these securities are recorded as a
separate component of stockholders' equity.
The Company's investment in 37,081 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), was purchased at a
cost of $132,000 and has a fair market value at December 31, 2009 of $189,000. At December 31,
2009, the total cumulative unrealized gain of $80,000 on all investments in equity and debt securities
is reported as accumulated other comprehensive income (loss) in the stockholders' equity section.
Realized gains and losses are determined using the average cost method and is included in
“Interest and other income” on the income statement. During 2009, 2008 and 2007, sales proceeds
and gross realized gains and losses on securities classified as available-for-sale were (amounts in
thousands):
Sales proceeds
Gross realized losses
Gross realized gains
Concentration of Credit Risk
2009
$4,495
-
$
-
$
2008
$ 525
4
$
4
$
2007
$ 843
-
$
$ 118
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.
F-12
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company’s properties are located in 27 states. For the years ended December 31, 2009, 2008
and 2007, 15.4%, 15.8% and 16.0% of rental revenues were attributable to properties located in
Texas and 15.4%, 14.6% and 15.0% of rental revenues were attributable to properties located in
New York. No other state contributed over 10% to the Company’s rental revenues.
The Company owns eleven retail furniture stores that are located in six states and are net leased to
Haverty Furniture Companies, Inc. pursuant to a master lease. The basic term of the net lease
expires August 2022, with several renewal options. These properties, which represented 14.9% of
the depreciated book value of real estate investments at December 31, 2009, generated rental
revenues of approximately $4,844,000 in each year, or 11.9%, 12.0% and 12.7%, of the Company’s
total revenues for the years ended December 31, 2009, 2008 and 2007, respectively.
In September 2008, the Company acquired eight retail office supply stores, located in seven states,
net leased to Office Depot, Inc. pursuant to eight separate leases which contain cross default
provisions. The basic term of the net leases expire September 2018, with several renewal options.
These eight properties plus two other Office Depot properties the Company already owned
represented 13.9% of the depreciated book value of real estate investments at December 31, 2009
and generated rental revenues of $4,433,000 and $1,551,000, or 10.9% and 3.8%, of the
Company’s total revenues for the years ended December 31, 2009 and 2008, respectively.
Earnings Per Common Share
Basic earnings per share was determined by dividing net income for each year by the weighted
average number of shares of common stock outstanding, which includes unvested restricted 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 shared in the earnings of the Company. The weighted
average number of common shares outstanding used for the diluted earnings per share calculations
includes the impact of common stock issued in connection with the dividends paid in April, July and
October 2009 and January 2010, as of the dividend declaration date, as the shares were
contingently issuable as of that date. Such stock dividends were included in basic EPS as of the
issuance date. There was zero impact on the income per common share used in the diluted
earnings per share calculations. There were no options to purchase shares of common stock or
other contracts exercisable for, or convertible into, common stock in the years ended December 31,
2009, 2008 and 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.
Derivatives and Hedging Activities
The Company’s primary objective in using derivatives is to add stability to interest expense and to
manage its exposure to interest rate movements. To accomplish this objective, the Company
primarily uses interest rate swaps as part of its interest rate risk management strategy. At December
31, 2009, the Company had one interest rate swap outstanding, involving the receipt of variable rate
amounts from a counterparty in exchange for the Company making fixed-rate payments over the life
of the agreement without exchange of the underlying principal amount. Derivatives were used to
hedge the variable cash flows associated with variable rate debt regarding two properties, including
F-13
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
one outstanding at December 31, 2009 and one outstanding at December 31, 2008. The Company
did not have any derivatives during the year ended December 31, 2007. The Company does not
use derivatives for trading or speculative purposes.
The Company records all derivatives on the consolidated balance sheets at fair value. In determining
the fair value of its derivatives, the Company considers the credit risk of its counterparties and the
Company and widely accepted valuation techniques, including discounted cash flow analysis on the
the derivative. These counterparties are generally larger financial
expected cash flows of
institutions engaged in providing a variety of financial services. These institutions generally face
similar risks regarding adverse changes in market and economic conditions, including, but not
limited to, fluctuations in interest rates, exchange rates, equity and commodity prices and credit
spreads.
The accounting for changes in the fair value of derivatives depends on the intended use of the
derivative, whether the Company has elected to designate a derivative in a hedging relationship and
apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to
apply hedge accounting. For derivatives designated as cash flow hedges, the effective portion of
changes in the fair value of the derivative is initially reported in accumulated other comprehensive
income (outside of earnings) and subsequently reclassified to earnings in the period in which the
hedged transaction affects earnings. The ineffective portion of changes in the fair value of the
derivative is recognized directly in earnings. For derivatives not designated as cash flow hedges,
changes in the fair value of the derivative are recognized directly in earnings in the period in which
the change occurs.
Stock Based Compensation
The fair value of restricted stock grants, determined as of the date of grant, is amortized into general
and administrative expense over the respective vesting period.
New Accounting Pronouncements
On January 1, 2009, the Company adopted the updated accounting guidance related to business
combinations and is applying such provisions prospectively to business combinations that have an
acquisition date on or after January 1, 2009. The updated guidance (i) establishes the acquisition-
date fair value as the measurement objective for all assets acquired, liabilities assumed and any
contingent consideration, (ii) requires expensing of most transaction costs that were previously
capitalized upon acquisition and (iii) requires the acquirer to disclose to investors and other users of
the information needed to evaluate and understand the nature and financial effect of the business
combination. The principal
impact of the adoption on the Company’s consolidated financial
statements is the requirement that the Company expense most of its transaction costs relating to its
acquisition activities. There were no acquisitions which occurred during the twelve months ended
December 31, 2009.
On January 1, 2009, the Company adopted the updated accounting guidance related to disclosures
about derivative instruments and hedging activities. The updated guidance expands the disclosure
requirements with the intent
financial statements with an enhanced
understanding of (i) how and why an entity uses derivative instruments, (ii) how derivative
instruments and related hedged items are accounted for, and (iii) how derivative instruments and
related hedged items affect an entity’s financial position, financial performance, and cash flows. In
addition, it requires qualitative disclosures about objectives and strategies for using derivatives,
to provide users of
F-14
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
quantitative disclosures about the fair value of and gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in derivative instruments. As a result of the
adoption, the Company has added significant disclosures to its financial statements. Refer to Note
7 for the Company’s added disclosures.
On January 1, 2009,
the Company adopted the updated accounting guidance related to
determining whether instruments granted in share-based payment transactions are participating
securities. The updated guidance states that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating
securities and shall be included in the computation of earnings per share. The adoption had no
impact on the Company as the unvested restricted stock awards were previously included in the
per share amounts for both basic and diluted earnings per share.
On April 1, 2009, the Company adopted the updated accounting guidance related to debt and
equity securities. The updated guidance changes existing accounting requirements for other-than-
temporary impairment for debt securities. The updated guidance also extends new disclosure
requirements for debt and equity securities to interim reporting periods as well as provides new
disclosure requirements. The adoption did not have a material effect on the Company’s
consolidated financial condition, results of operations, or cash flows. Refer to Note 8 for the
Company’s added disclosures.
On April 1, 2009, the Company adopted the updated accounting guidance related to fair value
measurements and disclosures. The updated guidance clarifies the guidance for fair value
measurements when the volume and level of activity for the asset or liability have significantly
decreased and includes guidance on identifying circumstances that indicate a transaction is not
orderly. The updated guidance must be applied prospectively. The adoption did not have a
material effect on the Company’s consolidated financial condition, results of operations, or cash
flows.
In January 2010, the FASB issued Accounting Standards Update No. 2010-1, Accounting for
Distributions to Shareholders with Components of Stock and Cash, (“ASU 2010-1). The updated
guidance clarifies that the stock portion of a distribution to shareholders that allows them to elect to
receive cash or stock with a potential limitation on the total amount of cash that all shareholders
can elect to receive in the aggregate is considered a share issuance that is reflected in earnings
per share prospectively and is not a stock dividend for the purpose of the calculation. ASU 2010-1
is effective for interim and annual periods ending on or after December 15, 2009 and is to be
applied retrospectively. As a result of the adoption of this updated guidance, the Company has
restated its weighted average shares outstanding and its earnings per share for the 2009 interim
quarters as presented in Note 18.
On April 1, 2009, the Company adopted the updated accounting guidance related to subsequent
events. The updated guidance establishes general standards of accounting for and disclosure of
subsequent events.
It renames the two types of subsequent events as recognized subsequent
events or non-recognized subsequent events and modifies the definition of the evaluation period for
subsequent events as events or transactions that occur after the balance sheet date, but before the
issuance of the financial statements. The adoption did not have a material effect on the Company’s
consolidated financial condition, results of operations, or cash flows.
In February 2010, the FASB
further amended the subsequent events guidance with the issuance of Accounting Standards
Update No. 2010-9, Amendments to Certain Recognition and Disclosure Requirements, (“ASU
2010-9”). As a result of the adoption of ASU 2010-9, the Company is no longer required to
F-15
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
disclose the date through which management evaluated subsequent events in the financial
statements, either in originally issued financial statements or reissued financial statements.
The FASB has issued updated consolidation accounting guidance for determining whether an
entity is a variable interest entity, or VIE, and requires the performance of a qualitative rather than a
quantitative analysis to determine the primary beneficiary of a VIE. The updated guidance requires
an entity to consolidate a VIE if it has (i) the power to direct the activities that most significantly
impact the entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the
right to receive benefits from the VIE that could be significant to the VIE. The updated guidance is
effective for the first annual reporting period that begins after November 15, 2009, with early
adoption prohibited. While the Company is currently evaluating the effect of adoption of this
guidance, it currently believes that its adoption will not have a material impact on its consolidated
financial statements.
Reclassification
Certain amounts reported in previous consolidated financial statements have been reclassified in
the accompanying consolidated financial statements to conform to the current year’s presentation,
primarily to reclassify three real estate investments sold in 2009 from real estate investments to
properties held for sale at December 31, 2008 and to reclassify the property operating income and
expenses to discontinued operations in all periods presented.
In addition, five real estate
investments, formerly leased to Circuit City Stores, Inc. and conveyed in July 2009 to the
mortgagee by deeds-in-lieu of foreclosure, were reclassified from real estate investments to
properties held for sale at December 31, 2008 and the related property operating income and
expenses were reclassified to discontinued operations in all periods presented.
NOTE 3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS
During the year ended December 31, 2008, the Company purchased twelve single tenant properties,
including a portfolio of eight properties which are leased to the same tenant, located in eight states
for a total consideration of $62,085,000. There were no property acquisitions during the year ended
December 31, 2009.
With the exception of one vacant property, the rental properties owned at December 31, 2009 are
leased under noncancellable operating leases with current expirations ranging from 2010 to 2038,
with certain tenant renewal rights. Substantially 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.
F-16
NOTE 3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued)
The minimum future rentals to be received over the next five years and thereafter on the operating
leases in effect at December 31, 2009 are as follows:
Year Ending
December 31,
2010
2011
2012
2013
2014
Thereafter
Total
(In Thousands)
$ 38,207
37,882
37,090
36,899
34,605
207,725
$392,408
Included in the minimum future rentals are rentals from a property not owned in fee, but ground
leased from an unrelated third party. The Company paid annual fixed leasehold rent of $237,500
through July 2009 at which time the annual amount increased to $296,875. There are 25%
increases every five years through March 3, 2020 and the Company has a right to extend the lease
for up to five 5-year and one seven month renewal options.
the Company has recorded an unbilled rent receivable
At December 31, 2009 and 2008,
aggregating $10,706,000 and $10,916,000, respectively, including $1,293,000 classified as assets
related to properties held for sale at December 31, 2008, 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.
During the year ended December 31, 2009, the Company wrote-off or recorded accelerated
amortization of $1,545,000 of unbilled “straight-line” rent receivable, which includes $1,384,000
relating to two properties sold during 2009. During the year ended December 31, 2008, the
Company wrote-off or recorded accelerated amortization of $332,000 of unbilled "straight-line" rent
receivable for six retail properties, including five properties formerly leased to Circuit City Stores, Inc.
Lease Termination Fee Income
In June 2009, the Company received a $1,905,000 lease termination fee from a retail tenant that had
been paying its rent on a current basis, but had vacated the property in March 2009. Offsetting this
amount is the write off of the entire balance of the unbilled rent receivable and the intangible lease
asset related to this property, aggregating $121,000. The net amount of $1,784,000 is recorded on
the income statement as “Lease termination fee” income in the year ended December 31, 2009.
The Company has re-leased this property effective November 2009.
Sale of Excess Unimproved Land
In May 2008, the Company sold a five acre parcel of excess, unimproved land to an unrelated third
party for a sales price of $3,150,000 and realized a gain of $1,830,000. This land, adjacent to a flex
property owned by the Company, had been acquired by the Company as part of the purchase of the
flex property in 2000.
NOTE 4 – PROPERTIES HELD FOR SALE AND DISCONTINUED OPERATIONS
Properties are classified as held for sale when management has determined that it has met the
criteria established under GAAP. Properties which are held for sale are not depreciated and their
F-17
NOTE 4 – PROPERTIES HELD FOR SALE AND DISCONTINUED OPERATIONS (Continued)
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
2009, 2008 and 2007 financial statement amounts.
Properties Conveyed to Mortgagee
Circuit City Stores, Inc., a retail tenant which previously leased five properties from five of OLP’s
wholly-owned subsidiaries, filed for protection under the Federal bankruptcy laws in November 2008,
rejected leases for two of the properties in December 2008 and rejected leases for the remaining
three properties in March 2009. These five properties were secured by non-recourse cross-
collateralized mortgages with an outstanding balance of $8,706,000. No payments were made on
these mortgages from December 1, 2008 and a letter of default was received on March 16, 2009.
On July 7, 2009, these properties were conveyed to the mortgagee by deeds-in-lieu of foreclosure
and OLP and the five wholly-owned subsidiaries which owned the Circuit City properties were
released from all obligations, including principal, interest and real estate taxes due.
The $8,075,000 carrying value of the portfolio of the properties transferred, net of the $5,231,000 of
impairment charges taken at December 31, 2008, approximated their fair value at the time of
transfer.
The conveyance of these properties was accounted for as a troubled debt restructuring. The
Company had accrued interest expense on these mortgages and real estate tax expense totaling
$297,000 and $246,000, respectively, for the period December 2008 through July 7, 2009.
In
connection with this conveyance, the Company wrote off deferred costs and escrows relating to
these mortgages totaling $277,000. The Company recognized a “Gain on troubled mortgage
restructuring, as a result of conveyance to mortgagee” based on the excess of the carrying amount
of the payables over the fair value of the portfolio of properties transferred in the amount of $897,000
($.08 per diluted and basic common share).
Sales of Properties
In February 2009, the Company entered into a lease termination agreement with a retail tenant of a
Texas property that had been paying its rent on a current basis, but had vacated the property in
2006. Pursuant to the agreement, the tenant paid the Company $400,000 as consideration for the
lease termination. On March 5, 2009, the Company sold this property for $1,900,000 and recorded
an impairment charge of $229,000 to recognize the loss. This is in addition to an impairment
charge of $752,000 taken in the prior year. The related property income and expenses, including
the impairment charges and the lease termination fee are included in discontinued operations for
the current and prior years. The net book value of this property was $2,072,000 and is included in
properties held for sale at December 31, 2008 on the accompanying consolidated balance sheet.
In October 2009, in unrelated transactions, the Company sold two properties for a total sales price
of $31,788,000, resulting in gains totaling $5,757,000, which is included in net gain on sales in
discontinued operations in the results of operations for the year ended December 31, 2009. In
connection with the closings, one mortgage, in the amount of $9,069,000, was assumed by the
buyer and is included in mortgages payable-properties held for sale on the accompanying balance
sheet at December 31, 2008. The other mortgage, in the amount of $10,477,000, was paid off and
the related interest rate swap agreement was terminated. The Company incurred a $492,000 fee
for terminating the swap which is included in interest expense in discontinued operations. The net
book value of the two properties was $24,104,000 at December 31, 2008 and is included in
properties held for sale on the accompanying consolidated balance sheet.
F-18
NOTE 4 – PROPERTIES HELD FOR SALE AND DISCONTINUED OPERATIONS (Continued)
At December 31, 2008, assets related to the three properties that were sold and the five properties
that were transferred to the mortgagee during 2009 aggregated approximately $2,129,000,
consisting of unbilled rent receivable, unamortized intangible lease assets, unamortized deferred
financing costs and escrow, deposits and other receivables.
The following details the components of income from discontinued operations, primarily the eight
properties discussed above. Rental income for the year ended December 31, 2007 includes
settlements of $405,000 relating to properties sold in a prior year (amounts in thousands):
Rental income
Depreciation and amortization
Real estate expenses
Interest expense
Total expenses
Income from operations
Impairment charges
Gain on troubled mortgage restructuring, as a
result of conveyance to mortgagee
Net gain on sales
Year Ended December 31,
2008
$4,310
2007
$5,116
2009
$3,080
539
270
1,375
2,184
896
(229)
897
5,757
1,196
278
1,904
3,378
932
(5,983)
-
-
873
55
1,283
2,211
2,905
-
-
-
Income (loss) from discontinued operations
$7,321
$(5,051)
$2,905
NOTE 5 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The Company’s five unconsolidated joint ventures each own and operate one property. At
December 31, 2009 and 2008, the Company’s equity investment in unconsolidated joint ventures
totaled $5,839,000 and $5,857,000, respectively. These balances are net of distributions, including
distributions of $593,000 and $1,970,000 received in 2009 and 2008, respectively. In addition to the
gain on sale of properties of $297,000 and $583,000 for the years ended December 31, 2008 and
the unconsolidated joint ventures contributed $559,000, $622,000 and
2007, respectively,
$648,000 in equity earnings for the years ending December 31, 2009, 2008 and 2007, respectively.
See Note 9 for related party fees paid by one of the unconsolidated joint ventures.
In 2008 and 2007, two of the Company’s unconsolidated joint ventures sold their only properties,
which were vacant, resulting in gains to the Company of $297,000 and $583,000, respectively.
NOTE 6 – DEBT OBLIGATIONS
Mortgages Payable
At December 31, 2009, there were 35 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 $318,767,000. The mortgage payments bear interest at fixed rates ranging from
5.44% to 8.8%, and mature between 2010 and 2037. The weighted average interest rate was
6.18% and 6.33% for the years ended December 31, 2009 and 2008, respectively.
F-19
NOTE 6 – DEBT OBLIGATIONS (Continued)
Scheduled principal repayments during the next five years and thereafter are as follows:
Year Ending
December 31,
2010
2011
2012
2013
2014
Thereafter
Total
(In Thousands)
$ 23,259 (a)
8,061
36,994
8,999
19,356
93,849
$190,518
(a) Includes a $4,500,000 mortgage loan which matured on March 1, 2010 which the Company has
not paid off and is currently in discussions with representatives of the mortgagee. In addition, three
other mortgages mature during 2010 which require balloon payments aggregating approximately
$12,400,000 at maturity, including a $2,400,000 mortgage loan the Company paid off in January
2010. Also included is a $1,700,000 mortgage loan which the lender can call on 90 days notice
and the scheduled amortization of principal balances in the amount of $4,659,000.
Line of Credit
The Company has a $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 Facility matures March 31, 2010 and provides that the Company pays interest at the lower of
LIBOR plus 2.15% or the respective bank’s prime rate on funds borrowed and has an unused
facility fee of 1/4%. At December 31, 2009, there was $27,000,000 outstanding under the Facility.
The Company was in compliance with all debt covenants at December 31, 2009.
The Facility is guaranteed by all of the Company’s subsidiaries which own unencumbered
properties and is secured by the outstanding stock of all subsidiaries of the Company. The Facility
is available to pay off existing mortgages, to fund the acquisition of additional properties, or to
invest in joint ventures. 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 Company has negotiated a modification and extension of its credit facility and has come to
agreement on all material terms. The proposed modification and extension will extend the maturity
date from March 31, 2010 to March 31, 2012 and reduce permitted borrowings from $62,500,000 to
$40,000,000. Interest will be charged at the 90 day LIBOR rate plus 3%, with a minimum interest
rate of 6% per annum and there is an unused facility fee of 1/4%. In connection with the
amendment, the Company will pay a commitment fee of $400,000. Although the Company is
confident that the modification and extension will be finalized, there can be no assurance that it will
be consummated.
F-20
NOTE 7 - DERIVATIVE FINANCIAL INSTRUMENTS
The following is a summary of the terminated and designated derivative financial instruments as of
December 31, 2009 and 2008 (amounts in thousands):
Designation
Non-
Qualifying
Qualifying
Derivative
Terminated
Interest Rate
Swap
Active Cash
Flow Interest
Rate Swap
Notional
December 31,
2009
2008
Fair Value
December 31,
Balance Sheet
Location
2009
2008
$
-
$10,675
Other Liabilities
$
-
$650
$9,832
$
-
Other Assets
$
111
$
-
At December 31, 2009, the Company had one qualifying interest rate swap, which was entered into
in March 2009. At December 31, 2008, the Company had one non-qualifying interest rate swap
which was subsequently designated as a qualifying cash flow hedge at April 1, 2009. The
Company terminated the loan agreement on this interest rate swap in October 2009 due to the sale
of the mortgaged property.
The following table presents the effect of the Company’s derivative financial instrument that was not
designated as a cash flow hedge on the consolidated statement of income for the year ended
December 31, 2009 (amounts in thousands):
Derivative Not Designated as
Hedging Instruments
Location of Gain Recognized in
Income on Derivative
Gain Recognized
on Derivative
2009
Interest Rate Swap
Interest Expense
$201
The following table presents the effect of the Company’s derivative financial instruments that
were designated as cash flow hedges on the consolidated statement of income for the year
ended December 31, 2009 (amounts in thousands):
(Loss)
Recognized
in OCI on
Derivatives
(Effective
Portion)
Location of Loss
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
(Loss)
Reclassified from
Accumulated
OCI into Income
(Effective
Portion)
Location of Gain
Recognized in
Income on
Derivative
(Ineffective Portion
and Amount
Excluded from
Effectiveness
Testing)
Gain
Recognized in
Income on
Derivative
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)
$ (24)
Interest Expense
$(135)
Interest Expense
$111
Derivative in
Cash Flow
Hedging
Relationships
Interest Rate
Swap
During the twelve months ended December 31, 2009, the Company recorded a $111,000 gain on
hedge ineffectiveness attributable to the late designation of one of the Company’s interest rate
In addition, the Company
swaps which was recorded as a reduction of interest expense.
F-21
NOTE 7 - DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
accelerated the reclassification of amounts in other comprehensive income to earnings as a result
of the Company’s termination of the loan agreement on this interest rate swap due to the sale of the
mortgaged property in October 2009. The accelerated amount was a gain of $63,000 reclassified
out of other comprehensive income into earnings as a reduction to interest expense due to the
termination of the loan agreement.
At December 31, 2009, the Company had one qualifying interest rate swap designated as a cash
flow hedge. During the next 12 months, the Company estimates an additional $188,000 will be
reclassified from other comprehensive income to interest expense.
The derivative agreement in existence at December 31, 2009 provides that if the wholly owned
subsidiary of the Company which is a party to the agreement defaults or is capable of being
declared in default on any of its indebtedness, then a default can be declared on such subsidiary’s
derivative obligation. In addition, the Company (but not any of its subsidiaries) is a credit support
provider and a party to the derivative agreement and if there is a default by the Company on any of
its indebtedness, a default can be declared on the derivative obligation under the agreement to
which the Company is a party. The default under the Circuit City mortgage obligations referred to in
Note 4 was not a default under the derivative agreement outstanding at December 31, 2009 or the
derivative agreement terminated in October 2009.
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Instruments Not Measured at Fair Value
The following methods and assumptions were used to estimate the fair value of each class of
financial instruments for which adjustments to measure at fair value are not reported:
Cash and cash equivalents: The carrying amounts reported in the balance sheet for these
instruments approximate their fair values.
Mortgages payable: At December 31, 2009, the $184,443,000 estimated fair value of the
Company's mortgages payable is less than their carrying value by approximately $6,075,000,
assuming a market interest rate of 7%.
Line of credit: At December 31, 2009, the $26,681,000 estimated fair value of the Company’s line of
credit is less than its carrying value by approximately $319,000, assuming a market interest rate of
6%.
The fair value of the Company’s mortgages and line of credit was estimated using other observable
inputs such as available market information and discounted cash flow analysis based on borrowing
rates the Company believes it could obtain with similar terms and maturities.
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.
Financial Instruments Measured at Fair Value
The Company accounts for fair value measurements based on the assumptions that market
participants would use in pricing the asset or liability. As a basis for considering market participant
F-22
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
assumptions in fair value measurements, a fair value hierarchy distinguishes between market
participant assumptions based on market data obtained from sources independent of the reporting
entity and the reporting entity’s own assumptions about market participant assumptions.
In
accordance with the fair value hierarchy, Level 1 assets/liabilities are valued based on quoted
prices for identical instruments in active markets, Level 2 assets/liabilities are valued based on
quoted prices in active markets for similar instruments, on quoted prices in less active or inactive
markets, or on other “observable” market inputs and Level 3 assets/liabilities are valued based
significantly on “unobservable” market inputs. The Company does not currently own any financial
instruments that are classified as Level 3.
The Company’s financial assets and liabilities, other than mortgages payable and line of credit, are
generally short-term in nature, and consist of cash and cash equivalents, rents and other
receivables, other assets, and accounts payable and accrued expenses. The carrying amounts of
these assets and liabilities are not measured at fair value on a recurring basis, but are considered
to be recorded at amounts that approximate fair value due to their short-term nature.
The fair value of the Company’s available-for-sale securities and derivative financial instrument was
determined using the following inputs as of December 31, 2009 (amount in thousands):
Carrying and
Fair Value
Maturity Date
Fair Value
Measurements Using
Fair Value Hierarchy
Level 2
Level 1
Financial assets:
Available-for-sale securities:
Corporate debt security
Corporate debt security
Equity securities
Treasury bill
Treasury bill
Derivative financial
instrument
Available-for-sale securities
$1,405
981
566
2,000
1,999
January 15, 2012
February 15, 2037
-
March 11, 2010
May 6, 2010
$
-
-
566
2,000
1,999
$1,405
981
-
-
-
111
-
-
111
The Company’s available-for-sale securities have a total amortized cost of $6,839,000. At
December 31, 2009, unrealized gains on such securities were $257,000 and unrealized losses
were $145,000. The aggregate net unrealized gain of $112,000 is included in accumulated other
comprehensive income on the balance sheet. Fair values are approximated on current market
quotes from financial sources that track such securities. All of the available-for-sale securities in an
unrealized loss position are equity securities and amounts are not considered to be other than
temporary impairment because the Company expects the value of these securities to recover and
plans on holding them until at least such recovery.
Derivative financial instrument
Fair values are approximated using widely accepted valuation techniques including discounted
cash flow analysis on the expected cash flows of the derivative. This analysis reflects the
F-23
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
contractual terms of the derivative, including the period to maturity, and uses observable market-
based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. At
December 31, 2009, this derivative is included in other assets on the consolidated balance sheet.
Although the Company has determined that the majority of the inputs used to value its derivative
fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with it
utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of
default by itself and its counterparty. However, as of December 31, 2009, the Company has
assessed the significance of the impact of the credit valuation adjustments on the overall valuation
of its derivative position and has determined that the credit valuation adjustments are not significant
to the overall valuation of its derivative. As a result, the Company has determined that its derivative
valuation is classified in Level 2 of the fair value hierarchy.
NOTE 9 – RELATED PARTY TRANSACTIONS
At December 31, 2009 and 2008, Gould Investors L.P. (“Gould”), a related party, owned 1,268,221
and 991,707 shares of the common stock of the Company or approximately 11.4% and 9.7%,
respectively. During 2009, Gould purchased 139,970 shares of the Company’s stock in the open
market and received 136,544 shares of the Company in connection with the stock dividends paid
in April, July and October 2009. There were no stock dividends in the years ended December 31,
2008 and 2007. During 2008, Gould purchased 78,466 shares of the Company through the
Company’s dividend reinvestment plan. The Company suspended the dividend reinvestment plan
on December 9, 2008 as described in Note 13.
Effective as of January 1, 2007, the Company entered into a compensation and services
agreement with Majestic Property Management Corp. (“Majestic”), 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 had theretofore 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 $2,025,000, $2,025,000 and $2,125,000 in 2009,
2008 and 2007, respectively, 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 2009, 2008 and 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 is negotiated each year by the Company and Majestic, and is
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.
F-24
NOTE 10 - STOCK BASED COMPENSATION
The Company’s 2009 Stock Incentive Plan (the “2009 Incentive Plan”), approved by the Company’s
stockholders in June 2009, permits the Company to grant stock options, restricted stock and/or
performance-based awards to its employees, officers, directors and consultants. The maximum
number of shares of the Company’s common stock that may be issued pursuant to the 2009
Incentive Plan is 600,000.
The Company’s 2003 Stock Incentive Plan (the “2003 Incentive Plan”), approved by the Company’s
stockholders in June 2003, permitted the Company to grant stock options and restricted stock to its
employees, officers, directors and consultants. The maximum number of shares of the Company’s
common stock that was allowed to be issued pursuant to the 2003 Incentive Plan was 275,000.
The restricted stock grants are recorded based on the market value of the common stock on the
date of the grant and substantially all restricted stock 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 is initially deferred, and amortization of amounts deferred is being charged to general
and administrative expense over the respective vesting periods.
Restricted share grants
Average per share grant price
Recorded as deferred compensation
Total charge to general and administrative
Years Ended December 31,
2008
50,550
$ 17.50
$885,000
2007
51,225
$ 24.50
$1,255,000
2009
175,025
$ 7.00
$1,225,000
expenses, all outstanding restricted grants
$853,000
$888,000
$826,000
Non-vested shares:
Non-vested beginning of period
Grants
Vested during period
Forfeitures
Non-vested end of period
213,625
175,025
(30,675)
(50)
357,925
186,300
50,550
(22,650)
(575)
213,625
140,175
51,225
(5,050)
(50)
186,300
Through December 31, 2009, a total of 274,950 and 143,100 shares were issued pursuant to the
Company’s 2003 and 2009 Stock Incentive Plans, respectively, of which 456,900 shares remain
available for grant under the 2009 Plan. Approximately $2,548,000 remains as deferred
compensation and will be charged to expense over the remaining respective vesting periods. The
weighted average vesting period is approximately 3.14 years.
As of December 31, 2009, 2008 and 2007 there were no options outstanding under the 2009 and
2003 Incentive Plans.
F-25
NOTE 11 - COMMON STOCK DIVIDEND DISTRIBUTIONS
The following table details the distributions paid in cash and common stock of the Company with
respect to the 2009 fiscal year.
Payment Date
January 25, 2010
October 30, 2009
July 21, 2009
April 27, 2009
Total
Dividend
$2,456,000
$2,401,000
$2,333,000
$2,229,000
Cash
$246,000
$240,000
$234,000
$223,000
# Common
Shares
Per Share Value of
Common Stock
216,000
255,000
376,000
529,000
$10.20
$ 8.45
$ 5.58
$ 3.79
The number of common shares issued and outstanding as presented on the balance sheet at
December 31, 2009 would have been 11,095,000, taking into account the 216,000 shares issued
on January 25, 2010.
NOTE 12 – STOCK REPURCHASE PROGRAMS
In November 2008, the Company announced that its Board of Directors had authorized a twelve
month common stock repurchase program of up to 500,000 shares of the Company’s common
stock in open market transactions. From November 2008 through October 2009, the Company
repurchased 300,000 shares of common stock for an aggregate consideration of $1,679,000.
In August 2007, the Company announced that its Board of Directors had authorized a twelve month
common stock repurchase program of up to 500,000 shares of the Company’s common stock in
open market transactions. From August 2007 through July 2008, the Company repurchased
252,000 shares of common stock for an aggregate consideration of $4,776,000.
NOTE 13 - DISTRIBUTION REINVESTMENT PLAN
On December 9, 2008, the Company suspended its Dividend Reinvestment Plan (the “Plan”). The
Plan had provided 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 was determined at the Company’s sole discretion and had been
offered at a 5% discount from market. Under the Plan, the Company issued 158,242 and 236,645
common shares during the years ended December 31, 2008 and 2007, respectively.
NOTE 14 – INCOME FROM SETTLEMENT WITH FORMER PRESIDENT
On November 23, 2009, the Company settled its civil suit against the Company’s former president
and chief executive officer (who resigned in July 2005 following the discovery of inappropriate
financial dealings). The terms of the settlement included his payment to us of $900,000, 5,641
shares of the Company, valued at $51,000, based on the November 23, 2009 stock closing price
and the assignment of his interest in a real estate consulting venture, which value has been fully
reserved against. The income from this settlement, which aggregated $951,000, was recorded in
the year ended December 31, 2009.
NOTE 15 – COMMITMENTS AND CONTINGENCIES
The Company maintains a non-contributory defined contribution pension plan covering eligible
employees. 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
$114,000, $107,000 and $100,000 for the years ended December 31, 2009, 2008 and 2007,
F-26
NOTE 15 – COMMITMENTS AND CONTINGENCIES (Continued)
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 16 – INCOME 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
income tax on taxable income it distributes currently to its
level
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.
federal, state and local
The Company recorded $91,000 of federal excise tax (included in general and administrative
expense) which is based on taxable income generated but not yet distributed for the year ended
December 31, 2007. There was no federal excise tax for the years ended December 31, 2009 and
2008.
Included in general and administrative expenses for the years ended December 31, 2009,
2008 and 2007 are state tax expense of $178,000, $162,000 and $226,000, respectively.
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, 2009, 2008 and 2007 (amounts in thousands):
Net income
Straight line rent adjustments
Excess of capital losses over capital gains
Financial statement gain on sale in excess of tax gain (A)
Rent received in advance, net
Financial statement impairment charge
Federal excise tax, non-deductible
Financial statement adjustment for above/below market
leases
Non-deductible portion of restricted stock expense
Financial statement adjustment of fair value of derivative
Financial statement depreciation in excess of tax
depreciation
Other adjustments
2009
Estimate
$19,641
(1,174)
-
(10,619)
299
229
-
23
741
(694)
1,002
389
2008
Actual
$ 4,892
(1,023)
-
(1,685)
(82)
5,983
-
(371)
507
650
1,158
64
2007
Actual
$10,590
(1,600)
868
(1,581)
95
-
91
(285)
710
-
702
2
Federal taxable income
$ 9,837
$10,093
$ 9,592
F-27
NOTE 16 – INCOME TAXES (Continued)
(A) For the year ended December 31, 2009, amount includes $4,951 GAAP gain on sale of real
estate which was deferred for federal tax purposes in accordance with Section 1031 of the
Internal Revenue Code of 1986, as amended. Also includes financial statement impairment
charges of $5,983, which were recorded during the year ended December 31, 2008 relating to
four properties that were disposed of in the year ended December 31, 2009.
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, 2009, 2008 and 2007 (amounts in thousands):
Dividends paid (A)
Dividend reinvestment plan (B)
Less: Spillover dividends designated to previous
year (C)
Plus: Dividends designated from following year (C)
Dividends paid deduction (D)
2009
Estimate
$9,419
-
9,419
2008
Actual
$13,241
96
13,337
2007
Actual
$21,218
268
21,486
(2,667)
3,135
$9,887
(5,861)
2,667
$10,143
(17,705)
5,861
$ 9,642
(A)
(B)
(C)
(D)
In 2009, the quarterly dividends on the Company’s common stock of $.22 per share were
paid in cash and/or shares of the Company’s common stock.
Amount reflects the 5% discount on the Company's common shares purchased through
the dividend reinvestment plan, which was terminated in December 2008.
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.
Dividends paid deduction is slightly higher than federal taxable income in 2009, 2008 and
2007 so as to account for adjustments made to federal taxable income as a result of the
impact of the alternative minimum tax.
NOTE 17 – SUBSEQUENT EVENTS
On February 24, 2010,
the Company acquired a community shopping center located in
Pennsylvania, for a purchase price of $23,500,000. The center is 99% occupied and leased to ten
separate tenants. In connection with the purchase, the Company assumed an existing first mortgage
encumbering the property of approximately $17,700,000 and the balance was paid in cash.
On March 9, 2010, the Board of Directors declared a quarterly cash distribution of $.30 per share
totaling $3,436,000, on the Company's common stock, payable on April 6, 2010 to stockholders of
record on March 26, 2010.
F-28
NOTE 18- QUARTERLY FINANCIAL DATA (Unaudited):
(In Thousands, Except Per Share Data)
2009
Rental revenues as previously reported
Revenues from discontinued operations (A)
Revenues
March 31
$10,679
(838)
$ 9,841
Income from continuing operations (B)
Income from discontinued operations (B)
Net income
$ 2,337
316
$ 2,653
Weighted average number of common
shares outstanding (C):
Quarter Ended
June 30
$12,324
(794)
$11,530
$ 4,304
139
$ 4,443
Sept. 30
$ 9,591
-
$ 9,591
$ 2,215
1,225
$ 3,440
Dec. 31
$ 9,838
-
$ 9,838
$ 3,464
5,641
$ 9,105
Total
For Year
$42,432
(1,632)
$40,800
$12,320
7,321
$19,641
Basic:
Diluted:
10,165
10,276
10,488
10,751
10,837
10,974
11,104
11,234
10,651
10,812
Net income per common share:
Basic:
Income from continuing operations (B)
Income from discontinued operations (B)
Net income (C)
Diluted:
Income from continuing operations (B)
Income from discontinued operations (B)
Net income (C)
$ .23
.03
$ .26
$ .23
.03
$ .26
$ .41
.01
$ .42
$ .40
.01
$ .41
$ .20
.12
$ .32
$ .20
.11
$ .31
$ .31
.51
$ .82
$ .31
.50
$ .81
$ 1.15 (D)
.69 (D)
$ 1.84 (D)
$ 1.14 (D)
.68 (D)
$ 1.82 (D)
(A)
Represents revenues from discontinued operations which were previously included in rental revenues
as previously reported in the March and June 2009 quarters.
(B)
Amounts have been adjusted to give effect to the Company’s discontinued operations.
(C)
Amounts have been restated to give effect to a new accounting pronouncement as discussed in Note 2.
(D)
Calculated on weighted average shares outstanding for the year.
F-29
NOTE 18- QUARTERLY FINANCIAL DATA (Continued)
2008
Rental revenues as previously reported
Reclassification of revenues (E)
Revenues
March 31
$9,751
(1,195)
$8,556
June 30
$ 9,686
(1,016)
$ 8,670
Sept. 30
$ 9,950
(1,204)
$ 8,746
Dec. 31
$10,954
(895)
$10,059
Total
For Year
$40,341
(4,310)
$36,031
Quarter Ended
Income from continuing operations (F)
Income (loss) from discontinued operations
(F)
Net income (loss)
Weighted average number of common
shares outstanding - basic and diluted
$2,089
$ 3,664
$ 1,787
$ 2,403
$ 9,943
690
$2,779
(418)
$ 3,246
681
$ 2,468
(6,004)
$(3,601)
(5,051)
$ 4,892
10,152
10,219
10,169
10,192
10,183
Net income per common share – basic and diluted:
Income from continuing operations
Income (loss) from discontinued operations
Net income (loss)
$ .21
.06
$ .27
$ .36
(.04)
$ .32
$ .17
.07
$ .24
$ .24
(.59)
$ (.35)
$ .98 (G)
(.50) (G)
$ .48 (G)
(E)
(F)
(G)
Represents revenues from discontinued operations which were previously included in rental
revenues as previously reported.
Amounts have been adjusted to give effect to the Company’s discontinued operations.
Calculated on weighted average shares outstanding for the year.
F-30
I
I
I
S
E
R
A
D
S
B
U
S
D
N
A
.
C
N
I
,
I
S
E
T
R
E
P
O
R
P
Y
T
R
E
B
L
E
N
O
I
)
s
d
n
a
s
u
o
h
T
n
i
s
t
n
u
o
m
A
(
9
0
0
2
,
1
3
r
e
b
m
e
c
e
D
l
i
t
n
o
i
t
a
c
e
r
p
e
D
d
e
a
u
m
u
c
c
A
d
n
a
e
a
t
s
E
t
l
a
e
R
d
e
a
d
t
i
l
o
s
n
o
C
-
I
I
I
l
e
u
d
e
h
c
S
n
o
e
f
i
L
i
h
c
h
W
n
o
i
t
i
a
c
e
r
p
e
D
t
t
s
e
a
L
n
i
e
m
o
c
n
I
s
i
t
n
e
m
e
a
S
t
t
t
d
e
u
p
m
o
C
)
s
r
a
e
Y
(
t
e
a
D
f
o
e
a
D
t
d
e
r
i
u
q
c
A
n
o
i
t
c
u
r
t
s
n
o
C
d
e
t
l
a
u
m
u
c
c
A
n
o
i
t
i
a
c
e
r
p
e
D
0
4
0
4
0
4
0
4
0
4
0
4
.
5
7
2
0
4
0
4
.
6
5
1
l
a
t
o
T
9
0
0
2
,
1
3
r
e
b
m
e
c
e
D
d
n
a
s
g
n
d
i
l
i
u
B
s
t
n
e
m
e
v
o
r
p
m
I
t
a
d
e
i
r
r
a
C
h
c
h
W
i
t
a
t
n
u
o
m
A
s
s
o
r
G
t
s
o
C
d
e
z
i
l
a
t
i
p
a
C
t
n
e
u
q
e
s
b
u
S
i
n
o
i
t
i
s
u
q
c
A
o
t
o
T
t
s
o
C
l
a
i
t
i
n
I
y
n
a
p
m
o
C
s
u
o
i
r
a
V
s
u
o
i
r
a
V
1
9
4
1
$
,
9
4
6
,
9
4
$
0
2
7
,
9
2
$
9
2
9
,
9
1
$
/
6
0
7
0
4
0
/
s
u
o
i
r
a
V
0
1
2
4
,
0
0
7
,
5
5
4
1
4
,
5
4
6
8
2
,
0
1
-
-
$
0
2
7
,
9
2
$
9
2
9
,
9
1
$
2
8
7
,
2
$
4
1
4
,
5
4
6
8
2
,
0
1
0
5
7
,
4
2
s
u
o
i
r
a
V
s
u
o
i
r
a
V
6
5
9
9
1
,
2
9
0
,
6
3
1
6
3
4
,
5
0
1
6
5
6
,
0
3
0
1
0
,
1
6
2
4
,
4
0
1
6
5
6
,
0
3
8
2
2
,
5
6
:
s
n
o
i
t
a
c
o
L
l
i
a
t
e
R
i
g
n
d
n
a
t
S
e
e
r
F
–
s
e
i
t
r
e
p
o
r
P
0
1
–
s
e
i
t
r
e
p
o
r
P
1
1
s
u
o
e
n
a
l
l
e
c
s
M
i
2
e
o
N
t
1
e
o
N
t
s
u
o
i
r
a
V
s
u
o
i
r
a
V
9
8
4
3
,
0
5
1
,
9
1
7
5
1
,
6
1
3
9
9
,
2
2
3
0
,
1
5
2
1
,
5
1
3
9
9
,
2
6
7
9
,
2
1
s
u
o
e
n
a
l
l
e
c
s
M
i
/
5
0
6
1
9
0
/
s
u
o
i
r
a
V
s
u
o
i
r
a
V
7
9
9
1
0
0
5
2
,
7
0
3
3
,
5
5
3
,
9
2
9
9
7
,
9
1
0
0
3
,
3
2
2
6
2
,
6
1
5
5
0
,
6
7
3
5
,
3
-
4
7
5
,
2
0
0
3
,
3
2
8
8
6
,
3
1
5
5
0
,
6
7
3
5
,
3
4
0
6
,
5
1
6
9
5
,
5
1
J
N
,
y
n
a
p
p
s
r
a
P
i
s
u
o
e
n
a
l
l
e
c
s
M
i
:
s
g
n
d
i
l
i
u
B
e
c
i
f
f
O
:
s
g
n
d
i
l
i
u
B
x
e
F
l
d
n
a
L
s
t
n
e
m
e
v
o
r
p
m
I
s
g
n
d
i
l
i
u
B
d
n
a
L
s
e
c
n
a
r
b
m
u
c
n
E
/
4
9
4
1
6
0
/
0
1
9
1
9
0
5
2
,
9
4
5
,
5
9
3
4
,
4
0
1
1
,
1
9
3
4
,
4
0
1
1
,
1
2
4
1
,
4
s
u
o
e
n
a
l
l
e
c
s
M
i
:
g
n
d
i
l
i
u
B
t
n
e
m
t
r
a
p
A
0
4
s
u
o
i
r
a
V
s
u
o
i
r
a
V
0
0
3
2
,
3
9
6
,
3
1
0
6
4
,
1
1
3
3
2
,
2
1
3
7
,
2
9
2
7
,
8
3
3
2
,
2
1
2
2
,
9
/
6
0
0
2
2
1
/
0
6
9
1
s
u
o
i
r
a
V
s
u
o
i
r
a
V
3
2
9
1
,
4
9
7
2
,
6
5
7
,
1
3
2
8
2
,
5
2
4
7
4
,
6
2
8
2
,
5
2
4
7
4
,
6
5
2
7
,
2
2
6
9
9
,
3
2
9
1
2
,
9
1
7
7
7
,
4
6
5
9
3
6
2
,
8
1
7
7
7
,
4
1
9
5
,
1
1
/
4
0
0
1
8
0
/
0
0
0
2
5
9
8
2
,
8
2
3
,
8
8
2
3
,
8
-
-
8
2
3
,
8
-
3
0
9
,
5
-
D
M
,
e
r
o
m
i
t
l
a
B
s
u
o
e
n
a
l
l
e
c
s
M
i
3
e
o
N
t
:
l
a
i
r
t
s
u
d
n
I
s
u
o
e
n
a
l
l
e
c
s
M
i
:
r
e
t
a
e
h
T
l
:
s
b
u
C
h
t
l
a
e
H
s
u
o
e
n
a
l
l
e
c
s
M
i
-
-
1
3
-
F
,
4
7
3
7
4
$
7
6
0
,
3
9
3
$
7
1
0
,
5
0
3
$
0
5
0
,
8
8
$
3
0
3
,
8
$
4
1
7
,
6
9
2
$
0
5
0
,
8
8
$
8
1
5
,
0
9
1
$
l
s
a
t
o
T
y
t
r
e
p
o
r
p
l
i
a
u
d
v
d
n
i
i
o
n
d
n
a
)
n
o
g
e
r
O
d
n
a
a
g
r
o
e
G
i
i
,
a
n
r
o
f
i
l
a
C
,
s
a
x
e
T
,
a
n
i
l
o
r
a
C
h
t
r
o
N
i
i
,
a
n
a
s
u
o
L
,
s
o
n
i
i
l
l
I
,
a
d
i
r
o
F
(
l
s
e
t
a
t
s
i
t
h
g
e
n
i
d
e
t
a
c
o
l
e
r
a
y
e
h
T
i
i
.
s
n
o
s
v
o
r
p
t
l
u
a
f
e
d
s
s
o
r
c
n
a
t
n
o
c
i
s
e
s
a
e
l
e
s
e
h
t
f
o
t
h
g
E
i
.
s
e
s
a
e
l
e
t
a
r
a
p
e
s
o
t
t
n
a
u
s
r
u
p
,
t
n
a
n
e
t
e
m
a
s
e
h
t
o
t
d
e
s
a
e
l
t
e
n
l
s
e
r
o
t
s
y
p
p
u
s
e
c
i
f
f
o
l
i
a
t
e
r
e
r
a
s
e
i
t
r
e
p
o
r
p
n
e
t
e
s
e
h
T
–
1
e
t
o
N
.
s
t
e
s
s
a
l
a
t
o
t
’
s
y
n
a
p
m
o
C
e
h
t
f
o
%
5
n
a
h
t
r
e
t
a
e
r
g
s
i
.
g
n
d
i
l
i
u
b
d
n
a
d
n
a
l
o
t
n
o
i
t
c
u
d
e
r
a
s
a
e
v
r
e
s
e
r
l
a
t
n
e
r
i
s
h
t
i
f
o
t
p
e
c
e
r
e
h
t
d
e
d
r
o
c
e
r
y
n
a
p
m
o
C
e
h
T
.
n
o
i
t
i
s
u
q
c
a
i
f
o
e
m
i
t
e
h
t
t
a
t
n
e
r
2
3
-
F
i
t
n
e
c
i
f
f
u
s
g
n
c
u
d
o
r
p
i
t
o
n
s
a
w
y
t
r
e
p
o
r
p
e
h
t
e
c
n
s
i
,
t
i
f
e
n
e
b
’
s
y
n
a
p
m
o
C
e
h
t
r
o
f
r
e
l
l
e
s
e
h
t
y
b
d
e
t
s
o
p
s
a
w
e
v
r
e
s
e
r
e
m
o
c
n
i
l
a
t
n
e
r
0
0
0
,
6
1
4
$
a
,
6
0
0
2
r
e
b
m
e
c
e
D
n
i
y
t
r
e
p
o
r
p
e
h
t
f
o
e
s
a
h
c
r
u
p
n
o
p
U
–
3
e
t
o
N
d
e
t
a
c
o
l
e
r
a
y
e
h
T
.
s
e
g
a
g
t
r
o
m
d
e
s
s
o
r
c
y
b
d
e
r
u
c
e
s
s
i
t
a
h
t
n
a
o
l
e
n
o
d
n
a
e
s
a
e
l
r
e
t
s
a
m
e
n
o
y
b
d
e
r
e
v
o
c
s
e
r
o
t
s
e
r
u
t
i
n
r
u
f
l
i
a
t
e
r
e
r
a
s
e
i
t
r
e
p
o
r
p
1
1
e
s
e
h
T
–
2
e
t
o
N
.
s
t
e
s
s
a
l
a
t
o
t
’
s
y
n
a
p
m
o
C
e
h
t
f
o
%
5
n
a
h
t
r
e
t
a
e
r
g
s
i
y
t
r
e
p
o
r
p
l
i
a
u
d
v
d
n
i
i
o
n
d
n
a
i
)
a
n
g
r
i
i
V
d
n
a
s
a
x
e
T
,
a
n
i
l
o
r
a
C
h
t
u
o
S
,
y
k
c
u
t
n
e
K
,
s
a
s
n
a
K
,
i
a
g
r
o
e
G
(
t
s
e
a
t
s
i
x
s
n
i
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,
2008
2009
2007
Investment in real estate:
Balance, beginning of year
$392,491
$380,270
$380,111
Addition: Land, buildings and improvements
576
59,015
576
Deductions:
Cost of properties sold
Reclassification to “properties held for sale”
Impairment charge
Rental reserve received (see Note 3 above)
Balance, end of year
Accumulated depreciation:
-
-
-
-
(1,148)
(39,663)
(5,983)
-
(1)
-
-
(416)
$393,067
(b)
$392,491
$380,270
Balance, beginning of year
$39,378
$36,228
$28,270
Addition: Depreciation
8,467
8,470
7,958
Deduction:
Accumulated depreciation related to “properties held
for sale”
(471)
(5,320)
-
Balance, end of year
$47,374
$ 39,378
$ 36,228
(b)
The aggregate cost of the properties is approximately $16,323 lower for federal
income tax purposes at December 31, 2009.
F-33
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 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
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
OLP Everett LLC
OLP Savannah JV Member II LLC
OLP Naples LLC
OLP-OD LLC
OLP Palo Alto LLC
OLP Miami Springs LLC
OLP Pensacola LLC
OLP Kennesaw LLC
OLP Chicago LLC
OLP Cary LLC
OLP Eugene LLC
OLP Sunland Park Drive LLC
Gurnee Real Estate Owners LLC
OLP Royersford LLC
OLP Lakeview LP
Illinois
Missouri
Missouri
Kentucky
Pennsylvania
Delaware
New York
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Massachusetts
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Illinois
Pennsylvania
Pennsylvania
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/A (No. 333-158215) and in the related Prospectuses pertaining to One Liberty Properties,
Inc.’s Shelf Registration Statement; (ii) on Form S-3 (No. 333-143450) pertaining to the
One Liberty Properties, Inc. Dividend Reinvestment Plan; (iii) on Form S-8 (No. 333-
107038) pertaining to the One Liberty Properties, Inc. 2003 Incentive Plan, and (iv) on Form
S-8 (No. 333-160326) pertaining to the One Liberty Properties, Inc. 2009 Incentive Plan of
our reports dated March 12, 2010, with respect to the consolidated financial statements and
schedule of One Liberty Properties, Inc. and Subsidiaries, and the effectiveness of internal
control over financial reporting of One Liberty Properties, Inc. and Subsidiaries, included in
this Annual Report (Form 10-K) for the year ended December 31, 2009.
/s/ Ernst & Young LLP
New York, New York
March 12, 2010
Exhibit 31.1
CERTIFICATION
I, Patrick J. Callan, Jr., certify that:
1.
2.
3.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31,
2009 of One Liberty Properties, Inc.;
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;
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 12, 2010
/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,
2009 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 12, 2010
/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, 2009 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 12, 2010
/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, 2009 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 12, 2010
/s/ David W. Kalish
David W. Kalish
Senior Vice President and
Chief Financial Officer
(cid:2)
(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:83)(cid:68)(cid:74)(cid:72)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:79)(cid:72)(cid:73)(cid:87)(cid:3)(cid:69)(cid:79)(cid:68)(cid:81)(cid:78)
BOARD OF DIRECTORS AND OFFICERS
Fredric H. Gould
Chairman of the Board of Directors; Chairman of the Board of Trustees of
BRT Realty Trust; President of REIT Management Corp., Advisor to BRT
Realty Trust; Chairman of Georgetown Partners, Inc., Managing General
Partner of Gould Investors L.P.; Director of EastGroup Properties, Inc.
Matthew J. Gould
Director; Senior Vice President; President of Georgetown Partners, Inc.;
Vice President of REIT Management Corp.; Trustee and Senior Vice
President of BRT Realty Trust.
Patrick J. Callan, Jr.
Director; President and Chief Executive Officer.
Lawrence G. Ricketts, Jr.
Executive Vice President and Chief Operating Officer.
Joseph A. Amato•
Director; Real Estate Developer; Managing Partner of the Kent
Companies.
David W. Kalish
Senior Vice President and Chief Financial Officer; Senior Vice President–
Finance of BRT Realty Trust; Vice President and Chief Financial Officer of
Georgetown Partners, Inc.
Charles L. Biederman* +
Director; Real Estate Developer; Chairman of Universal Development
Company.
Simeon Brinberg
Senior Vice President; Senior Vice President and Secretary of BRT Realty
Trust; Senior Vice President of Georgetown Partners, Inc.
James J. Burns* •
Director; Consultant to Reis, Inc.; Director of Cedar Shopping Centers, Inc.
Joseph A. DeLuca*
Director; Principal of Joseph A. DeLuca, Inc.; Principal of MHD Capital
Partners, LLC.
J. Robert Lovejoy+
Director; Senior Advisor, General Counsel and Chief Compliance Officer
of Coatue Management LLC; Director of Orient Express Hotels Ltd.
Israel Rosenzweig
Senior Vice President; Senior Vice President of BRT Realty Trust; Senior
Vice President of Georgetown Partners, Inc.
Mark H. Lundy
Senior Vice President and Secretary; Senior Vice President of BRT Realty
Trust; Senior Vice President of Georgetown Partners, Inc.
Karen Dunleavy
Vice President, Financial; Treasurer of Georgetown Partners, Inc.
Eugene I. Zuriff+ •
Director; Vice Chairman of PBS Real Estate, LLC.
Jeffrey A. Gould
Director; Senior Vice President; Trustee, President and Chief Executive
Officer of BRT Realty Trust; Senior Vice President of Georgetown
Partners, Inc.
Richard M. Figueroa
Vice President and Assistant Secretary; Vice President of Georgetown
Partners, Inc.
Alysa Block
Treasurer; Treasurer of BRT Realty Trust.
*Member of the Audit Committee
+Member of the Compensation Committee
•Member of the Nominating and Corporate Governance Committee
EXECUTIVE OFFICES
60 Cutter Mill Road
Suite 303
Great Neck, NY 11021
516-466-3100
REGISTRAR, TRANSFER AGENT,
DISTRIBUTION DISBURSING AGENT
American Stock Transfer and Trust Company
59 Maiden Lane
New York, NY 10038
212-936-5100 800-937-5449
AUDITORS
Ernst & Young LLP
5 Times Square, New York, NY 10036
FORM 10-K AVAILABLE
A copy of the annual report (Form 10-K) filed
with the Securities and Exchange Commission
may be obtained without charge by writing
to the Secretary, One Liberty Properties, Inc.,
60 Cutter Mill Road, Suite 303, Great Neck, NY
11021 or by accessing our web site.
COMMON STOCK
The Company’s common stock is listed on the
New York Stock Exchange under the ticker
symbol OLP.
ANNUAL MEETING
The annual meeting will be held on June 14,
2010 at the Company’s Executive Offices at
9:00 a.m.
WEB SITE ADDRESS
www.onelibertyproperties.com
Retail
Office
Industrial
Flex
Other
ONE LIBERTY PROPERTIES, INC. GEOGRAPHIC FOOTPRINT
77 PROPERTIES IN 27 STATES (5.4 mILLION SqUARE FEET)
VIRGINIA (3)
Newport News
Richmond
Virginia Beach
WASHINGTON (1)
Seattle
WISCONSIN (2)
Onalaska
South Milwaukee
CALIFORNIA (2)
East Palo Alto (San Francisco)
Los Angeles
COLORADO (1)
Greenwood Village (Denver)
DELAWARE (1)
Newark (Wilmington)
FLORIDA (6)
Ft. Myers
Miami
Miami Springs
Naples
Pensacola
West Palm Beach
GEORGIA (8)
Athens
Duluth (Atlanta)
Fayetteville (Atlanta)
Kennesaw (Atlanta)
Morrow (Atlanta)
Savannah (2)
Tucker (Atlanta)
ILLINOIS (3)
Champaign
Chicago
Gurnee (Chicago)
KANSAS (1)
Wichita
KENTUCKy (1)
Lexington
LOUISIANA (5)
Bastrop
Kentwood
Lake Charles
Monroe (2)
MAINE (1)
Saco (Portland)
MARyLAND (1)
Baltimore
MASSACHUSETTS (4)
Hyannis (Cape Cod)
Marstons Mills (Cape Cod)
Everett (Boston)
Somerville (Boston)
MICHIGAN (2)
Grand Rapids (2)
MISSISSIPPI (4)
D’lberville
Flowood
Vicksburg (2)
NEBRASKA (1)
Lincoln
NEW JERSEy (1)
Parsippany
NEW yORK (10)
Batavia
Brooklyn
Hauppauge (2, Long Island)
Melville (Long Island)
New Hyde Park (2, Long Island)
New York
Ronkonkoma (Long Island)
Selden (Long Island)
NORTH CAROLINA (2)
Cary (Raleigh-Durham)
Greensboro
OHIO (2)
Columbus (2)
OREGON (1)
Eugene
PENNSyLVANIA (2)
Philadelphia
Royersford (Philadelphia)*
SOUTH CAROLINA (1)
Bluffton (Hilton Head)
TENNESSEE (1)
Knoxville
TEXAS (10)
Amarillo
Austin
El Paso (2)
Houston
Killeen
Plano (2, Dallas)
Rosenberg (Houston)
Tyler
*Acquired by a wholly owned subsidiary of One Liberty Properties in February 2010.
50
40
30
20
10
0
TOTAL REVENUES
(DOLLARS IN MILLIONS)
$50
40
30
20
10
0
8
.
0
4
$
4
.
3
3
$
0
.
6
3
$
2007
2008
2009
INDUSTRY ALLOCATION OF REVENUES
(FOR THE YEAR ENDED DECEMBER 31, 2009)
Industrial (13.40%)
Office (11.19%)
Flex (6.12%)
Other (9.40%)
Retail (59.89%)
60 Cutter Mill Road, Suite 303 | Great Neck, NY 11021 | 516.466.3100
www.onelibertyproperties.com