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, 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)
|
|
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, a non-accelerated filer, or a smaller reporting company.
See
the definitions 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
November 3, 2008, the registrant had 10,207,509 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,
2008
|
|
December 31,
2007
|
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Real
estate investments, at cost
|
|
|
|
|
|
|
|
Land
|
|
$
|
89,738
|
|
$
|
72,386
|
|
Buildings
and improvements
|
|
|
347,329
|
|
|
307,884
|
|
Less
accumulated depreciation
|
|
|
437,067
42,485
|
|
|
380,270
36,228
|
|
|
|
|
394,582
|
|
|
344,042
|
|
|
|
|
|
|
|
|
|
Investment
in unconsolidated joint ventures
|
|
|
5,848
|
|
|
6,570
|
|
Cash
and cash equivalents
|
|
|
6,449
|
|
|
25,737
|
|
Restricted
cash
|
|
|
7,812
|
|
|
7,742
|
|
Unbilled
rent receivable
|
|
|
10,637
|
|
|
9,893
|
|
Escrow,
deposits and other receivables
|
|
|
1,528
|
|
|
2,465
|
|
Investment
in BRT Realty Trust at market (related party)
|
|
|
258
|
|
|
459
|
|
Deferred
financing costs
|
|
|
2,756
|
|
|
3,119
|
|
Other
assets (including available-for-sale securities
|
|
|
|
|
|
|
|
at
market of $461 and $1,024)
|
|
|
1,043
|
|
|
1,672
|
|
Unamortized
intangible lease assets
|
|
|
8,879
|
|
|
4,935
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
439,792
|
|
$
|
406,634
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Mortgages
and loan payable
|
|
$
|
222,523
|
|
$
|
222,035
|
|
Line
of credit
|
|
|
34,000
|
|
|
-
|
|
Dividends
payable
|
|
|
3,661
|
|
|
3,638
|
|
Accrued
expenses and other liabilities
|
|
|
4,438
|
|
|
4,252
|
|
Unamortized
intangible lease liabilities
|
|
|
5,597
|
|
|
5,470
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
270,219
|
|
|
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;
|
|
|
|
|
|
|
|
9,957
and 9,906 shares issued and outstanding
|
|
|
9,957
|
|
|
9,906
|
|
Paid-in
capital
|
|
|
138,129
|
|
|
137,076
|
|
Accumulated
other comprehensive income – net
|
|
|
|
|
|
|
|
unrealized
gain on available-for-sale securities
|
|
|
83
|
|
|
344
|
|
Accumulated
undistributed net income
|
|
|
21,404
|
|
|
23,913
|
|
Total
stockholders’ equity
|
|
|
169,573
|
|
|
171,239
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
439,792
|
|
$
|
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
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
income
|
|
$
|
9,950
|
|
$
|
9,569
|
|
$
|
29,388
|
|
$
|
28,803
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,149
|
|
|
2,046
|
|
|
6,475
|
|
|
6,219
|
|
General
and administrative (including $547, $572, $1,641 and $1,718,
respectively, to related party)
|
|
|
1,695
|
|
|
1,583
|
|
|
4,893
|
|
|
4,867
|
|
Impairment
charge
|
|
|
-
|
|
|
-
|
|
|
752
|
|
|
-
|
|
Federal
excise tax
|
|
|
-
|
|
|
5
|
|
|
-
|
|
|
55
|
|
Real
estate expenses
|
|
|
42
|
|
|
56
|
|
|
163
|
|
|
185
|
|
Leasehold
rent
|
|
|
77
|
|
|
77
|
|
|
231
|
|
|
231
|
|
Total
operating expenses
|
|
|
3,963
|
|
|
3,767
|
|
|
12,514
|
|
|
11,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
5,987
|
|
|
5,802
|
|
|
16,874
|
|
|
17,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
in earnings of unconsolidated joint ventures
|
|
|
149
|
|
|
141
|
|
|
446
|
|
|
433
|
|
Gain
on dispositions of real estate of unconsolidated joint
ventures
|
|
|
-
|
|
|
-
|
|
|
297
|
|
|
583
|
|
Gain
on sale of excess unimproved land
|
|
|
-
|
|
|
-
|
|
|
1,830
|
|
|
-
|
|
Interest
and other income
|
|
|
157
|
|
|
432
|
|
|
487
|
|
|
1,477
|
|
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
(3,669
|
)
|
|
(3,752
|
)
|
|
(10,971
|
)
|
|
(11,220
|
)
|
Amortization
of deferred financing costs
|
|
|
(156
|
)
|
|
(159
|
)
|
|
(470
|
)
|
|
(479
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
|
2,468
|
|
|
2,464
|
|
|
8,493
|
|
|
8,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations
|
|
|
-
|
|
|
115
|
|
|
-
|
|
|
216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
2,468
|
|
$
|
2,579
|
|
$
|
8,493
|
|
$
|
8,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic and
diluted
|
|
|
10,169
|
|
|
10,078
|
|
|
10,180
|
|
|
10,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share – basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
.24
|
|
$
|
.25
|
|
$
|
.83
|
|
$
|
.80
|
|
Income
from discontinued operations
|
|
|
-
|
|
|
.01
|
|
|
-
|
|
|
.02
|
|
Net
income per common share
|
|
$
|
.24
|
|
$
|
.26
|
|
$
|
.83
|
|
$
|
.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
distributions per share of common stock
|
|
$
|
.36
|
|
$
|
1.03
|
|
$
|
1.08
|
|
$
|
1.75
|
|
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, 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
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(11,002
|
)
|
|
(11,002
|
)
|
Repurchase
of common stock
|
|
|
(93
|
)
|
|
(1,471
|
)
|
|
-
|
|
|
-
|
|
|
(1,564
|
)
|
Shares
issued through dividend reinvestment plan
|
|
|
121
|
|
|
1,877
|
|
|
-
|
|
|
-
|
|
|
1,998
|
|
Restricted
stock vesting
|
|
|
23
|
|
|
(23
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Compensation
expense – restricted stock
|
|
|
-
|
|
|
670
|
|
|
-
|
|
|
-
|
|
|
670
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,493
|
|
|
8,493
|
|
Other
comprehensive income-net unrealized loss on available-for-sale
securities
|
|
|
-
|
|
|
-
|
|
|
(261
|
)
|
|
-
|
|
|
(261
|
)
|
Comprehensive
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
September 30, 2008
|
|
$
|
9,957
|
|
$
|
138,129
|
|
$
|
83
|
|
$
|
21,404
|
|
$
|
169,573
|
|
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,
|
|
|
|
2008
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
8,493
|
|
$
|
8,256
|
|
Adjustments
to reconcile net income to net cash provided
|
|
|
|
|
|
|
|
by
operating activities:
|
|
|
|
|
|
|
|
Gain
on sale of excess unimproved land and other
|
|
|
(1,830
|
)
|
|
(122
|
)
|
Increase
in rental income from straight-lining of rent
|
|
|
(744
|
)
|
|
(1,617
|
)
|
Increase
in rental income from amortization of intangibles
|
|
|
|
|
|
|
|
relating
to leases
|
|
|
(182
|
)
|
|
(190
|
)
|
Impairment
charge
|
|
|
752
|
|
|
-
|
|
Amortization
of restricted stock expense
|
|
|
670
|
|
|
619
|
|
Equity
in earnings of unconsolidated joint ventures
|
|
|
(446
|
)
|
|
(433
|
)
|
Gain
on disposition of real estate related to unconsolidated
|
|
|
|
|
|
|
|
joint
ventures
|
|
|
(297
|
)
|
|
(583
|
)
|
Distributions
of earnings from unconsolidated joint ventures
|
|
|
414
|
|
|
977
|
|
Depreciation
and amortization
|
|
|
6,475
|
|
|
6,219
|
|
Amortization
of financing costs
|
|
|
470
|
|
|
479
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
Decrease
in escrow, deposits and other receivables
|
|
|
1,012
|
|
|
134
|
|
Decrease
(increase) in accrued expenses and other liabilities
|
|
|
63
|
|
|
(632
|
)
|
Net
cash provided by operating activities
|
|
|
14,850
|
|
|
13,107
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Purchase
of real estate and improvements
|
|
|
(59,657
|
)
|
|
(38
|
)
|
Net
proceeds from sale of excess unimproved land
|
|
|
2,977
|
|
|
4
|
|
Investment
in unconsolidated joint ventures
|
|
|
(379
|
)
|
|
-
|
|
Distributions
of return of capital from unconsolidated joint ventures
|
|
|
1,399
|
|
|
442
|
|
Net
proceeds from sale of available-for-sale securities
|
|
|
525
|
|
|
161
|
|
Purchase
of available-for-sale securities
|
|
|
-
|
|
|
(535
|
)
|
Net
cash (used in) provided by investing activities
|
|
|
(55,135
|
)
|
|
34
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds
from bank line of credit
|
|
|
34,000
|
|
|
-
|
|
Repayment
of mortgages payable
|
|
|
(5,793
|
)
|
|
(3,545
|
)
|
Proceeds
from mortgage financings
|
|
|
3,509
|
|
|
2,700
|
|
Payment
of financing costs
|
|
|
(105
|
)
|
|
(666
|
)
|
Increase
in restricted cash
|
|
|
(70
|
)
|
|
(278
|
)
|
Cash
distributions – common stock
|
|
|
(10,978
|
)
|
|
(10,819
|
)
|
Repurchase
of common stock
|
|
|
(1,564
|
)
|
|
(1,440
|
)
|
Issuance
of shares through dividend reinvestment plan
|
|
|
1,998
|
|
|
1,879
|
|
Net
cash provided by (used in) financing activities
|
|
|
20,997
|
|
|
(12,169
|
)
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(19,288
|
)
|
|
972
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
25,737
|
|
|
34,013
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
6,449
|
|
$
|
34,985
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid during the period for interest
|
|
$
|
10,992
|
|
$
|
11,080
|
|
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 – intangible lease assets
|
|
|
4,262
|
|
|
-
|
|
Purchase
accounting allocations – intangible lease liabilities
|
|
|
(451
|
)
|
|
-
|
|
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, 2008, OLP owns 77 properties
and holds a 50% tenancy in common interest in one property. OLP’s joint ventures
own five properties. The 83 properties are located in 29 states.
Note
2 -
Basis
of Preparation
The
accompanying interim unaudited consolidated financial statements as of September
30, 2008 and 2007 and for the nine and three months ended September 30, 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 nine and three months ended September
30, 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, primarily to reclassify a property that was
presented as held for sale at December 31, 2007 and as a real estate investment
at September 30, 2008 and to reclassify such property’s operations from
discontinued operations to continuing operations.
The
Company accounts for its property acquisitions in accordance with SFAS 141
and
142 and is currently in the process of analyzing the fair value of the in-place
leases of its 2008 acquisitions. Therefore, the purchase price allocations
are
preliminary and subject to change.
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
nine and three months ended September 30, 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.
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, 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 to purchase shares of common stock in the nine and three
months ended September 30, 2008 and 2007.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
4 -
Investment
in Unconsolidated Joint Ventures
On
March
25, 2008, one of the Company’s unconsolidated joint ventures sold its only
property, which was vacant, 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 a prior year).
On
March
14, 2007, another of the Company’s unconsolidated joint ventures sold its only
property, a 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 five unconsolidated joint ventures each own and operate one
property. At September 30, 2008 and December 31, 2007, the Company’s equity
investment in unconsolidated joint ventures totaled $5,848,000 and $6,570,000,
respectively, and in addition to the gain on sale of properties of $297,000
and
$583,000, respectively, contributed $446,000 and $433,000 in equity earnings
for
the nine months ended September 30, 2008 and 2007, respectively. For the three
months ended September 30, 2008 and 2007, they contributed $149,000 and $141,000
in equity earnings, respectively.
Note
5 -
Property
Acquisitions and Dispositions
On
September 26, 2008, the Company acquired eight retail properties leased to
Office Depot, Inc. in a sale-leaseback transaction. The properties are located
in seven states and are net leased for an initial term of ten years, with
options to extend. The aggregate annual rent is $3,907,000 subject to 10%
increases every five years. The total purchase price including closing costs
for
the portfolio was approximately $48,200,000, with approximately $14,200,000
paid
in cash and $34,000,000 borrowed under the Company’s line of credit.
In
September 2008, the Company acquired a retail property in Florida subject to
a
long term net lease with a single tenant. The purchase price including closing
costs was $6,200,000, which was paid in cash.
In
June
2008, the Company acquired approximately two acres of land improved with an
18,500 square foot building in Massachusetts, subject to a long term ground
net
lease with a single retail tenant. The purchase price was $2,100,000, which
was
paid in cash. In September 2008, a $1,400,000 first mortgage financing was
completed encumbering this property.
In
May
2008, the Company sold a five acre parcel of excess, unimproved land to an
unrelated third party for a sales price of $3,150,000 and realized a gain of
$1,830,000. This land, adjacent to a flex property owned by the Company, had
been acquired by the Company as part of the purchase of the flex property in
2000.
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 including closing costs for both properties was
$5,500,000, of which approximately $1,934,000 and $837,000 represented the
assumption of first mortgages encumbering each property (to two separate
financial institutions) and the balance was paid in cash.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
6 –
Impairment
Charge
At
June
30, 2008, management estimated the value of a retail property based on estimated
current market rates and in accordance with FASB No. 144, “Accounting
for the Impairment of Long-Lived Assets,”
recorded an impairment charge of $752,000 as a direct write-down of the
investment on the balance sheet and depreciation will be calculated using the
new basis. In connection with such charge, the Company reversed $178,000 of
unbilled “straight line” rent receivable during the three months ended June 30,
2008.
Note
7 –
Reclassification
of “Held for Sale” Property
At
June
30, 2008, a property which had been classified as “held for sale” since August
2007 was taken off the market and was reclassified as a real estate investment.
For the three months ended March 31, 2008 and nine and three months ended
September 30, 2007, the operations of the property were reclassified from
discontinued to continuing operations. In connection with management’s decision
not to sell the property, the Company recorded, during the three months ended
June 30, 2008, $157,000 of “catch-up” depreciation that would have been recorded
had the property been continuously classified as “held and used” for the period
of August 2007 through March 2008.
Note
8 -
Common
Stock Dividend Distribution
On
September 9, 2008, the Board of Directors declared a quarterly cash distribution
of $.36 per share totaling $3,661,000 on the Company's common stock, which
was
paid on October 2, 2008 to stockholders of record on September 23, 2008.
Note
9 -
Comprehensive
Income
Comprehensive
income for the nine and three months ended September 30, 2008 and 2007 are
as
follows (amounts in thousands):
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Net
income
|
|
$
|
2,468
|
|
$
|
2,579
|
|
$
|
8,493
|
|
$
|
8,256
|
|
Other
comprehensive income – Unrealized loss on available-for-sale
securities
|
|
|
(5
|
)
|
|
(284
|
)
|
|
(261
|
)
|
|
(498
|
)
|
Comprehensive
income
|
|
$
|
2,463
|
|
$
|
2,295
|
|
$
|
8,232
|
|
$
|
7,758
|
|
Accumulated
other comprehensive income, which is solely comprised of the net unrealized
gain
on available-for-sale securities was $83,000 and $344,000 at September 30,
2008
and December 31, 2007, respectively.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
10 –
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; 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
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
2008
|
|
2007
|
|
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
|
|
$
|
225,000
|
|
$
|
195,000
|
|
$
|
670,000
|
|
$
|
619,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested
shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested
beginning of period
|
|
|
236,275
|
|
|
186,400
|
|
|
186,300
|
|
|
140,175
|
|
Grants
|
|
|
-
|
|
|
-
|
|
|
50,550
|
|
|
51,225
|
|
Vested
during period
|
|
|
(22,650
|
)
|
|
-
|
|
|
(22,650
|
)
|
|
(5,000
|
)
|
Forfeitures
|
|
|
-
|
|
|
-
|
|
|
(575
|
)
|
|
-
|
|
Non-vested
end of period
|
|
|
213,625
|
|
|
186,400
|
|
|
213,625
|
|
|
186,400
|
|
Through
September 30, 2008, a total of 243,075 shares were issued and 31,925 shares
remain available for grant pursuant to the Incentive Plan, and approximately
$2,394,000 remains as deferred compensation and will be charged to expense
over
the remaining respective vesting periods. The weighted average vesting period
is
approximately 2.7 years.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
11 –
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 has
an unused facility fee of ¼%. In April 2007 the Company paid approximately
$640,000 in fees and closing costs, which are being amortized over the term
of
the Facility. At September 30, 2008, there was $34,000,000 outstanding under
the
Facility.
Note
12 -
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 financial 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 ($461,000 at September 30, 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 elected
not
to report selected financial assets and liabilities at fair value.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
12 -
New
Accounting Pronouncements (continued)
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 No. 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 No. 141 (R) is effective for fiscal years
beginning after December 15, 2008 and early adoption is not permitted. The
impact of the adoption of SFAS No. 141 (R) on the Company’s consolidated
financial statements will be the requirement that the Company expense most
of
its transaction costs relating to its acquisition activities.
In
December 2007, the FASB issued Statement No. 160, “Non-controlling
Interests in Consolidated Financial Statements an amendment of ARB No
51”
(“SFAS
No. 160”). SFAS No. 160 requires non-controlling interests in consolidated
subsidiaries to be displayed in the statement of financial position as a
separate component of equity. Earnings and losses attributable to
non-controlling interests are no longer reported as part of consolidated
earnings, rather they are disclosed on the face of the income statement. This
statement is effective in fiscal years beginning after December 15, 2008.
Adoption is prospective and early adoption is not permitted. Based upon the
current 100% ownership of the Company’s consolidated subsidiaries, SFAS No. 160
will have no impact on the Company’s consolidated financial
statements.
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 September 30,
2008, we own 77 properties, hold a 50% tenancy in common interest in one
property and participate in five joint ventures which own a total of five
properties. These 83 properties are located in 29 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.
During
2008, we acquired 12 single tenant retail properties for an aggregate purchase
price of approximately $62 million. To finance these purchases, we utilized
$34
million from our credit facility and $4.2 million of mortgage debt and the
remaining balance of the purchase prices was funded with our available cash.
Beginning in 2007 and continuing to date, there has been a well publicized
and
dramatic contraction of the U.S. credit and capital markets, whereby banks
and
other lending institutions have tightened their lending standards and have
severely restricted credit. We have typically replaced our outstanding credit
facility debt with a mortgage loan secured by our recently acquired property.
To
the extent that third party financing is not available to replace funds borrowed
under our credit facility, or not available on terms acceptable to us, this
could limit or curtail our ability to acquire additional properties.
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, 2008, excluding mortgages payable of our unconsolidated joint
ventures, we had 39 outstanding mortgages payable covering 60 properties,
aggregating approximately $216.1 million in principal amount, all of which
are
secured by first liens on individual real properties. At September 30, 2008,
our
outstanding mortgages payable were secured by real properties with 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 2009 and 2037. During the period October 1, 2008 through December
31, 2009, $4.6 million of our mortgage debt will mature. In addition, at
September 30, 2008, we had one outstanding loan payable with a balance of $6.4
million, which was collateralized by cash held in escrow and shown on the
balance sheet as restricted cash. The loan was repaid in full on
October 31, 2008 with the cash held in escrow. The remaining escrow funds of
approximately $1.4 million are no longer restricted.
We
recognize the stress being placed on the value of real estate and our tenants
as
a result of the tightening of available credit and the weakening of the U.S.
economy. Although we have not recently experienced any material defaults by
tenants under our leases, we have been affected by the current economic crisis.
A significant number of our tenants are in the retail sales business and are
experiencing downturns in their businesses as a result of lower levels of
consumer spending and could experience declining availability of credit if
the
economic environment continues to deteriorate. At least one of our retail
tenants, Circuit City, which leases six properties from us, has announced that
it has a deteriorating liquidity position and will be closing stores. Two of
the
stores to be closed are properties owned by us. Defaults by this tenant or
any
of our other tenants could result in a reduction in rental revenue, an increase
in property operating costs and expenses and a reduction in the value of our
assets. Although we closely monitor each property in our portfolio, we cannot
predict how the continuing economic crisis will affect any of our tenants or
our
results of operations.
Results
of Operations
Comparison
of Nine Months and Three Months Ended September 30, 2008 and
2007
Revenues
Rental
income increased by $585,000, or 2%, to $29.4 million for the nine months ended
September 30, 2008 from $28.8 million for the nine months ended September 30,
2007. For the three months ended September 30, 2008, rental income increased
by
$381,000, or 4%, to $10 million from $9.6 million for the three months ended
September 30, 2007. The increase in rental income is primarily due to rental
revenues of $428,000 and $235,000 earned on twelve properties acquired by us
in
the current nine and three month periods. The increase in rental income also
resulted from rent increases based on the consumer price index and from the
exercise of lease renewal options at several of our properties which extended
the terms of such leases at a higher rent. These increases in rental income
were
offset in part in the nine months ended September 30, 2008 by a $178,000 write
off of the entire balance of the unbilled rent receivable of a property where
the tenant has vacated the premises.
Operating
Expenses
Depreciation
and amortization expense increased by $256,000, or 4.1%, and $103,000, or 5%,
to
$6.5 million and $2.1 million for the nine and three months ended September
30,
2008, respectively. The increase in depreciation and amortization expense was
primarily due to “catch-up” depreciation of $157,000 recorded during the three
months ended June 30, 2008 on the property which had been classified as “held
for sale” from August 2007 through March 2008. Normal depreciation on such
property was effective April 1, 2008. In addition, the increase was due to
depreciation taken on properties acquired in the current nine month
period.
General
and administrative expenses increased by $26,000, or .5%, and $112,000, or
7.1%,
to $4.9 million and $1.7 million for the nine and three months ended September
30, 2008, respectively, substantially due to increases of $126,000 and $45,000,
respectively, in professional fees incurred in connection with civil
litigations, in which we are the plaintiff, arising out of the activities of
our
former president and chief executive officer. The increase in general and
administrative expenses for the nine and three months ended September 30, 2008
also includes increases of $100,000 and $38,000, respectively, in payroll and
payroll related expenses for full time personnel, primarily resulting from
annual salary increases, increases of $51,000 and $29,000 in compensation
expense related to our restricted stock program and increases of $35,000 and
$68,000 in various other categories including public company expenses, travel
and insurance. These increases were offset by decreases of (i) $100,000 in
the
2008 annual amount, resulting in decreases of $75,000 and $25,000, respectively,
for the nine and three months ended September 30, 2008, paid under the
Compensation and Services Agreement, (ii) $83,000 and $27,000, respectively,
of
accounting and legal fees for the nine and three months ended September 30,
2008, (iii) $19,000 and $4,000, respectively, of director fees for the nine
and
three months ended September 30, 2008, (iv) $26,000 and $12,000, respectively,
of state tax expense for the nine and three months ended September 30, 2008
and
(v) $83,000 paid in the nine months ended September 30, 2007 to an independent
compensation consultant retained by the Compensation Committee of our Board
of
Directors.
At
June
30, 2008, we determined that the estimated fair value of a retail property
was
lower than its carrying value and we recorded a $752,000 impairment charge.
There were no impairment charges recorded in the nine and three months ended
September 30, 2007.
Real
estate expenses decreased by $22,000, or 11.9% and $14,000, or 25%, for the
nine
and three months ended September 30, 2008, respectively, resulting primarily
from a reimbursement from a tenant of real estate taxes that we had expensed
at
December 31, 2007 due to that tenant’s bankruptcy filing.
Other
Income and Expenses
We
recognized a gain of $297,000 on the sale by a joint venture of a vacant
property in the nine months ended September 30, 2008. We recognized a
gain of $583,000 on the sale by a different joint venture of a vacant
property in the nine months ended September 30, 2007.
During
the nine months ended September 30, 2008, we sold five acres of excess land
that
we acquired as part of the purchase of a flex building in 2000 and recognized
a
gain of $1.8 million.
Interest
and other income decreased by $990,000, or 67%, and $275,000, or 63.7%, to
$487,000 and $157,000 for the nine and three months ended September 30, 2008,
respectively. Due to the current credit crisis, interest rates have been
steadily declining over the past several quarters. This decline in
interest rates resulted in a decrease in the income we earn on our
investment in short-term cash equivalents, causing a decrease in interest
and other income for the nine and three months ended September 30, 2008. 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 of a $118,000 gain
on
sale of available-for-sale securities in the nine months ended September 30,
2007. There was no such sale of securities in 2008.
Interest
expense decreased by $249,000, or 2.2%, and $83,000, or 2.2%, to $11 million
and
$3.7 million for the nine and three months ended September 30, 2008,
respectively. The decrease results from the payoff in full of two mortgage
loans, one of which matured in December 2007 (repaid November 2007) and the
other which matured in July 2008 (repaid April 2008), as well as from the
monthly principal amortization of other mortgages. These decreases were 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 was $216,000 and $115,000 for the nine and three
months ended September
30,
2007,
respectively, and resulted from the receipt of settlements for a property that
was sold in a prior year. There were no discontinued operations in the current
year after the reclassification of a property from held for sale during the
nine
months ended September 30, 2008.
Liquidity
and Capital Resources
Our
business is affected by the current economic crisis in two primary ways.
First, a significant number of our tenants are in the retail sales business
and are experiencing downturns in their businesses as a result of lower
levels of consumer spending and could experience declining availability of
credit. As a result, they may default under our leases. In
particular, Circuit City leases six properties from us for an aggregate annual
2008 rent of $1,559,000 (4% of our annualized 2008 total revenues). On November
3, 2008, Circuit City announced that it will be closing 155 stores, including
two that are rented from us, having a 2008 rent of approximately $543,000.
Circuit City announced further that its working capital and liquidity is
“strained severely.” As a result of any defaults by Circuit City, or any other
of our tenants, we could have lower rental revenue and increased property
operating costs and expenses, less available cash and may be required to
take additional write-downs on the value of our properties. Second,
beginning
in 2007 and continuing to date, there has been a well publicized and dramatic
contraction of the U.S. credit and capital markets, whereby banks and other
lending institutions have tightened their lending standards and have severely
restricted credit. In the past, when
we
have drawn down our credit facility to finance acquisitions, we have typically
replaced the outstanding credit facility debt with a mortgage loan secured
by
the recently acquired property. To the extent that third party financing is
not
available to replace funds borrowed under our credit facility, or not available
on terms acceptable to us, our ability to acquire additional properties could
be
limited or curtailed.
At
September 30, 2008, we had cash and cash equivalents of approximately $6.4
million. On October 2, 2008, $3.7 million was used to pay our quarterly
distribution of $.36 per share. 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. At
September 30, 2008, there was $34 million outstanding under the Facility.
On
November 6, 2008, we announced that our Board of Directors authorized a twelve
month stock buy-back program, which allows for the repurchase of up to 500,000
shares of our common stock. Share repurchases may be made from time to time
in
the open market, depending upon market conditions. The repurchase program does
not obligate us to acquire any specific number of shares and may be discontinued
at any time.
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, distributions to stockholders
and repurchases of outstanding stock.
We
had no
outstanding contingent commitments, such as guarantees of indebtedness, or
any
other contractual cash obligations, other than mortgage and loan payable debt
and the amount outstanding under our line of credit, at September 30, 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).
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. Although we had a low average
balance outstanding on the credit line for the nine and three months ended
September 30, 2008, we currently have $34 million outstanding on the credit
line; therefore the effect of changes in interest rates could impact the amount
of interest expense incurred.
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, 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 nine and
three months ended September 30, 2008 that materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART
II –
OTHER INFORMATION
Item
1.
Legal
Proceedings
As
previously reported, Jeffrey Fishman, our former president and chief executive
officer and a member of our Board of Directors, resigned in July 2005 following
the discovery of inappropriate financial dealings by him with a former tenant
of
a property owned by a joint venture in which we were a 50% venture partner
and
managing member.
On
August
27, 2008, the Securities and Exchange Commission (the “SEC”) filed a civil
complaint against Mr. Fishman in the United States District Court in which
it
alleges, among other things, that between August 2002 and August 2003, Mr.
Fishman extracted almost $1 million in the aggregate of undisclosed “kick backs”
from a commercial partner and a commercial tenant and he never disclosed to
us,
our Audit Committee or our auditors his receipt of these payments or their
relation to our business transactions. The SEC complaint against Mr. Fishman
also alleges that Mr. Fishman participated in a second set of frauds, which
did
not involve us but in which four of our officers, along with other investors
made an investment in a private company Mr. Fishman created purportedly to
invest in foreign currency options. With respect to the currency trading fund,
the SEC complaint alleges, among other things, that Mr. Fishman made illegal
withdrawals from the account of this fund and that all investor funds were
dissipated as a result of Mr. Fishman’s misappropriations and through trading
losses.
At
the
time the SEC filed its complaint against Mr. Fishman, it had reached a
settlement with him. Without admitting or denying the allegations in the
complaint, Mr. Fishman, among other things, consented to the entry of a final
judgment in Federal District Court that would enjoin him from violating or
aiding and abetting future violations of various provisions of the securities
laws, permanently barring him from serving as an officer or director of a public
company, ordering him to pay restitution to investors in the currency trading
fund, including our four officers, and ordering him to pay a civil
penalty.
In
addition, Mr. Fishman pled guilty to one count of a conspiracy to commit mail
fraud relating to one of the “kick back” payments made to him. Mr. Fishman has
not yet been sentenced.
In
August
2005, we filed a complaint against Mr. Fishman and others in the Supreme Court
of the State of New York, County of Nassau, alleging commercial bribery, fraud,
breach of fiduciary duty, tortious interference, intentional tort, unjust
enrichment and violation of the New York Enterprise Corruption Act. Thereafter,
we filed suit against an insurer under a commercial crime insurance policy.
These actions are pending.
Item
6.
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Exhibits
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Exhibit
10.1
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Form
of Office Depot, Inc. lease, dated as of September 26,
2008.
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Exhibit
31.1
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Certification
of President and Chief Executive Officer pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002. (Filed with this Form
10-Q.)
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Exhibit
31.2
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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.)
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Exhibit
32.1
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Certification
of President and Chief Executive Officer pursuant to Section 906
of the
Sarbanes-Oxley Act of 2002. (Filed with this Form
10-Q.)
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Exhibit
32.2
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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.)
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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.
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(Registrant)
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November 7, 2008
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/s/
Patrick J. Callan, Jr.
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Date
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Patrick
J. Callan, Jr.
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President
and Chief Executive Officer
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(principal
executive officer)
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November 7, 2008
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/s/
David W. Kalish
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Date
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David
W. Kalish
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Senior
Vice President and
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Chief
Financial Officer
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(principal
financial officer)
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