UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
x Quarterly
Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
For
the
quarterly period ended June 30, 2007
OR
o 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
|
13-3147497
|
(State
or other jurisdiction of
|
(I.R.S.
employer
|
incorporation
or organization)
|
identification
number)
|
60
Cutter Mill Road, Great Neck, New York
|
11021
|
(Address
of principal executive offices)
|
(Zip
code)
|
(516)
466-3100
(Registrant’s
telephone number, including area code)
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
x
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
Accelerated Filer o
Accelerated
Filer x
Non-Accelerated Filer o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
o
No
x
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
As
of
August 7, 2007, the registrant had 10,102,675 shares of common stock
outstanding.
Part
I -
FINANCIAL INFORMATION
Item
1
Financial
Statements
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(Amounts
in Thousands, Except Per Share Data)
|
|
June
30,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
Real
estate investments, at cost
|
|
|
|
|
|
Land
|
|
$
|
72,398
|
|
$
|
72,431
|
|
Buildings
and improvements
|
|
|
307,476
|
|
|
307,679
|
|
|
|
|
379,874
|
|
|
380,110
|
|
Less
accumulated depreciation
|
|
|
32,297
|
|
|
28,269
|
|
|
|
|
347,577
|
|
|
351,841
|
|
|
|
|
|
|
|
|
|
Investment
in unconsolidated joint ventures
|
|
|
7,513
|
|
|
7,014
|
|
Cash
and cash equivalents
|
|
|
32,652
|
|
|
34,013
|
|
Restricted
cash
|
|
|
7,593
|
|
|
7,409
|
|
Unbilled
rent receivable
|
|
|
9,443
|
|
|
8,218
|
|
Escrow,
deposits and other receivables
|
|
|
1,969
|
|
|
2,251
|
|
Investment
in BRT Realty Trust at market (related party)
|
|
|
781
|
|
|
831
|
|
Deferred
financing costs
|
|
|
3,448
|
|
|
3,062
|
|
Other
assets (including available-for-sale securities
|
|
|
|
|
|
|
|
at
market of $1,700 and $1,372)
|
|
|
2,531
|
|
|
2,145
|
|
Unamortized
intangible lease assets
|
|
|
5,170
|
|
|
5,253
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
418,677
|
|
$
|
422,037
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Mortgages
and loan payable
|
|
$
|
225,572
|
|
$
|
227,923
|
|
Dividends
payable
|
|
|
3,620
|
|
|
3,587
|
|
Accrued
expenses and other liabilities
|
|
|
4,070
|
|
|
4,391
|
|
Unamortized
intangible lease liabilities
|
|
|
5,684
|
|
|
6,011
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
238,946
|
|
|
241,912
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
Preferred
stock, $1 par value;
|
|
|
|
|
|
|
|
12,500
shares authorized; none issued
|
|
|
-
|
|
|
-
|
|
Common
stock, $1 par value; 25,000 shares
|
|
|
|
|
|
|
|
authorized;
9,869 and 9,823 shares
|
|
|
|
|
|
|
|
issued
and outstanding
|
|
|
9,869
|
|
|
9,823
|
|
Paid-in
capital
|
|
|
136,155
|
|
|
134,826
|
|
Accumulated
other comprehensive income - net
|
|
|
|
|
|
|
|
unrealized
gain on available-for-sale securities
|
|
|
721
|
|
|
935
|
|
Accumulated
undistributed net income
|
|
|
32,986
|
|
|
34,541
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
179,731
|
|
|
180,125
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
418,677
|
|
$
|
422,037
|
|
See
accompanying notes to consolidated financial statements.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
(Amounts
in Thousands, Except Per Share Data)
(Unaudited)
|
|
Three
Months Ended June 30,
|
|
Six
Months Ended June 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Rental
income
|
|
$
|
9,642
|
|
$
|
8,562
|
|
$
|
19,235
|
|
$
|
15,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,086
|
|
|
1,767
|
|
|
4,173
|
|
|
3,263
|
|
General
and administrative (including $572, $416,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,146
and $748, respectively, to related parties)
|
|
|
1,588
|
|
|
1,583
|
|
|
3,284
|
|
|
2,687
|
|
Federal
excise tax
|
|
|
14
|
|
|
-
|
|
|
50
|
|
|
-
|
|
Real
estate expenses
|
|
|
59
|
|
|
78
|
|
|
130
|
|
|
135
|
|
Leasehold
rent
|
|
|
77
|
|
|
77
|
|
|
154
|
|
|
154
|
|
Total
operating expenses
|
|
|
3,824
|
|
|
3,505
|
|
|
7,791
|
|
|
6,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
5,818
|
|
|
5,057
|
|
|
11,444
|
|
|
9,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
in earnings of unconsolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
joint
ventures
|
|
|
149
|
|
|
903
|
|
|
293
|
|
|
1,678
|
|
Gain
on disposition of real estate of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unconsolidated
joint venture
|
|
|
-
|
|
|
-
|
|
|
583
|
|
|
-
|
|
Interest
and other income
|
|
|
461
|
|
|
44
|
|
|
1,045
|
|
|
260
|
|
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
(3,733
|
)
|
|
(3,214
|
)
|
|
(7,468
|
)
|
|
(5,907
|
)
|
Amortization
of deferred financing costs
|
|
|
(159
|
)
|
|
(151
|
)
|
|
(320
|
)
|
|
(290
|
)
|
Gain
on sale of option to purchase property
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
|
2,536
|
|
|
2,639
|
|
|
5,577
|
|
|
5,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
income from discontinued operations
|
|
|
(4
|
)
|
|
553
|
|
|
101
|
|
|
690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
2,532
|
|
$
|
3,192
|
|
$
|
5,678
|
|
$
|
6,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,055
|
|
|
9,930
|
|
|
10,028
|
|
|
9,912
|
|
Diluted
|
|
|
10,055
|
|
|
9,934
|
|
|
10,028
|
|
|
9,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share - basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
.25
|
|
$
|
.26
|
|
$
|
.56
|
|
$
|
.56
|
|
Income
from discontinued operations
|
|
|
-
|
|
|
.06
|
|
|
.01
|
|
|
.07
|
|
Net
income per common share
|
|
$
|
.25
|
|
$
|
.32
|
|
$
|
.57
|
|
$
|
.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
distributions per share of common stock
|
|
$
|
.36
|
|
$
|
.33
|
|
$
|
.72
|
|
$
|
.66
|
|
See
accompanying notes to consolidated financial statements.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
For
the
six month period ended June 30, 2007 (Unaudited)
and
the
year ended December 31, 2006
(Amounts
in Thousands)
|
|
Common
Stock
|
|
Paid-in
Capital
|
|
Accumulated
Other Comprehensive Income
|
|
Unearned
Compen-sation
|
|
Accumulated
Undistributed Net Income
|
|
Total
|
|
Balances,
January 1, 2006
|
|
$
|
9,770
|
|
$
|
134,645
|
|
$
|
818
|
|
$
|
(1,250
|
)
|
$
|
11,536
|
|
$
|
155,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
upon the adoption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
FASB No. 123 (R)
|
|
|
-
|
|
|
(1,250
|
)
|
|
-
|
|
|
1,250
|
|
|
-
|
|
|
-
|
|
Distributions
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(13,420
|
)
|
|
(13,420
|
)
|
Exercise
of options
|
|
|
9
|
|
|
101
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
110
|
|
Shares
issued through
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividend
reinvestment plan
|
|
|
44
|
|
|
815
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
859
|
|
Issuance
of restricted stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Compensation
expense -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
restricted
stock
|
|
|
-
|
|
|
515
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
515
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
36,425
|
|
|
36,425
|
|
Other
comprehensive income-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
unrealized gain on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale
securities
|
|
|
-
|
|
|
-
|
|
|
117
|
|
|
-
|
|
|
-
|
|
|
117
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2006
|
|
|
9,823
|
|
|
134,826
|
|
|
935
|
|
|
-
|
|
|
34,541
|
|
|
180,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(7,233
|
)
|
|
(7,233
|
)
|
Shares
issued through
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividend
reinvestment plan
|
|
|
41
|
|
|
910
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
951
|
|
Restricted
stock vesting
|
|
|
5
|
|
|
(5
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Compensation
expense -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
restricted
stock
|
|
|
-
|
|
|
424
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
424
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,678
|
|
|
5,678
|
|
Other
comprehensive income-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
unrealized loss on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale
securities
|
|
|
-
|
|
|
-
|
|
|
(214
|
)
|
|
-
|
|
|
-
|
|
|
(214
|
)
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
June 30, 2007
|
|
$
|
9,869
|
|
$
|
136,155
|
|
$
|
721
|
|
$
|
-
|
|
$
|
32,986
|
|
$
|
179,731
|
|
See
accompanying notes to consolidated financial statements.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Amounts
in Thousands)
(Unaudited)
|
|
Six
Months Ended June 30,
|
|
|
|
2007
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
Net
income
|
|
$
|
5,678
|
|
$
|
6,262
|
|
Adjustments
to reconcile net income
|
|
|
|
|
|
|
|
to
net cash provided by operating activities:
|
|
|
|
|
|
|
|
Gain
on sale
|
|
|
(118
|
)
|
|
(227
|
)
|
Increase
in rental income from straight-lining of rent
|
|
|
(1,224
|
)
|
|
(834
|
)
|
Increase
in rental income from amortization of
|
|
|
|
|
|
|
|
intangibles
relating to leases
|
|
|
(126
|
)
|
|
(58
|
)
|
Amortization
of restricted stock expense
|
|
|
424
|
|
|
242
|
|
Equity
in earnings of unconsolidated joint ventures
|
|
|
(293
|
)
|
|
(1,678
|
)
|
Gain
on disposition of real estate related to unconsolidated
|
|
|
|
|
|
|
|
joint
venture
|
|
|
(583
|
)
|
|
-
|
|
Distributions
of earnings from unconsolidated joint ventures
|
|
|
258
|
|
|
1,548
|
|
Depreciation
and amortization
|
|
|
4,173
|
|
|
3,360
|
|
Amortization
of financing costs
|
|
|
320
|
|
|
293
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
Decrease
(increase) in escrow, deposits and other receivables
|
|
|
214
|
|
|
(125
|
)
|
(Decrease)
increase in accrued expenses and other liabilities
|
|
|
(412
|
)
|
|
493
|
|
Net
cash provided by operating activities
|
|
|
8,311
|
|
|
9,276
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Reduction
(purchase) of real estate and improvements
|
|
|
41
|
|
|
(27,299
|
)
|
Distributions
of return of capital from unconsolidated
|
|
|
|
|
|
|
|
joint
ventures
|
|
|
111
|
|
|
87
|
|
Net
proceeds from sale of option to purchase property
|
|
|
-
|
|
|
227
|
|
Net
proceeds from sale of available-for-sale securities
|
|
|
161
|
|
|
11
|
|
Purchase
of available-for-sale securities
|
|
|
(521
|
)
|
|
(487
|
)
|
Net
cash used in investing activities
|
|
|
(208
|
)
|
|
(27,461
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Repayment
of mortgages payable
|
|
|
(2,351
|
)
|
|
(1,974
|
)
|
Proceeds
from mortgage payable
|
|
|
-
|
|
|
5,565
|
|
Payment
of financing costs
|
|
|
(681
|
)
|
|
(531
|
)
|
Proceeds
from bank line of credit, net
|
|
|
-
|
|
|
2,000
|
|
Increase
in restricted cash
|
|
|
(184
|
)
|
|
-
|
|
Cash
distributions - common stock
|
|
|
(7,199
|
)
|
|
(6,530
|
)
|
Issuance
of shares through dividend reinvestment plan
|
|
|
951
|
|
|
339
|
|
Net
cash used in financing activities
|
|
|
(9,464
|
)
|
|
(1,131
|
)
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(1,361
|
)
|
|
(19,316
|
)
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
34,013
|
|
|
26,749
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
32,652
|
|
$
|
7,433
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid during the period for interest
|
|
$
|
7,438
|
|
$
|
6,161
|
|
Supplemental
schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
Assumption
of mortgage payable in connection with purchase of real
estate
|
|
$
|
-
|
|
$
|
26,957
|
|
Purchase
accounting allocations
|
|
$
|
-
|
|
$
|
3,916
|
|
Reclassification
of 2005 deposit in connection with purchase of real estate
|
|
$
|
-
|
|
$
|
2,525
|
|
See
accompanying notes to consolidated financial statements.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
Note
1 -
Organization
and Background
One
Liberty Properties, Inc. (the “Company”) was incorporated in 1982 in the state
of Maryland. The Company is a self-administered and self-managed real estate
investment trust (“REIT”). The Company acquires, owns and manages a
geographically diversified portfolio of retail, including retail furniture
stores, industrial, office, flex, health and fitness and other properties,
a
substantial portion of which are under long-term net leases. As of June 30,
2007, the Company owns 65 properties and holds a 50% tenancy in common interest
in one property. The Company’s joint ventures own five properties, including two
properties that are held for sale, one of which is vacant. The 71 properties
are
located in 28 states.
Note
2 -
Basis
of Preparation
The
accompanying interim unaudited consolidated financial statements as of June
30,
2007 and 2006 and for the six and three months ended June 30, 2007 and 2006
reflect all normal recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the results for such interim
periods. The results of operations for the six and three months ended June
30,
2007 are not necessarily indicative of the results for the full
year.
The
preparation of the financial statements in conformity with U.S. generally
accepted accounting principles 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.
The
consolidated financial statements include the accounts and operations of One
Liberty Properties, Inc. and its wholly-owned subsidiaries (collectively, the
“Company”). Material intercompany items and transactions have been eliminated.
The Company accounts for its investments in unconsolidated joint ventures under
the equity method of accounting as the Company (1) is primarily the managing
member but does not exercise substantial operating control over these entities
pursuant to EITF 04-05, and (2) such entities are not variable-interest entities
pursuant to FASB Interpretation No. 46R, “Consolidation of Variable Interest
Entities”. These investments are recorded initially at cost, as investments in
unconsolidated joint ventures, and subsequently adjusted for equity in earnings
and cash contributions and distributions.
These
statements should be read in conjunction with the consolidated financial
statements and related notes which are included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2006.
Note
3 -
Earnings
Per Common Share
For
the
six and three months ended June 30, 2007 and 2006, basic earnings per share
were
determined by dividing net income for the period by the weighted average number
of shares of the Company’s Common Stock outstanding, which includes unvested
restricted stock during each period.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
3 -
Earnings
Per Common Share (Continued)
Diluted
earnings per share reflect the potential dilution that could occur if securities
or other contracts exercisable for, or convertible into, Common Stock were
exercised or converted or resulted in the issuance of Common Stock that shared
in the earnings of the Company. For the six and three months ended June 30,
2006, diluted earnings per share were determined by dividing net income for
the
period by the total of the weighted average number of shares of Common Stock
outstanding plus the dilutive effect of the Company’s outstanding options (3,448
and 3,427 for the six and three months ended June 30, 2006, respectively) using
the treasury stock method. There were no outstanding options in the six and
three months ended June 30, 2007.
Note
4 -
Investment
in Unconsolidated Joint Ventures
At
June
30, 2007 the Company is a member in seven unconsolidated joint ventures which
own and operate five properties. Two of these joint ventures are between the
Company and MTC Investors LLC, an unrelated party. The one remaining real estate
asset of these two joint ventures was a vacant parcel of land located in Monroe,
New York which was sold on March 14, 2007 for a consideration of $1,250,000
to a
former tenant of the joint venture as part of an overall settlement of a
litigation with the former tenant. See Note 12. This property had a net book
value of $40,000 after direct write downs totaling $3,162,000 taken in prior
periods. In the three months ended March 31, 2007, the joint venture realized
a
gain on sale of this property of $1,166,000, of which the Company’s 50% share is
$583,000. At June 30, 2007 and December 31, 2006, the Company’s equity
investment in these two joint ventures totaled $873,000 and $284,000,
respectively, and they contributed $12,000 and $8,000 in equity earnings for
the
six and three months ended June 30, 2007 and $1,461,000 and $799,000,
respectively, in equity earnings for the six and three months ended June 30,
2006.
The
remaining five unconsolidated joint ventures each own one property, including
two properties that are held for sale, one of which is vacant. At June 30,
2007
and December 31, 2006, the Company’s equity investment in these five joint
ventures totaled $6,640,000 and $6,730,000, respectively. These unconsolidated
joint ventures contributed $281,000 and $141,000 in equity earnings for the
six
and three months ended June 30, 2007, respectively, and $217,000 and $104,000
for the six and three months ended June 30, 2006, respectively.
Note
5 -
Line
of Credit
On
March
15, 2007 the Company consummated an amendment to its existing $62,500,000
revolving credit facility (“Facility”) with VNB New York Corp. (formerly Valley
National Bank), Bank Leumi USA, Israel Discount Bank of New York and
Manufacturers and Traders Trust Company. The amendment extended the maturity
date of the Facility from March 31, 2007 to March 31, 2010 and reduced the
interest rate to the lower of LIBOR plus 2.15% (formerly 2.5%) or the bank’s
prime rate on funds borrowed. The facility provides for an unused facility
fee
of ¼%. Substantially all material covenants remained the same. In connection
with the amendment, the Company paid approximately $650,000 in fees and closing
costs which are being amortized over the term of the Facility. There is no
balance outstanding under the Facility at June 30, 2007.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
6 -
Discontinued
Operations
The
following is a summary of income from discontinued operations, for the six
and
three months ended June 30, 2007 and 2006 applicable to the property sold on
October 5, 2006 and to the five properties sold in the year ended December
31,
2005 (amounts in thousands):
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Rental
income
|
|
$
|
-
|
|
$
|
303
|
|
$
|
-
|
|
$
|
607
|
|
Other
income
|
|
|
-
|
|
|
400
|
|
|
115
|
|
|
400
|
|
Total
revenues
|
|
|
-
|
|
|
703
|
|
|
115
|
|
|
1,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
-
|
|
|
39
|
|
|
-
|
|
|
97
|
|
Real
estate expenses
|
|
|
4
|
|
|
5
|
|
|
14
|
|
|
6
|
|
Interest
expense
|
|
|
-
|
|
|
106
|
|
|
-
|
|
|
214
|
|
Total
expenses
|
|
|
4
|
|
|
150
|
|
|
14
|
|
|
317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
income from discontinued operations
|
|
$
|
(4
|
)
|
$
|
553
|
|
$
|
101
|
|
$
|
690
|
|
Note
7 -
Common
Stock Dividend Distribution
On
June
12, 2007, the Board of Directors declared a quarterly cash distribution of
$.36
per share, totaling $3,620,000, on the Company's Common Stock which was paid
on
July 3, 2007 to stockholders of record on June 25, 2007.
Note
8 -
Comprehensive
Income
Comprehensive
income for the six and three months ended June 30, 2007 and 2006 are as follows
(amounts in thousands):
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Net
income
|
|
$
|
2,532
|
|
$
|
3,192
|
|
$
|
5,678
|
|
$
|
6,262
|
|
Other
comprehensive income -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
(loss) gain on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale
securities
|
|
|
(142
|
)
|
|
(94
|
)
|
|
(214
|
)
|
|
15
|
|
Comprehensive
income
|
|
$
|
2,390
|
|
$
|
3,098
|
|
$
|
5,464
|
|
$
|
6,277
|
|
Accumulated
other comprehensive income, which is solely comprised of the net unrealized
gain
on available-for-sale securities was $721,000 and $935,000 at June 30, 2007
and
December 31, 2006, respectively.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
9 -
Restricted
Stock
The
Company adopted the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 123R, “Share-Based Payments”, effective January 1, 2006. SFAS No.
123R established financial accounting and reporting standards for stock-based
employee compensation plans, including all
arrangements
by which employees receive shares of stock or other equity instruments of the
employer, or the employer incurs liabilities to employees in amounts based
on
the price of the employer’s stock. The statement also defined a fair value based
method of accounting for an employee stock option or similar equity instrument
whereby the fair-value is recorded based on the market value of the common
stock
on the grant date and is amortized to general and administrative expense over
the respective vesting periods.
The
Company’s 2003 Stock Incentive Plan (the “Incentive Plan”), approved by the
Company’s stockholders in June 2003, provides for the granting of restricted
shares. The maximum number of shares of the Company’s common stock that may be
issued pursuant to the Incentive Plan is 275,000. The restricted stock grants
are valued at the fair value as of the date of the grant and specify vesting
upon the fifth anniversary of the date of grant and under certain circumstances
may vest earlier. For accounting purposes, the restricted stock is not included
in the outstanding shares shown on the balance sheet until they vest. The value
of such grants is initially deferred, and amortization of amounts deferred
is
being charged to operations over the respective vesting periods.
|
|
Three
Months Ended
June
30,
|
|
Six
Months Ended
June
30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Restricted
share grants
|
|
|
|
|
|
|
|
|
51,225
|
|
|
50,050
|
|
Average
per share grant price
|
|
$
|
-
|
|
$
|
-
|
|
$
|
24.50
|
|
$
|
20.66
|
|
Recorded
as deferred compensation
|
|
$
|
-
|
|
$
|
-
|
|
$
|
1,255,000
|
|
$
|
1,034,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
charge to operations,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
all
outstanding restricted grants
|
|
$
|
265,000
|
|
$
|
136,000
|
|
$
|
424,000
$
|
|
|
242,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested
shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested
beginning of period
|
|
|
191,400
|
|
|
142,775
|
|
|
140,175
|
|
|
92,725
|
|
Grants
|
|
|
-
|
|
|
-
|
|
|
51,225
|
|
|
50,050
|
|
Vested
during period
|
|
|
(5,000
|
)
|
|
-
|
|
|
(5,000
|
)
|
|
-
|
|
Forfeitures
|
|
|
-
|
|
|
(1,100
|
)
|
|
-
|
|
|
(1,100
|
)
|
Non-vested
end of period
|
|
|
186,400
|
|
|
141,675
|
|
|
186,400
|
|
|
141,675
|
|
Through
June 30, 2007, a total of 193,150 shares were issued and 81,850 shares remain
available for grant pursuant to the Incentive Plan, and approximately $2,846,000
remains as deferred compensation and will be charged to expense over the
remaining weighted average vesting period of approximately 3.14 years. Included
in the 2007 compensation expense is $64,000 related to the accelerated vesting
of 5,000 shares of restricted stock that had been awarded to a retired board
member.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
10 -
Dividend
Reinvestment Plan
In
June
2007, the Company implemented a new Dividend Reinvestment Plan (the “Plan”),
replacing a similar plan which was established in May 1996 and terminated
simultaneously with the filing of the new Plan with the Securities and Exchange
Commission on June 1, 2007. The Plan provides owners of record the opportunity
to reinvest cash dividends paid on the Company’s common stock in additional
shares of its common stock, at a discount of 0% to 5% from the market price.
The
discount will be determined at the Company’s sole discretion. The Company is
currently offering a 5% discount from market.
Note
11 -
New
Accounting Pronouncements
In
July
2006, the FASB issued Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes”
(“FIN
48”). This interpretation, among other things, creates a two step approach for
evaluating uncertain tax positions. Recognition (step one) occurs when an
enterprise concludes that a tax position, based solely on its technical merits,
is more-likely-than-not to be sustained upon examination. Measurement (step
two)
determines the amount of benefit that more-likely-than-not will be realized
upon
settlement. Derecognition of a tax position that was previously recognized
would
occur when a company subsequently determines that a tax position no longer
meets
the more-likely-than-not threshold of being sustained. FIN 48 specifically
prohibits the use of a valuation allowance as a substitute for derecognition
of
tax positions, and it has expanded disclosure requirements. FIN 48 is effective
for fiscal years beginning after December 15, 2006, in which
the
impact of adoption should be accounted for as a cumulative-effect adjustment
to
the beginning balance of retained earnings. The Company has adopted FIN 48
and
determined that it has no material effect on its consolidated financial
statements.
In
September 2006, the FASB issued Statement No. 157, “Fair
Value Measurements” (“SFAS
No. 157”). SFAS No. 157 provides guidance for using fair value to measure assets
and liabilities. This statement clarifies the principle that fair value should
be based on the assumptions that market participants would use when pricing
the
asset or liability. SFAS No.157 establishes a fair value hierarchy, giving
the
highest priority to quoted prices in active markets and the lowest priority
to
unobservable data. SFAS No. 157 applies whenever other standards require assets
or liabilities to be measured at fair value. This statement is effective in
fiscal years beginning after November 15, 2007. The Company believes that the
adoption of this standard on January 1, 2008 will not have a material effect
on
its consolidated financial statements.
In
February 2007, the FASB issued Statement No. 159, “The
Fair Value Option for Financial Assets and Financial Liabilities” ("SFAS No.
159") SFAS
No.
159 provides companies with an option to report
selected financial assets and liabilities at fair value. The Standard’s
objective is to reduce both complexity in accounting for financial instruments
and the volatility in earnings caused by measuring related assets and
liabilities differently. The FASB believes that SFAS No. 159 helps to mitigate
this type of accounting-induced volatility by enabling companies to report
related assets and liabilities at fair value, which would likely reduce the
need
for companies to comply with detailed rules for hedge accounting. SFAS No.
159
also establishes presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement attributes
for
similar types of assets and liabilities. SFAS No. 159 is effective as of the
beginning of an entity’s first fiscal year beginning after November 15, 2007.
Early adoption is permitted
as of the beginning of the previous fiscal year provided that the entity makes
that choice in the first 120 days of that fiscal year and also elects to apply
the provisions of SFAS No. 157. The Company is evaluating SFAS No. 159 and
has
not yet determined the impact the adoption will have on its consolidated
financial statements, but it is not expected to be
significant.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
12 -
Legal
Matters
In
July
2005, the Company’s former president and chief executive officer, who was also a
member of its board of directors, resigned following the discovery of what
appeared to be inappropriate financial dealings by him with a former tenant
of a
property owned by a joint venture in which the Company is a 50% partner and
the
managing member. The Company reported this matter to the Securities and Exchange
Commission in July 2005. The Audit Committee of the Board of Directors conducted
an investigation of this matter and related matters and retained special counsel
to assist the committee in its investigation. This investigation was completed,
and the Audit Committee and its special counsel, based on the materials gathered
and interviews conducted, found no evidence that any officer or employee of
the
Company (other than the former president and chief executive officer) was aware
of, or knowingly assisted, our former president and chief executive officer’s
inappropriate financial dealings.
In
June
2006, the Company announced that it had received notification of a formal order
of investigation from the SEC. Management believes that the matters being
investigated by the SEC focus on the improper payments received by the Company’s
president and chief executive officer. The SEC also requested information
regarding “related party transactions” between the Company and
entities affiliated with it and with certain of the Company’s officers and
directors and compensation paid to certain of the Company’s officers by these
affiliates. The SEC and the Company’s Audit Committee have conducted
investigations concerning these issues. The Company believes that these
investigations have been substantially completed.
In
August
2005, the former tenant commenced litigation in the Supreme Court of the State
of New York, Nassau County against the Company, certain of its affiliated
entities, the Company’s former president and chief executive officer, and an
entity controlled by the Company’s former president and chief executive officer.
In the litigation, the former tenant alleged, as against the Company’s former
president and chief executive officer, an entity controlled by him, the Company
and its affiliated entities, fraud, breach of contract, intentional tort,
negligent supervision, respondeat superior, negligent misrepresentation,
tortious interference with prospective economic relations and conduct in
violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”). On
the same date that the complaint was filed against the Company and affiliated
entities, the Company filed suit in the Supreme Court of the State of New York,
Nassau County against the former tenant, the former tenant’s principal, the
Company’s former president and chief executive officer, an entity controlled by
him and others alleging conspiracy to defraud, commercial bribery, fraud, breach
of fiduciary duty, tortious interference, intentional tort, violation of the
New
York Enterprise Corruption Act, respondeat superior, unjust enrichment and
violations of RICO.
The
two
actions were consolidated for all purposes on motion by both parties. On March
14, 2007, the consolidated actions were settled with respect to all parties,
except that the action brought by the Company against its former president
and
chief executive officer and persons affiliated with him is continuing. Under
the
terms of the settlement agreement, a designee of the former tenant purchased,
from a joint venture in which the Company is a 50% joint venture partner, a
vacant property located in Monroe, New York, for a consideration of $1,250,000
(book value of $40,000 after write downs totaling $3,162,000), and the parties
exchanged releases.
Forward-Looking
Statements
With
the
exception of historical information, this quarterly report on Form 10-Q contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended. We intend such forward-looking statements
to
be covered by the safe harbor provision for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995 and include this
statement for purposes of complying with these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe
our future plans, strategies and expectations, are generally identifiable by
use
of the words "may," "will," "believe," "expect," "intend," "anticipate,"
"estimate," "project," or similar expressions or variations thereof.
Forward-looking statements should not be relied on since they involve known
and
unknown risks, uncertainties and other factors which are, in some cases, beyond
our control and which could materially affect actual results, performance or
achievements. Investors are cautioned not to place undue reliance on any
forward-looking statements.
Overview
We
are a
self-administered and self-managed real estate investment trust, or REIT, and
we
primarily own real estate that we net lease to tenants. As of June 30, 2007
we
own 65 properties, hold a 50% tenancy in common interest in one property and
participate in seven joint ventures which own a total of five properties,
including two properties that are held for sale, one of which is vacant. These
71 properties are located in 28 states.
We
have
elected to be taxed as a REIT under the Internal Revenue Code of 1986, as
amended. To qualify as a REIT, we must meet a number of organizational and
operational requirements, including a requirement that we distribute currently
at least 90% of ordinary taxable income to our stockholders. We intend to comply
with these requirements and to maintain our REIT status.
Our
principal business strategy is to acquire improved, commercial properties
subject to long-term net leases. We acquire properties for their value as
long-term investments and for their ability to generate income over an extended
period of time. We have borrowed funds in the past to finance the purchase
of
real estate and we expect to do so in the future.
Our
rental properties are generally leased to corporate tenants under operating
leases substantially all of which are noncancellable. Substantially all of
our
lease agreements are net lease arrangements that require the tenant to pay
not
only rent, but also substantially all of the operating expenses of the leased
property, including maintenance, taxes, utilities and insurance. A majority
of
our lease agreements provide for periodic rental increases and certain of our
other leases provide for increases based on the consumer price
index.
At
June
30, 2007, excluding mortgages payable of our unconsolidated joint ventures,
we
had 36 outstanding mortgages payable, aggregating approximately $219 million
in
principal amount, each of which is secured by a first lien on real estate
properties. The real properties securing our outstanding mortgages payable
have
an aggregate carrying value of approximately $352 million before accumulated
depreciation. The mortgages bear interest at fixed rates ranging from 5.13%
to
8.8%, and mature between 2007 and 2037. In addition, we had one loan payable
outstanding with a principal amount of $6.6 million, bearing interest at 6.25%
and maturing in 2018.
Results
of Operations
Comparison
of Six and Three Months Ended June 30, 2007 and 2006
Revenues
Rental
income increased by $3.4 million, or 21.4%, to $19.2 million for the six months
ended June 30, 2007 from $15.8 million for the six months ended June 30, 2006.
For the three months ended June 30, 2007, rental income increased by $1 million,
or 12.6%, to $9.6 million from $8.6 million for the six and three months ended
June 30, 2006. The increase in rental income is primarily due to rental revenues
earned during the six and three months ended June 30, 2007 on 22 properties
acquired by us between April 2006 and December 2006.
Operating
Expenses
Depreciation
and amortization expense increased by $910,000, or 27.9%, and $319,000, or
18.1%, to $4.2 million and $2.1 million for the six and three months ended
June
30, 2007. The increase in depreciation and amortization expense was due to
the
acquisition of 22 properties between April 2006 and December 2006.
General
and administrative expenses increased by $597,000, or 22.2%, to $3.3 million
for
the six months ended June 30, 2007. The increase was due to a number of factors,
including an increase of $399,000 resulting from the implementation of the
Compensation and Services Agreement which became effective on January 1, 2007.
This agreement, pursuant to which the Company’s obligations under a Shared
Services Agreement were assumed by Majestic Property Management Corp., a related
party, requires that the services of all affiliated executive, administrative,
legal, accounting and clerical personnel that we use on an “as-needed”, part
time basis, as well as certain property management services, property
acquisition, sales and leasing and mortgage brokerage services be provided
to us
by Majestic Property Management Corp. for an annual fee. The increase in general
and administrative expenses in the six months ended June 30, 2007 also includes
a $162,000 increase in professional fees primarily due to $83,000 paid to an
independent compensation consultant retained by the Compensation Committee
of
our Board of Directors and increases in various other legal and accounting
fees.
Additionally, in the six months ended June 30, 2007, general and administration
expenses increased due to a $100,000 increase in our chairman’s fee pursuant to
the Compensation and Services Agreement, a $182,000 increase in compensation
expense relating to our restricted stock program and a $73,000 increase in
payroll and payroll related expenses, primarily resulting from an additional
employee and salary increases. These increases were offset by a $349,000
decrease in professional fees incurred in connection with investigations by
the
Securities and Exchange Commission and our Audit Committee (described in Note
12) and legal fees relating to a civil litigation arising out of the activities
of our former president and chief executive officer.
General
and administrative expenses increased by $5,000 to $1,588,000 for the three
months ended June 30, 2007. The increase was due to a number of factors,
including an increase of $155,000 resulting from the implementation of the
Compensation and Services Agreement, as well as a $50,000 increase in our
chairman’s fee. Additionally, the three months ended June 30, 2007 included a
$129,000 increase in compensation expense related to our restricted stock
program and a $25,000 increase in payroll and payroll related expenses. These
increases were offset by a $357,000 decrease in professional fees incurred
in
connection with investigations by the Securities and Exchange Commission and
our
Audit Committee (described in Note 12) and legal fees relating to a civil
litigation arising out of the activities of our former president and chief
executive officer.
The
six
and three months ended June 30, 2007 includes $50,000 and $14,000, respectively,
of federal excise tax based on taxable income generated but not yet distributed.
There was no such tax in the six and three months ended June 30,
2006.
Real
estate expenses decreased by $5,000, or 3.7%, and $19,000, or 24.4% for the
six
and three months ended June 30, 2007, resulting primarily from operating
expenses incurred in 2006 relating to two properties.
Other
Income and Expenses
Our
equity in earnings of unconsolidated joint ventures decreased by $1,385,000,
or
82.5%, and $754,000, or 83.5%, to $293,000 and $149,000 for the six and three
months ended June 30, 2007, respectively. These decreases resulted from the
reduction in income producing properties following the September and October
2006 sales of nine movie theater properties by two of our unconsolidated joint
ventures. These properties had generated income of $1,461,000 and $799,000
in
the six and three months ended June 30, 2006. This decrease was offset in part
by an increase in our equity share of earnings from four of our other
unconsolidated joint ventures.
Gain
on
disposition of real estate of unconsolidated joint venture results from the
sale
of the last real estate asset owned by one of our movie theater joint ventures.
This vacant parcel of land, located in Monroe, New York, was sold for a
consideration of $1.25 million to a former tenant of the joint venture as part
of an overall settlement of a litigation with that former tenant. See Note
12.
The joint venture recognized a gain of $1.2 million, of which our 50% share
is
$583,000.
Interest
and other income increased by $785,000, or 302%, and $417,000, or 948%, to
$1,045,000 and $461,000 for the six and three months ended June 30, 2007. The
increase in interest and other income for the six and three months ended June
30, 2007 results substantially from our investment in short-term cash
equivalents of the distributions received from the movie theater joint ventures
upon the sale of its nine theater properties in September and October 2006.
Also
contributing to the increase in interest and other income in the six months
ended June 30, 2007 is a $118,000 gain on sale of available-for-sale
securities.
Interest
expense increased by $1.6 million, or 26.4%, and $519,000 or 16.1%, to $7.5
million and $3.7 million for the six and three months ended June 30, 2007.
This
increase results from mortgages placed on ten properties between April 2006
and
December 2006 and the assumption of a mortgage in connection with the purchase
of 11 properties in April 2006.
Amortization
of deferred financing costs increased by $30,000, or 10.3%, and $8,000, or
5.3%,
to $320,000 and $159,000 for the six and three months ended June 30, 2007.
The
increase results from the amortization of deferred mortgage costs during the
six
and three months ended June 30, 2007 resulting from mortgages placed on 21
properties between April 2006 and December 2006.
During
February 2006, we sold an option to buy an interest in certain property adjacent
to one of our properties and recognized a gain on the sale of
$227,000.
Discontinued
Operations
Discontinued
operations decreased by $589,000, or 85.4%, and $557,000, or 101%, to $101,000
and ($4,000) for the six and three months ended June 30, 2007. The six and
three
months ended June 30, 2006 includes net operating income of $295,000 and
$158,000, respectively, from a property we sold in October 2006 and a $400,000
settlement of a claim made by us against a title insurance company regarding
the
purchase of one of our properties in a prior year, which was sold in 2005.
This
decrease was offset in part by our receipt of an insurance settlement for
another property (sold in a prior year) in the three months ended March 31,
2007.
Liquidity
and Capital Resources
We
had
cash and cash equivalents of approximately $32.7 million at June 30, 2007.
Our
primary sources of liquidity are cash and cash equivalents, cash generated
from
operating activities, including mortgage financings and property dispositions,
and our revolving credit facility. We have a $62.5 million revolving credit
facility with VNB New York Corp., Bank Leumi USA, Manufacturers and Traders
Trust Company and Israel Discount Bank of New York. The facility is available
to
us to pay down existing and maturing mortgages, to fund the acquisition of
properties or to invest in joint ventures. The facility matures on March 31,
2010. Borrowings under the facility bear interest at the lower of LIBOR plus
2.15% or the bank's prime rate, and there is an unused facility fee of
one-quarter of 1% per annum. Net proceeds received from the sale or refinancing
of properties are required to be used to repay amounts outstanding under the
facility if proceeds from the facility were used to purchase or refinance such
properties. There is no outstanding balance at June 30, 2007.
We
actively engage in seeking additional property acquisitions and we are involved
in various stages of negotiation with respect to the acquisition of additional
properties. We will fund our future real estate acquisitions by using available
cash and cash equivalents, cash provided from operations, cash provided from
mortgage financings and property dispositions and funds available under our
credit facility.
We
had no
outstanding contingent commitments, such as guarantees of indebtedness, or
any
other contractual cash obligations, other than mortgage and loan payable debt,
at June 30, 2007.
Cash
Distribution Policy
We
have
elected to be taxed as a REIT under the Internal Revenue Code of 1986, as
amended. To qualify as a REIT, we must meet a number of organizational and
operational requirements, including a requirement that we distribute currently
at least 90% of our ordinary taxable income to our stockholders. It is our
current intention to comply with these requirements and maintain our REIT
status. As a REIT, we generally will not be subject to corporate federal, state
or local income taxes on taxable income we distribute currently (in accordance
with the Internal Revenue Code and applicable regulations) to our stockholders.
If we fail to qualify as a REIT in any taxable year, we will be subject to
federal, state and local income taxes at regular corporate rates and may not
be
able to qualify as a REIT for four subsequent tax years. Even if we qualify
as a
REIT for federal taxation purposes, 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
income.
It
is our
intention to pay to our stockholders no less than 90% of our taxable income
within the time periods prescribed by the Internal Revenue Code. It will
continue to be our policy to make sufficient cash distributions to stockholders
in order for us to maintain our REIT status under the Internal Revenue Code.
In
2006,
we recognized a significant capital gain, primarily due to the sale of our
movie
theater portfolio. Under the Internal Revenue Code, we are required to either
pay the federal income tax applicable to the gain not distributed to our
stockholders (at corporate rates) or to distribute the entire gain to our
stockholders who would then pay federal income taxes substantially at the
individual capital gains rate. In order to avoid the income tax at the
Company level, any portion of the gain not previously distributed must be
declared as a dividend prior to the due date of our federal tax return, as
extended (September 15, 2007), and paid with our October 2007 regular quarterly
distribution. Our Board of Directors will consider this issue at its September
11, 2007 board meeting. Management will recommend to the Board that a special
dividend of approximately $6.7 million ($.66 per common share), representing
the
portion of the gain not yet distributed, be declared at its September 11, 2007
board meeting for payment in October 2007. The special dividend, if declared
by
the Board, will be in addition to the regular quarterly dividend.
Item
3. -
Quantitative
and Qualitative Disclosures About Market Risk
All
of
our long-term mortgage debt bears interest at fixed rates and accordingly,
the
effect of changes in interest rates would not impact the amount of interest
expense that we incur under these mortgages. Our credit line is a variable
rate
facility which is sensitive to interest rates. However, for the three months
ended June 30, 2007, there was no balance outstanding on the credit line, and
thus, the effect of changes in interest rates would not have impacted the amount
of interest expense incurred during this period.
Item
4. -
Controls
and Procedures
As
required under Rules 13a-15 (e) and 15d-15 (e) under the Securities Exchange
Act
of 1934, as amended, we carried out an evaluation under the supervision and
with
the participation of our management, including our Chief Executive Officer
and
Chief Financial Officer, of the effectiveness of the design and operation of
our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934). Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures as of June 30, 2007 are effective.
There
were no changes in our internal control over financial reporting (as defined
in
Rule 13a-15(f) under the Securities Exchange Act of 1934) during the three
months ended June 30, 2007 that materially affected, or are reasonably likely
to
materially affect, our internal control over financial reporting.
PART
II -
OTHER INFORMATION
Item
1.
Legal
Proceedings
In
July
2005, our former president and chief executive officer, who was also a member
of
our board of directors, resigned following the discovery of what appeared to
be
inappropriate financial dealings by him with a former tenant of a property
owned
by a joint venture in which we are a 50% partner and the managing member. We
reported this matter to the Securities and Exchange Commission in July 2005.
The
Audit Committee of the Board of Directors conducted an investigation of this
matter and related matters and retained special counsel to assist the committee
in its investigation. This investigation was completed, and the Audit Committee
and its special counsel, based on the materials gathered and interviews
conducted, found no evidence that any officer or employee of our company (other
than the former president and chief executive officer) was aware of, or
knowingly assisted, our former president and chief executive officer’s
inappropriate financial dealings.
In
June
2006, we announced that we had received notification of a formal order of
investigation from the SEC. Management believes that the matters being
investigated by the SEC focus on the improper payments received by our president
and chief executive officer. The SEC also requested information regarding
“related party transactions” between us and entities affiliated with us and with
certain of our officers and directors and compensation paid to certain of our
officers by these affiliates. The SEC and our Audit Committee have conducted
investigations concerning these issues. We believe that these investigations
have been substantially completed.
In
August
2005, the former tenant commenced litigation in the Supreme Court of the State
of New York, Nassau County against us, certain of our affiliated entities,
our
former president and chief executive officer, and an entity controlled by our
former president and chief executive officer. In the litigation, the former
tenant alleged, as against our former president and chief executive officer,
an
entity controlled by him, us and our affiliated entities, fraud, breach of
contract, intentional tort, negligent supervision, respondeat superior,
negligent misrepresentation, tortious interference with prospective economic
relations and conduct in violation of the Racketeer Influenced and Corrupt
Organizations Act (“RICO”). On the same date that the complaint was filed
against us and our affiliated entities, we filed suit in the Supreme Court
of
the State of New York, Nassau County against our former tenant, the former
tenant’s principal, our former president and chief executive officer, an entity
controlled by him and others. Our complaint alleged conspiracy to defraud,
commercial bribery, fraud, breach of fiduciary duty, tortious interference,
intentional tort, violation of the New York Enterprise Corruption Act,
respondeat superior, unjust enrichment and violations of RICO.
The
two
actions were consolidated for all purposes on motion by both parties. On March
14, 2007, the consolidated actions were settled with respect to all parties,
except that the action brought by us against our former president and chief
executive officer and persons affiliated with him is continuing. Under the
terms
of the settlement agreement, a designee of the former tenant purchased, from
a
joint venture in which we are a 50% joint venture partner, a vacant property
located in Monroe, New York, for a consideration of $1,250,000 and the parties
exchanged releases.
Item
4.
Submission
of Matters to a Vote of Security Holders
The
Annual Meeting of Stockholders of the Company was held on June 12,
2007.
The
following persons were elected Directors at the Annual Meeting:
Name
|
|
Votes
For
|
|
Votes
Against
|
|
Votes
Withheld
|
|
Joseph
A. Amato
|
|
|
9,446,410
|
|
|
195,748
|
|
|
0
|
|
Jeffrey
Gould
|
|
|
9,410,299
|
|
|
231,859
|
|
|
0
|
|
Matthew
Gould
|
|
|
9,457,202
|
|
|
184,956
|
|
|
0
|
|
J.
Robert Lovejoy
|
|
|
9,502,437
|
|
|
139,721
|
|
|
0
|
|
Joseph
A.
Amato, Jeffrey Gould, Matthew Gould and J. Robert Lovejoy were elected to serve
until the Company’s 2010 Annual Meeting.
The
following persons continued in office as Directors after the
meeting:
Name
|
|
Term
of Office Until
|
Charles
Biederman
|
|
2008
Annual Meeting
|
Patrick
J. Callan, Jr.
|
|
2008
Annual Meeting
|
James
J. Burns
|
|
2009
Annual Meeting
|
Joseph
A. DeLuca
|
|
2009
Annual Meeting
|
Fredric
H. Gould
|
|
2009
Annual Meeting
|
Eugene
I. Zuriff
|
|
2009
Annual Meeting
|
At
the
2007 Annual Meeting, the stockholders also voted on the ratification of the
appointment of Ernst & Young, LLP as the registrant’s independent registered
public accounting firm for 2007. 9,609,816 votes were cast in favor of the
selection of Ernst & Young, LLP as the independent registered public
accounting firm for the year ended December 31, 2007, 19,150 votes were cast
against the proposal and 13,192 votes abstained with respect to the
proposal.
Item
6. Exhibits
Exhibit
31.1
|
|
Certification
of Chairman of the Board and Chief Executive Officer pursuant to
Section
302 of the Sarbanes-Oxley Act of 2002. (Filed with this Form
10-Q.)
|
|
|
|
Exhibit
31.2
|
|
Certification
of President pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
(Filed with this Form 10-Q.)
|
|
|
|
Exhibit
31.3
|
|
Certification
of Senior Vice President and Chief Financial Officer pursuant to
Section
302 of the Sarbanes-Oxley Act of 2002. (Filed with this Form
10-Q.)
|
|
|
|
Exhibit
32.1
|
|
Certification
of Chairman of the Board and Chief Executive Officer pursuant to
Section
906 of the Sarbanes-Oxley Act of 2002. (Filed with this Form
10-Q.)
|
|
|
|
Exhibit
32.2
|
|
Certification
of President pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(Filed with this Form 10-Q.)
|
|
|
|
Exhibit
32.3
|
|
Certification
of Senior Vice President and Chief Financial Officer pursuant to
Section
906 of the Sarbanes-Oxley Act of 2002. (Filed with this Form
10-Q.)
|
ONE
LIBERTY PROPERTIES, INC.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
|
|
|
|
|
One
Liberty Properties, Inc.
(Registrant)
|
|
|
|
August
8, 2007
|
|
/s/
Patrick J. Callan, Jr.
|
Date |
Patrick J. Callan, Jr.
President
(authorized
officer)
|
|
|
|
|
|
|
August
8, 2007
|
|
/s/
David W. Kalish
|
Date
|
David
W. Kalish
Senior
Vice President and
Chief
Financial Officer
(principal
financial officer)
|