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 September 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)
|
|
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
November 2, 2007, the registrant had 10,152,737 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)
|
|
September
30,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
Real
estate investments, at cost
|
|
|
|
|
|
Land
|
|
$
|
70,032
|
|
$
|
70,078
|
|
Buildings
and improvements
|
|
|
298,086
|
|
|
298,265
|
|
|
|
|
368,118
|
|
|
368,343
|
|
Less
accumulated depreciation
|
|
|
32,554
|
|
|
26,691
|
|
|
|
|
335,564
|
|
|
341,652
|
|
|
|
|
|
|
|
|
|
Investment
in unconsolidated joint ventures
|
|
|
6,580
|
|
|
7,014
|
|
Cash
and cash equivalents
|
|
|
34,985
|
|
|
34,013
|
|
Restricted
cash
|
|
|
7,687
|
|
|
7,409
|
|
Unbilled
rent receivable
|
|
|
9,835
|
|
|
8,218
|
|
Property
held for sale
|
|
|
10,052
|
|
|
10,189
|
|
Escrow,
deposits and other receivables
|
|
|
1,957
|
|
|
2,251
|
|
Investment
in BRT Realty Trust at market (related party)
|
|
|
521
|
|
|
831
|
|
Deferred
financing costs
|
|
|
3,265
|
|
|
3,062
|
|
Other
assets (including available-for-sale securities
|
|
|
|
|
|
|
|
at
market of $1,716 and $1,372)
|
|
|
2,639
|
|
|
2,145
|
|
Unamortized
intangible lease assets
|
|
|
5,052
|
|
|
5,253
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
418,137
|
|
$
|
422,037
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Mortgages
and loan payable
|
|
$
|
227,078
|
|
$
|
227,923
|
|
Dividends
payable
|
|
|
10,348
|
|
|
3,587
|
|
Accrued
expenses and other liabilities
|
|
|
3,774
|
|
|
4,391
|
|
Unamortized
intangible lease liabilities
|
|
|
5,576
|
|
|
6,011
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
246,776
|
|
|
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;
9,846 and 9,823 shares
|
|
|
|
|
|
|
|
issued
and outstanding
|
|
|
9,846
|
|
|
9,823
|
|
Paid-in
capital
|
|
|
135,861
|
|
|
134,826
|
|
Accumulated
other comprehensive income - net
|
|
|
|
|
|
|
|
unrealized
gain on available-for-sale securities
|
|
|
437
|
|
|
935
|
|
Accumulated
undistributed net income
|
|
|
25,217
|
|
|
34,541
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
171,361
|
|
|
180,125
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
418,137
|
|
$
|
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
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Rental
income
|
|
$
|
9,238
|
|
$
|
8,285
|
|
$
|
27,812
|
|
$
|
23,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,026
|
|
|
1,763
|
|
|
6,082
|
|
|
4,909
|
|
General
and administrative (including $572, $325,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,718
and $1,072, respectively, to related parties)
|
|
|
1,583
|
|
|
1,484
|
|
|
4,867
|
|
|
4,171
|
|
Federal
excise tax
|
|
|
5
|
|
|
-
|
|
|
55
|
|
|
-
|
|
Real
estate expenses
|
|
|
55
|
|
|
66
|
|
|
184
|
|
|
200
|
|
Leasehold
rent
|
|
|
77
|
|
|
77
|
|
|
231
|
|
|
231
|
|
Total
operating expenses
|
|
|
3,746
|
|
|
3,390
|
|
|
11,419
|
|
|
9,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
5,492
|
|
|
4,895
|
|
|
16,393
|
|
|
13,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
in earnings of unconsolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
joint
ventures
|
|
|
141
|
|
|
246
|
|
|
433
|
|
|
1,924
|
|
Gain
on dispositions of real estate of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unconsolidated
joint venture
|
|
|
-
|
|
|
3,294
|
|
|
583
|
|
|
3,294
|
|
Interest
and other income
|
|
|
432
|
|
|
43
|
|
|
1,477
|
|
|
303
|
|
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
(3,752
|
)
|
|
(3,247
|
)
|
|
(11,220
|
)
|
|
(9,154
|
)
|
Amortization
of deferred financing costs
|
|
|
(159
|
)
|
|
(153
|
)
|
|
(479
|
)
|
|
(443
|
)
|
Gain
on sale of option to purchase property and other
|
|
|
-
|
|
|
185
|
|
|
-
|
|
|
412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
|
2,154
|
|
|
5,263
|
|
|
7,187
|
|
|
10,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations
|
|
|
425
|
|
|
472
|
|
|
1,069
|
|
|
1,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
2,579
|
|
$
|
5,735
|
|
$
|
8,256
|
|
$
|
11.997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,078
|
|
|
9,937
|
|
|
10,045
|
|
|
9,921
|
|
Diluted
|
|
|
10,078
|
|
|
9,940
|
|
|
10,045
|
|
|
9,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share - basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
.22
|
|
$
|
.53
|
|
$
|
.72
|
|
$
|
1.04
|
|
Income
from discontinued operations
|
|
|
.04
|
|
|
.05
|
|
|
.10
|
|
|
.17
|
|
Net
income per common share
|
|
$
|
.26
|
|
$
|
.58
|
|
$
|
.82
|
|
$
|
1.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
distributions per share of common stock
|
|
$
|
1.03
|
|
$
|
.33
|
|
$
|
1.75
|
|
$
|
.99
|
|
See
accompanying notes to consolidated financial statements.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
For
the
nine month period ended September 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
|
|
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
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(17,580
|
)
|
|
(17,580
|
)
|
Repurchase
of common stock
|
|
|
(70
|
)
|
|
(1,370
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,440
|
)
|
Shares
issued through
dividend
reinvestment plan
|
|
|
88
|
|
|
1,791
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,879
|
|
Restricted
stock vesting
|
|
|
5
|
|
|
(5
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Compensation
expense -
restricted
stock
|
|
|
-
|
|
|
619
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
619
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,256
|
|
|
8,256
|
|
Other
comprehensive income-
net
unrealized loss on
available-for-sale
securities
|
|
|
-
|
|
|
-
|
|
|
(498
|
)
|
|
-
|
|
|
-
|
|
|
(498
|
)
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
September 30, 2007
|
|
$
|
9,846
|
|
$
|
135,861
|
|
$
|
437
|
|
$
|
-
|
|
$
|
25,217
|
|
$
|
171,361
|
|
See
accompanying notes to consolidated financial statements.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Amounts
in Thousands)
(Unaudited)
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
|
2007
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
Net
income
|
|
$
|
8,256
|
|
$
|
11,997
|
|
Adjustments
to reconcile net income
|
|
|
|
|
|
|
|
to
net cash provided by operating activities:
|
|
|
|
|
|
|
|
Gain
on sale
|
|
|
(122
|
)
|
|
(412
|
)
|
Increase
in rental income from straight-lining of rent
|
|
|
(1,617
|
)
|
|
(1,309
|
)
|
Increase
in rental income from amortization of
|
|
|
|
|
|
|
|
intangibles
relating to leases
|
|
|
(190
|
)
|
|
(120
|
)
|
Amortization
of restricted stock expense
|
|
|
619
|
|
|
378
|
|
Equity
in earnings of unconsolidated joint ventures
|
|
|
(433
|
)
|
|
(1,924
|
)
|
Gain
on dispositions of real estate related to unconsolidated
|
|
|
|
|
|
|
|
joint
venture
|
|
|
(583
|
)
|
|
(3,294
|
)
|
Distributions
of earnings from unconsolidated joint ventures
|
|
|
977
|
|
|
5,115
|
|
Depreciation
and amortization
|
|
|
6,219
|
|
|
5,182
|
|
Amortization
of financing costs
|
|
|
479
|
|
|
448
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
Decrease
(increase) in escrow, deposits and other receivables
|
|
|
134
|
|
|
(903
|
)
|
(Decrease)
increase in accrued expenses and other liabilities
|
|
|
(632
|
)
|
|
304
|
|
Net
cash provided by operating activities
|
|
|
13,107
|
|
|
15,462
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Purchase
of real estate and improvements
|
|
|
(38
|
)
|
|
(31,659
|
)
|
Net
proceeds from sale of real estate
|
|
|
4
|
|
|
974
|
|
Investment
in unconsolidated joint ventures
|
|
|
-
|
|
|
(1,553
|
)
|
Distributions
of return of capital from unconsolidated
|
|
|
|
|
|
|
|
joint
ventures
|
|
|
442
|
|
|
1,322
|
|
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
|
|
|
(535
|
)
|
|
(714
|
)
|
Net
cash provided by (used in) investing activities
|
|
|
34
|
|
|
(31,392
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Repayment
of mortgages payable
|
|
|
(3,545
|
)
|
|
(3,058
|
)
|
Proceeds
from mortgages payable
|
|
|
2,700
|
|
|
5,565
|
|
Payment
of financing costs
|
|
|
(666
|
)
|
|
(551
|
)
|
Proceeds
from bank line of credit, net
|
|
|
-
|
|
|
4,000
|
|
Increase
in restricted cash
|
|
|
(278
|
)
|
|
-
|
|
Cash
distributions - common stock
|
|
|
(10,819
|
)
|
|
(9,807
|
)
|
Exercise
of stock options
|
|
|
-
|
|
|
110
|
|
Repurchase
of common stock
|
|
|
(1,440
|
) |
|
-
|
|
Issuance
of shares through dividend reinvestment plan
|
|
|
1,879
|
|
|
430
|
|
Net
cash used in financing activities
|
|
|
(12,169
|
)
|
|
(3,311
|
)
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
972
|
|
|
(19,241
|
)
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
34,013
|
|
|
26,749
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
34,985
|
|
$
|
7,508
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid during the period for interest
|
|
$
|
11,080
|
|
$
|
9,540
|
|
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
|
|
$
|
-
|
|
$
|
4,082
|
|
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. (“OLP”) was incorporated in 1982 in the state of
Maryland. OLP is a self-administered and self-managed real estate investment
trust (“REIT”). OLP acquires, owns and manages a geographically diversified
portfolio of retail, including retail furniture stores, industrial, office,
flex, health and fitness and other properties, a substantial portion of which
are under long-term net leases. As of September 30, 2007, OLP owns 65
properties, one of which is held for sale, and holds a 50% tenancy in common
interest in one property. OLP’s joint ventures own five properties, including
one vacant property that is held for sale. The 71 properties are located in
28
states.
Note
2 -
Basis
of Preparation
The
accompanying interim unaudited consolidated financial statements as of September
30, 2007 and 2006 and for the nine and three months ended September 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 nine and three months ended September
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 OLP
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.
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.
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
nine and three months ended September 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 nine and three months ended September
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 (3,086
and 2,364 for the nine and three months ended September 30, 2006, respectively)
using the treasury stock method. There were no outstanding options in the nine
and three months ended September 30, 2007.
Note
4 -
Investment
in Unconsolidated Joint Ventures
At
September 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 13.
This
property had a net book value of $40,000 after direct write downs totaling
$3,162,000 taken in prior periods by the joint venture. 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 September 30,
2007 and December 31, 2006, the Company’s equity investment in these two joint
ventures totaled $4,000 and $284,000, respectively, and they contributed $8,000
and $(4,000) in equity earnings for the nine and three months ended September
30, 2007, respectively and $1,595,000 and $135,000, respectively, in equity
earnings for the nine and three months ended September 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. Each of these
five joint ventures are between the Company and an unrelated party. At September
30, 2007 and December 31, 2006, the Company’s equity investment in these five
joint ventures totaled $6,576,000 and $6,730,000, respectively. These
unconsolidated joint ventures contributed $425,000 and $145,000 in equity
earnings for the nine and three months ended September 30, 2007, respectively,
and $329,000 and $111,000 for the nine and three months ended September 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 $638,000 in fees and closing costs which
are being amortized over the term of the Facility. There is no balance
outstanding under the Facility at September 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 nine
and
three months ended September 30, 2007 and 2006 applicable to a property held
for
sale at September 30, 2007, to a property sold on October 5, 2006, as well
as to
settlements relating to properties sold in a prior year (amounts in
thousands):
|
|
Three
Months Ended
September
30,
|
|
Nine
Months Ended
September
30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Rental
income
|
|
$
|
331
|
|
$
|
676
|
|
$
|
991
|
|
$
|
1,943
|
|
Other
income - settlements
|
|
|
132
|
|
|
-
|
|
|
248
|
|
|
400
|
|
Total
revenues
|
|
|
463
|
|
|
676
|
|
|
1,239
|
|
|
2,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
20
|
|
|
59
|
|
|
137
|
|
|
273
|
|
Real
estate expenses
|
|
|
18
|
|
|
39
|
|
|
33
|
|
|
46
|
|
Interest
expense
|
|
|
-
|
|
|
106
|
|
|
-
|
|
|
320
|
|
Total
expenses
|
|
|
38
|
|
|
204
|
|
|
170
|
|
|
639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations
|
|
$
|
425
|
|
$
|
472
|
|
$
|
1,069
|
|
$
|
1,704
|
|
Note
7 -
Common
Stock Dividend Distribution
On
September 11, 2007, the Board of Directors declared a quarterly cash
distribution of $.36 per share and a special dividend of $.67 per share,
totaling $10,348,000, on the Company's Common Stock, which was paid on October
2, 2007 to stockholders of record on September 24, 2007. The special dividend
represents the remaining undistributed portion of the taxable income recognized
by the Company in 2006 primarily from gains on the sale by two of its 50% owned
joint ventures of their portfolio of movie theater properties.
Note
8 -
Comprehensive
Income
Comprehensive
income for the nine and three months ended September 30, 2007 and 2006 are
as
follows (amounts in thousands):
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Net
income
|
|
$
|
2,579
|
|
$
|
5,735
|
|
$
|
8,256
|
|
$
|
11,997
|
|
Other
comprehensive income -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
(loss) gain on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale
securities
|
|
|
(284
|
)
|
|
182
|
|
|
(498
|
)
|
|
197
|
|
Comprehensive
income
|
|
$
|
2,295
|
|
$
|
5,917
|
|
$
|
7,758
|
|
$
|
12,194
|
|
Accumulated
other comprehensive income, which is solely comprised of the net unrealized
gain
on available-for-sale securities was $437,000 and $935,000 at September 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 all restricted
share awards made to date provide for vesting upon the fifth anniversary of
the
date of grant and under certain circumstances may vest earlier. For accounting
purposes, the restricted stock is not included in the outstanding shares shown
on the balance sheet until they vest. 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
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
September
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
|
|
$ |
195,000 |
|
$ |
136,000 |
|
$ |
619,000 |
|
$
|
378,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested
shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested
beginning of period
|
|
|
186,400 |
|
|
141,675
|
|
|
140,175
|
|
|
92,725
|
|
Grants
|
|
|
-
|
|
|
-
|
|
|
51,225
|
|
|
50,050
|
|
Vested
during period
|
|
|
-
|
|
|
-
|
|
|
(5,000
|
)
|
|
-
|
|
Forfeitures
|
|
|
-
|
|
|
(1,250
|
)
|
|
-
|
|
|
(2,350
|
)
|
Non-vested
end of period
|
|
|
186,400
|
|
|
140,425
|
|
|
186,400
|
|
|
140,425
|
|
Through
September 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
$2,386,000 remains as deferred compensation and will be charged to expense
over
the remaining weighted average vesting period of approximately 2.89 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 a Registration Statement with the Securities
and Exchange Commission on June 1, 2007 relating to the Plan. The Plan provides
owners of record the opportunity to reinvest cash dividends paid on the
Company’s common stock in additional shares of its common stock, at a discount
of 0% to 5% from the market price. The discount is determined at the Company’s
sole discretion. The Company is currently offering a 5% discount from market.
During the three months ended September 30, 2007, the Company issued 46,794
common shares under the Plan. In connection with the filing of the Registration
Statement, the Company paid $70,000 for legal and accounting fees, which have
been netted against the shares issued in Paid-in Capital on the Company’s
balance sheet.
Note
11 -
Stock
Repurchase Program
In
August
2007, the Company announced that its Board of Directors had authorized a stock
repurchase program of up to 500,000 shares of the Company’s common stock in open
market transactions. All purchases will be executed in accordance with
applicable federal securities laws. The timing and exact number of shares
purchased will be determined at the Company’s discretion and will depend upon
market conditions. The stock repurchase program will continue for twelve months
and may be suspended or terminated by the Company at any time. Through September
30, 2007, the Company repurchased 69,583 shares of common stock for a
consideration of $1,440,000. Subsequent to September 30, 2007, the Company
repurchased an additional 28,800 shares of common stock for a consideration
of
$583,000.
Note
12 -
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
certain assets and liabilities. This statement clarifies the principle that
fair
value should be based on the assumptions that market participants would use
when
pricing the asset or liability. SFAS No.157 establishes a fair value hierarchy,
giving the highest priority to quoted prices in active markets and the lowest
priority to unobservable data. SFAS No. 157 applies whenever other standards
require assets or liabilities to be measured at fair value. This statement
is
effective 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.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
12 -
New
Accounting Pronouncements (Continued)
In
February 2007, the FASB issued Statement No. 159, “The
Fair Value Option for Financial Assets and
Financial Liabilities” ("SFAS No. 159"). SFAS
No.
159 provides companies with an option to report
selected financial assets and liabilities at fair value. The objective of SFAS
No. 159 is to reduce both complexity in accounting for financial instruments
and
the volatility in earnings caused by measuring related assets and liabilities
differently. The FASB believes that SFAS No. 159 helps to mitigate this type
of
accounting-induced volatility by enabling companies to report related assets
and
liabilities at fair value, which would likely reduce the need for companies
to
comply with detailed rules for hedge accounting. SFAS No. 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose 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. 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.
Note
13 -
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 (the “SEC”) in July 2005. The Audit Committee of the Board of
Directors conducted an investigation of this matter and related matters and
retained special counsel to assist the committee in 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.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
13 -
Legal
Matters - (Continued)
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 by the joint
venture), and the parties exchanged releases.
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 September 30,
2007, we own 65 properties, one of which is held for sale, hold a 50% tenancy
in
common interest in one property and participate in seven joint ventures which
own a total of five properties, including one vacant property that is held
for
sale. These 71 properties are located in 28 states.
We
have
elected to be taxed as a REIT under the Internal Revenue Code of 1986, as
amended. To qualify as a REIT, we must meet a number of organizational and
operational requirements, including a requirement that we 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.
Although
we have investigated, analyzed and bid on several properties in 2007, due to
a
variety of factors, including increased competition and unfavorable prices,
we
have not acquired any properties to date in 2007. We have recently executed
contracts to acquire two single tenant retail properties for an aggregate
purchase price of approximately $5.5 million, which are expected to close early
in 2008. We will continue to be active in the acquisition process.
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
September 30, 2007, excluding mortgages payable of our unconsolidated joint
ventures, we had 37 outstanding mortgages payable, aggregating approximately
$220.6 million in principal amount, each of which is secured by a first lien
on
a real estate property. The real properties securing our outstanding mortgages
payable have an aggregate carrying value of approximately $356 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
outstanding loan payable with a balance of $6.5 million, which is collateralized
by cash held in escrow and shown on the balance sheet as restricted cash. The
loan bears interest at 6.25% and matures in 2018.
Results
of Operations
Comparison
of Nine and Three Months Ended September 30, 2007 and 2006
Revenues
Rental
income increased by $4.3 million, or 18.5%, to $27.8 million for the nine months
ended September 30, 2007 from $23.5 million for the nine months ended September
30, 2006. For the three months ended September 30, 2007, rental income increased
by $953,000, or 11.5%, to $9.2 million from $8.3 million for the three months
ended September 30, 2006. The increase in rental income is primarily due to
rental revenues earned during the nine and three months ended September 30,
2007
on 22 properties acquired by us between April 2006 and December
2006.
Operating
Expenses
Depreciation
and amortization expense increased by $1.2 million, or 23.9%, and $263,000,
or
14.9%, to $6.1 million and $2 million for the nine and three months ended
September 30, 2007, respectively. 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 $696,000, or 16.7%, to $4.9 million
for
the nine months ended September 30, 2007. The increase was due to a number
of
factors, including an increase of $646,000 resulting from the implementation
of
a 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 taken over 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 nine months ended
September 30, 2007 also includes a $210,000 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 nine months ended
September 30, 2007, general and administration expenses increased due to a
$150,000 increase in our chairman’s fee pursuant to the Compensation and
Services Agreement, a $241,000 increase in compensation expense relating to
our
restricted stock program, a $103,000 increase in payroll and payroll related
expenses, primarily resulting from an additional employee and salary increases
and a $54,000 increase in state taxes. These increases were offset by a $701,000
decrease in professional fees incurred during the prior year in connection
with
investigations by the Securities and Exchange Commission and our Audit Committee
(described in Note 13) 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 $99,000, or 6.7 %, to $1.6 million
for
the three months ended September 30, 2007. The increase was due to a number
of
factors, including an increase of $247,000 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 September 30, 2007 included
a $59,000 increase in compensation expense related to our restricted stock
program, a $30,000 increase in payroll and payroll related expenses, a $41,000
increase in legal and accounting fees and a $32,000 increase in state taxes.
These increases were offset by a $352,000 decrease in professional fees incurred
in connection with the aforementioned investigations.
Real
estate expenses decreased by $16,000, or 8%, and $11,000, or 16.7%,
respectively, for the nine and three months ended September 30, 2007, resulting
primarily from repairs incurred in 2006 relating to a property.
Other
Income and Expenses
Our
equity in earnings of unconsolidated joint ventures decreased by $1.5 million,
or 77.5%, and $105,000, or 42.7%, to $433,000 and $141,000 for the nine and
three months ended September 30, 2007, respectively. These decreases resulted
from a decrease in income producing properties owned by our joint ventures
following the September and October 2006 sale of nine movie theater properties
by two of our unconsolidated joint ventures. These properties generated income
of $1.6 million and $135,000 in the nine and three months ended September 30,
2006,
respectively.
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
dispositions of real estate of unconsolidated joint venture results from two
sales of real estate assets owned by one of our movie theater joint ventures.
The nine and three months ended September 30, 2006 reflect the sale by this
joint venture of a movie theater property located in Brooklyn, New York for
a
consideration of $16 million from which it realized a gain of $6.6 million,
of
which our share was $3.3 million. The nine months ended September 30, 2007
reflects the sale by this joint venture of its last remaining real estate asset,
a vacant parcel of land, located in Monroe, New York, 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 13. The joint
venture recognized a gain of $1.2 million on this sale, of which our 50% share
is $583,000.
Interest
and other income increased by $1.2 million, or 387%, and $389,000, or 905%,
to
$1.5 million and $432,000 for the nine and three months ended September 30,
2007, respectively. The increase in interest and other income for the nine
and
three months ended September 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 theater properties in September
and
October 2006. Also contributing to the increase in interest and other income
in
the nine months ended September 30, 2007 is a $118,000 gain on sale of
available-for-sale securities.
Interest
expense increased by $2.1 million, or 22.6%, and $505,000 or 15.6%, to $11.2
million and $3.8 million for the nine and three months ended September 30,
2007,
respectively. This increase results from mortgages placed on 11 properties
between April 2006 and August 2007 and the assumption of a mortgage in
connection with the purchase of 11 properties in April 2006. In addition, the
increase in interest expense results from interest on a loan payable which
was
originally a mortgage collateralized by a movie theatre property the Company
owned and sold in October 2006.
Amortization
of deferred financing costs increased by $36,000, or 8.1%, and $6,000, or 3.9%,
to $479,000 and $159,000 for the nine and three months ended September 30,
2007,
respectively. The increase results from the amortization of deferred mortgage
costs during the nine and three months ended September 30, 2007 resulting from
mortgages placed on 22 properties between April 2006 and August 2007.
In
July
2006, we sold excess acreage at a property we own to an unrelated party and
recognized a $185,000 gain on the sale and in February 2006, we sold an option
to buy an interest in certain property adjacent to one of our properties and
recognized a $227,000 gain on the sale.
Discontinued
Operations
Income
from discontinued operations decreased by $635,000, or 37.3%, and $47,000,
or
10%, to $1.1 million and $425,000, respectively, for the nine and three months
ended September 30, 2007. The nine and three months ended September 30, 2006
includes net operating income of $492,000 and $197,000, respectively, from
a
property we sold in October 2006 and the nine months ended September 30, 2006
also includes 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
settlements for another property (sold in a prior year) of $222,000 and $128,000
for the nine and three months ended September 30, 2007,
respectively.
Liquidity
and Capital Resources
At
September 30, 2007, we had cash and cash equivalents of approximately $35
million. On October 2, 2007, we paid a quarterly cash distribution of $.36
per
share and a special dividend of $.67 per share, totaling $10 million on our
common stock. 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
September 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 September 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 and/or excise 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).
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. On October 2, 2007, we paid a special dividend of approximately
$6.7 million ($.67 per common share), representing the portion of the 2006
capital gain not yet distributed.
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 September 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 September 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 September 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 (the “SEC”) in
July 2005. The Audit Committee of the Board of Directors conducted an
investigation of this matter and related matters and retained special counsel
to
assist the committee in 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.
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)
|
|
|
|
November
8,
2007 |
|
/s/
Patrick
J. Callan, Jr. |
Date |
Patrick
J. Callan, Jr.
President
|
|
(authorized
officer)
|
|
|
|
|
|
|
November
8,
2007 |
|
/s/
David W. Kalish |
Date |
David W. Kalish
Senior Vice President and
Chief
Financial Officer
|
|
(principal
financial officer) |