One Liberty Properties
Annual Report 2013

Plain-text annual report

2 0 1 3 A N N U A L R E P O R T A N NUA L R EP O R T 2013 About Us One Liberty Properties, Inc. is a self-administered and self-managed real estate investment trust incorporated under the laws of Maryland in December 1982. The primary business of the Company is to acquire, own and manage a geographically diversified portfolio of retail, industrial, flex, office, health and fitness, 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 on the value of a property, determined primarily by its location, use, and by local demographics. We also evaluate a tenant’s financial ability to meet operational needs and lease obli- gations. We believe that our emphasis on property value enables us to achieve better returns on our acquired properties and also enhances our ability to re-rent or dispose of a property on favorable terms upon the expiration or early termination of a lease. Consequently, we believe that the weighting of these factors in our analysis enables us to achieve attractive current returns with potential growth through contractual rent increases and property appreciation. Comparison of 5-Year Cumulative Total Return Among One Liberty Properties, Inc., the S&P 500 Index, and the FTSE NAREIT Equity REITs Index One Liberty Properties, Inc. S&P 500 FTSE NAREIT Equity REITs $326.32 (+226%) $228.17 (+128%) $214.55 (+115%) $350 300 250 200 150 100 50 0 12/08 12/09 12/10 12/11 12/12 12/13 350 300 250 200 150 100 50 0 One Liberty Properties, Inc. 01 Dear Stockholders, We made significant progress and achieved a number of important milestones this past year. We executed on multiple initiatives, as we continued to make great strides in our strategy of adding accretive assets to drive higher cash-flow. Overall, the Company’s portfolio and foundation for profitable growth are stronger than ever. We owned 104 properties at year end and held interests in unconsolidated joint ventures that own five properties. Our total portfolio is located in 29 states. 2013 ACHIEVEMENTS OUTLOOK In 2013, we: R grew funds from operations 5.0% to $1.67 per diluted share and adjusted funds from operations 5.3% to $1.59 per diluted share, R increased rental income by 16.4%, to approximately $51 million, R acquired eleven properties for $107.5 million, R raised our quarterly dividend 5.7% to $0.37 per share (i.e., $1.48 per year), and R improved our occupancy rate for the total portfolio by more than 84 basis points to 99.6%. We are also pleased to report that during the five years ended December 31, 2013, our total stockholder return outperformed an investment over the same period in the S&P 500 and the FTSE NAREIT Equity Index by 143% and 152%, respectively. The average annual total return over that period on our common stock is 26.7%. GROWTH STRATEGY Our long-term strategy is focused on creating long-term value for our stockholders. One Liberty’s plan is to grow our portfolio by adding select assets when available at attractive cap rates, while judiciously selling assets that we believe have reached peak value. To achieve our growth objectives, we intend to continue acquiring well-located assets that provide accretive long- term cash flow. These assets are typically found in mar- kets with strong long-term, underlying fundamentals and in markets that offer stable employment, growing popula- tions and lower risk of new supply. Further, we constantly seek to optimize our portfolio by considering dispositions of older assets in slower growth areas in order to continue to improve the age, quality and growth profile of our port- folio. While gains from these dispositions are not recur- ring, they are a testament to our strategy of acquiring properties with strong fundamental real estate value. In 2014, we aim to: R improve our portfolio through select acquisitions and dispositions, R maintain our high occupancy, R continue to modestly leverage our solid balance sheet which provides financial flexibility and capacity, and R remain disciplined in our approach to growth. There are challenges ahead. Though our pipeline remains strong, there is extensive competition for the properties we seek to acquire. We will remain deliberate and only close acquisitions in 2014 that add value to our portfolio. Further, while we continue to pursue select retail prop- erties, we are sensitive to the risks facing the retail indus- try as a result of the growth of e-commerce. We are addressing this exposure by acquiring properties that are less sensitive to e-commerce risk such as restaurant properties or that capitalize on e-commerce growth such as e-commerce distribution and warehousing facilities. In closing, we want to thank our team whose hard work and dedication have made this year’s achievements possi- ble. We would like to thank our entire organization for its continued contribution and dedication in helping One Liberty build on its success year-after-year. Additionally, we remain appreciative to our Board of Directors for their support and valuable insight. Sincerely yours, Matthew J. Gould Chairman April 4, 2014 Patrick J. Callan, Jr. President and Chief Executive Officer A Look at Our Properties Whole Foods—West Hartford, CT PROPERTIES IN STATES Recent Acquisitions One Liberty Properties, Inc. 03 Texas Land & Cattle Steak House—Killeen, TX FedEx Express— Indianapolis, IN Shutterfly—Fort Mill, SC TGI Fridays—Greensboro, NC More Properties from our Portfolio LA Fitness—Secaucus, NJ Kohl’s—Kansas City, MO Applebee’s—Kennesaw, GA Financial Highlights (Amounts in Thousands, Except Per Share Data) Total revenues Depreciation and amortization Real estate expenses including acquisition costs Other expenses Total operating expenses Operating income Income from continuing operations Income from discontinued operations Net income Less net (income) loss attributable to non-controlling interests Net income attributable to One Liberty Properties, Inc. Net income per common share—diluted: Income from continuing operations Income from discontinued operations Net income Weighted average number of common shares—diluted Real estate investments, net Properties held for sale Investment in unconsolidated joint ventures Cash and cash equivalents Total assets Mortgages payable Line of credit—outstanding Total liabilities Total equity Year Ended December 31, 2013 2012 $ 50,979 $ 43,793 11,919 4,134 8,364 24,417 9,564 3,441 8,082 21,087 $ 26,562 $ 22,706 $ 17,409 515 $ 11,328 20,980 17,924 (49) 32,308 12 $ 17,875 $ 32,320 $ 1.11 .03 $ .76 1.40 $ 1.14 $ 2.16 15,048 14,527 December 31, 2013 2012 $ 567,358 5,177 4,906 16,631 571,898 278,045 23,250 321,808 250,090 $ 466,213 5,364 19,485 14,577 481,166 225,971 — 243,107 238,059 Total Assets Total Revenues Funds from Operations 600 500 400 300 200 100 0 60 50 40 30 20 10 0 30 25 20 15 10 5 0 TOTAL ASSETS (Dollars in Millions) TOTAL REVENUES (Dollars in Millions) FUNDS FROM OPERATIONS (Dollars in Millions) $571.9 $436.4 $452.8 $481.2 $43.8 $40.9 $36.7 $51.0 $25.8 $23.8 $22.8 $18.2 2010 2011 2012 2013 2010 2011 2012 2013 2010 2011 2012 2013 2013 F O R M 10 - K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (cid:1) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013 Or (cid:2) 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 No.) 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 (cid:2) No (cid:1) Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes (cid:2) No (cid:1) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:1) No (cid:2) 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 (cid:1) No (cid:2) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:2) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ and ‘‘small reporting company’’ in Rule 12b-2 of the Exchange Act. Large accelerated filer (cid:2) Smaller reporting company (cid:2) Accelerated filer (cid:1) Non-accelerated filer (cid:2) (Do not check if a small reporting company) Indicate by check mark whether registrant is a shell company (defined in Rule 12b-2 of the Act). Yes (cid:2) No (cid:1) As of June 30, 2013 (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 $266.6 million. As of March 10, 2014, the registrant had 15,870,172 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the 2014 annual meeting of stockholders of One Liberty Properties, Inc., to be filed pursuant to Regulation 14A not later than April 30, 2014, are incorporated by reference into Part III of this Annual Report on Form 10-K. TABLE OF CONTENTS Form 10-K Item No. PART I 1. 1A. 1B. 2. 3. 4. PART II 5. 6. 7. 7A. 8. 9. 9A. 9B. PART III 10. 11. 12. 13. 14. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes In and Disagreements With Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Certain Relationships and Related Transactions, and Director Independence . . . . . Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART IV 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page(s) 1 8 16 18 23 23 24 25 29 40 41 41 41 42 42 42 43 43 43 44 47 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 in Maryland on December 20, 1982. We acquire, own and manage a geographically diversified portfolio of retail, industrial, flex, office, health and fitness, and other properties, a substantial portion of which are under long-term leases. Substantially all of our leases are ‘‘net leases’’ and ground leases under which the tenant is typically responsible for real estate taxes, insurance and ordinary maintenance and repairs. As of December 31, 2013, we own 104 properties (including two properties sold in February 2014 as described below) and participate in joint ventures that own five properties. These properties and the properties owned by our joint ventures are located in 29 states and have an aggregate of approximately 6.6 million square feet of space (including approximately 1.2 million square feet of space at properties owned by our joint ventures). As of December 31, 2013: (cid:127) our 2014 contractual rental income (as described below) is approximately $53.1 million; (cid:127) the occupancy rate of properties owned by us is approximately 99.6% based on square footage; (cid:127) the occupancy rate of properties owned by our joint ventures is 100% based on square footage; (cid:127) the weighted average remaining term of our mortgage debt is nine years and the weighted average interest rate thereon is 5.2%; and (cid:127) the weighted average remaining term of the leases generating our 2014 contractual rental income and for the leases at properties owned by our joint ventures is 8.2 years and 7.0 years, respectively. Our 2014 contractual rental income represents, after giving effect to any abatements, concessions or adjustments, the base rent payable to us in 2014 under leases in effect at December 31, 2013. Contractual rental income excludes approximately $1.1 million of straight-line rent, amortization of approximately $164,000 of intangibles and our share of the rental income payable to our joint ventures, which in 2014 will be approximately $1.5 million. 2013 Highlights and Recent Developments (cid:127) Our rental income increased by $7.19 million, or 16.4%, from 2012. (cid:127) Income from continuing operations increased by $6.08 million, or 53.7%, from 2012. (cid:127) We acquired eleven properties for an aggregate of $107.5 million. The acquired properties account for approximately $7.9 million, or 14.9%, of our 2014 contractual rental income. (cid:127) In connection and contemporaneously with the acquisition in 2013 of three properties with an aggregate purchase price of $77.5 million, we obtained mortgage financing aggregating $51.9 million. (cid:127) We recorded an aggregate gain of $4.71 million in connection with the sales of our equity interest in our Plano, Texas joint venture and our tenant-in-common interest in a California property. In the narrative portion of this report, information with respect to our consolidated joint ventures is generally described as if such ventures were our wholly owned subsidiaries and information with respect to unconsolidated joint ventures is generally separately described. Except as otherwise indicated, all references to joint ventures refer to unconsolidated joint ventures. Further, except as otherwise 1 indicated or the context otherwise requires, the property information set forth herein includes two properties located in Michigan with an aggregate of 202,000 square feet that were sold in February 2014 for an aggregate sales price of $5.5 million and excludes two properties acquired in January 2014 for an aggregate purchase price of $5.11 million. Finally, 2014 contractual rental income derived from multiple properties leased pursuant to a master lease is allocated among such properties based on management’s estimate of the appropriate allocations. Acquisition Strategies We seek to acquire properties throughout the United States that have locations, demographics and other investment attributes that we believe to be attractive. We believe that long-term leases provide a predictable income stream over the term of the lease, making fluctuations in market rental rates and in real estate values less significant to achieving our overall investment objectives. Our goal is to acquire single-tenant properties that are subject to long-term net or ground leases that include periodic contractual rental increases or rent increases based on increases in the consumer price index. Periodic contractual rental increases provide reliable increases in future rent payments and 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. We may, however, 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 the acquisition of single-tenant properties subject to net and ground leases is the focus of our investment strategy, we will also consider investments in, among other things, (i) properties that can be re-positioned or re-developed, (ii) community shopping centers anchored by national or regional tenants and (iii) multi-tenant properties. We pay substantially all the operating expenses at community shopping centers, a significant portion of which is 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. 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. Our charter documents do not limit 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 the concentration of investments in any region 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. 2 Investment Evaluation In evaluating potential investments, we consider, among other criteria, the following: (cid:127) the ability of a tenant, if a net leased property, or major tenants, if a shopping center, to meet operational needs and lease obligations; (cid:127) the current and projected cash flow of the property; (cid:127) the estimated return on equity to us; (cid:127) an evaluation of the property and improvements, given its location and use; (cid:127) local demographics (population and rental trends); (cid:127) the terms of tenant leases, including the relationship between current rents and market rents; (cid:127) the projected residual value of the property; (cid:127) the potential to finance or refinance the property; (cid:127) potential for income and capital appreciation; (cid:127) occupancy of and demand for similar properties in the market area; and (cid:127) alternate uses or tenants for the property. Our Business Objective Our business objective is to maintain and increase, over time, the cash available for distribution to our stockholders by: (cid:127) identifying opportunistic and strategic property acquisitions consistent with our portfolio and our acquisition strategies; (cid:127) obtaining mortgage indebtedness on favorable terms and maintaining access to capital to finance property acquisitions; (cid:127) monitoring and maintaining our portfolio, including tenant negotiations and lease amendments with tenants having financial difficulty; and (cid:127) managing assets effectively, including lease extensions and opportunistic and strategic property sales. Typical Property Attributes As of December 31, 2013, the properties in our portfolio and owned by our joint ventures typically have the following attributes: (cid:127) 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; (cid:127) Long-term leases. Many of our leases are long-term leases. Excluding leases relating to properties owned by our joint ventures, leases representing approximately 29.3% of our 2014 contractual rental income expire between 2019 and 2022, and leases representing approximately 39.9% of our 2014 contractual rental income expire after 2022; and (cid:127) Scheduled rent increases. Leases representing approximately 72.5% of our 2014 contractual rental income and leases representing 37.8% of our share of the rental income payable in 2014 with 3 respect to properties owned by our joint ventures provide for either periodic contractual rent increases or a rent increase based on the consumer price index. Our Tenants The following table sets forth information about the diversification of our tenants by industry sector as of December 31, 2013: Type of Property Retail—various . . . . . . . . . . . Industrial . . . . . . . . . . . . . . . Retail—furniture(1) . . . . . . . Flex . . . . . . . . . . . . . . . . . . . Retail—office supply(2) . . . . . Office . . . . . . . . . . . . . . . . . Health & fitness . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . Number of Tenants Number of Properties 2014 Contractual Rental Income Percentage of 2014 Contractual Rental Income 70 9 3 3 2 2 3 2 94 58 12 13 3 9 2 5 2 $21,290,232 9,283,651 5,524,110 3,706,785 3,623,175 3,423,441 2,961,524 3,243,088 104 $53,056,006 40.1% 17.5 10.4 7.0 6.8 6.5 5.6 6.1 100% (1) Eleven properties are net leased to Haverty Furniture pursuant to a master lease covering all such properties. (2) Includes seven properties which are net leased to Office Depot pursuant to seven separate leases. Five of the Office Depot leases contain cross-default provisions. Also includes two properties net leased to OfficeMax pursuant to separate leases. OfficeMax was acquired by Office Depot in November 2013. Most of our retail tenants (including franchisees of national chains) operate on a national basis and include, among others, Applebees, Barnes & Noble, Burlington Coat Factory, CarMax, CVS, Kohl’s, Marshalls, Mens’ Wearhouse, Office Depot, Party City, PetSmart, TGI Fridays, The Sports Authority, Urban Outfitters, Walgreens, Wendy’s and Whole Foods and some of our tenants operate on a regional basis, including Haverty Furniture, Giant Food Stores and hhgregg. 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 insurance coverage for the property it leases and naming us an additional insured. 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 or for rent increases pursuant to a formula based on the consumer price index. 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 2013 rental revenues and are not expected to be a material part of our 2014 rental revenues. 4 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 as of December 31, 2013: Year of Lease Expiration(1) 2014 . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . 2023 and thereafter . . . . . . . . . . . Number of Expiring Leases Approximate Square Footage Subject to Expiring Leases 2014 Contractual Rental Income Under Expiring Leases 11 8 14 8 18 5 7 6 8 29 114 669,274 191,099 358,042 89,718 397,147 94,952 181,108 119,260 1,154,724 2,114,914 5,370,238 $ 3,639,171 1,798,687 3,156,162 1,781,737 5,924,158 1,392,124 4,305,178 1,121,779 8,730,507 21,206,503 $53,056,006 Percent of 2014 Contractual Rental Income Represented by Expiring Leases 6.9% 3.4 6.0 3.4 11.1 2.6 8.1 2.1 16.5 39.9 100% (1) Lease expirations assume tenants do not exercise existing renewal options. Subsequent to December 31, 2013 and with respect to three leases expiring in 2014 representing in the aggregate $2.6 million or 4.9% of 2014 contractual rental income, we: (cid:127) extended until September 30, 2015, at the base rent in effect as of December 31, 2013, a lease expiring in late December 2014. The lease as in effect at December 31, 2013, accounts for $2.04 million or 3.8% of 2014 contractual rental income. (cid:127) extended until November 2016, at the current base rent rate, a lease expiring in November 2014. The lease as in effect at December 31, 2013 accounts for $563,163, or 1.06%, of 2014 contractual rental income. (cid:127) leased for five years a property to a new tenant for which the lease expired in January 2014. The monthly base rent in the first year of such lease is approximately $40,000 and rent payments commence when specified work is completed at the property. Financing, Re-Renting and Disposition of Our Properties Our charter documents do not limit the level of debt we may incur. Our revolving credit facility matures on March 31, 2015 and, among other things, limits total debt that we may incur to 70% of the value of our properties (as determined pursuant to the credit agreement). 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 the standard carve-outs described under ‘‘Item 2. Properties—Mortgage Debt’’, 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, and to a more limited extent, invest in joint ventures and for 5 working capital. Net proceeds received from the sale, financing or refinancing of properties are generally required to be used to repay amounts outstanding under our credit facility. 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. 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. If there is a substantial tax gain, we may seek to enter into a tax deferred transaction and reinvest the proceeds in another property. Cash realized from the sale of properties, net of required paydowns of our credit facility and of any distributions to stockholders, is available for general working capital purposes and the acquisition of additional properties. Our Joint Ventures As of December 31, 2013, we participated in five joint ventures that own an aggregate of five properties, with approximately 1.2 million rentable square feet of space. Four of the properties are retail properties and one is an industrial property. We own 50% of the equity interest in all of these joint ventures. At December 31, 2013, our investment in joint ventures was approximately $4.9 million. Based on the leases in effect at December 31, 2013, we anticipate that our share of rental income payable to our joint ventures in 2014 will be approximately $1.5 million. The leases for two properties are expected to contribute 78.3% of the aggregate projected rental income payable to all of our joint ventures in 2014 and 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 Seven employees, including Patrick J. Callan, Jr., our president and chief executive officer, Lawrence G. Ricketts, Jr., our executive vice president and chief operating officer, Justin Clair, our assistant vice-president and four 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 is wholly-owned by our vice chairman of the board and it provides compensation to certain of our executive officers. Pursuant to this agreement, we pay an annual fee to Majestic Property and Majestic Property assumed our obligations under a shared 6 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 are negotiated each year by us and Majestic Property and are approved by our audit committee and independent directors. In 2013, pursuant to the compensation and services agreement, we paid Majestic Property a fee of approximately $2.725 million and $175,000 for our share of all direct office expenses, including, among other expenses, rent, telephone, postage, computer services and internet usage. See Note 9 to our consolidated financial statements for information regarding equity awards to individuals performing services on our behalf. 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 this 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 7 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: (cid:127) the financial condition of our tenants and the performance of their lease obligations; (cid:127) general economic and business conditions, including those currently affecting our nation’s economy and real estate markets; (cid:127) the availability of and costs associated with sources of liquidity; (cid:127) accessibility of debt and equity capital markets; (cid:127) general and local real estate conditions, including any changes in the value of our real estate; (cid:127) compliance with credit facility covenants; (cid:127) more competition for leasing of vacant space due to current economic conditions; (cid:127) changes in governmental laws and regulations relating to real estate and related investments; (cid:127) the level and volatility of interest rates; (cid:127) competition in our industry; and (cid:127) the other risks described under ‘‘Risks Related to Our Business’’ and ‘‘Risks Related to the REIT Industry.’’ Any or all of our forward-looking statements in this report 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 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 we are unable to re-rent properties upon the expiration of our leases or if our tenants default, our rental income will be reduced and we would incur additional costs. Substantially all of our revenues are derived from rental income paid by our tenants. From 2014 through 2016, leases with respect to 33 tenants that account for 18.3% of our 2013 rental income and 8 16.3% of our 2014 contractual rental income, expire. One tenant, whose lease expires in September 2015 (after giving effect to an extension entered into in January 2014), accounts for 3.4% of our 2013 rental income and 3.8% of 2014 contractual rental income. If our tenants, and in particular, our significant tenants, (i) do not renew their leases upon the expiration of same, (ii) default on their obligations or (iii) seek rent relief, lease renegotiation or other accommodations, our revenues could decline. At the same time, we would remain responsible for the payment of the mortgage obligations with respect to the related properties and would become responsible for the operating expenses related to these properties, including, among other things, real estate taxes, maintenance and insurance. In addition, we may incur expenses in 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 and pay distributions. Approximately 61.5% of our 2013 rental income and 57.3% of our 2014 contractual rental income is derived from tenants operating in the retail industry and the inability of those tenants to pay rent would significantly reduce our revenues. Approximately 61.5% of our rental income for 2013 was derived from retail tenants and approximately 57.3% of our 2014 contractual rental income is expected to be derived from retail tenants, including 10.4% and 6.8%, from tenants engaged in retail furniture and office supply operations, respectively. Difficult economic conditions could cause our retail tenants to fail to meet their lease obligations, including rental payments, 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. Approximately 29.0% of our 2013 rental income and 30.4% of our 2014 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, Office Depot, LA Fitness, Northern Tool and Ferguson Enterprises, account for approximately 9.5%, 6.7%, 6.3%, 1.7% and 4.8%, of our rental income for 2013, respectively, and account for approximately 8.6%, 6.8%, 5.4%, 5.0% and 4.6%, respectively, of our 2014 contractual rental income. The default, financial distress or bankruptcy of any of these tenants could cause interruptions in the receipt of, or the loss of, a significant amount of rental income and would require us to pay operating expenses (including real estate taxes) 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. Declines in the value of our properties could result in impairment charges. 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 any of our properties at which indicators of impairment exist have a value which is below the net book value of such property, we may 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; such impairment charges may then increase in subsequent quarters. 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. 9 Competition that traditional retail tenants face from on-line retail sales could adversely affect our business. Our retail tenants face increasing competition from online retailers. Online retailers may be able to provide customers with better pricing and the ease and comfort of shopping from their home or office. Internet sales have been obtaining an increasing percentage of retail sales over the past few years and this trend is expected to continue. The continued growth of online sales could decrease the need for traditional retail outlets and reduce retailers’ space and property requirements. This could adversely impact our ability to rent space at our retail properties and increase competition for retail tenants thereby reducing the rent we would receive at these properties and adversely affecting our results of operations and financial condition. 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. We had, as of December 31, 2013, $278 million in mortgage debt outstanding, all of which is non-recourse (subject to standard carve-outs) and our ratio of mortgage debt to total assets was 48.6%. Our joint ventures had $17.8 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 indebtedness and our available cash and cash equivalents and short-term investments will be insufficient to meet required payments of principal and interest. Generally, only a small portion of the principal of our mortgage indebtedness will be repaid prior to maturity and we do not plan to retain sufficient cash to repay such indebtedness at maturity. Accordingly, 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 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. From 2014 through 2018, approximately $146.8 million of our mortgage debt matures—specifically, $36.2 million in 2014, $14.6 million in 2015, $32.7 million in 2016, $44.6 million in 2017 and $18.7 million in 2018. With respect to our joint ventures, approximately $17.8 million of mortgage debt matures from 2014 through 2018—specifically, $613,000 in 2014, $13.6 million in 2015, $94,000 in 2016, $101,000 in 2017 and $3.4 million in 2018. If we (or our joint ventures) are unsuccessful 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, 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 the terms of the mortgage cannot be satisfactorily renegotiated, forfeit the property by conveying it to the mortgagee and writing off our investment. If our borrowings increase, the risk of default on our repayment obligations and our debt service requirements will also increase. The terms of our revolving credit facility 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. 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 10 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 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. If credit markets tighten or interest rates increase, it may be more 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. Reduced access to credit markets or increases in interest rates may make it difficult for us to secure mortgage debt, limiting the mortgage debt available on properties we wish to acquire and possibly limiting the 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 may be unable to refinance the entire outstanding loan balance or be 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 income from those properties and reduce cash available for distribution, which may adversely affect the investment goals of our stockholders. Certain of 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. However, under the provisions of certain net and ground leases, we are 11 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 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 57.3% and 17.5% of our 2014 contractual rental income is expected to come from retail and industrial 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. 12 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 regions may make our revenues and the value of our portfolio vulnerable to adverse changes in local economic conditions. The properties we own may be located in the same or a limited number of geographic regions. Approximately 34.6% of our 2013 rental income was, and approximately 32.7% of our 2014 contractual rental income will be, derived from properties located in New York, Texas and New Jersey. At December 31, 2013, approximately 50% of the net book value of our real estate investments was located in five states—Texas (13.1%), New Jersey (10.9%), South Carolina (10.9%), Pennsylvania (7.9%), and New York (7.0%). As a result, a decline in the economic conditions in these regions, or in 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. We have been, and in the future will be, subject to significant competition and we may not be able to compete successfully for investments. We have been, and in the future will be, subject to significant competition for attractive investment opportunities from other real estate investors, many of which have greater financial resources than us, including publicly-traded REITs, non-traded REITs, insurance companies, commercial and investment banking firms, private institutional funds, hedge funds, private equity funds and other investors. We may not be able to compete successfully for investments. If we pay higher prices for investments, our returns may be lower and the value of our assets may not increase or may decrease significantly below the amount we paid for such assets. If such events occur, we may experience lower returns on our investments. 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 is distributed. This, along with other factors, will enable us to qualify for the tax benefits accorded to a REIT under the Internal Revenue Code of 1986, as amended. We have not established a minimum dividend payment level and our ability to pay dividends may be adversely affected by the risk factors described in this Annual Report 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 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, funds from operations and maintenance of our REIT status. Various factors could cause our board of directors to decrease our 13 dividend level, including insufficient income to cover our dividends, 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 of directors determines to reduce our common stock dividend, the market value of our common stock could be adversely affected. Our current and future investments in joint ventures could be adversely affected by the lack of sole decision making authority, reliance on joint venture partners’ financial condition, and any dispute that may arise between our joint venture partners and us. A number of properties in which we have an interest are owned through joint ventures. We may continue to acquire properties through joint ventures and/or contribute some of our properties to joint ventures. Investments in joint ventures may, under certain circumstances, involve risks not present when a third party is not involved, including the possibility that joint venture partners might file for bankruptcy protection, or fail to fund their share of required capital contributions. Further, joint venture partners may have conflicting business interests or goals, and as a result there is the potential risk of impasses on decisions, such as a sale. Any disputes that may arise between joint venture partners and us may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by or disputes with joint venture partners might result in subjecting properties owned by the joint venture to additional risk. Compliance with environmental regulations and associated costs could adversely affect our results of operations and 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 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. 14 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 Matthew J. Gould, chairman of our Board of Directors, Fredric H. Gould, vice 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 us. 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, the inability or failure of the members of senior management providing services to us on a part-time basis to devote sufficient time or attention to our activities or our inability to recruit and retain qualified personnel in the future, could impair our ability to carry out our business and investment strategies. 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 effective as of January 1, 2007. Majestic Property is wholly-owned by the vice-chairman of our Board of Directors and it provides compensation to certain of our part-time senior executive officers. Pursuant to the compensation and services agreement, we pay an annual fee to Majestic Property and it assumes 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 2013, pursuant to the compensation and services agreement, we paid Majestic Property a fee of $2,725,000 and an additional $175,000 for our share of all direct office expenses, including rent, telephone, postage, computer services, and internet usage. See Note 9 to our consolidated financial statements for information regarding equity awards to individuals performing services on our behalf. The failure of any bank in which we deposit our funds could have an adverse impact on our financial condition. We have diversified our cash and cash equivalents between several banking institutions in an attempt to minimize exposure to any one of these entities. However, the Federal Deposit Insurance Corporation, or ‘‘FDIC,’’ only insures accounts in amounts up to $250,000 per depositor per insured bank. We currently have cash and cash equivalents deposited in certain financial institutions significantly in excess of federally insured levels. If any of the banking institutions in which we have deposited funds ultimately fails, we may lose our deposits over $250,000. The loss of our deposits may have an adverse effect on our financial condition. 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 15 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, in 2013 and 2012, we were subject to a 4% nondeductible excise tax on the amount by which distributions paid by us in such year was less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. As a result of differences in timing between the receipt of income and the payment of expenses, and the inclusion of such income and the deduction of such expenses in arriving at taxable income, and the effect of nondeductible capital expenditures, the creation of reserves and the timing of required debt service (including amortization) payments, we may need to borrow funds in order to make the distributions necessary to retain the tax benefits associated with qualifying as a REIT, even if we believe that then prevailing market conditions are not generally favorable for such borrowings. Such borrowings could reduce our net income and the cash available for distributions to holders of our common stock. Compliance with REIT requirements may hinder our ability to maximize profits. In order to qualify as a REIT for Federal income tax purposes, we must continually satisfy tests concerning, among other things, our sources of income, the amounts we distribute to our stockholders and the ownership of our stock. We may also be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. Accordingly, compliance with REIT requirements may hinder our ability to operate solely on the basis of maximizing profits. In order to qualify as a REIT, we must also ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and 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. 16 EXECUTIVE OFFICERS Set forth below is a list of our executive officers whose terms expire at our 2014 annual board of directors’ 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, 2014. NAME AGE POSITION WITH THE COMPANY Matthew J. Gould* . . . . . . . . . . . . . . . . Fredric H. Gould* . . . . . . . . . . . . . . . . Patrick J. Callan, Jr. . . . . . . . . . . . . . . . Lawrence G. Ricketts, Jr. . . . . . . . . . . . Jeffrey A. Gould* . . . . . . . . . . . . . . . . . David W. Kalish*** . . . . . . . . . . . . . . . Mark H. Lundy** . . . . . . . . . . . . . . . . . Israel Rosenzweig . . . . . . . . . . . . . . . . . Simeon Brinberg** . . . . . . . . . . . . . . . . Karen Dunleavy . . . . . . . . . . . . . . . . . . Alysa Block . . . . . . . . . . . . . . . . . . . . . Richard M. Figueroa . . . . . . . . . . . . . . Isaac Kalish*** . . . . . . . . . . . . . . . . . . Justin Clair . . . . . . . . . . . . . . . . . . . . . President, Chief Executive Officer and Director Executive Vice President and Chief Operating Officer Senior Vice President and Director Senior Vice President and Chief Financial Officer Senior Vice President and Secretary Senior Vice President Senior Vice President 54 Chairman of the Board 78 Vice Chairman of the Board 51 37 48 66 51 66 80 55 Vice President, Financial 53 46 Vice President and Assistant Secretary 38 Vice President and Assistant Treasurer 31 Assistant Vice President Treasurer * Matthew J. Gould and Jeffrey A. Gould are Fredric H. Gould’s sons. ** Mark H. Lundy is Simeon Brinberg’s son-in-law. *** Isaac Kalish is David W. Kalish’s son. Lawrence G. Ricketts, Jr. Mr. Ricketts has been our Chief Operating Officer since 2008, Vice President from 1999 through 2006 and Executive Vice President since 2006. David W. Kalish. Mr. Kalish has served as our Senior Vice President and Chief Financial Officer since 1990 and as Senior Vice President, Finance of BRT Realty Trust since 1998. Since 1990, he has served as Vice President and Chief Financial Officer of the managing general partner of Gould Investors L.P., a master limited partnership involved primarily in the ownership and operation of a diversified portfolio of real estate assets. Mr. Kalish is a certified public accountant. Israel Rosenzweig. Mr. Rosenzweig has served as our Senior Vice President since 1997, as Chairman of the Board of Trustees of BRT Realty Trust since 2013, as Vice Chairman of its Board of Trustees from 2012 through 2013, and as its Senior Vice President from 1998 through 2012. He has been a Vice President of the managing general partner of Gould Investors since 1997. Mark H. Lundy. Mr. Lundy has served as our Secretary since 1993, as our Vice President since 2000 and as our Senior Vice President since 2006. Mr. Lundy has been a Vice President of BRT Realty Trust from 1993 to 2006, its Senior Vice President since 2006, a Vice President of the managing general partner of Gould Investors from 1990 through 2012 and its President and Chief Operating Officer since 2013. He is an attorney admitted to practice in New York and the District of Columbia. Simeon Brinberg. Mr. Brinberg has served as our Senior Vice President since 1989. He served as Secretary of BRT Realty Trust from 1983 through 2013, a Senior Vice President of BRT Realty Trust since 1988 and a Vice President of the managing general partner of Gould Investors since 1988. Mr. Brinberg is an attorney admitted to practice in New York. 17 Karen Dunleavy. Ms. Dunleavy has been our Vice President, Financial since 1994. She has served as Treasurer of the managing general partner of Gould Investors from 1986 through 2013. Ms. Dunleavy is a certified public accountant. Alysa Block. Ms. Block has been our Treasurer since 2007, and served as Assistant Treasurer from 1997 to 2007. Ms. Block has also served as the Treasurer of BRT Realty Trust since 2008, and served as its Assistant Treasurer from 1997 to 2008. Richard M. Figueroa. Mr. Figueroa has served as our Vice President and Assistant Secretary since 2001 and as Vice President and Assistant Secretary of BRT Realty Trust since 2002. He joined the managing general partner of Gould Investors in 1999, and serves as its Vice President. Mr. Figueroa is an attorney admitted to practice in New York. Isaac Kalish. Mr. Kalish has served as our Vice President since 2013, Assistant Treasurer since 2007, as Assistant Treasurer of the managing general partner of Gould Investors from 2012 through 2013, as Treasurer from 2013, as Vice President of BRT Realty Trust since 2013, and as its Assistant Treasurer since 2009. Mr. Kalish is a certified public accountant. Justin Clair. Mr. Clair has served as Assistant Vice President since 2010 and has been employed by us since 2006. His responsibilities include sourcing new acquisition opportunities, managing the portfolio, underwriting of investments and marketing. Item 2. Properties. As of December 31, 2013, we owned 104 properties with an aggregate net book value of $496.2 million and participated in joint ventures that own five properties. Our occupancy rate based on total rentable square footage was 99.6% and 98.4% as of December 31, 2013 and 2012, respectively. The occupancy rate of our joint venture properties, based on total rentable square footage, was 100% as of December 31, 2013 and 2012. Our Properties The following table summarizes as of December 31, 2013 the specified information about the properties owned by us and our consolidated subsidiaries: Location Type of Property Industrial Industrial Fort Mill, SC . . . . . . . . . . . . . . . . Baltimore, MD . . . . . . . . . . . . . . . Parsippany, NJ . . . . . . . . . . . . . . . Office Royersford, PA(1) . . . . . . . . . . . . . Retail Hauppauge, NY . . . . . . . . . . . . . . Flex Round Rock, TX . . . . . . . . . . . . . . Assisted Living Facility Greensboro, NC . . . . . . . . . . . . . . Theater W. Hartford, CT(2) . . . . . . . . . . . . Retail Cherry Hill, NJ(3) . . . . . . . . . . . . . Retail Secaucus, NJ . . . . . . . . . . . . . . . . . Health & Fitness Brooklyn, NY . . . . . . . . . . . . . . . . Office Knoxville, TN . . . . . . . . . . . . . . . . Retail El Paso, TX . . . . . . . . . . . . . . . . . Retail Philadelphia, PA . . . . . . . . . . . . . . Fort Mill, SC . . . . . . . . . . . . . . . . Flex Industrial 18 Percentage of 2014 Contractual Rental Income Approximate Square Footage of Building 2014 Contractual Rental Income per Square Foot 5.0% 4.6 4.2 3.9 3.8 3.4 2.7 2.6 2.6 2.3 2.2 2.2 2.2 1.9 1.9 701,595 367,000 106,680 194,600 149,870 87,560 61,213 47,174 112,630 44,863 66,000 35,330 110,179 166,000 303,188 $ 3.79 6.72 21.08 10.66 13.61 20.68 23.41 28.85 12.40 27.63 17.81 32.84 10.66 6.22 3.41 Location Type of Property Percentage of 2014 Contractual Rental Income Approximate Square Footage of Building 2014 Contractual Rental Income per Square Foot Industrial Industrial Industrial Tucker, GA . . . . . . . . . . . . . . . . . . Health & Fitness Kansas City, MO . . . . . . . . . . . . . . Retail Hamilton, OH . . . . . . . . . . . . . . . . Health & Fitness Columbus, OH(4) . . . . . . . . . . . . . Retail Indianapolis, IN . . . . . . . . . . . . . . Cedar Park, TX(4) . . . . . . . . . . . . Retail Lake Charles, LA(5) . . . . . . . . . . . Retail Ronkonkoma, NY(6) . . . . . . . . . . . Flex Ft. Myers, FL . . . . . . . . . . . . . . . . Retail Columbus, OH . . . . . . . . . . . . . . . Houston, TX(7) . . . . . . . . . . . . . . Retail Chicago, IL(8) . . . . . . . . . . . . . . . . Retail Kennesaw, GA(8) . . . . . . . . . . . . . Retail Saco, ME . . . . . . . . . . . . . . . . . . . Naples, FL(8) . . . . . . . . . . . . . . . . Retail Clemmons, NC . . . . . . . . . . . . . . . Retail Wichita, KS(4) . . . . . . . . . . . . . . . Retail Morrow, GA . . . . . . . . . . . . . . . . . Retail Tyler, TX(4) . . . . . . . . . . . . . . . . . Retail Athens, GA(9) . . . . . . . . . . . . . . . Retail Greenwood Village, CO . . . . . . . . . Retail Champaign, IL(10) . . . . . . . . . . . . Retail New Hyde Park, NY . . . . . . . . . . . Cary, NC(8) . . . . . . . . . . . . . . . . . Retail Onalaska, WI . . . . . . . . . . . . . . . . Retail Fayetteville, GA(4) . . . . . . . . . . . . Retail Niles, IL . . . . . . . . . . . . . . . . . . . . Retail Houston, TX . . . . . . . . . . . . . . . . . Retail Selden, NY . . . . . . . . . . . . . . . . . . Retail Deptford, NJ . . . . . . . . . . . . . . . . Retail Eugene, OR(8) . . . . . . . . . . . . . . . Retail El Paso, TX(8) . . . . . . . . . . . . . . . Retail Duluth, GA(4) . . . . . . . . . . . . . . . Retail Lexington, KY(4) . . . . . . . . . . . . . Retail Virginia Beach, VA(4) . . . . . . . . . . Retail Richmond, VA(4) . . . . . . . . . . . . . Retail Amarillo, TX(4) . . . . . . . . . . . . . . Retail Newark, DE . . . . . . . . . . . . . . . . . Retail Durham, NC . . . . . . . . . . . . . . . . . Houston, TX . . . . . . . . . . . . . . . . . Retail Hyannis, MA . . . . . . . . . . . . . . . . Retail Newport News, VA(4) . . . . . . . . . . Retail Hauppauge, NY . . . . . . . . . . . . . . Retail Gurnee, IL(4) . . . . . . . . . . . . . . . . Retail Pinellas Park, FL . . . . . . . . . . . . . . Crystal Lake, IL . . . . . . . . . . . . . . Retail Somerville, MA . . . . . . . . . . . . . . . Retail Batavia, NY(8) . . . . . . . . . . . . . . . Retail Industrial Industrial Industrial 19 1.7 1.4 1.4 1.3 1.3 1.3 1.2 1.2 1.1 1.1 1.1 1.1 1.0 1.0 1.0 1.0 1.0 .9 .9 .9 .9 .9 .9 .9 .8 .8 .8 .7 .7 .7 .7 .7 .7 .7 .7 .7 .7 .6 .6 .6 .6 .6 .5 .5 .5 .5 .5 .5 58,800 88,807 38,000 96,924 125,622 50,810 54,229 89,500 29,993 100,220 42,446 23,939 32,052 91,400 15,912 96,725 88,108 50,400 72,000 41,280 45,000 50,530 38,000 33,490 63,919 65,951 33,089 25,005 14,550 25,358 24,978 25,000 50,260 30,173 58,937 38,788 72,227 23,547 46,181 20,087 9,750 49,865 7,000 22,768 53,064 32,446 12,054 23,483 15.46 8.32 19.25 6.99 5.35 13.88 11.76 8.50 20.17 5.62 14.23 24.62 17.35 5.82 33.00 5.40 5.99 8.96 6.36 11.62 10.50 9.30 12.05 13.99 6.75 6.57 12.09 15.70 26.05 14.90 15.66 14.54 6.88 11.78 6.44 9.93 5.31 14.00 14.00 15.50 30.07 6.69 40.73 12.21 5.03 8.00 23.23 12.10 Location Type of Property Percentage of 2014 Contractual Rental Income Approximate Square Footage of Building 2014 Contractual Rental Income per Square Foot Industrial Carrollton, GA . . . . . . . . . . . . . . . Retail Cartersville, GA . . . . . . . . . . . . . . Retail Bluffton, SC(4) . . . . . . . . . . . . . . . Retail Ann Arbor, MI . . . . . . . . . . . . . . . Retail Island Park, NY . . . . . . . . . . . . . . Retail Bolingbrook, IL . . . . . . . . . . . . . . . Retail W. Hartford, CT(11) . . . . . . . . . . . Retail Cape Girardeau, MO . . . . . . . . . . . Retail Kennesaw, GA . . . . . . . . . . . . . . . Retail Miamisburg, OH . . . . . . . . . . . . . . Lawrenceville, GA . . . . . . . . . . . . . Retail Everett, MA . . . . . . . . . . . . . . . . . Retail Myrtle Beach, SC . . . . . . . . . . . . . Retail Concord, NC . . . . . . . . . . . . . . . . Retail Vicksburg, MS . . . . . . . . . . . . . . . . Retail Richmond, VA . . . . . . . . . . . . . . . Retail Greensboro, NC . . . . . . . . . . . . . . Retail Killeen, TX . . . . . . . . . . . . . . . . . . Retail Marston Mills, MA . . . . . . . . . . . . Retail Houston, TX . . . . . . . . . . . . . . . . . Retail Monroeville, PA . . . . . . . . . . . . . . Retail Flowood, MS . . . . . . . . . . . . . . . . Retail D’Iberville, MS . . . . . . . . . . . . . . . Retail Vicksburg, MS . . . . . . . . . . . . . . . . Retail Bastrop, LA . . . . . . . . . . . . . . . . . Retail Monroe, LA . . . . . . . . . . . . . . . . . Retail Kentwood, LA . . . . . . . . . . . . . . . Retail Monroe, LA . . . . . . . . . . . . . . . . . Retail Gettysburg, PA . . . . . . . . . . . . . . . Retail West Palm Beach, FL . . . . . . . . . . Lawrence, KS . . . . . . . . . . . . . . . . Retail Palmyra, PA . . . . . . . . . . . . . . . . . Retail Reading, PA . . . . . . . . . . . . . . . . . Retail Hanover, PA . . . . . . . . . . . . . . . . . Retail Trexlertown, PA . . . . . . . . . . . . . . . Retail Reading, PA . . . . . . . . . . . . . . . . . Retail Seattle, WA . . . . . . . . . . . . . . . . . Retail Rosenberg, TX . . . . . . . . . . . . . . . Retail Grand Rapids, MI(12) . . . . . . . . . . Health & Fitness Grand Rapids, MI(12) . . . . . . . . . . Health & Fitness Melville, NY(13) . . . . . . . . . . . . . . Industrial Industrial .5 .5 .5 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .3 .3 .3 .3 .3 .3 .3 .3 .3 .3 .3 .3 .2 .2 .2 .2 .2 .2 .2 .2 .1 .1 .1 — 6,012 5,635 35,011 7,945 6,125 33,111 — 13,502 4,051 35,707 4,025 18,572 6,734 4,749 2,790 9,367 6,655 7,470 8,775 12,000 6,051 4,505 2,650 4,505 2,607 2,756 2,578 2,806 2,944 10,361 8,600 2,798 2,754 2,702 3,004 2,551 3,038 8,000 72,000 130,000 51,351 41.74 42.02 7.47 27.47 37.55 6.10 — 14.71 47.99 5.48 46.28 10.08 29.39 38.99 71.68 23.86 33.43 24.25 18.00 14.00 23.00 39.89 63.68 36.42 66.53 62.93 65.46 59.02 44.94 11.80 12.21 42.21 42.36 47.79 37.46 45.02 21.40 7.99 .41 .40 — (1) This property is leased to twelve tenants. Contractual rental income per square foot excludes 2,200 vacant square feet. (2) The property is a supermarket. Additional parking for such property is identified in note 11 below. 100% 5,393,346 20 (3) Contractual rental income per square foot excludes 2,130 vacant square feet. (4) This property is leased to a retail furniture operator. (5) This property has three tenants. Approximately 43% of the square footage is leased to a retail office supply operator. (6) Contractual rental income per square foot excludes 15,000 vacant square feet. (7) This property has 15 tenants. Contractual rental income per square foot excludes 3,778 vacant square feet. (8) This property is leased to a retail office supply operator. (9) This property has two tenants. Approximately 48% of the square footage is leased to a retail office supply operator. (10) This property has two tenants. (11) This property is the additional parking lot for the property identified in note 2 above. (12) This property was sold in February 2014. (13) In January 2014, we leased this property for approximately $9.25 per square foot. Properties Owned by Joint Ventures The following table summarizes the specified information about the properties owned by joint ventures in which we are a venture partner. We own a 50% economic interest in each joint venture: Location Percentage of our Share of the Aggregate Rent Payable in 2014 to our Joint Ventures Type of Property Lincoln, NE . . . . . . . . . . . . . Retail Milwaukee, WI . . . . . . . . . . . Savannah, GA . . . . . . . . . . . . Retail Savannah, GA . . . . . . . . . . . . Retail Savannah, GA . . . . . . . . . . . . Retail Industrial 40.5% 37.8 12.3 8.3 1.1 100% 2014 Contractual Rental Income per Square Foot $10.75 1.21 7.95 2.44 4.30 Approximate Square Footage of Building(1) 112,260 927,685 45,973 101,550 7,959 1,195,427 (1) Approximate square footage indicated represents the total rentable square footage of the property owned by the joint venture. 21 Geographic Concentration As of December 31, 2013, the 104 properties owned by us are located in 28 states. The following table sets forth certain information, presented by state, related to our properties as of December 31, 2013: State Texas . . . . . . . . . . . . . . . . . . . . New York . . . . . . . . . . . . . . . . . New Jersey . . . . . . . . . . . . . . . . South Carolina . . . . . . . . . . . . . Georgia . . . . . . . . . . . . . . . . . . Pennsylvania . . . . . . . . . . . . . . . North Carolina . . . . . . . . . . . . . Maryland . . . . . . . . . . . . . . . . . Illinois . . . . . . . . . . . . . . . . . . . Ohio . . . . . . . . . . . . . . . . . . . . . Connecticut . . . . . . . . . . . . . . . . Florida . . . . . . . . . . . . . . . . . . . Virginia . . . . . . . . . . . . . . . . . . Louisiana . . . . . . . . . . . . . . . . . Tennessee . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . Number of Properties 12 9 4 4 10 9 6 1 6 4 2 4 4 5 1 23 2014 Contractual Rental Income $ 6,582,470 5,484,821 5,236,040 4,150,166 4,043,987 3,946,119 3,148,848 2,466,630 2,198,573 2,167,850 1,561,013 1,519,120 1,321,668 1,318,785 1,160,320 6,749,596 104 $53,056,006 Percentage of 2014 Contractual Rental Income Approximate Building Square Feet 12.4% 10.3 10.0 7.8 7.6 7.4 5.9 4.6 4.1 4.1 2.9 2.9 2.5 2.5 2.2 12.8 100% 532,784 445,879 289,531 1,046,528 318,466 383,404 249,013 367,000 195,883 270,851 47,174 109,330 156,957 64,976 35,330 880,240 5,393,346 The following table sets forth certain information, presented by state, related to the properties owned by our joint ventures as of December 31, 2013: State Nebraska . . . . . . . . . . . . . . . . . . . . . . . . . . . Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of Properties 1 1 3 5 Our Share of Rent Payable in 2014 to Our Joint Ventures $ 603,594 562,500 323,645 Approximate Building Square Feet 112,260 927,685 155,482 $1,489,739 1,195,427 Mortgage Debt At December 31, 2013, we had: (cid:127) 51 first mortgages on 73 of our 104 properties; and (cid:127) $278 million of mortgage debt outstanding with a weighted average interest rate of 5.22% and a weighted average maturity of nine years. Substantially all of such mortgage debt bears fixed interest at rates ranging from 3.13% to 8.80% and contains prepayment penalties. 22 The following table sets forth scheduled principal mortgage payments due for our properties as of December 31, 2013: YEAR PRINCIPAL PAYMENTS DUE (Dollars in Thousands) 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,172(1) 14,643 32,679 44,595 18,696 131,260 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $278,045 (1) In February 2014, we refinanced approximately $16.26 million in principal amount of such debt scheduled to mature in May 2014. As a result of this refinancing, which is not reflected in this table, approximately $19.75 million in principal amount of mortgage debt with an annual interest rate of 4.75% (interest only for five years and amortizing on a 30-year schedule thereafter) becomes due in 2024. See ‘‘Item 9B. Other Information’’. At December 31, 2013, our joint ventures had first mortgages on four properties with outstanding balances aggregating approximately $17.8 million, bearing interest at rates ranging from 5.81% to 6% with a weighted average interest rate of 5.86%. Substantially all of 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, 2013, and assumes no payment is made on principal on any outstanding mortgage in advance of its due date: YEAR PRINCIPAL PAYMENTS DUE (Dollars in Thousands) 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 613 13,556 94 101 3,429 $17,793 The mortgages on our properties are generally non-recourse, subject to standard carve-outs. The term ‘‘standard carve-outs’’ refers to recourse items to an otherwise non-recourse mortgage and are customary to mortgage financing. While carve-outs vary from lender to lender and transaction to transaction, the carve-outs may include, among other things, voluntary bankruptcy filings, environmental liabilities, the sale, financing or encumbrance of the property in violation of loan documents, damage to property as a result of intentional misconduct or gross negligence, failure to pay valid taxes and other claims which could create liens on property and the conversion of security deposits, insurance proceeds or condemnation awards. Item 3. Legal Proceedings. Not applicable. Item 4. Mine Safety Disclosures. Not applicable. 23 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 under the symbol ‘‘OLP.’’ The following table sets forth for the periods indicated, the high and low prices for our common stock as reported by the New York Stock Exchange and the per share distributions declared on our common stock. 2013 2012 Quarter Ended High Low Dividend Per Share(1) March 31 . . . . . . . . . . June 30 . . . . . . . . . . . September 30 . . . . . . . December 31 . . . . . . . $24.36 27.74 24.58 22.24 $20.65 21.28 19.75 19.60 $.35 .35 .35 .37 High Low $19.44 19.99 20.36 20.88 $16.25 16.87 18.15 17.52 Dividend Per Share(1) $.33 .33 .33 .35 (1) The dividends in the fourth quarter of 2013 and 2012 were distributed on January 3, 2014 and January 4, 2013, respectively. As of March 12, 2014, there were approximately 332 holders of record 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. 24 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, 2008 in our common stock and assumes the reinvestment of dividends. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS OLP S&P 500 NAREIT Equity Index 350 300 250 200 150 100 50 0 12/08 12/09 12/10 12/11 12/12 12/13 13MAR201402475203 2008 2009 2010 2011 2012 2013 December 31, OLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . S&P 500 . . . . . . . . . . . . . . . . . . . . . . . . . FTSE NAREIT Equity REITs Index . . . . . $100.00 100.00 100.00 $106.20 126.46 127.99 $217.68 145.50 163.78 $233.92 148.58 177.35 $308.44 172.35 209.38 $326.32 228.17 214.55 Issuer Purchases of Equity Securities We did not repurchase any shares of our outstanding common stock in October, November or December 2013. 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 2013, 2012 and 2011 should be read together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on 25 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. As of and for the Year Ended December 31, (Amounts in thousands, except per share data) 2013 2012 2011 2010 2009 OPERATING DATA(1) Rental income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,979 $ 43,793 $ 40,874 $ 36,715 $ 35,174(2) Real estate acquisition costs . . . . . . . . . . . . . . . . . . . . Equity in earnings of unconsolidated joint ventures . . . . Income from continuing operations . . . . . . . . . . . . . . . Income from discontinued operations . . . . . . . . . . . . . . Net income attributable to One Liberty Properties, Inc. . Weighted average number of common shares 921 651 17,409 515 17,875 213 914 11,088 2,632 13,724 59 1,085 10,145 9,496 19,641 823 1,368 11,328 20,980 32,320 1,010 992 6,990 2,316 9,306 outstanding: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income per common share—basic 14,948 15,048 14,427 14,527 13,801 13,851 11,465 11,510 10,651 10,812 Income from continuing operations . . . . . . . . . . . . . . $ Income from discontinued operations . . . . . . . . . . . . 1.12 $ .03 .77 $ 1.41 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.15 $ 2.18 $ Net income per common share—diluted Income from continuing operations . . . . . . . . . . . . . . $ Income from discontinued operations . . . . . . . . . . . . 1.11 $ .03 .76 $ 1.40 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.14 $ 2.16 $ .77 $ .19 .96 $ .61 $ .20 .81 $ .77 $ .19 .96 $ .61 $ .20 .81 $ .95 .89 1.84 .94 .88 1.82 .08 .80 1.34 $ — 1.23 $ — $ 1.42 $ — 1.32 $ — Cash distributions per share of common stock . . . . . . . . $ Stock distributions per share of common stock . . . . . . . BALANCE SHEET DATA(1) Real estate investments, net . . . . . . . . . . . . . . . . . . . . . $496,187 $405,161 $370,617 $360,779 $300,227 38,468 Properties held for sale and related assets . . . . . . . . . . . Investment in unconsolidated joint ventures . . . . . . . . . 7,635 28,036 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . 400,097 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,767 Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgages payable—properties held for sale . . . . . . . . . 4,162 27,000 Due under line of credit . . . . . . . . . . . . . . . . . . . . . . . 219,969 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,128 OTHER DATA(3)(4) Funds from operations . . . . . . . . . . . . . . . . . . . . . . . . $ 25,845 $ 23,775 $ 22,825 $ 18,160 $ 23,501 Funds from operations per common share: 22,481 5,364 7,170 19,485 12,668 14,577 452,821 481,166 190,967 225,971 — 6,970 — 20,000 233,874 218,947 33,829 6,769 7,732 436,362 199,989 7,058 36,200 257,179 179,183 5,177 4,906 16,631 571,898 278,045 — 23,250 321,808 250,090 243,107 238,059 Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.21 2.17 Adjusted funds from operations . . . . . . . . . . . . . . . . . . $ 24,663 $ 22,577 $ 21,430 $ 17,030 $ 22,293 Adjusted funds from operations per common share: 1.61 $ 1.61 $ 1.68 $ 1.67 $ 1.58 $ 1.58 $ 1.60 $ 1.59 $ Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.60 $ 1.59 $ 1.52 $ 1.51 $ 1.51 $ 1.51 $ 1.49 $ 1.48 $ 2.09 2.06 (1) Certain amounts reported in prior years have been reclassified to conform to the current year’s presentation. Specifically, amounts for prior years have been reclassified (i) for discontinued operations and (ii) with respect to our tenant-in-common interest, from an investment in real estate to an investment in an unconsolidated joint venture for 2011 and prior periods. (2) Includes a lease termination fee of $1.78 million. 26 (3) See ‘‘—Funds from Operations and Adjusted Funds from Operations’’ for a discussion of the limitations on such data and a reconciliation of such data to our financial information presented in accordance with GAAP. (4) Amounts reported in 2009 have been adjusted to add back impairment charges in accordance with NAREIT’s (as defined) guidance. Funds from Operations and Adjusted Funds from Operations We compute funds from operations, or FFO, in accordance with the ‘‘White Paper on Funds From Operations’’ issued by the National Association of Real Estate Investment Trusts (‘‘NAREIT’’) and NAREIT’s related guidance. 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, plus impairment write-downs of depreciable real estate 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 adjusted funds from operations, or AFFO, by deducting from FFO our straight-line 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 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 our performance, management is careful to examine GAAP measures such as net income and cash flows from operating, investing and financing activities. Management also prepares and reviews the reconciliation of net income to FFO and AFFO. 27 The table below provides a reconciliation of net income in accordance with GAAP to FFO and AFFO for each of the indicated years (amounts in thousands): Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add: depreciation of properties . . . . . . . . . . . . . . . Add: our share of depreciation in unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . Add: impairment charges . . . . . . . . . . . . . . . . . . . . Add: amortization of deferred leasing costs . . . . . . . Add: our share of amortization of deferred leasing cost in unconsolidated joint ventures . . . . . . . . . . Add: Federal excise tax relating to gain on sales . . . Deduct: gain on sales of real estate . . . . . . . . . . . . Deduct: net gains on sales of real estate of 2013 2012 2011 2010 2009 $17,875 11,891 $ 32,320 9,857 $13,724 9,364 $ 9,306 8,606 $19,641 8,779 517 62 152 849 — 109 82 8 290 45 — (19,732) 595 — 74 — — (932) 537 — 53 545 229 64 — — (235) — — (5,757) unconsolidated joint ventures . . . . . . . . . . . . . . . (4,705) — — (107) — Funds from operations . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . 25,845 23,775 22,825 18,160 23,501 (1,273) (1,352) (1,430) (1,129) (1,108) 91 154 35 (1) (100) Adjusted funds from operations . . . . . . . . . . . . . . . $24,663 $ 22,577 $21,430 $17,030 $22,293 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add: depreciation of properties . . . . . . . . . . . . . . . . . . . . . . . Add: our share of depreciation in unconsolidated joint ventures Add: impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add: amortization of deferred leasing costs . . . . . . . . . . . . . . . Add: our share of amortization of deferred leasing cost in unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . . Add: Federal excise tax relating to gain on sales . . . . . . . . . . . Deduct: gain on sales of real estate . . . . . . . . . . . . . . . . . . . . . Deduct: net gains on sales of real estate of unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Funds from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deduct: straight line rent accruals and amortization of lease 2013 2012 2011 2010 2009 $1.14 .78 .03 .01 .01 $ 2.16 .66 .06 — .01 $ .96 .66 .05 — .01 $ .81 .75 .05 — — $1.82 .81 .05 .02 — — — — .02 — (1.32) — — (.07) — — (.02) — — (.53) (.30) 1.67 — — (.01) — 1.59 1.61 1.58 2.17 intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.08) (.09) (.10) (.10) (.10) Deduct: our share of straight line rent accruals and amortization of lease intangibles of unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — .01 — — (.01) Adjusted funds from operations . . . . . . . . . . . . . . . . . . . . . . . $1.59 $ 1.51 $1.51 $1.48 $2.06 28 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview We are a self-administered and self-managed real estate investment trust. We acquire, own and manage a geographically diversified portfolio of retail, industrial, health and fitness, office, flex and other properties, a substantial portion of which are leased under long-term net leases. As of December 31, 2013, we own 104 properties (including two properties located in Michigan that were sold in February 2014) and our joint ventures own five properties. These 109 properties are located in 29 states. We face a variety of risks and challenges in our business. As more fully described under Item 1A. Risk Factors, we, among other things, face the possibility we will not be able to acquire accretive properties on acceptable terms, lease our properties on terms favorable to us or at all, our tenants may not be able to pay their rental and other obligations and we may not be able to renew or relet, on acceptable terms, leases that are expiring. We seek to manage the risk of our real property portfolio by diversifying among types of properties and industries, locations, tenants and scheduled lease expirations. As a result: (cid:127) 57.3%, 17.5%, 7.0%, 6.5%, 5.6% and 6.1% of our 2014 contractual rental income is derived from retail, industrial, flex, office, health and fitness, and other properties, respectively, (cid:127) no tenant accounts for 10% or more of our 2014 contractual rental income, (cid:127) properties in only three states account for 10% or more of 2014 contractual rental income, and (cid:127) through 2022, there are two years in which the percentage of our contractual rental income represented by expiring leases exceeds 10% of our 2014 contractual rental income and approximately 40.0% of our 2014 contractual rental income is represented by leases expiring in 2023 and thereafter. We monitor the risk of tenant non-payments through a variety of approaches tailored to the applicable situation. Generally, based on our assessment of the credit risk posed by our tenants, we monitor a tenant’s financial condition through one or more of the following actions: reviewing tenant financial statements, obtaining other tenant related financial information, regular contact with tenant’s representatives, tenant credit checks and regular management reviews of our tenants. In acquiring properties, we balance an evaluation of the terms of the leases and the credit of the existing tenants with a fundamental analysis of the real estate to be acquired, which analysis takes into account, among other things, the estimated value of the property, local demographics and the ability to re-rent or dispose of the property on favorable terms upon lease expiration or early termination. 2013 Highlights and Recent Developments In 2013: (cid:127) our rental income increased by $7.19 million, or 16.4%, from 2012, (cid:127) our income from continuing operations increased by $6.08 million, or 53.7%, from 2012, (cid:127) we purchased for an aggregate purchase price of $107.5 million, eleven properties representing approximately $7.9 million of 2014 contractual rental income, (cid:127) in connection and contemporaneously with the acquisition in 2013 of three properties with an aggregate purchase price of $77.5 million, we obtained mortgage financing aggregating $51.9 million, and 29 (cid:127) we recorded an aggregate gain of $4.71 million in connection with the sales of our equity interest in our Plano, Texas joint venture and our tenant-in-common interest in a California property. In February 2014, contemporaneously with the expiration of the related leases, we sold two health and fitness facilities in Michigan. At December 31, 2013, we recorded the related impairment charge of $62,000. Results of Operations Comparison of Years Ended December 31, 2013 and 2012 Revenues The following table compares rental income for the periods indicated: (Dollars in thousands) Year Ended December 31, Increase 2013 2012 (Decrease) % Change Rental income, net . . . . . . . . . . . . . . . . $50,979 $43,793 $7,186 16.4% Rental income, net. The increase is primarily due to rental income of $2.86 million earned from eleven properties acquired in 2012 and $3.3 million from eleven properties acquired in 2013. Real estate tax and expense reimbursements from tenants (primarily from seven properties acquired since February 2012) of $747,000 also contributed to the increase. We estimate that the rental income in 2014 (calculated on a straight line basis and excluding tenant reimbursements) from the eleven properties we acquired in 2013 will be approximately $8.9 million. Operating Expenses The following table compares operating expenses for the periods indicated: (Dollars in thousands) Operating expenses: Year Ended December 31, Increase 2013 2012 (Decrease) % Change Depreciation and amortization . . . . . . . . General and administrative . . . . . . . . . . Federal excise and state taxes . . . . . . . . Real estate expenses . . . . . . . . . . . . . . . Leasehold rent . . . . . . . . . . . . . . . . . . . Real estate acquisition costs . . . . . . . . . $11,919 7,801 255 3,213 308 921 $ 9,564 7,317 457 2,618 308 823 $2,355 484 (202) 595 — 98 Total operating expenses . . . . . . . . . . 24,417 21,087 3,330 Operating income . . . . . . . . . . . . . . . . . . $26,562 $22,706 $3,856 24.6% 6.6 (44.2) 22.7 — 11.9 15.8 17.0 Depreciation and amortization expense. Approximately $1.3 million and $880,000 of the increase is due to depreciation expense on the properties we acquired in 2013 and 2012, respectively. The balance of the increase is primarily due to depreciation on improvements to properties. We estimate that the expense in 2014 related to the eleven properties acquired in 2013 will be approximately $3.5 million. General and administrative expenses. Contributing to the increase were increases of (i) $217,000 in non-cash compensation expense primarily related to the increase in the number of restricted stock 30 awards granted and the higher fair value of such awards at the time of grant and (ii) $145,000 in payroll and payroll related expenses due to higher compensation levels and an increase in medical insurance. Federal excise and state taxes. State taxes were $210,000 in 2013 compared to $167,000 in 2012. We are subject to a Federal excise tax of 4% to the extent that the sum of (i) 85% of our ordinary taxable income, (ii) 95% of our capital gains and (iii) any undistributed taxable income from the prior year exceeds our distributions paid in such year. We incurred Federal excise tax of $45,000 in 2013 (net of an approximate $110,000 over-accrual for such tax in 2012) and $290,000 in 2012 because our calendar year distributions in the applicable year was less than the total of these amounts. Real estate expenses. Contributing to the increase was the expense related to a property acquired in July 2013 and the inclusion, for a full year, of the expense related to a property acquired in November 2012. Other Income and Expenses The following table compares other income and expenses for the periods indicated: (Dollars in thousands) Other income and expenses: Equity in earnings of unconsolidated joint ventures . . . . . Gain on disposition of real estate—unconsolidated joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale—unconsolidated joint venture interest Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest: Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of deferred financing costs . . . . . . . . . . . Gain on sale of real estate . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . Year Ended December 31, Increase 2013 2012 (Decrease) % Change $ 651 $ 1,368 $ (717) (52.4)% 2,807 1,898 97 — — 241 (13,716) (890) — 17,409 (12,532) (774) 319 11,328 2,807 1,898 (144) 1,184 116 (319) 6,081 n/a n/a (59.8) 9.4 15.0 100.0 53.7 Equity in earnings of unconsolidated joint ventures. The decrease is attributable substantially to the following factors: (i) the sale in May 2013 of a property owned by us and another entity as tenants-in-common resulting in a decrease of $515,000, including a $148,000 mortgage prepayment penalty incurred as a result of the sale, and (ii) the inclusion in 2012 of our share of the net settlement entered into with a former tenant which accounted for $230,000 of the decrease. Gain on disposition of real estate—unconsolidated joint venture. In May 2013, the property in which we held a tenant-in-common interest was sold and we recorded a gain of $2,807,000. There was no comparable gain in 2012. Gain on sale—unconsolidated joint venture interest. In April 2013, we sold our 90% equity interest in our Plano, Texas unconsolidated joint venture and recorded a gain of $1,898,000. There was no comparable gain in 2012. Other income. The 2012 results include a $199,000 recovery from an insurance claim. There was no comparable income in 2013. 31 Interest expense. The following table summarizes interest expense for the periods indicated: (Dollars in thousands) Interest expense: Year Ended December 31, Increase 2013 2012 (Decrease) % Change Credit line interest . . . . . . . . . . . . . . . . Mortgage interest . . . . . . . . . . . . . . . . . $ 501 13,215 $ 852 11,680 $ (351) 1,535 (41.2)% 13.1 Total . . . . . . . . . . . . . . . . . . . . . . . . . . $13,716 $12,532 $1,184 9.4 Credit line interest The decrease is due to the $7.8 million decrease from $14.6 million in 2012 to $6.8 million in 2013 in the weighted average balance outstanding under our line of credit. The weighted average balance decreased due to repayments on the facility with proceeds from the sales and financing of several properties in 2012 and 2013 and from the sale of our common stock. Mortgage interest The following table reflects the interest rate on our mortgage debt and principal amount of outstanding mortgage debt, in each case on a weighted average basis: (Dollars in thousands) Interest rate on mortgage debt Principal amount of mortgage debt . . . . . . . . . . . Year Ended December 31, Increase 2013 2012 (Decrease) % Change 5.41% 5.78% (0.37)% (6.4)% $244,444 $202,190 $42,254 20.9 The increase in mortgage interest expense is due to the increase in the weighted average amount of mortgage debt outstanding, partially offset by a decrease in the weighted average interest rate on outstanding mortgage debt. The increase in the weighted average balance outstanding is due to the incurrence of mortgage debt of $80 million in connection with properties acquired in 2012 and 2013 and the financing or refinancing of $22.9 million, net of refinanced amounts, in connection with properties acquired in prior years. The decrease in the weighted average interest rate is due to the financing (including financings effectuated in connection with acquisitions) or refinancing in 2012 and 2013 of $140.2 million of gross new mortgage debt with a weighted average interest rate of approximately 4.8%. We estimate that the mortgage interest expense associated with the five properties acquired in 2013 with mortgage debt (including mortgage debt placed subsequent to the purchase), will be approximately $2.6 million in 2014. Interest expense for these five properties in 2013 was $993,000. Amortization of deferred financing costs. The increase is due to $63,000 of amortization incurred in connection with financings on eight properties we acquired in 2013 and 2012 and $48,000 is due to additional costs relating to the amendment to our line of credit in August 2012. 32 Discontinued Operations The following table compares discontinued operations for the periods indicated: (Dollars in thousands) Discontinued operations: Year Ended December 31, Increase 2013 2012 (Decrease) % Change Income from operations . . . . . . . . . . . . . . Impairment charge . . . . . . . . . . . . . . . . . . Net gain on sales . . . . . . . . . . . . . . . . . . . $ 1,567 $577 — (62) — 19,413 $ (990) (62) (19,413) (63.2)% n/a 100.0 Income from discontinued operations . . . . . . $515 $20,980 $(20,465) (97.5) Income from discontinued operations for 2013 includes the results of operations for two properties sold in February 2014 for which a $62,000 impairment charge was recorded. For 2012, income from discontinued operations includes the results of operations and the gain on sale of five of our properties sold in 2012, as well as the results of operations for the two properties sold in February 2014. Comparison of Years Ended December 31, 2012 and 2011 Revenues The following table compares rental income for the periods indicated: (Dollars in thousands) Year Ended December 31, Increase 2012 2011 (Decrease) % Change Rental income, net . . . . . . . . . . . . . . . . $43,793 $40,874 $2,919 7.1% Rental income, net. The increase is attributable to rental revenues of $3.30 million earned from 17 properties acquired by us beginning March 2011 (of which $1.3 million is attributable to properties acquired in 2012), and $153,000 of real estate tax and expense reimbursements from tenants (primarily from properties we acquired since July 2011). Partially offsetting the increase was the net decrease of approximately $637,000 in rental revenue resulting from the contribution, on February 6, 2012, of a property located in Plano, TX, which we refer to as the Plano Property, to an unconsolidated joint venture. Operating Expenses The following table compares operating expenses for the periods indicated: (Dollars in thousands) Operating expenses: Year Ended December 31, Increase 2012 2011 (Decrease) % Change Depreciation and amortization . . . . . . . . General and administrative . . . . . . . . . . Federal excise and state taxes . . . . . . . . Real estate expenses . . . . . . . . . . . . . . . Leasehold rent . . . . . . . . . . . . . . . . . . . Real estate acquisition costs . . . . . . . . . $ 9,564 7,317 457 2,618 308 823 $ 8,792 6,849 168 2,331 308 213 Total operating expenses . . . . . . . . . . 21,087 18,661 $ 772 468 289 287 — 610 2,426 Operating income . . . . . . . . . . . . . . . . . . $22,706 $22,213 $ 493 8.8% 6.8 172.0 12.3 — 286.4 13.0 2.2 33 Depreciation and amortization expense. The increase is substantially due to depreciation expense on the 17 properties we acquired beginning March 2011, partially offset by the decrease in depreciation resulting from the contribution of the Plano Property to an unconsolidated joint venture. General and administrative expenses. Contributing to the increase were increases of approximately (i) $268,000 in payroll and payroll related expenses due to higher levels of compensation and to a lesser extent, additional employees and (ii) $214,000 in non-cash compensation expense related to restricted stock awards due to the increase in the number of awards granted, the higher fair value of such awards at the time of grant and changes in assumptions relating to restricted stock units. Federal excise and state taxes. We incurred a Federal excise tax of $290,000. There was no corresponding Federal excise tax expense in the prior year. Real estate expenses. The increase is attributable to the following factors: (i) approximately $620,000 is due to the net increase in expenses (including approximately $356,000 of real estate taxes) relating to properties we acquired since July 2011 and (ii) increases in other real estate expenses, none of which was individually material. Partially offsetting the increase was the inclusion, with respect to the Plano Property, of $12,000 of real estate taxes in 2012 compared to $260,000 in 2011. Real estate acquisition costs. The increase is due to the increased acquisition activity and increased professional fees resulting from the complexity of certain of the acquisitions. Other Income and Expenses The following table compares other income and expenses for the periods indicated: (Dollars in thousands) Other income and expenses: Equity in earnings of unconsolidated joint ventures . . . . . . . . . . . . . . . . . Gain on settlement of debt . . . . . . . . . Other income (loss) . . . . . . . . . . . . . . Interest: Expense . . . . . . . . . . . . . . . . . . . . . Amortization of deferred financing Year Ended December 31, Increase 2012 2011 (Decrease) % Change $ 1,368 — 241 $ 914 1,240 (35) 454 $ (1,240) 276 49.7% 100.0 788.6 (12,532) (12,429) 103 0.8 costs . . . . . . . . . . . . . . . . . . . . . . Gain on sale of real estate . . . . . . . . . Income from continuing operations . . . . . (774) 319 11,328 (815) — 11,088 (41) 319 240 (5.0) n/a 2.2 Equity in earnings of unconsolidated joint ventures. The increase is due primarily to: (i) our approximate 36% share (i.e., $233,000) of the net proceeds from a settlement entered into in May 2012 with a former tenant; (ii) the inclusion during 2011 of our 50% share (i.e., $62,000) of real estate acquisition costs incurred in connection with the purchase of a property by a joint venture in March 2011; and (iii) our 90% share (i.e., $137,000) of the net operating income from the Plano Property. Partially offsetting the increase was the inclusion during 2012 of our share (i.e., $68,000) of real estate acquisition costs related to the Plano Property. Gain on settlement of debt. This gain represents the satisfaction, at less than face value, of the $8.9 million mortgage payable related to the Plano Property. The $1.24 million gain is net of a $19,000 write off of the balance of related deferred mortgage costs. 34 Other income (loss). The results for 2012 include a $199,000 settlement with the carrier of a commercial crime insurance policy relating to our claim against our former president. The loss for 2011 includes an impairment charge recorded on marketable securities that had unrealized losses of $126,000 and that were sold in January 2012. Interest expense. The following table summarizes interest expense for the periods indicated: (Dollars in thousands) Interest expense: Year Ended December 31, Increase 2012 2011 (Decrease) % Change Credit line interest . . . . . . . . . . . . . . . . Mortgage interest . . . . . . . . . . . . . . . . . $ 852 11,680 $ 987 11,442 $(135) 238 Total . . . . . . . . . . . . . . . . . . . . . . . . . . $12,532 $12,429 $ 103 (13.7)% 2.1 0.8% Credit line interest The decrease is due to the decrease, pursuant to amendments to our credit facility, which, among other things, reduced the annual interest rate from 6% to 5.5%, effective August 5, 2011, and from 5.5% to 4.75%, effective July 31, 2012, and, to a lesser extent, a decrease in the weighted average balance outstanding under our credit facility. The weighted average balance decreased due to repayments with financing proceeds from several properties and with a portion of the proceeds from the sale of three properties in June, September and October 2012, partially offset by borrowings for property acquisitions. Mortgage interest The following table reflects the interest rate on our mortgage debt and principal amount of outstanding mortgage debt, in each case on a weighted average basis: (Dollars in thousands) Interest rate on mortgage debt Principal amount of mortgage debt . . . . . Year Ended December 31, 2012 2011 Increase (Decrease) % Change 5.87% 6.16% (.29)% $199,014 $185,770 $13,244 (4.7)% 7.1 The increase in mortgage interest expense is due to the increases in the weighted average amount of mortgage debt outstanding, partially offset by a decrease in the weighted average interest rate on outstanding mortgage debt. The decrease in the weighted average interest rate is principally due to the financing in 2011 and 2012 of $86 million of mortgage debt with a weighted average interest rate of approximately 4.9%. Gain on sale of real estate. In February 2012, we contributed the Plano Property to an unconsolidated joint venture in exchange for a 90% interest therein, and our joint venture partner contributed $1.5 million for a 10% interest therein and we realized a gain of $319,000. In March 2013, our venture partner exercised its right to purchase our interest in the venture for $13.5 million. 35 Discontinued Operations The following table compares discontinued operations for the periods indicated: (Dollars in thousands) Discontinued operations: Year Ended December 31, 2012 2011 Increase (Decrease) % Change Income from operations . . . . . . . . . . . . . Net gain on sales . . . . . . . . . . . . . . . . . . $ 1,567 19,413 $1,700 932 $ (133) 18,481 (7.8)% 1,983.0 Income from discontinued operations . . . . . $20,980 $2,632 $18,348 697.1 Income from discontinued operations includes the income from operations and gain on sale of six of our properties, five of which were sold during 2012 and one of which was sold in 2011. Liquidity and Capital Resources Our sources of liquidity and capital include cash flow from operations, cash and cash equivalents, borrowings under our revolving credit facility, refinancing existing mortgage loans, obtaining mortgage loans secured by our unencumbered properties, issuance of our equity securities and property sales. Our available liquidity at March 12, 2014 was approximately $69.4 million, including approximately $7.2 million of cash and cash equivalents (net of the credit facility’s required $7.5 million deposit maintenance balance) and $62.2 million available under our revolving credit facility. Liquidity and Financing We expect to meet substantially all of our operating cash requirements (including dividend and mortgage amortization payments) from cash flow from operations. To the extent that cash flow from operations is not adequate to cover all of our operating needs, we will be required to use our available cash and cash equivalents or draw on our credit line (to the extent permitted) to satisfy operating requirements. The following table sets forth, as of December 31, 2013, information with respect to our mortgage debt (excluding mortgage debt of our unconsolidated joint ventures), that is payable from January 2014 through December 31, 2016: (Dollars in thousands) Amortization payments . . . . . . . . . . . . . . . . Principal due at maturity . . . . . . . . . . . . . . . 2014 2015 2016 Total $ 7,535 28,637 $ 7,189 7,454 $ 7,001 25,678 $21,725 61,769 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36,172 $14,643 $32,679 $83,494 At December 31, 2013, the Company’s unconsolidated joint ventures had first mortgages on four properties with outstanding balances aggregating approximately $17.8 million, bearing interest at rates ranging from 5.81% to 6.0% (i.e., a 5.86% weighted average interest rate). We intend to make debt amortization payments from operating cash flow and, though no assurance can be given that we will be successful in this regard, generally intend to refinance or extend the mortgage loans which mature in 2014 through 2016. We intend to repay the amounts not refinanced or extended from our existing funds and sources of funds, including our available cash and our credit line (to the extent available). 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 36 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. Typically, we utilize funds from our 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. Additionally in connection with the acquisition of a number of larger properties during 2013, we arranged for contemporaneous mortgage financing covering a major portion of the applicable purchase price. Credit Facility We can borrow up to $75 million pursuant to our revolving credit facility which is available to us for the acquisition of commercial real estate, repayment of mortgage debt, property improvements and general working capital purposes; provided, that if used for property improvements and working capital purposes, the amount outstanding for such purposes will not exceed the lesser of $15 million and 15% of the borrowing base and if used for working capital purposes, will not exceed $10 million. The facility matures on March 31, 2015 and bears interest at the greater of (i) 90 day LIBOR plus 3% and (ii) 4.75%. There is an unused facility fee of 0.25% per annum on the difference between the outstanding loan balance and $75 million. The credit facility requires the maintenance of $7.5 million in average deposit balances. The terms of our revolving credit facility include certain restrictions and covenants which may limit, among other things, the incurrence of liens, and which require compliance with financial ratios relating to, among other things, the minimum amount of tangible net worth, the minimum amount of debt service coverage, the minimum amount of fixed charge coverage, the maximum amount of debt to value, the minimum level of net income, certain investment limitations and the minimum value of unencumbered properties and the number of such properties. Net proceeds received from the sale, financing or refinancing of properties are generally required to be used to repay amounts outstanding under our credit facility. At December 31, 2013, we were in compliance in all material respects with the covenants under this facility. 37 Contractual Obligations The following sets forth our contractual obligations as of December 31, 2013: (Dollars in thousands) Contractual Obligations Mortgages payable—interest and amortization(1) Mortgages payable—balances due at maturity(1) . Credit facility(2) . . . . . . . . . . . . . . . . . . . . . . . . Purchase obligations(3) . . . . . . . . . . . . . . . . . . . Payment due by period Total Less than 1 Year 1 - 3 Years 4 - 5 Years More than 5 Years $193,898 176,563 23,250 17,300 $22,258 28,637 — 3,270 $ 37,751 33,132 23,250 6,630 $30,197 49,433 — 6,542 $103,692 65,361 — 858 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $411,011 $54,165 $100,763 $86,172 $169,911 (1) Does not give effect to financings and refinancings completed after December 31, 2013. See ‘‘Item 9B. Other Information.’’ (2) Represents the amount outstanding at December 31, 2013. We may borrow up to $75 million under such facility. (3) Includes $2.9 million payable annually pursuant to the compensation and services agreement (at the rate in effect at December 31, 2013 and assuming such agreement continues for only five years), amounts payable for office space leased from a related party and amounts payable pursuant to a ground lease. As of December 31, 2013, we had $278.0 million of mortgage debt outstanding (excluding mortgage indebtedness of our unconsolidated joint ventures), all of which is non-recourse (subject to standard carve-outs). We expect that mortgage interest and amortization payments (excluding repayments of principal at maturity) of approximately $60.0 million due through 2016 will be paid primarily from cash generated from our operations. We anticipate that debt obligations due through 2016 of approximately $61.8 million will be paid primarily from cash and cash equivalents and mortgage financings and refinancings. If we are unsuccessful 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 debt obligations when payments become due, and we may need to issue additional equity, obtain long or short-term debt, or dispose of properties on unfavorable terms. 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 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. 38 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. Our board of directors reviews the dividend policy regularly to determine if any changes to our dividend should be made. Off-Balance Sheet Arrangements None. Critical Accounting Policies Our significant accounting policies are more fully described in Note 2 to our Consolidated Financial Statements included 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 fair values associated with below-market rental renewal options are determined based on our experience and the relevant facts and circumstances that existed at the time of the acquisitions. The portion of the values of the leases associated with below-market renewal options that are likely to be exercised are amortized to rental income over the respective renewal periods. The allocation made by management may have a positive or negative effect on net income and may have an effect on the assets and liabilities on the balance sheet. Revenues Our revenues, which are substantially derived from rental income, include rental income that our tenants pay in accordance with the terms of their respective leases reported on a straight line basis over the term of each lease. Since many of our leases provide for rental increases at specified intervals, straight line basis accounting requires us to record as an asset and include in revenues, unbilled rent receivables which we will only receive if the tenant makes all rent payments required through the expiration of the 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. 39 Carrying 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 carrying 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 agreements. 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. We utilize interest rate swaps to limit interest rate risk. These swaps are used for hedging purposes-not for speculation. We do not enter into interest rate swaps for trading purposes. At December 31, 2013, we had 13 interest rate swap agreements outstanding (including one held by two of our unconsolidated joint ventures). The fair market value of the interest rate swaps is dependent upon existing market interest rates and swap spreads, which change over time. As of December 31, 2013, if there had been an increase of 100 basis points in forward interest rates, the fair market value of the interest rate swaps and net unrealized gain on derivative instruments would have increased by approximately $3.71 million. If there were a decrease of 100 basis points in forward interest rates, the fair market value of the interest rate swaps and net unrealized gain on derivative instruments would have decreased by approximately $3.70 million. These changes would not have any impact on our net income or cash. Our mortgage debt, after giving effect to the interest rate swap agreements, 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 credit facility and believe that there is no foreseeable market risk because interest is charged at the greater of (i) 90 day LIBOR plus 3% and (ii) 4.75% per annum. At December 31, 2013, 90 day LIBOR plus 3% was approximately 3.25%; therefore, an increase or decrease of 100 basis points on this interest rate would not have any impact on our interest expense related to this facility. 40 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, 2013: (Dollars in thousands) Fixed rate: Long-term debt . . . Weighted average interest rate . . . . Variable rate: Long-term debt(1) For the Year Ended December 31, 2014 2015 2016 2017 2018 Thereafter Total Fair Market Value $36,172 $14,643 $32,679 $44,594 $18,696 $131,261 $278,045 $283,142 5.38% 5.29% 5.24% 5.16% 5.17% 5.18% 5.22% 5.0% — $23,250 — — — — — — (1) Our credit facility matures on March 31, 2015 and bears interest at the greater of (i) 4.75% and (ii) 90 day LIBOR plus 3%. 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 into this Item 8 by reference thereto. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. 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: (cid:127) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of a company; (cid:127) 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 41 company are being made only in accordance with authorizations of management and directors of a company; and (cid:127) 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, 2013. In making this assessment, our management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control— Integrated Framework (1992). Based on its assessment, our management believes that, as of December 31, 2013, 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. On January 21, 2014, we acquired for $2.97 million a 12,950 square foot property located in Greensboro, North Carolina that is operated as a retailer of wine and spirits. On January 23, 2014, we acquired for $2.14 million a 12,820 square foot property located in Indianapolis, Indiana that is operated as a ‘‘Chuck E. Cheese’’ restaurant. On February 25, 2014, we refinanced mortgage debt in principal amount of $16.26 million, maturing in May 2014 and with an annual interest rate of 5.76%. The new mortgage debt is in the principal amount of $19.75 million, has an annual interest rate of 4.75%, matures in 2024, is interest only for five years and amortizes on a 30 year schedule thereafter. On March 4, 2014, we obtained mortgage debt of approximately $1.49 million, maturing in 2022, amortizing on a 25 year basis and with an annual interest rate of 5.16%. On March 6, 2014, we obtained mortgage debt of $6.5 million, maturing in 2024, amortizing on a 25 year basis and with an annual interest rate of 4.51%. Item 10. Directors, Executive Officers and Corporate Governance. PART III 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 2014 annual meeting of stockholders, to be filed with the SEC not later than April 30, 2014, and is incorporated herein by reference. Item 11. Executive Compensation. The information concerning our executive compensation required by this Item 11 shall be included in our proxy statement for our 2014 annual meeting of stockholders, to be filed with the SEC not later than April 30, 2014, and is incorporated herein by reference. 42 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 2014 annual meeting of stockholders, to be filed with the SEC not later than April 30, 2014 and is incorporated herein by reference. Equity Compensation Plan Information The following table provides information as of December 31, 2013 about shares of our common stock that may be issued upon the exercise of options, warrants and rights under our 2012 Stock Incentive Plan: Plan Category Equity compensation plans approved by security holders(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity compensation plans not approved by security holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) 200,000(2) — Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))(3) (c) 487,350 — 487,350 Weighted-average exercise price of outstanding options, warrants and rights (b) — — — (1) As of December 31, 2013, the only equity compensation plan under which equity compensation may be awarded is our 2012 Incentive Plan, which was approved by our stockholders in June 2012. This plan permits us to grant stock options, restricted stock, restricted stock units and performance based awards to our employees, officers, directors and consultants. (2) Represents an aggregate of up to 200,000 shares of common stock issuable pursuant to restricted stock units issued pursuant to our 2009 Incentive Plan. The shares underlying these units vest on June 30, 2017 if and to the extent specified performance or market conditions are satisfied, assuming continued employment. (3) Does not give effect to 118,850 restricted stock awards granted January 6, 2014 pursuant to our 2012 Incentive Plan. 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 2014 annual meeting of stockholders, to be filed with the SEC not later than April 30, 2014 and is incorporated herein by reference. 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 2014 annual meeting of stockholders, to be filed with the SEC not later than April 30, 2014, and is incorporated herein by reference. 43 Item 15. Exhibits and Financial Statement Schedules. (a) Documents filed as part of this Report: PART IV (1) The following financial statements of the Company are included in this Annual Report on Form 10-K: —Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . —Statements: F-1 through F-2 F-3 Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4 Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5 Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . F-6 Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8 through F-35 (2) Financial Statement Schedules: —Schedule III—Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . F-36 through F-39 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. (b) Exhibits: 3.1 Articles of Amendment and Restatement of One Liberty Properties, Inc., dated July 20, 2004 (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). 3.2 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 our Quarterly Report on Form 10-Q for the quarter ended June 30, 2005). 3.3 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 our Quarterly Report on Form 10-Q for the quarter ended June 30, 2005). 3.4 By-Laws of One Liberty Properties, Inc., as amended (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on December 12, 2007). 3.5 Amendment, effective as of June 12, 2012, to By-Laws of One Liberty Properties, Inc. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on June 12, 2012). 4.1* One Liberty Properties, Inc. 2009 Incentive Plan (incorporated by reference to Exhibit 4.1 to our Annual Report on Form 10-K for the year ended December 31, 2010). 4.2* One Liberty Properties, Inc. 2012 Incentive Plan (incorporated by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2012). 44 4.3 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-2, Registration No. 333-86850, filed on April 24, 2002 and declared effective on May 24, 2002). 10.1 Seconded Amended and Restated Loan Agreement, dated as of March 31, 2010, 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 Exhibit 10.1 to our Current Report on Form 8-K filed on January 10, 2011). 10.2 First Amendment dated as of January 6, 2011 to the Second Amended and Restated Loan Agreement, dated as of March 31, 2010, 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 10.2 to our Current Report on Form 8-K filed on January 10, 2011). 10.3 Second Amendment to Second Amended and Restated Loan Agreement dated as of August 5, 2011, between VNB New York Corp., Bank Leumi USA, Israel Discount Bank of New York, Manufacturers and Traders Trust Company and One Liberty Properties, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed August 15, 2011). 10.4 Third Amendment to Second Amended and Restated Loan Agreement dated as of July 31, 2012, between VNB New York Corp., Bank Leumi USA, Israel Discount Bank of New York, Manufacturers and Traders Trust Company and One Liberty Properties, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed August 2, 2012). 10.5* Compensation and Services Agreement effective as of January 1, 2007 between One Liberty Properties, Inc. and Majestic Property Management Corp. (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on March 14, 2007). 10.6* First Amendment to Compensation and Services Agreement effective as of April 1, 2012 between One Liberty Properties, Inc. and Majestic Property Management Corp. (incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012). 10.7* Form of Performance Award Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on September 15, 2010). 10.8* Form of Restricted Stock Award Agreement for the 2009 Incentive Plan (incorporated by reference to Exhibit 10.6 to our Annual Report on Form 10-K for the year ended December 31, 2010). 10.9* Form of Restricted Stock Award Agreement for the 2012 Incentive Plan. 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 the 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 45 32.1 Certification of President and Chief Executive Officer 32.2 Certification of Senior Vice President and Chief Financial Officer 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Definition Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document * Indicates a management contract or compensatory plan or arrangement. The file number for all the exhibits incorporated by reference is 001-09279 other than exhibit 4.3 whose file number is 333-86850. 46 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. March 17, 2014 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/ MATTHEW J. GOULD Matthew J. Gould /s/ FREDRIC H. GOULD Fredric H. Gould Chairman of the Board of Directors March 17, 2014 Vice Chairman of the Board of Directors March 17, 2014 /s/ PATRICK J. CALLAN, JR. Patrick J. Callan, Jr. President, Director and Chief Executive Officer (Principal Executive Officer) March 17, 2014 /s/ JOSEPH A. AMATO Joseph A. Amato /s/ CHARLES BIEDERMAN Charles Biederman /s/ JAMES J. BURNS James J. Burns /s/ JOSEPH A. DELUCA Joseph A. DeLuca /s/ JEFFREY A. GOULD Jeffrey A. Gould Director Director Director Director Director 47 March 17, 2014 March 17, 2014 March 17, 2014 March 17, 2014 March 17, 2014 Signature Title Date /s/ LOUIS P. KAROL Louis P. Karol /s/ J. ROBERT LOVEJOY J. Robert Lovejoy /s/ EUGENE I. ZURIFF Eugene I. Zuriff Director Director Director March 17, 2014 March 17, 2014 March 17, 2014 /s/ DAVID W. KALISH David W. Kalish Senior Vice President and Chief Financial Officer (Principal Financial Officer) March 17, 2014 /s/ KAREN DUNLEAVY Karen Dunleavy Vice President, Financial (Principal Accounting Officer) March 17, 2014 48 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, 2013, based on criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 Framework) (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, 2013, 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, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2013 of the Company and our report dated March 17, 2014 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP New York, New York March 17, 2014 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2013. 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, 2013 and 2012, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, 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, 2013, based on criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 Framework) and our report dated March 17, 2014 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP New York, New York March 17, 2014 F-2 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Amounts in Thousands, Except Par Value) ASSETS December 31, 2013 2012 Real estate investments, at cost Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $153,529 413,829 $136,727 329,486 Total real estate investments, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 567,358 71,171 466,213 61,052 Real estate investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496,187 405,161 Properties held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment in unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,177 4,906 16,631 13,743 26,035 5,690 262 3,267 5,364 19,485 14,577 12,629 16,491 3,741 241 3,477 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $571,898 $481,166 LIABILITIES AND EQUITY Liabilities: Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unamortized intangible lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $278,045 23,250 5,806 7,790 6,917 $225,971 — 5,252 6,584 5,300 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321,808 243,107 Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity: One Liberty Properties Inc. stockholders’ equity: . . . . . . . . . . . . . . . . . . . . . . . Preferred stock, $1 par value; 12,500 shares authorized; none issued Common stock, $1 par value; 25,000 shares authorized; 15,221 and 14,598 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated undistributed net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total One Liberty Properties, Inc. stockholders’ equity . . . . . . . . . . . . . . . . . . . . Non-controlling interests in joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — 15,221 210,324 (490) 23,877 248,932 1,158 14,598 196,107 (1,578) 28,001 237,128 931 Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,090 238,059 Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $571,898 $481,166 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, 2013 2012 2011 Revenues: Rental income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,979 $ 43,793 $ 40,874 Operating expenses: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative (including $2,681, $2,681 and $2,687 to related parties) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal excise and state taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate expenses (including $600 in each year to related party) . . . . . . . . . Leasehold rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income and expenses: Equity in earnings of unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . Gain on disposition of real estate—unconsolidated joint venture . . . . . . . . . . Gain on sale—unconsolidated joint venture interest . . . . . . . . . . . . . . . . . . . Gain on settlement of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest: 11,919 9,564 8,792 7,801 255 3,213 308 921 24,417 26,562 651 2,807 1,898 — 97 7,317 457 2,618 308 823 21,087 22,706 1,368 — — — 241 6,849 168 2,331 308 213 18,661 22,213 914 — — 1,240 (35) Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,716) (890) — (12,532) (774) 319 (12,429) (815) — Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,409 11,328 11,088 Discontinued operations: Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net gain on sales Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577 (62) — 515 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less net (income) loss attributable to non-controlling interests . . . . . . . . . . . . . 17,924 (49) 1,567 — 19,413 20,980 32,308 12 1,700 — 932 2,632 13,720 4 Net income attributable to One Liberty Properties, Inc. . . . . . . . . . . . . . . . . . $ 17,875 $ 32,320 $ 13,724 Weighted average number of common shares outstanding: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Per common share attributable to common stockholders—basic: Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . Per common share attributable to common stockholders—diluted: Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,948 15,048 14,427 14,527 13,801 13,851 $ $ $ $ 1.12 .03 1.15 1.11 .03 1.14 $ $ $ $ .77 1.41 2.18 .76 1.40 2.16 $ $ $ $ .77 .19 .96 .77 .19 .96 See accompanying notes. F-4 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Amounts in Thousands) Year Ended December 31, 2013 2012 2011 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,924 $32,308 $13,720 Other comprehensive gain (loss) Net unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . Net unrealized gain (loss) on derivative instruments . . . . . . . . . . . . . . One Liberty Property’s share of joint venture net unrealized gain (loss) on derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 961 76 Other comprehensive gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,084 11 (547) (23) (559) 66 (747) (182) (863) Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: comprehensive (income) loss attributable to non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plus: unrealized loss on derivative instruments attributable to non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,008 31,749 12,857 (49) (4) 12 — 4 — Comprehensive income attributable to One Liberty Properties, Inc. . . . . $18,955 $31,761 $12,861 See accompanying notes. F-5 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Equity For the Three Years Ended December 31, 2013 (Amounts in Thousands, Except Per Share Data) Common Stock Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Undistributed Net Income Non- Controlling Interests in Joint Ventures Total Balances, December 31, 2010 . . . . . . . $11,212 $147,158 $ (156) $ 20,969 $ — $179,183 Distributions—common stock Cash—$1.32 per share . . . . . . . . . . Shares issued in public offering—net of offering costs of $282 . . . . . . . . . . Restricted stock vesting . . . . . . . . . . Shares issued through dividend reinvestment plan . . . . . . . . . . . . . Contribution from non-controlling interest partner . . . . . . . . . . . . . . Compensation expense—restricted stock . . . . . . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . Other comprehensive (loss) . . . . . . . . — 2,700 46 — 37,869 (46) 255 3,496 — — — — — 1,009 — — — — — — — — — (863) Balances, December 31, 2011 . . . . . . . 14,213 189,486 (1,019) Distributions—common stock Cash—$1.34 per share . . . . . . . . . . Shares issued through equity offering program—net . . . . . . . . . . . . . . . Restricted stock vesting . . . . . . . . . . Shares issued through dividend reinvestment plan . . . . . . . . . . . . . Contributions from non-controlling interests . . . . . . . . . . . . . . . . . . . Distributions to non-controlling Interests . . . . . . . . . . . . . . . . . . . Compensation expense—restricted stock . . . . . . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . Other comprehensive (loss) . . . . . . . . — 121 49 215 — — — — — — 2,010 (49) 3,437 — — 1,223 — — — — — — — — — — (559) Balances, December 31, 2012 . . . . . . . 14,598 196,107 (1,578) Distributions—common stock Cash—$1.42 per share . . . . . . . . . . Shares issued through equity offering program—net . . . . . . . . . . . . . . . Restricted stock vesting . . . . . . . . . . Shares issued through dividend reinvestment plan . . . . . . . . . . . . . Contributions from non-controlling interest . . . . . . . . . . . . . . . . . . . . Distributions to non-controlling interests . . . . . . . . . . . . . . . . . . . Compensation expense—restricted stock . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . Other comprehensive income . . . . . . . — 363 50 210 — — — — — — 8,802 (50) 4,025 — — 1,440 — — — — — — — — (19,088) — — — — — 13,724 — 15,605 (19,924) — — — — — — 32,320 — 28,001 (21,999) — — — — — — — — — 666 — (4) — (19,088) 40,569 — 3,751 666 1,009 13,720 (863) 662 218,947 — — — — 571 (290) — (12) — 931 — — — — 480 (298) — 49 (4) (19,924) 2,131 — 3,652 571 (290) 1,223 32,308 (559) 238,059 (21,999) 9,165 — 4,235 480 (298) 1,440 17,924 1,084 — — 1,088 — 17,875 — Balances, December 31, 2013 . . . . . . . $15,221 $210,324 $ (490) $ 23,877 $1,158 $250,090 See accompanying notes. F-6 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 disposition of real estate held by unconsolidated joint venture . . . . . . . . . . . . . . . . . . . . Gain on sale—unconsolidated joint venture interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sales of real estate and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on settlement of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in rental income from straight-lining of rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Increase) decrease in rental income resulting from bad debt (recovery) expense, net . . . . . . . . . . . . (Increase) decrease in rental income from amortization of intangibles relating to leases . . . . . . . . . . Impairment charge on properties held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment charge on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of restricted stock expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in earnings of unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributions of earnings from unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization and write off of financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in assets and liabilities: (Increase) in escrow, deposits, other assets and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2013 2012 2011 $ 17,924 $ 32,308 $ 13,720 (2,807) (1,898) (6) — (1,114) — (160) 62 — 1,440 (651) 1,103 12,043 891 (1,653) 1,763 — — (19,741) — (1,354) (117) 2 — — 1,223 (1,368) 1,016 9,966 800 (492) 71 — — (932) (1,240) (1,455) 467 26 — 126 1,009 (914) 902 9,439 850 (395) 33 Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,937 22,314 21,636 Cash flows from investing activities: Purchase of real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Improvements to real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net proceeds from sale of real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net proceeds from disposition of unconsolidated joint venture interest Distributions of return of capital from unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . Investment in unconsolidated joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment of leasing commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net proceeds from sale of available-for-sale securities (107,579) (2,867) — 13,444 5,495 — (200) 19 (44,088) (4,969) 36,062 — 145 — (438) 373 (25,668) (3,746) 11,544 — 95 (669) (183) — Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (91,688) (12,915) (18,627) Cash flows from financing activities: Scheduled amortization payments of mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment of mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from mortgage financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from common stock offering, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from bank line of credit Repayment on bank line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issuance of shares through dividend reinvestment plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment of financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital contributions from non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributions to non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash distributions to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,808) (4,708) 63,590 9,165 32,500 (9,250) 4,235 (656) 480 (298) (21,445) 66,805 2,054 14,577 (5,533) (32,422) 65,989 2,131 14,550 (34,550) 3,652 (2,111) 571 (290) (19,477) (7,490) 1,909 12,668 (5,181) (15,302) 12,455 40,569 28,500 (44,700) 3,751 (741) 666 — (18,090) 1,927 4,936 7,732 Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,631 $ 14,577 $ 12,668 Supplemental disclosures of cash flow information: Cash paid during the year for interest expense, net of capitalized interest of $9 and $35 in 2013 and 2012, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash paid during the year for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,744 78 $ 13,088 68 $ 13,363 70 Supplemental schedule of non-cash investing and financing activities: Contribution of property to unconsolidated joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Settlement of mortgage debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase accounting allocations—intangible lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase accounting allocations—intangible lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . Reclassification of 2010 prepaid tenant improvement allowance to building improvements . . . . . . . . . $ — $ 11,734 — — 6,641 11,624 (588) (2,210) — — $ — 1,259 2,387 (614) 1,750 See accompanying notes. F-7 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2013 NOTE 1—ORGANIZATION AND BACKGROUND One Liberty Properties, Inc. (‘‘OLP’’) was incorporated in 1982 in 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, industrial, flex, office, health and fitness and other properties, a substantial portion of which are subject to long-term net leases. As of December 31, 2013, OLP owned 109 properties, including five properties owned by consolidated joint ventures and five properties owned by unconsolidated joint ventures. The 109 properties are located in 29 states. NOTE 2—SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts and operations of OLP, its wholly- owned subsidiaries and its investment in five joint ventures in which the Company, as defined, has a controlling interest. OLP and its subsidiaries are hereinafter referred to as the ‘‘Company’’. Material intercompany items and transactions have been eliminated in consolidation. Investment in Joint Ventures The Financial Accounting Standards Board, or FASB, guidance for determining whether an entity is a variable interest entity, or VIE, requires the performance of a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE. Under this guidance, an entity would be required 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 Company assesses the accounting treatment for each joint venture investment. This assessment includes a review of each joint venture or limited liability company agreement to determine the rights of each party and whether those rights are protective or participating. The agreements typically contain certain protective rights such as the requirement of partner approval to sell, finance or refinance the property and the payment of capital expenditures and operating expenditures outside of the approved budget or operating plan. In situations where the Company and its partner (i) approve the annual budget, (ii) approve certain expenditures, (iii) prepare or review and approve the joint venture’s tax return before filing, and (iv) approve each lease at each property, the Company does not consolidate the joint venture as the Company considers these to be substantive participation rights that result in shared power over the activities that most significantly impact the performance of the joint venture. With respect to the five consolidated joint ventures in which the Company has between an 85% and 95% interest, the Company has determined that (i) such ventures are not VIE’s and (ii) the Company exercises substantial operating control and accordingly, such ventures are consolidated for financial statement purposes. The Company accounts for its investments in five unconsolidated joint ventures under the equity method of accounting. All investments in these five joint ventures have sufficient equity at risk to permit the entity to finance its activities without additional subordinated financial support and, as a group, the holders of the equity at risk have power through voting rights to direct the activities of these ventures. As a result, none of these five joint ventures are VIE’s. In addition, although the Company is F-8 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 2—SIGNIFICANT ACCOUNTING POLICIES (Continued) the managing member, it does not exercise substantial operating control over these entities, and therefore the entities are not consolidated. These investments are recorded initially at cost, as investments in unconsolidated joint ventures, and subsequently adjusted for their share of equity in earnings, cash contributions and distributions. None of the joint venture debt is recourse to the Company, subject to customary carve-outs. 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 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 U.S. generally accepted accounting principles (‘‘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. 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 financial condition. 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. Substantially all of the Company’s properties are subject to long-term net leases under which the tenant is typically responsible to pay for real estate taxes, insurance and ordinary maintenance and F-9 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 2—SIGNIFICANT ACCOUNTING POLICIES (Continued) repairs for the property directly to the vendor and the Company is not the primary obligor with respect to such items. As a result, the revenue and expenses relating to these properties is recorded on a net basis. For certain properties, the tenants, in addition to base rent, also pay the Company their pro rata share of real estate taxes and operating expenses. The income and expenses associated with these properties is recorded on a gross basis. During 2013, 2012 and 2011, the Company recorded additional rental income for the reimbursement of expenses in the amount of $1,694,000, $947,000 and $794,000, respectively. Gains or losses on disposition of properties are recorded when the criteria under GAAP have been met. Fair Value Measurements The Company measures the fair value of financial instruments based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant 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. Purchase Accounting for Acquisition of Real Estate The Company allocates the purchase price of real estate among land, building, improvements and intangibles, such as the value of above, below and at-market leases and origination costs associated with in-place leases. The Company assesses the fair value of the lease intangibles and the assumed mortgage based on estimated cash flow projections that utilize appropriate discount rates and available market information. Such inputs are Level 3 in the fair value hierarchy. The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant. The value, as determined, is allocated to land, buildings and improvements based on management’s determination. In valuing an acquired property’s intangibles, factors considered by management include an estimate of carrying costs during the expected lease-up periods, such as real estate taxes, insurance, other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on its evaluation of current market demand. Management also estimates costs to execute similar leases, including leasing commissions, tenant improvements, legal and other related costs. The values of acquired above-market and below-market leases are recorded based on the present values (using discount rates which reflect the risks associated with the leases acquired) of the differences between the contractual amounts to be received and management’s estimate of market lease rates, measured over the terms of the respective leases that management deemed appropriate at the time of the acquisitions. Such valuations include a consideration of the non-cancellable terms of the respective leases as well as any applicable renewal period(s). The fair values associated with F-10 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 2—SIGNIFICANT ACCOUNTING POLICIES (Continued) below-market rental renewal options are determined based on the Company’s experience and the relevant facts and circumstances that existed at the time of the acquisitions. The values of above- market leases are amortized to rental income over the terms of the respective non-cancellable lease periods. The portion of the values of below-market leases associated with the original non-cancellable lease terms are amortized to rental income over the terms of the respective non-cancellable lease periods. The portion of the values of the leases associated with below-market renewal options that are likely of exercise are amortized to rental income over the respective renewal periods. The value of other intangible assets (including leasing commissions and tenant improvements) is amortized to expense over the applicable terms of the respective leases. If a lease were to be terminated prior to its stated expiration or not renewed, all unamortized amounts relating to that lease would be recognized in operations at that time. The estimated useful lives of intangible assets or liabilities generally range from one to 55 years. 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 one or more of the following: 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, the timeliness of the payments made by the tenant under its lease, and any current communication 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. The analysis includes an estimate of the future cash flows that are expected to result from the real estate investment’s use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects, the effects of leasing demand, competition and other factors. 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. Real estate investments include costs of development and redevelopment activities, and construction in progress. Capitalized costs, including interest and other carrying costs during the construction and/or renovation periods, are included in the cost of the related asset and charged to operations through depreciation over the asset’s estimated useful life. 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. F-11 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 2—SIGNIFICANT ACCOUNTING POLICIES (Continued) Escrow, Deposits and Other Assets and Receivables Escrow, deposits and other assets and receivables include $1,453,000 and $1,104,000 at December 31, 2013 and 2012, 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 its 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, 2013, there was no balance in allowance for doubtful accounts. At December 31, 2012, the balance in allowance for doubtful accounts was $132,000, 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, 2012 and 2011, the Company recorded bad debt expense of $56,000 and $486,000, respectively, in income from continuing operations and net recoveries of previously recognized bad debt expense of $173,000 and $19,000, respectively, in discontinued operations as a result of collections from one tenant. For the year ended December 31, 2013, the Company did not incur any bad debt expense. Depreciation and Amortization Depreciation of buildings is computed on the straight-line method over an estimated useful life of 40 years. Depreciation of improvements is computed on the straight line method over the lesser of the remaining lease term or the estimated useful life of the improvements. Depreciation ceases when a property is deemed ‘‘held for sale’’. 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 and excluding depreciation expense included in discontinued operations, amounted to $11,919,000, $9,564,000, and $8,792,000 for 2013, 2012 and 2011, 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, 2013 and 2012, accumulated amortization of such costs was $3,908,000 and $3,096,000, respectively. Federal Income Taxes The Company has qualified as a real estate investment trust under the applicable provisions of the Internal Revenue Code. Under these provisions, the Company will not be subject to federal income taxes on amounts distributed to stockholders providing it distributes at least 90% of its taxable income and meets certain other conditions. During the years ended December 31, 2013 and 2012, the Company recorded accruals of Federal excise tax of $45,000 and $290,000, respectively, which are based on taxable income generated but not yet distributed. F-12 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 2—SIGNIFICANT ACCOUNTING POLICIES (Continued) For 2013, 27% of the distributions are treated as capital gain distributions, with the balance treated as ordinary income. For 2012, 73% of the distributions were 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 classification of equity securities at the time of purchase and reassesses the classification at each reporting date. At December 31, 2013, all marketable securities have been classified as available-for-sale and recorded at fair value. The fair value of the Company’s equity investment in publicly-traded companies is determined based upon the closing trading price of the securities as of the balance sheet date and unrealized gains and losses on these securities are recorded as a separate component of stockholders’ equity. Unrealized losses that are determined to be other-than-temporary are recognized in earnings. 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 had a fair market value of $262,000 and $241,000 at December 31, 2013 and 2012, respectively. At December 31, 2013 and 2012, the total cumulative net unrealized gains of $145,000 and $98,000, respectively, on all investments in equity 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 are included in ‘‘Other income’’ on the income statement. During 2013, 2012 and 2011, sales proceeds and gross realized gains and losses on securities classified as available-for-sale were (amounts in thousands): Sales proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19 6 $373 $— 9(a) — 2013 2012 2011 (a) At December 31, 2011 the Company recorded an impairment charge of $126 on such securities. F-13 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 2—SIGNIFICANT ACCOUNTING POLICIES (Continued) Concentration of Credit Risk The Company maintains accounts at various financial institutions. While the Company attempts to limit any financial exposure, substantially all of its deposit balances exceed federally insured limits. The Company has not experienced any losses on such accounts. Including the properties owned by our unconsolidated joint ventures, the Company’s properties are located in 29 states. The following chart lists the states where the Company’s properties contributed over 10% to the Company’s rental income (amounts in thousands): Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.0% 10.8% 12.8% 12.8 11.0 8.3 10.7 10.1 8.8 13.8 5.9 10.8 2013 2012 2011 The Company owns eleven real estate investments that are located in six states and are net leased to Haverty Furniture Companies, Inc., a retail furniture company, pursuant to a master lease. The initial term of the net lease expires August 2022, with several renewal options. These real estate investments, which represented 9.5% of the depreciated book value of real estate investments at December 31, 2013, generated rental revenues of approximately $4,844,000 in each year or 9.5%, 11.1%, and 11.9%, of the Company’s total revenues for 2013, 2012 and 2011, respectively. Earnings Per Common Share Basic earnings per share was determined by dividing net income allocable to common stockholders for each year by the weighted average number of shares of common stock outstanding during each year. Net income is also allocated to the unvested restricted stock outstanding during each year, as the restricted stock is entitled to receive dividends and is therefore considered a participating security. Unvested restricted stock is not allocated net losses and/or any excess of dividends declared over net income; such amounts are allocated entirely to the common stockholders other than the holders of unvested restricted stock. The restricted stock units awarded under the Pay-for-Performance program described in Note 9 are excluded from the basic earnings per share calculation, as these units are not participating securities. Diluted earnings per share reflects the potential dilution that could occur if securities or other rights exercisable for, or convertible into, common stock were exercised or converted or otherwise resulted in the issuance of common stock that shared in the earnings of the Company. For 2013, 2012 and 2011, the diluted weighted average number of common shares includes 100,000, 100,000 and 50,000 shares respectively, representing the diluted weighted average impact of 100,000 shares (of an aggregate of 200,000 shares) of common stock underlying the restricted stock units awarded pursuant to the Pay-For-Performance Program. These 100,000 shares may vest upon satisfaction of the total stockholder return metric. The number of shares that would be issued pursuant to this metric is based on the market price and dividends paid at the end of each quarterly period assuming the end of that quarterly period was the end of the vesting period The remaining 100,000 shares of common stock underlying the F-14 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 2—SIGNIFICANT ACCOUNTING POLICIES (Continued) restricted stock units awarded under the Pay-For-Performance Program are not included during 2013, 2012 and 2011, as they did not meet the return on capital performance metric during such years. There were no options outstanding to purchase shares of common stock or other rights exercisable for, or convertible into, common stock in 2013, 2012 and 2011. The following table provides a reconciliation of the numerator and denominator of earnings per share calculations (amounts in thousands, except per share amounts): Year Ended December 31, 2013 2012 2011 Numerator for basic and diluted earnings per share: Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . Less net (income) loss attributable to noncontrolling interests . . . . . . . Less earnings allocated to unvested shares . . . . . . . . . . . . . . . . . . . . . $17,409 (49) (667) $11,328 12 — $11,088 4 (460) Income from continuing operations available for common stockholders Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,693 515 11,340 20,980 10,632 2,632 Net income available for common stockholders, basic and diluted . . . . $17,208 $32,320 $13,264 Denominator for basic earnings per share: —weighted average common shares . . . . . . . . . . . . . . . . . . . . . . . . . . —weighted average unvested restricted stock shares . . . . . . . . . . . . . . Effect of diluted securities: —restricted stock units awarded under Pay-for-Performance program . . Denominator for diluted earnings per share —weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per common share, basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per common share, diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts attributable to One Liberty Properties, Inc. common stockholders, net of noncontrolling interests: 14,948 — 14,948 14,427 411 14,838 13,801 — 13,801 100 100 50 15,048 14,938 13,851 $ $ 1.15 1.14 $ $ 2.18 2.16 $ $ .96 .96 Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . $17,360 515 $11,340 20,980 $11,092 2,632 Net income attributable to One Liberty Properties, Inc. . . . . . . . . . . . . . $17,875 $32,320 $13,724 Segment Reporting Substantially all of the Company’s real estate assets, at acquisition, 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. F-15 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 2—SIGNIFICANT ACCOUNTING POLICIES (Continued) Derivatives and Hedging Activities The Company’s objective in using derivatives, and in particular interest rate swaps, is to add stability to interest expense and to manage its exposure to interest rate movements. The Company does not use derivatives for trading or speculative purposes. The Company records all derivatives on the balance sheet at fair value. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. In addition, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. These counterparties are generally the larger financial 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. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows are considered cash flow hedges. 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, if any, 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, however; the Company’s policy is to not enter into such transactions. Stock Based Compensation The fair value of restricted stock grants and restricted stock units, determined as of the date of grant, is amortized into general and administrative expense over the respective vesting period. The deferred compensation to be recognized as expense is net of certain forfeiture and performance assumptions which are re-evaluated quarterly. New Accounting Pronouncements Effective January 1, 2013, the Company adopted ASU No. 2013-02, Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income, which the FASB issued in February 2013. The standard requires an entity to present information about significant items reclassified out of accumulated other comprehensive income by component either on the face of the statement where net income is presented or as a separate disclosure in the notes to financial statements. The guidance was effective for calendar year-end public companies beginning in the first quarter of 2013 with application on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s financial condition, results of operations or disclosures. F-16 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 2—SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 the two properties that were sold in February 2014 to properties held-for-sale at December 31, 2012 and to reclassify the operations of these properties to discontinued operations for all years presented. NOTE 3—REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS Real Estate Acquisitions The following chart details the Company’s real estate acquisitions during 2013 and 2012 (amounts in thousands): Description of Property Kmart retail store, Date Acquired Contract Purchase Price Terms of Payment(a) Clemmons, North Carolina(c) . . . . . . . March 22, 2013 $ 4,640 All cash Shutterfly flex facility, Cash and $9,300 Fort Mill, South Carolina . . . . . . . . . . July 1, 2013 15,500 mortgage(d) Texas Land & Cattle restaurant, Third Party Real Estate Acquisition Costs(b) $119 124 Killeen, Texas . . . . . . . . . . . . . . . . . . . July 30, 2013 2,020 All cash —(e) Hooters restaurant, Concord, North Carolina . . . . . . . . . . . August 1, 2013 2,469 All cash TRISUN Health Care—assisted living facility, Round Rock, Texas . . . . . . . . . . . . . . . August 6, 2013 Cash and $15,275 22,800 mortgage(f) Hooters restaurant, Myrtle Beach, South Carolina . . . . . . . September 3, 2013 2,635 All cash Joe’s Crab Shack restaurant, Ann Arbor, Michigan . . . . . . . . . . . . . September 12, 2013 2,980 All cash FedEx Express facility, Indianapolis, Indiana . . . . . . . . . . . . . September 13, 2013 9,270 All cash Northern Tool & Equipment distribution facility, Fort Mill, South Carolina . . . . . . . . . . TGIF restaurant, September 18, 2013 39,195 mortgage(g) Cash and $27,300 Greensboro, North Carolina . . . . . . . . December 3, 2013 3,003 All cash TGIF restaurant, Richmond, Virginia . . . . . . . . . . . . . . December 3, 2013 3,017 All cash Other(h) . . . . . . . . . . . . . . . . . . . . . . . . Totals for 2013 . . . . . . . . . . . . . . . . . . — $107,529 15 321 33 31 39 91 —(e) —(e) 148 $921 F-17 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 3—REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued) Description of Property Date Acquired Urban Outfitters retail store, Contract Purchase Price Terms of Payment(a) Third Party Real Estate Acquisition Costs(b) Lawrence, Kansas . . . . . . . . . . . . . . . . February 7, 2012 $ 1,230 All cash Three Applebee’s restaurants, Carrollton, Kennesaw and Cartersville, Georgia . . . . . . . . . . . . . . . . . . . . . . . March 12, 2012 Avalon Carpet Tile and Flooring, retail 8,568 All cash store and warehouse, Deptford, New Jersey(i) . . . . . . . . . . . April 24, 2012 Cash and $2,040 2,200 mortgage(j) Applebee’s restaurant, Lawrenceville, Georgia . . . . . . . . . . . . May 17, 2012 2,340 All cash FedEx Facility, Pinellas Park, Florida . . . . . . . . . . . . . October 11, 2012 2,810 All cash Walgreens Pharmacy, Cape Girardeau, Missouri(l) . . . . . . . . October 25, 2012 2,268 All cash Shopping Center, Cash and $5,100 Houston, Texas(m) . . . . . . . . . . . . . . . November 13, 2012 7,150 mortgage(n) LA Fitness Health Club, Cash and $10,000 Secaucus, New Jersey . . . . . . . . . . . . . December 12, 2012 16,400 mortgage(o) FedEx Facility, Miamisburg, Ohio . . . . . . . . . . . . . . . December 26, 2012 1,650 All cash Other(h) . . . . . . . . . . . . . . . . . . . . . . . . Totals for 2012 . . . . . . . . . . . . . . . . . . — $ 44,616 $ 21 84 —(i) 19 28(k) 92 206 341 6(k) 26 $823 (a) All of the mortgages listed in this column were obtained from institutional lenders simultaneously with the acquisition of the respective properties. (b) Included as an expense in the accompanying consolidated statements of income. (c) Owned by a consolidated joint venture in which the Company has a 90% interest. The non-controlling interest contributed $470 for its 10% interest, which was equal to fair value at the date of purchase. (d) The mortgage bears interest at 4.562% per annum and matures July 2023. (e) Transaction costs of $50 incurred with these asset acquisitions were capitalized. (f) The mortgage bears interest at 5.375% per annum and matures August 2023. (g) The mortgage bears interest at 4.875% per annum and matures April 2029. (h) Costs incurred for potential acquisitions and properties purchased in prior year. (i) Owned by a consolidated joint venture in which the Company has a 95% interest. Transaction costs of $90 incurred with this asset acquisition were capitalized. (j) The mortgage bears interest at 5% per annum through April 2017 and thereafter at a rate of not less than 5% and matures May 2022. F-18 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 3—REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued) (k) Assignment fees of $84 and $125, paid in connection with the purchase of the FedEx properties located in Florida and Ohio, respectively, were capitalized. (l) Owned by a consolidated joint venture in which the Company has a 95% interest. (m) Owned by a consolidated joint venture in which the Company has an 85% interest. (n) The mortgage bears interest at 3.75% per annum and matures December 2017. (o) The mortgage bears interest at 4.9% per annum and matures January 2025. The following chart provides the allocation of the purchase price for the Company’s real estate acquisitions during 2013 and 2012 (amounts in thousands): Description of Property Kmart retail store, Land Building Building Improvements Intangible Lease Asset Liability Total Clemmons, North Carolina . . . . . . . . . $ 2,496 $ 2,553 $ 653 $ 425 $(1,487) $ 4,640 Shutterfly flex facility, Fort Mill, South Carolina . . . . . . . . . . 1,841 12,353 Texas Land & Cattle restaurant, Killeen, Texas Hooters restaurant, . . . . . . . . . . . . . . . . . . 1,263 Concord, North Carolina . . . . . . . . . . 999 739 954 TRISUN Health Care—assisted living facility, Round Rock, Texas . . . . . . . . . . . . . . . Hooters restaurant, 1,678 16,577 Myrtle Beach, South Carolina . . . . . . . 1,102 1,090 Joe’s Crab Shack restaurant, Ann Arbor, Michigan . . . . . . . . . . . . . 1,098 1,338 FedEx Express facility, Indianapolis, Indiana . . . . . . . . . . . . . 1,224 6,438 335 64 122 93 71 122 498 1,546 (575) 15,500 — 394 4,452 372 422 — — — — — 2,066(a) 2,469 22,800 2,635 2,980 1,222 (112) 9,270 Northern Tool & Equipment distribution facility, Fort Mill, South Carolina . . . . . . . . . . TGIF restaurant, 1,804 31,635 2,014 3,742 Greensboro, North Carolina . . . . . . . . 1,768 1,054 TGIF restaurant, Richmond, Virginia . . . . . . . . . . . . . . Subtotals . . . . . . . . . . . . . . . . . . . . . . . Other(b) . . . . . . . . . . . . . . . . . . . . . . . . 1,678 16,951 — 1,184 75,915 — 183 157 4,312 — — — — 39,195 3,005(a) 3,019(a) — — 12,575 (951) (2,174) (36) 107,579 (987) Totals for 2013 . . . . . . . . . . . . . . . . . . $16,951 $75,915 $4,312 $11,624 $(2,210) $106,592 (a) Includes capitalized transaction costs of $50 incurred with these asset acquisitions. (b) Adjustments to finalize intangibles relating to properties purchased in 2012. F-19 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 3—REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued) Description of Property Land Building Urban Outfitters retail store, Building Improvements Intangible Lease Asset Liability Total Lawrence, Kansas . . . . . . . . . . . . . . . . . $ 134 $ 937 $ — $ 169 $ (10) $ 1,230 Three Applebee’s restaurants, Carrollton, Kennesaw and Cartersville, Georgia . . . . . . . . . . . . . . . . . . . . . . . . Applebee’s restaurant, 2,284 3,439 Lawrenceville, Georgia . . . . . . . . . . . . . . 804 739 281 43 2,564 754 Avalon Carpet Tile and Flooring, retail store and warehouse, Deptford, New Jersey . . . . . . . . . . . . . . . FedEx Facility, 556 1,605 129 — — — 8,568 2,340 2,290(c) Pinellas Park, Florida . . . . . . . . . . . . . . . 1,231 1,607 Walgreens Pharmacy, Cape Girardeau, Missouri . . . . . . . . . . . . 545 1,478 Shopping Center, Houston, Texas . . . . . . . . . . . . . . . . . . . 3,122 3,589 LA Fitness Health Club, Secaucus, New Jersey . . . . . . . . . . . . . . . 5,660 8,830 FedEx Facility, Miamisburg, Ohio . . . . . . . . . . . . . . . . . 165 1,248 Totals for 2012 . . . . . . . . . . . . . . . . . . . . . $14,501 $23,472 62 69 180 25 100 $889 94 (100) 2,894(d) 379 534 1,885 262 (203) 2,268 (275) 7,150 — — 16,400 1,775(d) $6,641 $(588) $44,915 (c) Includes capitalized transaction costs of $90 incurred with this asset acquisition. (d) Includes capitalized assignment fees of $84 and $125 which were paid in connection with the purchase of these FedEx properties located in Florida and Ohio, respectively. All of the properties purchased in 2013 and 2012 are (i) currently 100% occupied, other than the Houston, Texas property which is 91% occupied and (ii) leased by a single tenant pursuant to a long term net lease, other than the Northern Tool property, which is jointly leased by two companies under common ownership and the Houston, Texas property, which has 17 tenant spaces. As a result of the 2013 and 2012 purchases, the Company recorded intangible lease assets of $11,624,000 and $6,641,000, respectively, and intangible lease liabilities of $2,210,000 and $588,000, respectively, representing the value of the acquired leases and origination costs. As of December 31, 2013, the weighted average amortization period for the 2013 and 2012 acquisitions is 13.2 and 16.8 years for the intangible lease assets and 6.0 and 16.2 years for the intangible lease liabilities, respectively. At December 31, 2013 and 2012, accumulated amortization of intangible lease assets was $7,054,000 and $4,974,000, respectively and accumulated amortization of intangible lease liabilities was $3,099,000 and $2,505,000, respectively. The Company recognized a net increase (decrease) in rental revenue of $160,000, $(2,000) and $(26,000) for the amortization of the above/below market leases for 2013, 2012 and 2011, respectively. F-20 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 3—REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued) For 2013, 2012 and 2011, the Company recognized amortization expense of $1,647,000, $1,006,000 and $844,000, respectively, relating to the amortization of the origination costs. The unamortized balance of intangible lease assets as a result of acquired above market leases at December 31, 2013 will be deducted from rental income through 2032 as follows (amounts in thousands): 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 458 453 443 410 370 2,046 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,180 The unamortized balance of intangible lease liabilities as a result of acquired below market leases at December 31, 2013 will be added to rental income through 2055 as follows (amounts in thousands): 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 622 601 583 574 492 4,045 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,917 The unamortized balance of origination costs associated with in-place leases at December 31, 2013 will be charged to amortization expense through 2055 as follows (amounts in thousands): 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,167 2,133 2,013 1,927 1,808 11,807 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,855 F-21 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 3—REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued) Minimum Future Rents The minimum future contractual rents (without taking into consideration straight-line rent or amortization of intangibles) to be received over the next five years and thereafter on the operating leases in effect at December 31, 2013 are as follows (amounts in thousands): 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,056 49,432 47,505 45,316 42,900 233,512 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $471,721 The rental properties owned at December 31, 2013 are leased under noncancellable operating leases with current expirations ranging from 2014 to 2033, with certain tenant renewal rights. Substantially all lease agreements are net lease arrangements which require the tenant to pay rent and substantially all the expenses of the leased property including maintenance, taxes, utilities and insurance. For certain properties, the tenants pay the Company, in addition to the contractual base rent, their pro rata share of real estate taxes and operating expenses. Certain lease agreements provide for periodic rental increases and others provide for increases based on the consumer price index. Unbilled Rent Receivable At December 31, 2013 and 2012, the Company recorded unbilled rent receivables aggregating $13,743,000 and $12,629,000, respectively, representing rent reported on a straight-line basis in excess of rental payments required under the respective leases. The unbilled rent receivable is to be billed and received pursuant to the lease terms during the next 20 years. During 2012, the Company wrote off $256,000 of unbilled ‘‘straight-line’’ rent receivable, relating to properties sold during such year. NOTE 4—DISCONTINUED OPERATIONS AND REAL ESTATE INVESTMENTS Discontinued operations include two properties sold in February 2014 that are considered as held-for-sale at December 31, 2013, as well as a total of six properties sold in 2012 and 2011. Real estate investments are classified as held-for-sale when management has determined that it has met the criteria established under GAAP. Real estate investments which are held for sale are not depreciated and their operations are included in a separate component of income on the consolidated statements of income under the caption Discontinued Operations. Sales of Properties During 2013, the Company entered into a contract to sell two properties located in Michigan which were sold on February 3, 2014 for a total sales price of $5,177,000, net of closing costs. The net book value of the two properties was $5,177,000 (after recording an impairment charge of $61,700, F-22 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 4—DISCONTINUED OPERATIONS AND REAL ESTATE INVESTMENTS (Continued) representing the loss on sale of the properties) and $5,364,000 at December 31, 2013 and 2012, respectively, and is included in properties held-for-sale on the accompanying balance sheets. The impairment charge is included in discontinued operations at December 31, 2013. During 2012, the Company sold two properties located in Florida and leased to Office Depot, two properties located in New York and a property located in Texas. The total sales prices aggregated $36,062,000, net of closing costs, and the Company realized aggregate gains of $19,413,000 which is included in net gain on sales in discontinued operations in the results of operations for 2012. During 2011, the Company sold a property, leased to Office Depot and located in California, for $11,544,000, net of closing costs, and realized a gain of approximately $932,000, which is included in net gain on sales in discontinued operations in the results of operations for 2011. The following summarizes the components of income from discontinued operations (amounts in thousands): Year Ended December 31, 2013 2012 2011 Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $973 $ 2,690 $3,377 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . Real estate expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 12 259 396 577 402 106 615 1,123 1,567 Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net gain on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 — — 19,413 647 257 773 1,677 1,700 — 932 Income from discontinued operations . . . . . . . . . . . . . . . . . . . $515 $20,980 $2,632 NOTE 5—INVESTMENT IN UNCONSOLIDATED JOINT VENTURES AND SALES OF JOINT VENTURE PROPERTIES At December 31, 2013 and 2012, the Company had investments in five and seven unconsolidated joint ventures, respectively, each of which owned and operated one property. The Company’s equity investment in such unconsolidated joint ventures at such dates totaled $4,906,000 and $19,485,000, respectively. In addition to the $4,705,000 gain on sale of the two properties in 2013 described below, the Company recorded equity in earnings of $651,000, $1,368,000 and $914,000 for the years ended December 31, 2013, 2012 and 2011, respectively. In February 2012, the Company entered into a joint venture with an affiliate of Trammell Crow Company pursuant to which the Company contributed a property located in Plano, Texas to the joint venture in exchange for a 90% equity interest therein, and Trammell Crow contributed $1,500,000 in exchange for a 10% equity interest therein which resulted in a $319,000 gain to the Company. In February 2013, Trammell Crow exercised its right to purchase the Company’s 90% equity interest in the unconsolidated joint venture for $13,500,000. The sale was completed in April 2013 and the Company recorded a gain of $1,898,000. F-23 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 5—INVESTMENT IN UNCONSOLIDATED JOINT VENTURES AND SALES OF JOINT VENTURE PROPERTIES (Continued) In May 2013, a property located in Los Angeles, California and owned by the Company and another entity as tenants-in-common, accounted for as an unconsolidated joint venture, was sold for $25,000,000, of which our share was $12,500,000. The Company recorded a $2,807,000 gain on this sale in 2013 and incurred a $148,000 expense, representing its share of the related mortgage prepayment penalty. The Company received net proceeds of $4,630,000 from the sale transaction. NOTE 6—DEBT OBLIGATIONS Mortgages Payable At December 31, 2013, there were 51 outstanding mortgages payable, all of which are secured by first liens on individual real estate investments with an aggregate carrying value of $459,760,000 before accumulated depreciation of $57,748,000. After giving effect to the interest rate swap agreements (see Note 7), the mortgage payments bear interest at fixed rates ranging from 3.13% to 8.80%, and mature between 2014 and 2037. The weighted average interest rate on all mortgage debt was 5.22% and 5.25% at December 31, 2013 and 2012, respectively. Scheduled principal repayments during the next five years and thereafter are as follows (amounts in thousands): Year Ending December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,172(a) 14,643 32,679 44,595 18,696 131,260 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $278,045 (a) Includes a $16,261 mortgage loan which bears interest at 5.67% per annum and matures May 1, 2014. In February 2014, the Company refinanced this loan with a $19,750 new mortgage loan bearing interest at 4.75% per annum (with interest only payments for the first five years) and maturing March 2024. Line of Credit The Company has a $75,000,000 revolving credit facility with Manufacturer’s & Trader’s Trust Company, VNB New York Corp., Bank Leumi USA and Israel Discount Bank of New York. This facility matures March 31, 2015 and provides for an interest rate equal to the greater of (i) 90 day LIBOR plus 3% (3.25% at December 31, 2013), and (ii) 4.75% per annum, and an unused facility fee of .25% per annum. At December 31, 2013 and March 12, 2014, there were outstanding balances of $23,250,000 and $12,850,000, respectively, under the facility. F-24 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 6—DEBT OBLIGATIONS (Continued) The credit facility includes certain restrictions and covenants which may limit, among other things, the incurrence of liens, and which require compliance with financial ratios relating to, among other things, minimum amount of tangible net worth, minimum amount of debt service coverage, minimum amount of fixed charge coverage, maximum amount of debt to value, minimum level of net income, certain investment limitations and minimum value of unencumbered properties and the number of such properties. The Company was in compliance with all covenants at December 31, 2013. The facility is guaranteed by subsidiaries of the Company that own unencumbered properties and the Company pledged to the lenders the equity interests in the Company’s subsidiaries and delivered to the lenders collateral mortgages with respect to certain unencumbered properties owned by the Company or its subsidiaries. The facility is available for the acquisition of commercial real estate, repayment of mortgage debt, property improvements and general working capital purposes; provided, that if used for property improvements and working capital purposes, the amount outstanding for such purposes will not exceed the lesser of $15 million and 15% of the borrowing base and if used for working capital purposes, will not exceed $10 million. Net proceeds received from the sale, financing or refinancing of properties are generally required to be used to repay amounts outstanding under the credit facility. NOTE 7—FAIR VALUE MEASUREMENTS The carrying amounts of cash and cash equivalents, escrow, deposits and other assets and receivables, and accrued expenses and other liabilities are not measured at fair value on a recurring basis, but are considered to be recorded at amounts that approximate fair value. At December 31, 2013, the $283,142,000 estimated fair value of the Company’s mortgages payable is more than their carrying value by approximately $5,097,000 assuming a blended market interest rate of 5% based on the 9.0 year weighted average remaining term of the mortgages. At December 31, 2012, the $233,170,000 estimated fair value of the Company’s mortgages payable is more than their carrying value by approximately $7,199,000 assuming a blended market interest rate of 4.8% based on the 9.2 year weighted average remaining term of the mortgages. At December 31, 2013, the $23,250,000 carrying amount of the Company’s line of credit approximates its fair value. The fair values of the Company’s mortgages payable and line of credit are estimated using unobservable 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. These fair value measurements fall within Level 3 of the fair value hierarchy. Financial Instruments Measured at Fair Value 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. F-25 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 7—FAIR VALUE MEASUREMENTS (Continued) The fair value of the Company’s available-for-sale securities and derivative financial instruments was determined using the following inputs (amounts in thousands): Financial assets: Available-for-sale securities: Equity securities . . . . . . . . . . . . . . . . Derivative financial instruments: Interest rate swaps . . . . . . . . . . . . . . . Financial liabilities: Derivative financial instruments: Interest rate swaps . . . . . . . . . . . . . . . Year Ended December 31, Carrying and Fair Value Fair Value Measurements Using Fair Value Hierarchy on a Recurring Basis Level 1 Level 2 2013 2012 2013 2012 2013 2012 $ 282 278 $282 278 $ — — 265 — 774 1,470 — — 265 — — 774 — 1,470 The Company does not currently own any financial instruments that are classified as Level 3. Available-for-sale securities At December 31, 2013, the Company’s available-for-sale securities were as follows: (i) a $262,000 investment in 37,081 shares of BRT Realty Trust and (ii) a $20,000 investment in other equity securities (included in other assets on the balance sheet). The aggregate cost of these securities was $138,000 and unrealized gains on such securities were $144,000. Such unrealized gains were included in accumulated other comprehensive loss on the balance sheet. Fair values are approximated on current market quotes from financial sources that track such securities. During 2013 and 2012, the Company sold certain available-for-sale securities for gross proceeds of $19,000 and $373,000, respectively, and recognized gains of $6,000 and $9,000, respectively. At December 31, 2011, the Company recorded an impairment charge of $126,000 (net against ‘‘Other income (loss)’’ on the income statement) on the securities sold in 2012. Derivative financial instruments Fair values are approximated using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with it use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself F-26 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 7—FAIR VALUE MEASUREMENTS (Continued) and its counterparty. As of December 31, 2013, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuation is classified in Level 2 of the fair value hierarchy. As of December 31, 2013, the Company had entered into twelve interest rate derivatives, all of which were interest rate swaps, related to twelve outstanding mortgage loans with an aggregate $69,173,000 notional amount and mature between 2014 and 2024 (weighted average maturity of 6.6 years). Such interest rate swaps, all of which were designated as cash flow hedges, converted Libor based variable rate mortgages to fixed annual rate mortgages with interest rates ranging from 3.55% to 6.50% (weighted average interest rate of 5.05%). The fair value of the Company’s derivatives designated as hedging instruments in asset and liability positions reflected as other assets or other liabilities on the consolidated balance sheets were $265,000 and $774,000, respectively, at December 31, 2013 and $0 and $1,470,000, respectively, at December 31, 2012. Two of the Company’s unconsolidated joint ventures, in which a wholly owned subsidiary of the Company is a 50% partner, had an interest rate derivative outstanding at December 31, 2013 with a notional amount of $3,798,000. The interest rate derivative, which was entered into in March 2011, has an interest rate of 5.81% and matures in April 2018. The following table presents the effect of the Company’s derivative financial instruments on the statement of income for the periods presented (amounts in thousands): Consolidated Amount of (loss) recognized on derivatives in Other comprehensive (loss) . Amount of (loss) reclassification from Accumulated other comprehensive Years Ended December 31, 2013 2012 2011 $ (1) $(1,051) $(1,098) (loss) into Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (962) (504) (351) Joint Ventures (Company’s share) Amount of gain (loss) recognized on derivative in Other comprehensive (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21 $ (79) $ (225) Amount of (loss) reclassification from Accumulated Other comprehensive (loss) into Equity in earnings of unconsolidated joint ventures . . . . . . . . . (55) (56) (43) No gain or loss was recognized with respect to hedge ineffectiveness or to amounts excluded from effectiveness testing on the Company’s cash flow hedges for the three years ended December 31, 2013. During the twelve months ending December 31, 2014, the Company estimates an additional $1,458,000 will be reclassified from other comprehensive income as an increase to interest expense. The derivative agreements in effect at December 31, 2013 provide 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 is a party to one of the derivative agreements and if the subsidiary defaults on the loan subject to such agreement and if there are swap breakage losses on F-27 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 7—FAIR VALUE MEASUREMENTS (Continued) account of the derivative being terminated early, the Company could be held liable for interest rate swap breakage losses, if any. As of December 31, 2013, the fair value of the derivatives in the liability position, including accrued interest and excluding any adjustments for nonperformance risk was approximately $817,000. In the unlikely event that the Company breaches any of the contractual provisions of the derivative contracts, it would be required to settle its obligations thereunder at their termination liability value of $817,000. Such amount is included in accrued expenses and other liabilities at December 31, 2013. NOTE 8—RELATED PARTY TRANSACTIONS At December 31, 2013 and 2012, Gould Investors L.P. (‘‘Gould’’), a related party, owned 1,597,304 and 1,524,009 shares of the outstanding common stock of the Company or approximately 10.2% in each year. During 2013, Gould purchased 69,595 shares of the Company’s stock through the Company’s dividend reinvestment plan and 3,700 shares of the Company’s stock in the open market. During 2012, Gould purchased 73,038 shares of the Company’s stock through the Company’s dividend reinvestment plan and 301 shares of the Company’s stock in the open market. 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 the Company’s Vice Chairman and in which certain of the Company’s executive officers are officers and from which they receive compensation. Under the agreement, Majestic assumed 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 used prior to 2007 on an as needed, part time basis and for which the Company had reimbursed an allocated portion of the payroll expenses of such personnel in accordance with the shared services agreement. Commencing January 1, 2007, the Company no longer incurs any allocated expenses. Under the compensation and services 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 prior to 2007, 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. In consideration for providing to the Company the services described above, the Company paid Majestic an annual fee of $2,725,000 in each of 2013, 2012 and 2011, in equal monthly installments, of which $600,000 of property management costs is allocated annually to real estate expenses. Majestic credits against the fees 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 that were paid by our joint venture partner on a property located in Los Angeles, California until its sale in May 2013). The agreement also provides for an additional payment to Majestic of $175,000 in 2013, 2012 and 2011 for the Company’s share of all direct office expenses, such as rent, telephone, postage, computer services and internet usage, previously allocated to the Company under the shared services agreement. The annual payment the Company makes to Majestic is negotiated each year by the Company and Majestic, and is approved by the Company’s independent directors. F-28 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 8—RELATED PARTY TRANSACTIONS (Continued) Executive officers and others providing services under the compensation and services agreement also receive awards of shares of restricted stock and restricted stock units under the Company’s stock incentive plans (described in Note 9). The costs of the plans charged to the Company’s operations applicable to the executive officers and others providing services under the compensation and services agreement amounted to $867,000, $743,000 and $603,000 in 2013, 2012, and 2011, respectively. In addition to its share of rent included in the $175,000 payment to Majestic, the Company leased additional space in the same building, and paid a subsidiary of Gould, an annual rent of $41,000 in each of 2013 and 2012, and $47,000 in 2011. The Company also pays a fee of $250,000 and $100,000 per annum to the Company’s chairman and vice-chairman, respectively. Except for the $600,000 of real estate expenses described above, the fees paid under the compensation and services agreement, the chairman and vice-chairman fees and the rent expense are included in general and administrative expense in 2013, 2012 and 2011. NOTE 9—STOCKHOLDERS’ EQUITY Stock Based Compensation The Company’s 2012 Incentive Plan, approved by the Company’s stockholders in June 2012, permits the Company to grant, among other things, stock options, restricted stock, restricted stock units and performance share awards and any one or more of the foregoing to its employees, officers, directors and consultants. A maximum of 600,000 shares of the Company’s common stock is authorized for issuance pursuant to this Plan, of which 112,650 have been issued and 50 have vested. An aggregate of 557,415 shares of restricted stock and restricted stock units are outstanding under the Company’s 2003 and 2009 equity incentive plans (collectively, the ‘‘Prior Plans’’) and have not yet vested. No additional awards may be granted under the Prior Plans. The restricted stock grants are charged to general and administrative expense over the respective vesting periods based on the market value of the common stock on the grant date. 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 shares shown as outstanding on the balance sheet until they vest; however dividends are paid on the unvested shares. On September 14, 2010, the Board of Directors approved a Pay-For-Performance Program under the Company’s 2009 Incentive Plan and awarded 200,000 performance share awards in the form of restricted stock units (the ‘‘Units’’), half of which were awarded to full time employees of the Company. The other half were awarded to part time officers of the Company who are compensated through the compensation and services agreement, some of whom are also officers of Majestic Property Management Corp. The holders of Units are not entitled to dividends or to vote the underlying shares until the Units vest and shares are issued. Accordingly, for financial statement purposes, the shares underlying the Units are not included in the shares shown as outstanding on the balance sheet. If the defined performance criteria are satisfied in full at June 30, 2017, one share of the Company’s common stock will vest and be issued for each Unit outstanding and a pro-rata portion of the Units will vest and F-29 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 9—STOCKHOLDERS’ EQUITY (Continued) be issued if the performance criteria fall between defined ranges. In the event that the performance criteria are not satisfied in whole or in part at June 30, 2017, the unvested Units will be forfeited and no shares of the Company’s common stock will be issued for those Units. For the awards which vest based on total stockholder return, a third party appraiser prepared a Monte Carlo simulation pricing model to determine the fair value. For the awards which vest based on return on capital, the fair value is based on the market value on the date of grant. Expense is not recognized on the Units which the Company does not expect to vest as a result of service conditions or the Company’s performance expectations. The average per Unit grant price of the 200,000 units granted is $11.74. The total amount recorded as deferred compensation is $779,000 and is being charged to general and administrative expense over the approximate seven year vesting period. The deferred compensation expense to be recognized is net of certain forfeiture and performance assumptions (which are re-evaluated quarterly). No Units were forfeited or vested during 2013, 2012 and 2011. As of December 31, 2013, 2012 and 2011 there were no options outstanding under the Company’s equity incentive plans. The following is a summary of the activity of the equity incentive plans (excluding, except as otherwise noted, the 200,000 Units): Years Ended December 31, 2013 2012 2011 Restricted share grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Average per share grant price . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred compensation to be recognized over vesting period . . . 112,650 $ 21.59 $2,432,000 109,450 $ 16.77 $1,835,000 74,040 $ 16.19 $1,199,000 Non-vested shares: Non-vested beginning of period . . . . . . . . . . . . . . . . . . . . . . . Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested during period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407,460 112,650 (50,095) — 348,385 109,450 (49,325) (1,050) 320,940 74,040 (46,450) (145) Non-vested end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . 470,015 407,460 348,385 Average per share value of non-vested shares (based on grant price) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14.22 $ 12.59 $ 12.96 Value of shares vested during the year (based on grant price) . . . $ 876,000 $1,208,000 $ 960,000 Average value of shares forfeited (based on grant price) . . . . . . $ — $ 13.65 $ 11.03 The total charge to operations for all incentive plans, including the 200,000 Units, is as follows: Outstanding restricted stock grants . . . . . . . . . . . . . . . . . . . . . . Outstanding restricted stock units . . . . . . . . . . . . . . . . . . . . . . . $1,341,000 99,000 $1,050,000 173,000 $ 930,000 79,000 Total charge to operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,440,000 $1,223,000 $1,009,000 F-30 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 9—STOCKHOLDERS’ EQUITY (Continued) As of December 31, 2013, there were approximately $4,219,000 of total compensation costs related to nonvested awards that have not yet been recognized, including $401,000 related to the Pay-for-Performance Program (net of forfeiture and performance assumptions which are re-evaluated quarterly). These compensation costs will be charged to general and administrative expense over the remaining respective vesting periods. The weighted average vesting period is approximately 2.6 years. Common Stock Dividend Distributions In 2013, 2012 and 2011, the Company declared an aggregate $1.42, $1.34 and $1.32 per share in cash distributions, respectively. Distribution Reinvestment Plan The Company’s Dividend Reinvestment Plan (the ‘‘Plan’’) provides stockholders with the opportunity to reinvest all, or a portion of, their cash dividends paid on the Company’s common stock in additional shares of its common stock, at a discount of up to 5% from the market price. The discount is determined in the Company’s sole discretion. The Company is currently offering up to a 5% discount from market. The Company issued 210,000, 215,000 and 255,000 common shares under the Plan during 2013, 2012 and 2011, respectively. Shares Issued Through Equity Offering Program On August 9, 2012, the Company entered into an equity offering sales agreement to sell shares of the Company’s common stock from time to time with an aggregate sales price of up to $50,000,000, through an ‘‘at the market’’ equity offering program. During 2013, the Company sold 363,463 shares for proceeds of $9,227,800, net of commissions of $93,000, and incurred offering costs of $63,000. During 2012, the Company sold 120,844 shares for proceeds of $2,296,000, net of commissions of $23,000 and incurring offering costs of $165,000. Public Offering On February 11, 2011, the Company sold 2,700,000 shares of its common stock and received net proceeds of approximately $40,569,000. The proceeds were used to repay two mortgages in the aggregate amount of $7,700,000 having a weighted average interest rate of 7.9%, to reduce the amount outstanding under the line of credit by $26,200,000, to purchase a property in March 2011 for $2,325,000 and for general corporate purposes. NOTE 10—GAIN ON SETTLEMENT OF DEBT In June 2011, with a payment of $7,634,000, the Company paid off the $8,893,000 principal balance of the mortgage secured by a property previously leased to a tenant which vacated the property in June 2011 in the course of its liquidation after filing for bankruptcy protection in early 2011. The $1,240,000 gain on settlement of debt is net of a $19,000 write off of the remaining balance of related deferred mortgage costs. The property was tested for impairment in June 2011 and it was determined that no charge was required. As described in Note 5, the Company contributed this property to an F-31 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 10—GAIN ON SETTLEMENT OF DEBT (Continued) unconsolidated joint venture and then sold its equity interest in the venture for a gain of $1,898,000 in April 2013. NOTE 11—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 the qualified employees’ total salary (subject to the maximum amount allowed by law). Pension expense approximated $147,000, $128,000 and $119,000 for 2013, 2012 and 2011, respectively. The Company pays, with respect to one of its real estate properties, annual fixed leasehold rent of $296,875 through July 2014 with 25% increases every five years through March 3, 2020. The Company has the right to extend the lease for up to five 5-year and one seven month renewal options. 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 financial statements taken as a whole. NOTE 12—INCOME TAXES The Company elected to be taxed as a REIT under the Internal Revenue Code, commencing with its taxable year ended December 31, 1983. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its adjusted taxable income to its stockholders. It is management’s current intention to adhere to these requirements and maintain the Company’s REIT status. As a REIT, the Company generally will not be subject to corporate level federal, state and local income tax on taxable income it distributes currently to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal, state and local income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even though the Company qualifies for taxation as a REIT, the Company is subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. F-32 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 12—INCOME TAXES (Continued) Reconciliation between Financial Statement Net Income and Federal Taxable Income: The following unaudited table reconciles financial statement net income to federal taxable income for the years indicated (amounts in thousands): Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Straight line rent adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial statement gain on sale—less than (in excess of) tax gain . . . . . . Rent received in advance, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial statement adjustment for above/below market leases . . . . . . . . Non-deductible portion of restricted stock expense . . . . . . . . . . . . . . . . . Federal excise tax, non-deductible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial statement depreciation in excess of tax depreciation . . . . . . . . . Property acquisition costs—capitalized for tax purposes . . . . . . . . . . . . . Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 Estimate 2012 Actual 2011 Actual $17,875 (1,003) 1,391 691 (42) 357 45 1,644 774 (59) $32,320 (919) (445) 97 6 341 290 (208) 836 (201) $13,724 (1,419) 61 (78) 31 300 — 1,042 268 (516) Federal taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,673 $32,117 $13,413 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 indicated (amounts in thousands): Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend reinvestment plan(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Spillover dividends designated to previous year . . . . . . . . . . . . . . . Plus: Dividends designated from following year . . . . . . . . . . . . . . . . . . . 2013 Estimate $21,999 230 22,229 (7,659) 7,103 2012 Actual 2011 Actual $24,252 256 $14,758 153 24,508 14,911 — (1,448) — 7,659 Dividends paid deduction(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,673 $32,167 $13,463 (a) Reflects the up to 5% discount on common stock purchased through the dividend reinvestment plan. (b) Dividends paid deduction is slightly higher than federal taxable income in 2012 and 2011 to account for adjustments made to federal taxable income as a result of the impact of the alternative minimum tax. F-33 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 13—SUBSEQUENT EVENTS Subsequent events have been evaluated and except as disclosed below and in Note 4 (Sales of Properties), there were no other events relative to our consolidated financial statements that require additional disclosure. On January 15, 2014, 118,850 shares were issued as restricted share grants having an aggregate value of approximately $2,478,000 and will vest in January 2019. On March 13, 2014, the Board of Directors declared a quarterly cash dividend of $.37 per share on the Company’s common stock, totaling $5,872,000. The quarterly dividend is payable on April 3, 2014 to stockholders of record on March 25, 2014. NOTE 14—QUARTERLY FINANCIAL DATA (Unaudited): (In Thousands, Except Per Share Data) 2013 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 Total For Year Rental revenues as previously reported . . . . . . . . . . Revenues from discontinued operations(a) . . . . . . . . $12,102 (240) $12,227 (246) $13,214 (244) $14,166 — $51,709 (730) Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,862 $11,981 $12,970 $14,166 $50,979 Income from continuing operations(b) . . . . . . . . . . . Income from discontinued operations(b) . . . . . . . . . $ 3,313 136 $ 7,607 145 $ 3,084 144 $ 3,405 90 $17,409 515 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,449 $ 7,752 $ 3,228 $ 3,495 $17,924 Net income attributable to One Liberty Properties, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,450 $ 7,736 $ 3,211 $ 3,478 $17,875 Weighted average number of common shares outstanding: Basic: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,672 14,844 15,093 15,178 14,948 Diluted: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,772 14,944 15,193 15,278 15,048 Basic: Income from continuing operations(b) . . . . . . . . . . . Income from discontinued operations(b) . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted: Income from continuing operations(b) . . . . . . . . . . . Income from discontinued operations(b) . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ .21 .01 .22 .21 .01 .22 $ $ $ $ .50 .01 .51 .49 .01 .50 $ $ $ $ .19 .01 .20 .19 .01 .20 $ $ $ $ .21 .01 .22 .21 .01 .22 $ 1.12(c) .03(c) $ 1.15 $ 1.11(c) .03(c) $ 1.14 (a) Represents revenues from discontinued operations which were previously included in rental revenues as previously reported. (b) Amounts have been adjusted to give effect to discontinued operations. (c) Calculated on weighted average shares outstanding for the year. F-34 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2013 NOTE 14—QUARTERLY FINANCIAL DATA (Unaudited): (Continued) 2012 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 Total For Year Rental revenues as previously reported . . . . . . . . . . Revenues from discontinued operations(d) . . . . . . . . $10,758 (237) $11,102 (240) $11,333 (240) $11,557 (240) $44,750 (957) Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,521 $10,862 $11,093 $11,317 $43,793 Income from continuing operations(e) . . . . . . . . . . . Income from discontinued operations(e) . . . . . . . . . $ 2,833 393 $ 3,137 2,617 $ 2,867 15,553 $ 2,491 2,417 $11,328 20,980 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,226 $ 5,754 $18,420 $ 4,908 $32,308 Net income attributable to One Liberty Properties, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,223 $ 5,750 $18,414 $ 4,933 $32,320 Weighted average number of common shares outstanding: Basic: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,289 14,378 14,443 14,596 14,427 Diluted: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,389 14,478 14,543 14,696 14,527 Basic: Income from continuing operations(e) . . . . . . . . . . . Income from discontinued operations(e) . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted: Income from continuing operations(e) . . . . . . . . . . . Income from discontinued operations(e) . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ .19 .03 .22 .19 .02 .21 $ $ $ $ .21 .18 .39 .21 .18 .39 $ $ $ $ .19 1.05 1.24 .19 1.04 1.23 $ $ $ $ .16 .17 .33 .16 .17 .33 $ $ $ $ .77(f) 1.41(f) 2.18 .76(f) 1.40(f) 2.16 (d) Represents revenues from discontinued operations which were previously included in rental revenues as previously reported. (e) Amounts have been adjusted to give effect to discontinued operations. (f) Calculated on weighted average shares outstanding for the year. F-35 S E I R A I D I S B U S D N A . C N I , S E I T R E P O R P Y T R E B I L E N O n o i t a i c e r p e D d e t a l u m u c c A d n a e t a t s E l a e R d e t a d i l o s n o C — I I I e l u d e h c S 3 1 0 2 , 1 3 r e b m e c e D ) s d n a s u o h T n i s t n u o m A ( e t a D f o e t a D d e r i u q c A n o i t c u r t s n o C d e t a l u m u c c A ) 1 ( n o i t a i c e r p e D l a t o T & g n i d l i u B s t n e m e v o r p m I d n a L s t n e m e v o r p m I s t n e m e v o r p m I d n a L s e c n a r b m u c n E n o i t a c o L h c i h W t a t n u o m A s s o r G 3 1 0 2 , 1 3 r e b m e c e D t a d e i r r a C t s o C d e z i l a t i p a C o t t n e u q e s b u S n o i t i s i u q c A g n i d l i u B d n a y n a p m o C o t t s o C l a i t i n I 0 0 0 2 0 0 0 2 3 1 0 2 2 0 0 2 0 0 0 2 0 0 0 2 2 1 0 2 1 1 0 2 8 9 9 1 2 1 0 2 3 1 0 2 6 0 0 2 6 0 0 2 1 1 0 2 3 0 0 2 9 9 9 1 5 9 9 1 2 1 0 2 5 0 0 2 3 1 0 2 5 0 0 2 8 9 9 1 6 9 9 1 0 1 0 2 0 1 0 2 3 0 0 2 6 9 9 1 8 0 0 2 4 0 0 2 6 9 9 1 2 1 0 2 2 1 0 2 6 0 0 2 6 0 0 2 8 0 0 2 2 8 9 1 6 8 9 1 2 9 9 1 8 8 9 1 2 7 9 1 8 6 9 1 6 8 9 1 8 0 0 2 3 7 9 1 5 9 9 1 7 9 9 1 0 6 9 1 1 0 0 2 1 9 9 1 2 8 9 1 0 6 9 1 9 7 9 1 7 8 9 1 4 6 9 1 7 9 9 1 7 9 9 1 3 7 9 1 5 9 9 1 A N / 5 0 0 2 6 9 9 1 5 9 9 1 2 9 9 1 3 0 0 2 4 9 9 1 6 9 9 1 5 9 9 1 7 8 9 1 7 8 9 1 5 9 9 1 1 7 5 , 3 1 4 5 , 1 1 6 1 3 0 6 , 1 9 0 2 , 1 0 8 6 8 5 2 8 0 4 5 7 2 3 7 8 6 8 9 6 7 7 1 3 9 8 3 7 2 4 6 5 1 4 1 5 4 , 4 8 4 3 1 0 7 , 1 0 3 1 , 5 2 8 7 , 2 6 0 5 , 1 2 3 9 6 4 5 4 9 6 7 3 6 3 7 , 1 4 4 0 , 1 5 9 3 , 1 7 7 6 7 4 6 6 0 3 8 5 7 5 $ 6 0 9 , 2 1 $ 4 5 9 , 0 1 $ 0 3 3 , 6 7 2 5 , 4 1 0 6 9 , 6 1 3 5 , 4 6 3 5 , 2 6 3 4 , 7 2 2 3 , 5 1 5 0 9 0 0 9 , 2 9 5 1 , 8 6 5 7 , 1 3 0 5 6 , 4 7 4 4 , 3 2 0 6 , 4 3 4 9 8 3 1 , 2 2 2 5 , 1 9 4 6 , 9 4 5 4 , 5 3 1 8 1 , 1 3 5 9 6 , 9 1 4 4 , 4 2 2 0 , 3 6 4 6 , 4 1 8 8 5 , 4 7 6 0 , 5 6 1 9 , 5 0 7 4 , 5 4 1 0 , 4 4 5 2 , 2 2 3 1 , 2 4 1 2 , 4 4 8 2 , 5 0 5 8 , 5 8 8 2 , 5 7 8 6 , 2 1 3 5 1 , 6 5 2 6 , 3 9 2 0 , 2 3 7 8 , 9 3 5 9 , 5 4 2 7 9 6 6 , 1 5 3 9 , 6 3 2 6 , 3 4 0 4 , 2 8 2 8 , 3 1 6 7 3 0 7 , 1 7 5 3 , 1 8 6 6 , 7 2 8 2 , 5 2 0 5 6 , 3 3 6 2 1 , 5 2 4 1 3 , 8 1 6 6 , 3 1 4 1 0 5 3 , 5 3 5 6 , 3 4 5 0 , 4 6 4 8 , 2 0 4 3 , 4 1 1 2 , 3 8 5 4 , 1 6 4 3 , 1 6 3 4 , 3 8 0 3 , 4 9 4 3 , 4 2 5 9 , 1 2 4 0 , 1 0 4 8 , 1 7 0 8 6 0 9 7 0 5 9 4 4 , 5 3 8 4 , 1 1 8 1 1 3 2 , 1 4 2 2 , 1 4 7 4 , 6 7 2 0 , 1 3 4 0 , 1 4 7 7 2 8 1 5 3 4 5 6 1 1 8 9 , 1 4 0 8 , 1 5 5 0 , 6 1 8 3 , 1 0 8 7 1 8 8 , 2 6 9 2 , 9 5 3 9 3 1 0 , 1 0 7 0 , 3 0 3 1 , 1 3 0 8 6 9 7 6 8 7 8 7 7 6 7 9 1 0 5 , 1 $ — — 7 1 1 , 1 6 2 1 , 3 $ — — — — — — — — — — 3 3 — 9 — — 9 9 7 6 2 8 , 1 7 6 8 , 2 7 4 3 1 4 9 7 2 0 1 — — — — — — — — — 1 7 1 , 4 7 8 6 , 2 1 4 5 9 , 0 1 $ 7 2 0 , 3 9 4 6 , 3 3 5 0 , 2 3 7 8 , 9 3 5 9 , 5 4 2 7 9 6 6 , 1 5 3 9 , 6 3 2 6 , 3 4 0 4 , 2 9 2 0 , 3 8 2 7 3 0 7 , 1 8 4 3 , 1 8 6 6 , 7 2 8 2 , 5 2 0 5 6 , 3 3 0 0 3 , 3 2 7 4 4 , 5 8 4 2 , 3 4 9 1 7 0 , 5 3 4 6 , 3 4 5 0 , 4 6 4 8 , 2 0 4 3 , 4 1 1 2 , 3 8 5 4 , 1 6 4 3 , 1 6 3 4 , 3 8 0 3 , 4 9 4 3 , 4 2 5 9 , 1 2 4 0 , 1 0 4 8 , 1 7 0 8 2 1 9 3 1 5 9 4 4 , 5 3 8 4 , 1 1 8 1 1 3 2 , 1 4 2 2 , 1 4 7 4 , 6 7 2 0 , 1 3 4 0 , 1 4 7 7 2 8 1 5 3 4 5 6 1 1 8 9 , 1 4 0 8 , 1 5 5 0 , 6 1 8 3 , 1 0 8 7 1 8 8 , 2 6 9 2 , 9 5 3 9 3 1 0 , 1 0 7 0 , 3 0 3 1 , 1 3 0 8 6 9 7 6 8 7 8 7 7 6 7 9 1 0 5 , 1 $ 8 6 6 , 8 7 9 7 , 3 2 1 2 , 9 3 8 0 , 5 1 2 8 , 1 3 5 9 9 0 8 , 9 4 0 8 , 3 — — — — — — 0 8 2 , 3 6 0 1 , 2 0 8 4 , 1 2 8 4 8 6 2 6 , 5 7 7 1 , 7 2 6 3 8 , 3 1 3 7 4 , 5 3 6 9 , 2 — 9 9 9 , 1 5 7 0 , 3 8 9 5 , 2 1 — 7 5 7 , 2 1 3 5 , 1 7 3 7 , 1 2 4 6 , 1 7 1 8 , 1 8 7 2 , 2 — $ Y N , a m o k n o k n o R Y N , e g u a p p u a H C S , l l i M t r o F A G , r e k c u T ) 5 ( I M ) 5 ( I M , s d i p a R d n a r G , s d i p a R d n a r G H O , n o t l i m a H J N , s u c u a c e S L F , h c a e B m l a P t s e W L F , k r a P s a l l e n i P N I , s i l o p a n a i d n I ) 2 ( D M , e r o m i t l a B Y N , k r a P e d y H w e N H O , g r u b s i m a i M A P , a i h p l e d a l i h P H O , s u b m u o C l J N , y n a p p i s r a P Y N , n y l k o o r B C S , l l i M t r o F O C , r e v n e D T C T C , d r o f t r a H , d r o f t r a H t s e W t s e W C N , m a h r u D Y N , e l l i v l e M E M , o c a S L F , s r e y M . t F ) 3 ( L F , s e l p a N E D , k r a w e N ) 3 ( A G , s n e h t A A G , a t n a l t A A G , e l l i v s r e t r a C A G , n o t l l o r r a C ) 4 ( A G , e l l i v e t t e y a F ) 3 ( A G , w a s e n n e K ) 4 ( A G , h t u u D l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x e l F x e l F x e l F l s b u C h t l a e H l s b u C h t l a e H l s b u C h t l a e H l s b u C h t l a e H l s b u C h t l a e H e p y T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l a i r t s u d n I l a i r t s u d n I l a i r t s u d n I l a i r t s u d n I l a i r t s u d n I l a i r t s u d n I l a i r t s u d n I l a i r t s u d n I l a i r t s u d n I l a i r t s u d n I l a i r t s u d n I l a i r t s u d n I . . . . . . . . . . . . . . . . . . . . . . . . . . . . e c i f f O e c i f f O l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R F-36 e t a D f o e t a D d e r i u q c A n o i t c u r t s n o C d e t a l u m u c c A ) 1 ( n o i t a i c e r p e D l a t o T & g n i d l i u B s t n e m e v o r p m I d n a L s t n e m e v o r p m I s t n e m e v o r p m I d n a L s e c n a r b m u c n E n o i t a c o L h c i h W t a t n u o m A s s o r G 3 1 0 2 , 1 3 r e b m e c e D t a d e i r r a C t s o C d e z i l a t i p a C o t t n e u q e s b u S n o i t i s i u q c A g n i d l i u B d n a y n a p m o C o t t s o C l a i t i n I 2 1 0 2 2 1 0 2 1 1 0 2 9 9 9 1 8 0 0 2 1 1 0 2 6 0 0 2 1 1 0 2 2 1 0 2 6 0 0 2 6 0 0 2 6 0 0 2 6 0 0 2 2 0 0 2 6 0 0 2 6 0 0 2 8 0 0 2 8 0 0 2 8 0 0 2 3 0 0 2 3 1 0 2 0 1 0 2 2 1 0 2 6 0 0 2 6 0 0 2 6 0 0 2 6 0 0 2 8 0 0 2 3 1 0 2 3 1 0 2 3 1 0 2 1 1 0 2 2 1 0 2 9 9 9 1 5 0 0 2 0 1 0 2 9 9 9 1 7 9 9 1 8 0 0 2 0 1 0 2 0 1 0 2 9 8 9 1 8 8 9 1 1 0 0 2 5 8 9 1 4 9 9 1 7 9 9 1 4 9 9 1 5 9 9 1 5 1 9 1 6 9 9 1 9 9 9 1 5 9 9 1 5 9 9 1 8 9 9 1 5 9 9 1 5 9 9 1 A N / 8 9 9 1 8 9 9 1 3 9 9 1 8 9 9 1 4 0 0 2 4 9 9 1 5 9 9 1 5 9 9 1 5 8 9 1 5 9 9 1 5 9 9 1 3 9 9 1 0 0 0 2 3 8 9 1 0 0 0 2 1 8 9 1 8 9 9 1 2 9 9 1 7 4 9 1 7 9 9 1 6 9 9 1 4 9 9 1 1 9 9 1 2 9 9 1 1 5 2 6 3 3 1 3 0 2 , 1 8 9 2 4 4 1 3 6 6 1 3 2 4 4 1 8 6 1 6 2 4 5 2 1 1 0 , 1 8 4 3 , 1 2 6 2 0 5 2 — 6 4 3 0 4 3 7 4 5 4 1 4 0 5 3 5 4 5 2 9 6 2 5 4 2 1 0 3 4 9 4 0 9 2 1 2 4 3 6 0 5 1 6 6 7 2 0 6 4 2 1 8 8 8 9 5 8 5 7 7 2 0 3 3 , 2 8 1 6 , 1 5 6 7 , 1 1 2 7 , 2 0 3 2 , 4 3 3 1 , 6 4 1 5 , 2 9 6 4 , 4 8 2 3 , 4 2 7 0 , 1 7 3 4 , 6 2 3 3 , 4 3 4 8 , 1 3 9 7 , 1 4 1 2 , 6 3 4 8 , 1 0 6 7 , 1 5 3 9 , 1 6 2 1 , 3 4 7 7 , 2 6 2 5 , 2 8 5 5 , 2 9 4 6 , 8 2 9 0 , 2 3 9 7 , 1 9 0 9 , 1 3 4 7 , 1 5 2 1 , 2 5 6 8 , 4 1 0 7 , 5 5 7 0 , 2 5 0 0 , 3 6 5 0 , 3 6 7 5 , 2 8 8 6 , 3 0 9 5 , 2 9 0 0 , 3 6 2 2 , 7 8 4 0 , 4 8 5 4 , 1 2 2 4 , 1 8 2 2 , 1 1 6 1 9 9 9 8 7 8 8 , 1 9 3 4 , 3 6 5 2 , 2 9 9 8 , 1 5 3 6 , 3 5 8 4 , 3 8 3 9 8 4 2 , 5 2 3 5 , 3 5 6 4 , 1 5 2 4 , 1 7 4 0 , 5 5 6 4 , 1 9 9 3 , 1 0 4 2 3 , 2 3 1 3 , 2 6 1 0 , 2 0 6 4 , 1 1 9 6 , 5 7 4 5 , 1 5 2 4 , 1 7 1 5 , 1 5 8 3 , 1 9 8 6 , 1 6 3 7 , 3 5 0 2 , 3 6 7 0 , 1 7 3 2 , 1 4 4 6 , 7 4 8 4 , 2 1 6 0 , 2 3 6 9 , 2 5 5 3 , 1 7 3 4 , 2 1 8 7 , 5 6 9 0 , 2 4 0 7 6 8 6 2 0 7 6 6 8 4 3 8 1 9 7 7 7 8 , 3 5 1 6 4 3 8 3 4 8 4 3 1 0 0 8 8 7 3 8 6 3 9 8 1 , 1 7 6 1 , 1 8 7 3 1 6 3 5 3 9 , 1 2 0 8 1 6 4 0 1 5 8 9 0 , 1 8 5 9 , 2 5 4 5 8 6 3 2 9 3 8 5 3 6 3 4 9 2 1 , 1 6 9 4 , 2 9 9 9 8 6 7 , 1 4 8 5 , 3 2 7 5 5 1 5 5 2 7 2 7 5 5 3 2 , 1 5 4 4 , 1 2 5 9 , 1 4 5 7 6 3 7 — — — 4 7 2 — — — — — — — — — 8 7 3 — — — — — 3 2 — — — — — — — — — — — 5 0 7 0 5 8 , 4 — — — 0 5 1 0 5 3 — — — 6 1 9 9 9 8 7 8 8 , 1 5 6 1 , 3 6 5 2 , 2 9 9 8 , 1 5 3 6 , 3 5 8 4 , 3 8 3 9 8 4 2 , 5 2 3 5 , 3 5 6 4 , 1 5 2 4 , 1 9 6 6 , 4 5 6 4 , 1 9 9 3 , 1 — 4 2 3 , 2 3 1 3 , 2 3 9 9 , 1 0 6 4 , 1 1 9 6 , 5 7 4 5 , 1 5 2 4 , 1 7 1 5 , 1 5 8 3 , 1 9 8 6 , 1 6 3 7 , 3 5 0 2 , 3 6 7 0 , 1 7 3 2 , 1 4 9 7 , 2 9 7 7 , 1 1 6 0 , 2 3 6 9 , 2 5 5 3 , 1 7 8 2 , 2 1 3 4 , 5 6 9 0 , 2 4 0 7 6 8 6 2 0 7 6 6 8 4 3 8 1 9 7 7 7 8 , 3 5 1 6 4 3 8 3 4 8 4 3 1 9 8 1 , 1 0 0 8 8 7 3 8 6 3 7 6 1 , 1 8 7 3 1 6 3 5 3 9 , 1 2 0 8 1 6 4 0 1 5 8 9 0 , 1 8 5 9 , 2 5 4 5 8 6 3 2 9 3 8 5 3 6 3 4 9 2 1 , 1 6 9 4 , 2 9 9 9 8 6 7 , 1 4 8 5 , 3 2 7 5 5 1 5 5 2 7 5 3 2 , 1 2 7 5 5 4 4 , 1 2 5 9 , 1 4 5 7 6 3 7 6 4 3 , 1 2 9 2 , 1 — 7 5 8 , 1 — 8 7 9 , 1 7 4 4 , 2 5 1 3 , 3 — 4 7 7 , 2 7 6 8 , 1 3 1 0 , 1 — 5 8 9 3 1 0 , 1 7 6 9 1 9 2 , 1 6 3 0 , 1 4 3 4 5 4 9 , 1 0 9 4 , 1 1 3 2 , 4 — 5 8 9 — 8 5 9 9 4 0 , 1 8 6 1 , 1 0 0 5 , 2 — — — 2 4 5 , 7 0 7 9 , 1 5 6 9 , 1 2 1 1 , 1 4 6 2 , 3 — — 4 1 9 2 9 8 A G , e l l i v e c n e r w a L A G , w a s e n n e K L I , k o o r b g n i l o B L I , n g i a p m a h C ) 3 ( L I , o g a c i h C L I , e k a L l a t s y r C ) 4 ( Y K , n o t g n i x e L S K , e c n e r w a L ) 4 ( S K , a t i h c i W A L , d o o w t n e K A L , p o r t s a B L I , e e n r u G L I , s e l i N ) 3 ( A L , s e l r a h C e k a L A L A L , e o r n o M , e o r n o M A M , t t e r e v E A M , s i n n a y H A M , s l l i M n o t s r a M A M , e l l i v r e m o S I M , r o b r A n n A O M , y t i C s a s n a K O M , u a e d r a r i G e p a C S M , e l l i v r e b l ’ D S M S M , g r u b s k c i V , g r u b s k c i V S M , d o o w o F l ) 3 ( C N , y r a C C N , s n o m m e l C C N , d r o c n o C C N , o r o b s n e e r G J N , l l i H y r r e h C Y N Y N , e g u a p p u a H , k r a P d n a l s I ) 3 ( Y N , a i v a t a B J N , d r o f t p e D H O , s u b m u o C l ) 3 ( R O , e n e g u E A P , g r u b s y t t e G A P , r e v o n a H Y N , n e d l e S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e p y T l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R F-37 e t a D f o e t a D d e r i u q c A n o i t c u r t s n o C d e t a l u m u c c A ) 1 ( n o i t a i c e r p e D l a t o T & g n i d l i u B s t n e m e v o r p m I d n a L s t n e m e v o r p m I s t n e m e v o r p m I d n a L s e c n a r b m u c n E n o i t a c o L h c i h W t a t n u o m A s s o r G 3 1 0 2 , 1 3 r e b m e c e D t a d e i r r a C o t t n e u q e s b u S n o i t i s i u q c A g n i d l i u B d n a t s o C d e z i l a t i p a C y n a p m o C o t t s o C l a i t i n I 0 1 0 2 0 1 0 2 0 1 0 2 0 1 0 2 0 1 0 2 0 1 0 2 6 0 0 2 3 1 0 2 4 0 0 2 6 0 0 2 6 0 0 2 0 0 0 2 8 0 0 2 8 9 9 1 0 1 0 2 0 1 0 2 3 1 0 2 5 9 9 1 6 0 0 2 2 1 0 2 6 0 0 2 3 1 0 2 6 0 0 2 6 0 0 2 7 8 9 1 4 0 0 2 4 0 0 2 3 1 0 2 4 9 9 1 1 8 9 1 1 8 9 1 3 8 9 1 1 0 0 2 4 9 9 1 4 9 9 1 8 7 9 1 3 0 0 2 6 9 9 1 1 0 0 2 4 7 9 1 3 9 9 1 7 9 9 1 6 0 0 2 9 0 0 2 7 0 0 2 4 9 9 1 1 0 0 2 1 0 0 2 5 9 9 1 3 8 9 1 9 7 9 1 5 9 9 1 6 8 9 1 4 9 9 1 9 9 9 1 2 1 0 2 8 7 6 5 4 5 7 5 7 3 4 1 3 0 0 5 1 1 8 6 1 , 2 4 3 7 3 5 3 , 1 0 5 9 , 3 7 5 3 2 2 6 8 3 1 9 5 1 6 1 6 9 3 9 7 8 9 6 1 9 3 6 2 8 3 7 6 2 7 4 2 1 7 0 7 8 5 1 3 3 0 , 5 3 1 3 , 1 0 0 3 , 1 0 8 2 , 1 1 6 2 , 1 2 9 0 , 3 2 9 3 2 , 1 9 8 1 , 3 3 6 2 , 2 5 4 1 , 1 1 3 7 6 , 4 7 9 5 , 8 5 6 2 , 4 1 5 3 7 , 3 9 7 9 , 1 2 3 5 , 3 2 0 8 , 3 6 6 0 , 2 6 4 1 , 1 5 8 5 , 5 2 4 9 , 6 7 6 0 , 4 9 1 0 , 3 6 9 6 , 4 4 2 6 , 4 0 9 3 2 5 8 , 3 8 2 3 , 8 3 6 8 0 5 6 5 2 6 3 4 6 9 3 4 4 5 5 , 3 0 0 6 , 2 1 6 1 , 1 5 5 8 , 8 0 1 8 , 3 0 1 0 , 7 4 4 4 , 1 1 0 0 7 , 2 3 8 5 , 1 0 7 5 , 1 0 0 8 , 1 3 0 8 0 3 9 4 5 5 , 4 0 2 8 , 3 6 1 3 , 3 1 4 3 , 1 9 2 8 , 3 0 7 7 , 3 9 8 1 9 9 0 , 3 8 2 3 , 8 0 5 4 0 5 6 5 5 6 8 1 6 8 3 5 , 9 1 0 0 8 9 8 5 2 0 1 , 1 0 9 2 , 2 3 6 8 7 8 5 , 1 1 2 8 , 2 5 3 0 , 1 6 9 3 2 6 9 , 1 2 0 0 , 2 3 6 2 , 1 6 1 2 1 3 0 , 1 2 2 1 , 3 1 5 7 8 7 6 , 1 7 6 8 4 5 8 1 0 2 3 5 7 0 8 4 3 , 8 1 0 7 6 , 6 1 8 7 6 , 1 — — — — 4 0 4 — — — — — — 1 2 3 — — 0 3 — — 7 6 — 2 5 — — — — — — — — 3 6 8 0 5 6 5 2 6 3 4 6 9 3 4 0 5 1 , 3 0 0 6 , 2 1 6 1 , 1 5 5 8 , 8 0 1 8 , 3 0 1 0 , 7 3 2 1 , 1 1 0 0 7 , 2 3 8 5 , 1 0 4 5 , 1 0 0 8 , 1 3 0 8 3 6 8 4 5 5 , 4 8 6 7 , 3 6 1 3 , 3 1 4 3 , 1 9 2 8 , 3 0 7 7 , 3 9 8 1 9 9 0 , 3 8 2 3 , 8 0 5 4 0 5 6 5 5 6 8 1 6 8 3 5 , 9 1 0 0 8 9 8 5 2 0 1 , 1 0 9 2 , 2 3 6 8 7 8 5 , 1 1 2 8 , 2 5 3 0 , 1 6 9 3 2 6 9 , 1 2 0 0 , 2 3 6 2 , 1 6 1 2 1 3 0 , 1 2 2 1 , 3 1 5 7 8 7 6 , 1 7 6 8 4 5 8 1 0 2 3 5 7 — 0 7 6 , 6 1 8 7 6 , 1 — 6 1 8 5 0 8 3 9 7 7 7 7 4 7 3 , 1 1 6 2 , 6 1 — 4 9 1 , 4 4 1 0 , 2 7 0 7 , 3 — — — 0 5 7 , 2 — — — 8 0 4 , 2 5 7 9 , 4 3 5 7 , 1 — 5 2 0 , 2 3 9 9 , 1 — — 1 3 2 , 5 9 9 1 , 5 1 0 6 0 , 3 7 $ 4 2 4 , 4 7 5 $ 2 8 4 , 9 1 4 $ 2 4 9 , 4 5 1 $ 0 3 1 , 8 1 $ 0 0 4 , 1 0 4 $ 4 5 9 , 4 5 1 $ 5 4 0 , 8 7 2 $ C S , h c a e B e l t r y M ) 4 ( X T , o l l i r a m A N T , e l l i v x o n K ) 3 ( X T X T , o s a P , o s a P l E l E ) 4 ( X T , n i t s u A X T X T X T , n o t s u o H , n o t s u o H , n o t s u o H X T , n e e l l i K X T , g r e b n e s o R ) 4 ( X T , r e l y T X T , n o t s u o H ) 4 ( A V , s w e N t r o p w e N ) 4 ( A V , d n o m h c i R A V , d n o m h c i R ) 4 ( A V , h c a e B a i n i g r i V C N , o r o b s n e e r G X T , k c o R d n u o R I W , a k s a l a n O A W , e l t t a e S A P , e l l i v e o r n o M A P , d r o f s r e y o R A P , n w o t r e l x e r T A P , a r y m l a P A P A P , g n i d a e R , g n i d a e R ) 4 ( C S , n o t f f u B l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e p y T l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R l i a t e R r e h t O r e h t O S L A T O T F-38 g n i c u d o r p t o n s a w y t r e p o r p e h t e c n i s , 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 — 2 e t o N . g n i d 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 s i h t f o t p i 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 i u q c a f o e m i t e h t t a t n e r t n e i c i f f u s e r a y e h T . s n o i s i v o r p t l u a f e d s s o r c n i a t n o c s e s a e l e s e h t f o e v i F . 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 s e r o t s y l 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 e n i n e s e h T — 3 e t o N . ) a d i r o F l d n a k r o Y w e N , n o g e r O , a i g r o e G , s a x e T , a n i l o r a C h t r o N , a n a i s i u o L , s i o n i l l I ( s e t a t s t h g i e n i d e t a c o l s e t a t s x i s n i 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 z i l a r e t a l l o c — 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 — 4 e t o N . s r a e y 0 4 o t 3 m o r f e g n a r h c i h w , s t n e m e v o r p m i d n a s g n i d l i u b e h t f o s e v i l l u f e s u d e t a m i t s e e h t r e v o d e d i v o r p s i n o i t a i c e r p e D — 1 e t o N . 3 1 0 2 , 1 3 r e b m e c e D t a s e i t r e p o r p e s e h t t s n i a g a 0 0 7 , 1 6 $ f o e g r a h c t n e m r i a p m i n a d e d r o c e r y n a p m o C e h T . 3 1 0 2 , 1 3 r e b m e c e D t a e l a s - r o f - d l e h e r a s e i t r e p o r p o w t e s e h T — 5 e t o N . ) a i n i g r 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 , a i g r o e G ( 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, 2013 2012 2011 Investment in real estate(b): Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Addition: Land, buildings and improvements . . . . . . . . . . . . . . . . . . Deduction: Impairment charge on properties held-for-sale . . . . . . . . $473,341 101,145 (62) $430,337 43,004 — $400,795 29,542 — Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $574,424(c) $473,341 $430,337 Accumulated depreciation(b): Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Addition: Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deduction: Accumulated depreciation related to properties sold and property contributed to joint venture . . . . . . . . . . . . . . . . . . . . . . $ 62,816 10,244 $ 54,214 8,602 $ 46,410 8,537 — — (733) Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,060 $ 62,816 $ 54,214 (b) Includes two properties that are held-for-sale. (c) The aggregate cost of the properties is approximately $26,297 higher for federal income tax purposes at December 31, 2013. F-39 This page intentionally left blank Board of Directors and Executive Officers Matthew J. Gould Chairman of the Board of Directors; Chairman and Chief Executive Officer of Georgetown Partners, Inc., Managing General Partner of Gould Investors L.P.; Vice President of REIT Management Corp., Advisor to BRT Realty Trust; Trustee and Senior Vice President of BRT Realty Trust Lawrence G. Ricketts, Jr. Executive Vice President and Chief Operating Officer Simeon Brinberg Senior Counsel; Senior Counsel of BRT Realty Trust; Senior Vice President of Georgetown Partners, Inc. Fredric H. Gould Vice Chairman of the Board of Directors; Trustee of BRT Realty Trust; President of REIT Management Corp.; Director of Georgetown Partners, Inc.; Director of EastGroup Properties, Inc. David W. Kalish Senior Vice President and Chief Financial Officer; Senior Vice President— Finance of BRT Realty Trust; Senior Vice President and Chief Financial Officer of Georgetown Partners, Inc. Patrick J. Callan, Jr. Director; President and Chief Executive Officer Jeffrey A. Gould Director; Senior Vice President; Trustee, President and Chief Executive Officer of BRT Realty Trust; Senior Vice President and Director of Georgetown Partners, Inc. Joseph A. Amato Director; Real Estate Developer; Managing Partner of the Kent Companies Mark H. Lundy Senior Vice President and Secretary; Senior Vice President of BRT Realty Trust; President and Chief Operating Officer of Georgetown Partners, Inc. Israel Rosenzweig Senior Vice President; Chairman of BRT Realty Trust; Senior Vice President of Georgetown Partners, Inc. Karen Dunleavy Vice President, Financial Charles L. Biederman Director; Real Estate Developer; President of CLB, Inc. James J. Burns Director; Consultant to Reis, Inc.; Director of Cedar Realty Trust Joseph A. DeLuca Director; Principal of Joseph A. DeLuca, Inc.; Member of Board of Managers of Wrightwood Capital LLC Louis P. Karol Director; Partner of Karol Hausman & Sosnik, P.C. J. Robert Lovejoy Independent Lead Director; Principal of J.R. Lovejoy & Co. LLC Eugene I. Zuriff Director; Consultant to the Restaurant Industry Richard M. Figueroa Vice President and Assistant Secretary; Vice President of BRT Realty Trust; Vice President of Georgetown Partners, Inc. Isaac Kalish Vice President and Assistant Treasurer; Vice President and Treasurer of BRT Realty Trust; Vice President and Treasurer of Georgetown Partners, Inc. Alysa Block Treasurer Justin Clair Assistant Vice President EXECUTIVE OFFICES 60 Cutter Mill Road Suite 303 Great Neck, NY 11021 516-466-3100 REGISTRAR, TRANSFER AGENT, DISTRIBUTION DISBURSING AGENT American Stock Transfer & Trust Company 6201 15th Avenue Brooklyn, NY 11219 212-936-5100 800-937-5449 www.amstock.com INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 5 Times Square New York, NY 10036 FORM 10-K AVAILABLE A copy of the Annual Report on Form 10-K filed with the Securities and Exchange Commission is included as part of this Annual Report. Exhibits to the Form 10-K may be obtained 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 11, 2014 at the Company’s Executive Offices at 9:00 a.m. WEB SITE ADDRESS onelibertyproperties.com 2 0 1 3 A N N U A L R E P O R T 60 Cutter Mill Road, Suite 303 R Great Neck, NY 11021 R 516.466.3100 R onelibertyproperties.com 

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