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 March 31, 2008
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
Noo
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
definition of “large accelerated filer,” “accelerated filer” and “small
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o (Do
not
check if a smaller reporting company) Smaller
reporting company 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 May
2, 2008, the registrant had 10,225,479 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)
|
|
March 31,
2008
|
|
December 31, 2007
|
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Real estate
investments, at cost |
|
|
|
|
|
|
|
|
|
$
|
71,135
|
|
$
|
70,032
|
|
Buildings
and improvements
|
|
|
303,353
|
|
|
298,470
|
|
|
|
|
374,488 |
|
|
368,502 |
|
Less
accumulated depreciation
|
|
|
36,491
|
|
|
34,512
|
|
|
|
|
337,997
|
|
|
333,990
|
|
|
|
|
|
|
|
|
|
Investment
in unconsolidated joint ventures
|
|
|
5,565
|
|
|
6,570
|
|
Cash
and cash equivalents
|
|
|
24,870
|
|
|
25,737
|
|
Restricted
cash
|
|
|
7,780
|
|
|
7,742
|
|
Unbilled
rent receivable
|
|
|
10,223
|
|
|
9,893
|
|
Property
held for sale
|
|
|
10,052
|
|
|
10,052
|
|
Escrow,
deposits and other receivables
|
|
|
2,001
|
|
|
2,465
|
|
Investment
in BRT Realty Trust at market (related party)
|
|
|
421
|
|
|
459
|
|
Deferred
financing costs
|
|
|
3,022
|
|
|
3,119
|
|
Other
assets (including available-for-sale securities at
market of $451 and $1,024)
|
|
|
1,067
|
|
|
1,672
|
|
Unamortized
intangible lease assets
|
|
|
4,924
|
|
|
4,935
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
407,922
|
|
$
|
406,634
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Mortgages
and loan payable
|
|
$
|
223,541
|
|
$
|
222,035
|
|
Dividends
payable
|
|
|
3,667
|
|
|
3,638
|
|
Accrued
expenses and other liabilities
|
|
|
3,654
|
|
|
4,252
|
|
Unamortized
intangible lease liabilities
|
|
|
5,819
|
|
|
5,470
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
236,681
|
|
|
235,395
|
|
|
|
|
|
|
|
|
|
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; 9,949
and 9,906 shares issued and outstanding
|
|
|
9,949
|
|
|
9,906
|
|
Paid-in
capital
|
|
|
138,022
|
|
|
137,076
|
|
Accumulated
other comprehensive income – net unrealized
gain on available-for-sale securities
|
|
|
247
|
|
|
344
|
|
Accumulated
undistributed net income
|
|
|
23,023
|
|
|
23,913
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
171,241
|
|
|
171,239
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
407,922
|
|
$
|
406,634
|
|
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
March 31,
|
|
|
|
2008
|
|
2007
|
|
Revenues:
|
|
|
|
|
|
|
|
Rental
income
|
|
$
|
9,398
|
|
$
|
9,263
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,051
|
|
|
2,029
|
|
General
and administrative (including $547 and $574, respectively,
to related party)
|
|
|
1,596
|
|
|
1,696
|
|
Federal
excise tax
|
|
|
11
|
|
|
36
|
|
Real
estate expenses
|
|
|
55
|
|
|
71
|
|
Leasehold
rent
|
|
|
77
|
|
|
77
|
|
Total
operating expenses
|
|
|
3,790
|
|
|
3,909
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
5,608
|
|
|
5,354
|
|
|
|
|
|
|
|
|
|
Other
income and expenses:
|
|
|
|
|
|
|
|
Equity
in earnings of unconsolidated joint ventures
|
|
|
145
|
|
|
144
|
|
Gain
on dispositions of real estate of unconsolidated joint
ventures
|
|
|
297
|
|
|
583
|
|
Interest
and other income
|
|
|
209
|
|
|
584
|
|
Interest:
|
|
|
|
|
|
|
|
Expense
|
|
|
(3,670
|
)
|
|
(3,735
|
)
|
Amortization
of deferred financing costs
|
|
|
(158
|
)
|
|
(161
|
)
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
|
2,431
|
|
|
2,769
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations
|
|
|
348
|
|
|
377
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
2,779
|
|
$
|
3,146
|
|
|
|
|
|
|
|
|
|
Weighted
average number common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
|
10,152
|
|
|
10,001
|
|
Diluted
|
|
|
10,152
|
|
|
10,001
|
|
|
|
|
|
|
|
|
|
Net
income per common share – basic and diluted:
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
.24
|
|
$
|
.27
|
|
Income
from discontinued operations
|
|
|
.03
|
|
|
.04
|
|
Net
income per common share
|
|
$
|
.27
|
|
$
|
.31
|
|
|
|
|
|
|
|
|
|
Cash
distributions per share of common stock
|
|
|
.36
|
|
|
.36
|
|
See
accompanying notes to consolidated financial statements.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
For
the
three month period ended March 31, 2008 (Unaudited)
and
the
year ended December 31, 2007
(Amounts
in Thousands)
|
|
Common
Stock
|
|
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Income
|
|
Accumulated
Undistributed
Net Income
|
|
Total
|
|
Balances, January 1, 2007
|
|
$
|
9,823
|
|
$
|
134,826
|
|
$
|
935
|
|
$
|
34,541
|
|
$
|
180,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
– common
stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(21,218
|
)
|
|
(21,218
|
)
|
Repurchase
of common stock
|
|
|
(159
|
)
|
|
(3,053
|
)
|
|
-
|
|
|
-
|
|
|
(3,212
|
)
|
Shares
issued through dividend
reinvestment plan
|
|
|
237
|
|
|
4,482
|
|
|
-
|
|
|
-
|
|
|
4,719
|
|
Restricted
stock vesting
|
|
|
5
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
-
|
|
Compensation
expense – restricted
stock
|
|
|
-
|
|
|
826
|
|
|
-
|
|
|
-
|
|
|
826
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
10,590
|
|
|
10,590
|
|
Other
comprehensive income – net
unrealized loss on available-for-sale
securities
|
|
|
-
|
|
|
-
|
|
|
(591
|
)
|
|
-
|
|
|
(591
|
)
|
Comprehensive
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
9,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2007
|
|
|
9,906
|
|
|
137,076
|
|
|
344
|
|
|
23,913
|
|
|
171,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
– common
stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,669
|
)
|
|
(3,669
|
)
|
Shares
issued through dividend
reinvestment plan
|
|
|
43
|
|
|
740
|
|
|
-
|
|
|
-
|
|
|
783
|
|
Compensation
expense – restricted
stock
|
|
|
-
|
|
|
206
|
|
|
-
|
|
|
-
|
|
|
206
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,779
|
|
|
2,779
|
|
Other
comprehensive income-net
unrealized loss on available-for-sale
securities
|
|
|
-
|
|
|
-
|
|
|
(
97
|
)
|
|
-
|
|
|
(
97
|
)
|
Comprehensive
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
March 31, 2008
|
|
$
|
9,949
|
|
$
|
138,022
|
|
$
|
247
|
|
$
|
23,023
|
|
$
|
171,241
|
|
See
accompanying notes to consolidated financial statements.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Amounts
in Thousands)
(Unaudited)
|
|
Three Months Ended
March 31,
|
|
|
|
2008
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
2,779
|
|
$
|
3,146
|
|
Adjustments
to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Gain
on sale
|
|
|
-
|
|
|
(117
|
)
|
Increase
in rental income from straight-lining of rent
|
|
|
(330
|
)
|
|
(620
|
)
|
Increase
in rental income from amortization of intangibles relating
to leases
|
|
|
(57
|
)
|
|
(63
|
)
|
Amortization
of restricted stock expense
|
|
|
206
|
|
|
159
|
|
Equity
in earnings of unconsolidated joint ventures
|
|
|
(145
|
)
|
|
(144
|
)
|
Gain
on dispositions of real estate related to unconsolidated joint
ventures
|
|
|
(297
|
)
|
|
(583
|
)
|
Distributions
of earnings from unconsolidated joint ventures
|
|
|
145
|
|
|
124
|
|
Depreciation
and amortization
|
|
|
2,051
|
|
|
2,087
|
|
Amortization
of financing costs
|
|
|
158
|
|
|
161
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
Decrease
in escrow, deposits and other receivables
|
|
|
504
|
|
|
31
|
|
Decrease
in accrued expenses and other liabilities
|
|
|
(648
|
)
|
|
(149
|
)
|
Net
cash provided by operating activities
|
|
|
4,366
|
|
|
4,032
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Purchase
of real estate and improvements
|
|
|
(2,821
|
)
|
|
(30
|
)
|
Investment
in unconsolidated joint ventures
|
|
|
(39
|
)
|
|
-
|
|
Distributions
of return of capital from unconsolidated joint ventures
|
|
|
1,327
|
|
|
87
|
|
Net
proceeds from sale of available-for-sale securities
|
|
|
519
|
|
|
158
|
|
Purchase
of available-for-sale securities
|
|
|
-
|
|
|
(506
|
)
|
Net
cash used in investing activities
|
|
|
(1,014
|
)
|
|
(291
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Repayment
of mortgages payable
|
|
|
(1,265
|
)
|
|
(1,170
|
)
|
Payment
of financing costs
|
|
|
(59
|
)
|
|
(685
|
)
|
Increase
in restricted cash
|
|
|
(38
|
)
|
|
(91
|
)
|
Cash
distributions – common stock
|
|
|
(3,640
|
)
|
|
(3,587
|
)
|
Issuance
of shares through dividend reinvestment plan
|
|
|
783
|
|
|
471
|
|
Net
cash used in financing activities
|
|
|
(4,219
|
)
|
|
(5,062
|
)
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(867
|
)
|
|
(1,321
|
)
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
25,737
|
|
|
34,013
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
24,870
|
|
$
|
32,692
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid during the period for interest
|
|
$
|
3,673
|
|
$
|
3,565
|
|
Supplemental
schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
Assumption
of mortgages payable in connection with purchase of real
estate
|
|
$
|
2,771
|
|
$
|
-
|
|
Purchase
accounting allocations
|
|
|
(386
|
)
|
|
-
|
|
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 March 31, 2008, OLP owns 67 properties,
one of which is held for sale, and holds a 50% tenancy in common interest in
one
property. OLP’s joint ventures own four properties. The 72 properties are
located in 28 states.
Note
2 -
Basis
of Preparation
The
accompanying interim unaudited consolidated financial statements as of March
31,
2008 and 2007 and for the three months ended March 31, 2008 and 2007 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 three months ended March 31, 2008 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, 2007.
Note
3 -
Earnings
Per Common Share
For
the
three months ended March 31, 2008 and 2007, 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 three months ended March 31, 2008 and
2007, 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 using the treasury stock method. There were no outstanding options
in the three months ended March 31, 2008 and 2007.
Note
4 -
Investment
in Unconsolidated Joint Ventures
On
March
25, 2008, one of the Company’s unconsolidated joint ventures sold its vacant
property for a consideration of $1,302,000, net of closing costs. The sale
resulted in a gain to the Company of $297,000 (after giving effect to the
Company’s $480,000 share of a direct write down taken by the joint venture in
2006).
On
March
14, 2007, another one of the Company’s unconsolidated joint ventures sold its
vacant parcel of land for a consideration of $1,250,000 to a former tenant
of
the joint venture. The sale resulted in a gain to the Company of $583,000 (after
giving effect to the Company’s $1,581,000 share of direct write downs taken by
the joint venture in prior years).
The
Company’s remaining four unconsolidated joint ventures each own and operate one
property. At March 31, 2008 and December 31, 2007, the Company’s equity
investment in unconsolidated joint ventures totaled $5,565,000 and $6,570,000,
respectively and in addition to the gain on sale of properties of $297,000
and
$583,000, respectively, they contributed $145,000 and $144,000 in equity
earnings for the three months ended March 31, 2008 and 2007,
respectively.
Note
5 -
Discontinued
Operations
The
following is a summary of income from discontinued operations, for the three
months ended March 31, 2008 and 2007 applicable to a property held for sale
at
March 31, 2008, as well as to a settlement relating to a property sold in a
prior year (amounts in thousands):
|
|
Three
Months Ended
March
31,
|
|
|
|
2008
|
|
2007
|
|
Rental
income
|
|
$
|
353
|
|
$
|
331
|
|
Other
income - settlement
|
|
|
-
|
|
|
115
|
|
Total
revenues
|
|
|
353
|
|
|
446
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
-
|
|
|
59
|
|
Real
estate expenses
|
|
|
5
|
|
|
10
|
|
Total
expenses
|
|
|
5
|
|
|
69
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations
|
|
$
|
348
|
|
$
|
377
|
|
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
6 –
Property
Acquisitions
In
January
and February 2008, the Company acquired two retail properties in Massachusetts
subject to long term net leases, each leased by a single tenant. The aggregate
purchase price for both properties was $5,500,000, of which approximately
$1,934,000 and $837,000 represented the assumption of existing first mortgages
encumbering each property (to two separate financial institutions) and the
balance was paid in cash.
Note
7 -
Common
Stock Dividend Distribution
On
March
11, 2008, the Board of Directors declared a quarterly cash distribution of
$.36
per share totaling $3,667,000, on the Company's common stock, which was paid
on
April 2, 2008 to stockholders of record on March 24, 2008.
Note
8 -
Comprehensive
Income
Comprehensive
income for the three months ended March 31, 2008 and 2007 are as follows
(amounts in thousands):
|
|
Three
Months Ended
March
31,
|
|
|
|
2008
|
|
2007
|
|
Net
income
|
|
$
|
2,779
|
|
$
|
3,146
|
|
Other
comprehensive income – Unrealized loss on
available-for-sale securities
|
|
|
(97
|
)
|
|
(72
|
)
|
Comprehensive
income
|
|
$
|
2,682
|
|
$
|
3,074
|
|
Accumulated
other comprehensive income, which is solely comprised of the net unrealized
gain
on available-for-sale securities was $247,000 and $344,000 at March 31, 2008
and
December 31, 2007, respectively.
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.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
9 –
Restricted
Stock (continued)
The
Company’s 2003 Stock Incentive Plan (the “Incentive Plan”), approved by the
Company’s stockholders in June 2003, provides for the granting of restricted
shares. The maximum number of shares of the Company’s common stock that may
be issued pursuant to the Incentive Plan is 275,000.
The restricted stock grants are valued at the fair value as of the date of
the
grant and all restricted share awards made to date provide for vesting upon
the
fifth anniversary of the date of grant and under certain circumstances may
vest
earlier. For accounting purposes, the restricted stock is not included in the
outstanding shares shown on the balance sheet until they vest, however dividends
are paid on the unvested shares. The value of such grants is initially deferred,
and amortization of amounts deferred is being charged to operations over the
respective vesting periods.
|
|
Three Months Ended
March 31,
|
|
|
|
2008
|
|
2007
|
|
Restricted
share grants
|
|
|
50,550
|
|
|
51,225
|
|
Average
per share grant price
|
|
$
|
17.50
|
|
$
|
24.50
|
|
Recorded
as deferred compensation
|
|
$
|
885,000
|
|
$
|
1,255,000
|
|
|
|
|
|
|
|
|
|
Total
charge to operations, all outstanding restricted
grants
|
|
$
|
206,000
|
|
$
|
159,000
|
|
|
|
|
|
|
|
|
|
Non-vested
shares:
|
|
|
|
|
|
|
|
Non-vested
beginning of period
|
|
|
186,300
|
|
|
140,175
|
|
Grants
|
|
|
50,550
|
|
|
51,225
|
|
Vested
during period
|
|
|
-
|
|
|
-
|
|
Forfeitures
|
|
|
(500
|
)
|
|
-
|
|
Non-vested
end of period
|
|
|
236,350
|
|
|
191,400
|
|
Through
March 31, 2008, a total of 243,150 shares were issued and 31,850 shares remain
available for grant pursuant to the Incentive Plan, and approximately $2,857,000
remains as deferred compensation and will be charged to expense over the
remaining weighted average vesting period of approximately 2.93 years.
Note
10 –
Line
of Credit
The
Company has a $62,500,000 revolving credit facility (“Facility”) with VNB New
York Corp., Bank Leumi USA, Israel Discount Bank of New York and Manufacturers
and Traders Trust Company. The Facility matures on March 31, 2010 and provides
that the Company pays interest at the lower of LIBOR plus 2.15% or at the bank’s
prime rate on funds borrowed and an unused facility fee of ¼%. The Company paid
approximately $640,000 in fees and closing costs, in April 2007, which are
being
amortized over the term of the Facility. There is no balance outstanding under
the Facility at March 31, 2008.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
11 -
New
Accounting Pronouncements
In
September 2006, the FASB issued Statement No. 157, “Fair
Value Measurements” (“SFAS
No. 157”). SFAS No. 157 provides guidance for using fair value to measure
certain assets and liabilities. This statement clarifies the principle that
fair
value should be based on the assumptions that market participants would use
when
pricing the asset or liability. SFAS No.157 establishes a fair value hierarchy,
giving the highest priority to quoted prices in active markets and the lowest
priority to unobservable data. SFAS No. 157 applies whenever other standards
require assets or liabilities to be measured at fair value. The Company adopted
SFAS No. 157 on January 1, 2008.
The
Company’s financial assets and liabilities, other than fixed-rate mortgages and
loan payable, are generally short-term in nature, or bear interest at variable
current market rates, and consist of cash and cash equivalents, restricted
cash,
rents and other receivables, other assets, and accounts payable and accrued
expenses. The carrying amounts of these assets and liabilities are not measured
at fair value on a recurring basis but are considered to be recorded at amounts
that approximate fair value due to their short-term nature. The valuation of
the
Company’s available-for-sale securities ($451,000 at March 31, 2008), was
determined to be a Level 1 within the valuation hierarchy established by SFAS
No. 157, and are approximated on current market quotes received from financial
sources that trade such securities. Accordingly, the adoption of SFAS
No. 157, as it relates to fair value measurements of financial assets and
liabilities, has not had a material effect on the Company’s consolidated
financial statements.
In
February 2007, the FASB issued Statement No. 159, “The
Fair Value Option for Financial Assets and
Financial Liabilities” ("SFAS
No. 159"). SFAS
No.
159 provides companies with an option to report
selected financial assets and liabilities at fair value. The objective of SFAS
No. 159 is to reduce both complexity in accounting for financial instruments
and
the volatility in earnings caused by measuring related assets and liabilities
differently. The FASB believes that SFAS No. 159 helps to mitigate this type
of
accounting-induced volatility by enabling companies to report related assets
and
liabilities at fair value, which would likely reduce the need for companies
to
comply with detailed rules for hedge accounting. SFAS No. 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose different measurement attributes for similar
types
of assets and liabilities. The Company adopted SFAS No. 159 and has determined
that it has no effect on its consolidated financial statements.
In
December 2007, the FASB issued Statement No. 141 (R), “Business Combinations
- a replacement of FASB Statement No. 141”
(“SFAS
No. 141 (R)”), which applies to all transactions or events in which an entity
obtains control of one or more businesses. SFAS 141 (R) (i) establishes the
acquisition-date fair value as the measurement objective for all assets acquired
and liabilities assumed, (ii) requires expensing of most transaction costs,
and
(iii) requires the acquirer to disclose to investors and other users of the
information needed to evaluate and understand the nature and financial effect
of
the business combination. SFAS 141 (R) is effective for fiscal years beginning
after December 15, 2008 and early adoption is not permitted. The effect of
adopting SFAS 141 (R) on the Company’s consolidated financial statements will be
the expensing of most acquisition transaction costs.
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 March 31, 2008,
we
own 67 properties, one of which is held for sale, hold a 50% tenancy in common
interest in one property and participate in four joint ventures which own a
total of four properties. These 72 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 investigated, analyzed and bid on several properties in 2007, due to a
variety of factors, including increased competition and unfavorable prices,
we
did not acquire any properties in 2007. In January and February 2008, we
acquired two single tenant retail properties for an aggregate purchase price
of
approximately $5.5 million. We will continue to seek properties to acquire
and
at this time are negotiating on a number of acquisitions that we hope to
conclude in 2008.
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
March
31, 2008, excluding mortgages payable of our unconsolidated joint ventures,
we
had 38 outstanding mortgages payable, aggregating approximately $217.1 million
in principal amount, all of which are secured by first liens on individual
real
estate investments. The real properties securing our outstanding mortgages
payable have an aggregate carrying value of approximately $355 million before
accumulated depreciation. The mortgages bear interest at fixed rates ranging
from 5.13% to 8.8%, and mature between 2008 and 2037. In addition, we had one
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 Three Months Ended March 31, 2008 and 2007
Revenues
Rental
income increased by $135,000, or 1.5%, to $9.4 million for the three months
ended March 31, 2008 from $9.3 million for the three months ended March 31,
2007. The increase in rental income is primarily due to rental revenues earned
during the three months ended March 31, 2008 on two properties acquired by
us in
the current three month period. The increase in rental income also results
from
lease provisions which provide for increased rent based on the consumer price
index.
Operating
Expenses
Depreciation
and amortization expense increased by $22,000, or 1.1%, to $2.05 million for
the
three months ended March 31, 2008. The increase in depreciation and amortization
expense was primarily due to depreciation taken on the two properties acquired
in the current three month period.
General
and administrative expenses decreased by $100,000, or 5.9%, to $1.6 million
for
the three months ended March 31, 2008. The decrease was substantially due to
decreases in professional fees including $83,000 paid in the three months ended
March 31, 2007 to an independent compensation consultant retained by the
Compensation Committee of our Board of Directors and decreases of $53,000 in
legal and accounting fees. Additionally, the annual amount paid under the
Compensation and Services Agreement was reduced by $100,000 in 2008 (or $25,000
for the three months ended March 31, 2008). These decreases were offset in
part
in the three months ended March 31, 2008 by a $48,000 increase in compensation
expense related to our restricted stock program and a $32,000 increase in
payroll and payroll related expenses for full time personnel, primarily
resulting from annual salary increases.
Real
estate expenses decreased by $16,000, or 22.5%, for the three months ended
March
31, 2008, resulting primarily from repairs incurred at one property in
2007.
Other
Income and Expenses
Gain
on
dispositions of real estate of unconsolidated joint ventures for the three
months ended March 31, 2008 reflects the sale by one of our joint ventures
of a
vacant property for a consideration of $1.3 million, resulting in a gain to
us
of $297,000. The three months ended March 31, 2007 reflects the sale by another
of our joint ventures of a vacant parcel of land, for a consideration of $1.25
million, resulting in a gain to us of $583,000.
Interest
and other income decreased by $375,000, or 64.2%, to $209,000 for the three
months ended March 31, 2008. The decrease in interest and other income for
the
three months ended March 31, 2008 results substantially from the decrease in
interest rates available for our investment in short-term cash equivalents.
There was also less cash available for investment after we paid a special
distribution of $6.7 million to our stockholders in October 2007. Also
contributing to the decrease in interest and other income was the inclusion
in
interest and other income of a $117,000 gain on sale of available-for-sale
securities in the three months ended March 31, 2007, while there was no sale
of
securities in 2008.
Interest
expense decreased by $65,000, or 1.7%, to $3.67 million for the three months
ended March 31, 2008. The decrease results from the payoff in full of a mortgage
which matured in December 2007, offset in part by interest expense on a fixed
rate mortgage placed on a property in August 2007 and the assumption of two
fixed rate mortgages in connection with the purchase of two properties in
January and February 2008.
Discontinued
Operations
Income
from discontinued operations decreased by $29,000, or 7.7%, to $348,000, for
the
three months ended March 31, 2008. Although the three months ended March 31,
2008 includes an increase of $59,000 resulting from the cessation of
depreciation expense on a property deemed held for sale and an increase of
$22,000 of rental income for this property, these increases were
offset by our receipt of a settlement for another property (sold in a prior
year) in the three months ended March 31, 2007.
Net
Income
Net
income declined from $3.1 million during the three months ended March 31, 2007
to $2.8 million during the three months ended March 31, 2008, despite an
increase in operating income from $5.4 million during the three months ended
March 31, 2007 to $5.6 million during the three months ended March 31, 2008.
This divergence between operating income and net income results primarily from
the decline in “Gain on dispositions of real estate of unconsolidated joint
ventures” from $583,000 to $297,000 and the decline in “Interest and other
income” from $584,000 to $209,000, in each case from the three months ended
March 31, 2007 compared to the three months ended March 31, 2008.
Liquidity
and Capital Resources
At
March
31, 2008, we had cash and cash equivalents of approximately $24.9 million.
On
April 2, 2008, we paid a quarterly cash distribution of $.36 per share,
aggregating $3,667,000. 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 additional properties or to invest in
joint ventures. The facility matures on March 31, 2010. Borrowings under the
facility bear interest at the lower of LIBOR plus 2.15% or the bank's prime
rate, and there is an unused facility fee of 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 on our facility at March 31, 2008.
We
continue to seek additional property acquisitions. We will use our available
cash and cash equivalents, cash provided from operations, cash provided from
mortgage financings and property dispositions and funds available under our
credit facility to fund acquisitions.
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 March 31, 2008.
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.
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 March 31, 2008, 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 March 31, 2008 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 March 31, 2008 that materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.
PART
II –
OTHER INFORMATION
Item
6. Exhibits
Exhibit
31.1
|
Certification
of President 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 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 President 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 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)
|
|
|
|
|
|
|
|
|
May
9, 2008
|
/s/
Patrick J. Callan, Jr.
|
Date
|
Patrick
J. Callan, Jr.
|
|
President
and Chief Executive Officer
|
|
(authorized
officer)
|
|
|
|
|
|
|
May
9, 2008
|
/s/
David W. Kalish
|
Date
|
David
W. Kalish
|
|
Senior
Vice President and
|
|
Chief
Financial Officer
|
|
(principal
financial officer)
|