Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
Amendment
No. 1
ANNUAL
REPORT
PURSUANT
TO SECTIONS 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
Annual
Report Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of l934
For the
fiscal year ended December 31, 2008
Or
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)
|
Registrant's
telephone number, including area code: (516) 466-3100
Securities
registered pursuant to Section 12(b) of the Act:
|
|
Name
of exchange
|
Title
of each class
|
|
on
which registered
|
Common
Stock, par value $1.00 per share
|
|
New
York Stock Exchange
|
Securities
registered pursuant to Section 12(g) of the Act:
NONE
Indicate
by check mark if the registrant is a well-known seasoned issuer as defined in
Rule 405 of the Securities Act. Yes o No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act. Yes o No x
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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting
company. See definitions of “large accelerated filer,”
“accelerated filer,” and “small reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer o
|
Accelerated
filer x
|
|
|
Non-accelerated
filer o
|
Small
reporting company o
|
(Do
not check if a small reporting company)
|
|
Indicate
by check mark whether registrant is a shell company (defined in Rule 12b-2 of
the Exchange Act).
As of
June 30, 2008 (the last business day of the registrant’s most recently completed
second quarter), the aggregate market value of all common equity held by
non-affiliates of the registrant, computed by reference to the price at which
common equity was last sold on said date, was approximately $129.4
million.
As of
March 25, 2009, the registrant had 10,175,345 shares of common stock
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
EXPLANATORY
NOTE
As
announced in a Current Report on Form 8-K, filed on March 16, 2009, the board of
directors of One Liberty Properties, Inc. (“OLP,” “Company,” “we,” “us,” “our,”
and “registrant”), declared a quarterly dividend for the Company’s common stock
of $.22 per share payable in cash and/or shares of our common
stock. The dividend is payable on April 27, 2009, to stockholders of
record as of March 30, 2009. In connection therewith, the Company
filed a Registration Statement on Form S-3 on March 26, 2009 and will file a
Prospectus Supplement with respect to the dividend as soon after the
effectiveness of the S-3 as is practicable.
The
purpose of this Amendment No. 1 on Form 10–K/A is to amend Item 2 and Footnote 2
to our financial statements in Part IV, Item 15, and to include Part III, Items
10 through 14. Item 2 and Footnote 2 to our financial statements in
Part IV, Item 15 are being amended herein solely for the purpose of providing
information inadvertently omitted from such Items in our Annual Report on Form
10–K for the year ended December 31, 2008, as filed with the Securities and
Exchange Commission (the “SEC”) on March 13, 2009 (the “Annual
Report”). Other than Footnote 2, our financial statements in Part IV,
Item 15 presented herein are identical to those presented in our Annual
Report.
Part III,
Items 10 through 14 were previously omitted from our Annual Report in reliance
on General Instruction G to Form 10-K. General Instruction G provides
that registrants may incorporate by reference certain information from a
definitive proxy statement filed with the SEC within 120 days after the end of
the fiscal year, which involves the election of directors. While we
anticipate filing our proxy statement within such period, the information
provided herein is being made public in connection with delivery of the
prospectus constituting a part of our Registration Statement on Form S-3, when
declared effective, and the Prospectus Supplement (collectively, the
“Prospectus”) relating to the above referenced dividend prior to our filing our
definitive proxy statement. The reference on the cover of the Annual
Report to the incorporation by reference of the registrant’s definitive proxy
statement into Part III of the Annual Report is hereby deleted.
In
addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934,
as amended, new certifications by our principal executive officer and principal
financial officer are filed as exhibits to this Annual Report under Item 15 of
Part IV hereof.
For
purposes of this Annual Report on Form 10-K/A, and in accordance with Rule
12b-15, Item 2, Items 10 through 14 and the financial statements in Item 15 of
our Annual Report have been amended and restated in their
entirety. Except as stated herein, this Form 10−K/A does not reflect
events occurring after the filing of the Annual Report on March 13, 2009 and no
attempt has been made in this Annual Report on Form 10-K/A to modify or update
other disclosures as presented in the Annual Report. Accordingly,
this Form 10−K/A should be read in conjunction with our filings with the SEC
subsequent to the filing of the Annual Report.
This
Annual Report on Form 10-K/A, together with other statements and information
publicly disseminated by us, contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. We
intend such forward-looking statements to be covered by the safe harbor
provision for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995 and include this statement for purposes of
complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words “may,” “will,” “could,” “believe,” “expect,” “intend,” “anticipate,”
“estimate,” “project,” or similar expressions or variations
thereof. You should not rely on forward-looking statements since they
involve known and unknown risks, uncertainties and other factors which are, in
some cases, beyond our control and which could materially affect actual results,
performance or achievements.
PART
I
Item
2. Properties.
As of December 31, 2008, we owned 79
properties, three of which are vacant, three of which are leased to a tenant in
bankruptcy (which is liquidating its assets) and one of which is a 50% tenancy
in common interest, and participated in five joint ventures that own five
properties, one of which is vacant. For the year ended December 31,
2008, the average annual rental per square foot for our total portfolio of real
estate investments, including each property owned by our joint ventures was
$7.08. The properties owned by us and our joint ventures are suitable
and adequate for their current uses. The aggregate net book value of
our 79 properties was $387.5 million after taking into account impairment
charges of $6 million for the year ended December 31, 2008.
The
tables below set forth information as of December 31, 2008 concerning each
property which we own and in which we currently own an equity
interest. Except for one movie theater property, we and our joint
ventures own fee title to each property.
Location
|
|
|
Percentage
of
2009
Contractual
Rental Income
(1)
|
|
|
Baltimore,
MD
|
Industrial
|
|
|
5.6 |
% |
|
|
367,000 |
|
Parsippany,
NJ
|
Office
|
|
|
4.7 |
|
|
|
106,680 |
|
Hauppauge,
NY
|
Flex
|
|
|
4.3 |
|
|
|
149,870 |
|
El
Paso, TX
|
Retail
|
|
|
3.8 |
|
|
|
110,179 |
|
St.
Cloud, MN
|
Industrial
|
|
|
3.8 |
|
|
|
338,000 |
|
Hanover,
PA
|
Industrial
|
|
|
3.4 |
|
|
|
458,560 |
|
Plano,
TX
|
Retail
(2)
|
|
|
3.3 |
|
|
|
112,389 |
|
Los
Angeles, CA
|
Office
(3)
|
|
|
3.1 |
|
|
|
106,262 |
|
Greensboro,
NC
|
Theater
|
|
|
3.0 |
|
|
|
61,213 |
|
Brooklyn,
NY
|
Office
|
|
|
2.6 |
|
|
|
66,000 |
|
Knoxville,
TN
|
Retail
|
|
|
2.6 |
|
|
|
35,330 |
|
Columbus,
OH
|
Retail
(2)
|
|
|
2.5 |
|
|
|
96,924 |
|
Plano,
TX
|
Retail
(4)
|
|
|
2.3 |
|
|
|
51,018 |
|
Philadelphia,
PA
|
Industrial
|
|
|
2.2 |
|
|
|
166,000 |
|
East
Palo Alto, CA
|
Retail
(5)
|
|
|
2.1 |
|
|
|
30,978 |
|
Tucker,
GA
|
Health
& Fitness
|
|
|
2.1 |
|
|
|
58,800 |
|
Ronkonkoma,
NY
|
Flex
|
|
|
1.8 |
|
|
|
89,500 |
|
Lake
Charles, LA
|
Retail
(6)
|
|
|
1.6 |
|
|
|
54,229 |
|
Manhattan,
NY
|
Residential
|
|
|
1.6 |
|
|
|
125,000 |
|
Cedar
Park, TX
|
Retail
(2)
|
|
|
1.6 |
|
|
|
50,810 |
|
Grand
Rapids, MI
|
Health
& Fitness
|
|
|
1.4 |
|
|
|
130,000 |
|
Location
|
Type
of
Property
|
|
|
Percentage
of
2009
Contractual
Rental
Income (1)
|
|
|
Approximate
Building
Square
Feet
|
Ft.
Myers, FL
|
Retail
|
|
|
1.3 |
|
|
|
29,993 |
|
Chicago,
IL
|
Retail
(5)
|
|
|
1.3 |
|
|
|
23,939 |
|
Newark,
DE
|
Retail
(5)
|
|
|
1.3 |
|
|
|
23,547 |
|
Columbus,
OH
|
Industrial
|
|
|
1.2 |
|
|
|
100,220 |
|
Miami
Springs, FL
|
Retail
(5)
|
|
|
1.2 |
|
|
|
25,000 |
|
Kennesaw,
GA
|
Retail
(5)
|
|
|
1.2 |
|
|
|
32,052 |
|
Wichita,
KS
|
Retail
(2)
|
|
|
1.2 |
|
|
|
88,108 |
|
Atlanta,
GA
|
Retail
|
|
|
1.2 |
|
|
|
50,400 |
|
Naples,
FL
|
Retail
(5)
|
|
|
1.1 |
|
|
|
15,912 |
|
Athens,
GA
|
Retail
(7)
|
|
|
1.1 |
|
|
|
41,280 |
|
Saco,
ME
|
Industrial
|
|
|
1.1 |
|
|
|
91,400 |
|
Champaign,
IL
|
Retail
|
|
|
1.1 |
|
|
|
50,530 |
|
New
Hyde Park, NY
|
Industrial
|
|
|
1.1 |
|
|
|
38,000 |
|
Greenwood
Village, CO
|
Retail
|
|
|
1.1 |
|
|
|
45,000 |
|
Tyler,
TX
|
Retail
(2)
|
|
|
1.0 |
|
|
|
72,000 |
|
Melville,
NY
|
Industrial
|
|
|
1.0 |
|
|
|
51,351 |
|
Cary,
NC
|
Retail
(5)
|
|
|
1.0 |
|
|
|
33,490 |
|
Mesquite,
TX
|
Retail
(2)
|
|
|
1.0 |
|
|
|
22,900 |
|
Fayetteville,
GA
|
Retail
(2)
|
|
|
1.0 |
|
|
|
65,951 |
|
Onalaska,
WI
|
Retail
|
|
|
1.0 |
|
|
|
63,919 |
|
Richmond,
VA
|
Retail
(2)
|
|
|
.9 |
|
|
|
38,788 |
|
Amarillo,
TX
|
Retail
(2)
|
|
|
.9 |
|
|
|
72,227 |
|
Virginia
Beach, VA
|
Retail
(2)
|
|
|
.9 |
|
|
|
58,937 |
|
Eugene,
OR
|
Retail
(5)
|
|
|
.8 |
|
|
|
24,978 |
|
Selden,
NY
|
Retail
|
|
|
.8 |
|
|
|
14,550 |
|
Pensacola,
FL
|
Retail
(5)
|
|
|
.8 |
|
|
|
22,700 |
|
Lexington,
KY
|
Retail
(2)
|
|
|
.8 |
|
|
|
30,173 |
|
El
Paso, TX
|
Retail
(5)
|
|
|
.8 |
|
|
|
25,000 |
|
Location
|
Type
of
Property
|
|
|
Percentage
of
2009
Contractual
Rental
Income (1)
|
|
|
Approximate
Building
Square
Feet
|
Duluth,
GA
|
Retail
(2)
|
|
|
.8 |
|
|
|
50,260 |
|
Grand
Rapids, MI
|
Health
& Fitness
|
|
|
.8 |
|
|
|
72,000 |
|
Newport
News, VA
|
Retail
(2)
|
|
|
.7 |
|
|
|
49,865 |
|
Hyannis,
MA
|
Retail
|
|
|
.7 |
|
|
|
9,750 |
|
Batavia,
NY
|
Retail
(5)
|
|
|
.6 |
|
|
|
23,483 |
|
Gurnee,
IL
|
Retail
(2)
|
|
|
.6 |
|
|
|
22,768 |
|
Somerville,
MA
|
Retail
|
|
|
.6 |
|
|
|
12,054 |
|
Hauppauge,
NY
|
Retail
|
|
|
.6 |
|
|
|
7,000 |
|
Bluffton,
SC
|
Retail
(2)
|
|
|
.6 |
|
|
|
35,011 |
|
Houston,
TX
|
Retail
|
|
|
.5 |
|
|
|
12,000 |
|
Vicksburg,
MS
|
Retail
|
|
|
.4 |
|
|
|
2,790 |
|
Everett,
MA
|
Retail
|
|
|
.4 |
|
|
|
18,572 |
|
Killeen,
TX
|
Retail
|
|
|
.4 |
|
|
|
8,000 |
|
Flowood,
MS
|
Retail
|
|
|
.4 |
|
|
|
4,505 |
|
Marston
Mills, MA
|
Retail
|
|
|
.4 |
|
|
|
8,775 |
|
Bastrop,
LA
|
Retail
|
|
|
.4 |
|
|
|
2,607 |
|
Monroe,
LA
|
Retail
|
|
|
.4 |
|
|
|
2,756 |
|
D’Iberville,
MS
|
Retail
|
|
|
.4 |
|
|
|
2,650 |
|
Kentwood,
LA
|
Retail
|
|
|
.4 |
|
|
|
2,578 |
|
Monroe,
LA
|
Retail
|
|
|
.3 |
|
|
|
2,806 |
|
Vicksburg,
MS
|
Retail
|
|
|
.3 |
|
|
|
4,505 |
|
Rosenberg,
TX
|
Retail
|
|
|
.3 |
|
|
|
8,000 |
|
West
Palm Beach, FL
|
Industrial
|
|
|
.3 |
|
|
|
10,361 |
|
Seattle,
WA
|
Retail
|
|
|
.1 |
|
|
|
3,038 |
|
St.
Louis, MO
|
Retail
(8)
|
|
|
- |
|
|
|
30,772 |
|
Fairview
Heights, IL
|
Retail
(8)
|
|
|
- |
|
|
|
31,252 |
|
Florence,
KY
|
Retail
(8)
|
|
|
- |
|
|
|
31,252 |
|
Antioch,
TN
|
Retail
(8)
|
|
|
- |
|
|
|
34,059 |
|
Ferguson,
MO
|
Retail
(8)
|
|
|
- |
|
|
|
32,046 |
|
New
Hyde Park, NY
|
Industrial
(9)
|
|
|
- |
|
|
|
51,000 |
|
|
|
|
|
100 |
% |
|
|
4,603,602 |
|
Properties
Owned by Joint Ventures (10)
|
Percentage
|
|
|
|
|
|
|
of
Our Share
|
|
|
|
|
|
|
|
|
Approximate
|
|
Type
of
|
|
in
2009 to Our
|
|
Building
|
Location
|
|
|
|
|
|
Lincoln,
NE
|
Retail
|
|
|
43.3 |
% |
|
|
112,260 |
|
Milwaukee,
WI
|
Industrial
|
|
|
40.4 |
|
|
|
927,685 |
|
Miami,
FL
|
Industrial
|
|
|
11.1 |
|
|
|
396,000 |
|
Savannah,
GA
|
Retail
|
|
|
5.2 |
|
|
|
101,550 |
|
Savannah,
GA
|
Retail
(9)
|
|
|
- |
|
|
|
7,959 |
|
|
|
|
|
100 |
% |
|
|
1,545,454 |
|
____________________
(1)
|
Percentage
of 2009 contractual rental income payable to us pursuant to leases as of
December 31, 2008, including rental income payable on our tenancy in
common interest and excluding any rental income from five properties
formerly leased by Circuit City.
|
(2)
|
This
property is leased to a retail furniture
operator.
|
(3)
|
An
undivided 50% interest in this property is owned by us as tenant in common
with an unrelated entity. Percentage of contractual rental
income indicated represents our share of the 2009 rental
income. Approximate square footage indicated represents the
total rentable square footage of the
property.
|
(4)
|
Property
has two tenants, of which approximately 53% is leased to a retail
furniture operator.
|
(5)
|
This
property is leased to a retail office supply
operator.
|
(6)
|
Property
has three tenants, of which approximately 43% is leased to a retail office
supply operator.
|
(7)
|
Property
has two tenants, of which approximately 48% is leased to a retail office
supply operator.
|
(8)
|
Property
was leased to Circuit City, which in 2008 rejected the leases for
properties located in Antioch, TN, and Ferguson, MO, both of which are
vacant. Circuit City rejected its remaining leases with us in
March 2009 for our properties located in St. Louis, MO, Fairview Heights,
IL and Florence, KY.
|
(10)
|
Each
property is owned by a joint venture in which we are a venture
partner. Except for the joint venture which owns the Miami,
Florida property, in which we own a 36% economic interest, we own a 50%
economic interest in each joint venture. Approximate square
footage indicated represents the total rentable square footage of the
property owned by the joint
venture.
|
The
occupancy rate for our properties (including the property in which we own a
tenancy in common interest and the five properties formerly leased to Circuit
City) based on total rentable square footage, was 97.5% and 100% as of December
31, 2008 and 2007. The occupancy rate for the properties owned by our joint
ventures, based on total rentable square footage, was approximately 99.5% and
98.9% as of December 31, 2008 and 2007, respectively.
As of December 31, 2008, the 79
properties owned by us and the five properties owned by our joint ventures are
located in 29 states. The following tables set forth certain
information, presented by state, related to our properties and properties owned
by our joint ventures as of December 31, 2008.
Our
Properties
|
|
Approximate
|
|
|
|
Number
of
|
|
|
2009
Contractual
|
|
|
Building
|
|
State
|
|
Properties
|
|
|
Rental
Income
|
|
|
Square
Feet
|
|
Texas
|
|
11
|
|
|
$ |
6,648,615 |
|
|
|
544,523 |
|
New
York
|
|
10
|
|
|
|
6,094,678 |
|
|
|
615,754 |
|
Georgia
|
|
6
|
|
|
|
3,103,938 |
|
|
|
298,743 |
|
Maryland
|
|
1
|
|
|
|
2,340,923 |
|
|
|
367,000 |
|
Pennsylvania
|
|
2
|
|
|
|
2,338,343 |
|
|
|
624,560 |
|
California
|
|
2
|
|
|
|
2,186,055 |
|
|
|
137,240 |
|
Florida
|
|
5
|
|
|
|
2,011,972 |
|
|
|
103,966 |
|
New
Jersey
|
|
1
|
|
|
|
1,981,581 |
|
|
|
106,680 |
|
North
Carolina
|
|
2
|
|
|
|
1,692,751 |
|
|
|
94,703 |
|
Minnesota
|
|
1
|
|
|
|
1,574,022 |
|
|
|
338,000 |
|
Ohio
|
|
2
|
|
|
|
1,572,080 |
|
|
|
197,144 |
|
Louisiana
|
|
5
|
|
|
|
1,301,690 |
|
|
|
128,489 |
|
Illinois
|
|
4
|
|
|
|
1,258,630 |
|
|
|
64,976 |
|
Tennessee
|
|
2
|
|
|
|
1,079,367 |
|
|
|
69,389 |
|
Other
|
|
25
|
|
|
|
6,768,441 |
|
|
|
912,435 |
|
|
|
79
|
|
|
$ |
41,953,086 |
|
|
|
4,603,602 |
|
Properties
Owned by Joint Ventures
|
|
|
|
|
|
|
Our
Share
|
|
|
|
|
|
|
|
|
|
of Rent
Payable
|
|
|
Approximate
|
|
|
|
Number
of
|
|
|
in
2009 to Our
|
|
|
Building
|
|
State
|
|
Properties
|
|
|
Joint
Ventures
|
|
|
Square
Feet
|
|
Nebraska
|
|
1
|
|
|
$ |
603,594 |
|
|
|
112,260 |
|
Wisconsin
|
|
1
|
|
|
|
562,500 |
|
|
|
927,685 |
|
Florida
|
|
1
|
|
|
|
154,488 |
|
|
|
396,000 |
|
Georgia
|
|
2
|
|
|
|
72,188 |
|
|
|
109,509 |
|
|
|
5
|
|
|
$ |
1,392,770 |
|
|
|
1,545,454 |
|
At
December 31, 2008, we had first mortgages on 61 of the 79 properties we owned as
of that date (including our 50% tenancy in common interest, but excluding
properties owned by our joint ventures). At December 31, 2008, we had
approximately $225.5 million of mortgage loans outstanding, bearing interest at
rates ranging from 5.44% to 8.8%. Substantially all of our mortgage
loans contain prepayment penalties. The following table sets forth
scheduled principal mortgage payments due for our properties as of December 31,
2008, and assumes no payment is made on principal on any outstanding mortgage in
advance of its due date:
|
|
PRINCIPAL
PAYMENTS DUE
|
|
|
|
IN YEAR
INDICATED
|
|
YEAR
|
|
(Amounts in
Thousands)
|
|
|
|
|
|
2009
|
|
$ |
18,869 |
|
2010
|
|
|
22,532 |
|
2011
|
|
|
8,816 |
|
2012
|
|
|
37,806 |
|
2013
|
|
|
19,036 |
|
2014
and thereafter
|
|
|
118,455 |
|
Total
|
|
$ |
225,514 |
|
Included
in 2009 is a $8.7 million non-recourse mortgage which is secured and cross
collateralized by the five Circuit City properties. The Company has
not made any payments on this mortgage since December 1, 2008 and has entered
into negotiations with representatives of the mortgagee relating to possible
modifications of the mortgage. The mortgage is due in
2014.
At
December 31, 2008, our joint ventures had first mortgages on three properties
with outstanding balances of approximately $18.3 million, bearing interest at
rates ranging from 5.8% to 6.4%. Substantially all these mortgages
contain prepayment penalties. The following table sets forth the
scheduled principal mortgage payments due for properties owned by our joint
ventures as of December 31, 2008, and assumes no payment is made on principal on
any outstanding mortgage in advance of its due date:
|
|
PRINCIPAL
PAYMENTS DUE
|
|
|
|
IN
YEAR INDICATED
|
|
YEAR
|
|
(Amounts in
Thousands)
|
|
|
|
|
|
2009
|
|
$ |
435 |
|
2010
|
|
|
462 |
|
2011
|
|
|
490 |
|
2012
|
|
|
520 |
|
2013
|
|
|
552 |
|
2014
and thereafter
|
|
|
15,882 |
|
Total
|
|
$ |
18,341 |
|
Significant
Tenants
As of
December 31, 2008, no single property owned by us had a book value equal to or
greater than 10% of our total assets or had revenues which accounted for more
than 10% of our aggregate annual gross revenues in the year ended December 31,
2008.
Haverty
Furniture Companies, Inc.
As of
December 31, 2008, we owned a portfolio of eleven properties leased under a
master lease to Haverty Furniture Companies, Inc., which properties had a net
book value equal to 13.6% of our depreciated book value of real estate
investments, and revenues which accounted for 12% of our aggregate annual gross
revenues in the year ended December 31, 2008. Of the eleven properties, three
are located in each of Texas and Virginia, two are located in Georgia, and one
is located in each of Kansas, Kentucky and South Carolina. The
properties contain buildings with an aggregate of approximately 612,130 square
feet.
The
properties are net leased to Haverty Furniture Companies, Inc. pursuant to a
master lease, which expires on August 14, 2022. Haverty Furniture
Companies, Inc. is a New York Stock Exchange listed company and operates over
100 showrooms in 17 states. The master lease provides for a current base
rent of $4,310,000 per annum (which accounts for 10.3% of our 2009 contractual
rental income), increasing on August 15, 2012 and every five years thereafter
and provides the tenant with certain renewal options. Pursuant to the
master lease, the tenant is responsible for maintenance and repairs, and for
real estate taxes and assessments on the properties. The 2008 annual real
estate taxes on the properties aggregated $800,000. The tenant
utilizes approximately 86% of the properties for retail and 14% for
warehouse.
The
mortgage loan, which our subsidiary, OLP Havertportfolio L.P.
assumed when it acquired these eleven properties in 2006, is secured by
mortgages/deeds of trust on all such properties in the principal amount of
approximately $25.4 million at December 31, 2008. The mortgage loan bears
interest at 6.87% per annum, matures on September 1, 2012 and is being amortized
based on a 25-year amortization schedule. Assuming only contractual
payments are made on the principal amount of the mortgage loan, the principal
balance due on the maturity date will be approximately $23 million.
Although the mortgage loan provides for defeasance, it is generally not
prepayable until 90 days prior to the maturity date.
Office
Depot, Inc.
As of
December 31, 2008, we owned a portfolio of ten properties, each of which is
subject to a lease with Office Depot, Inc. We purchased eight of
these properties on September 26, 2008. The ten Office Depot, Inc.
properties have a net book value equal to 12.6% of our depreciated book value of
real estate investments, accounted for 3.8% of our 2008 rental income and will
account for 10.6% of our 2009 contractual rental income. Of the ten
properties, two are located in each of Florida and Georgia, and one is located
in each of California, Illinois, Louisiana, North Carolina, Oregon and
Texas. The properties contain buildings with an aggregate of
approximately 261,678 square feet.
Each
property is subject to a separate lease. Eight of the leases contain
cross-default provisions, expire on September 30, 2018, and provide the tenant
with four five-year renewal options. One lease expires on June 30,
2013 and provides the tenant with three five-year renewal options, and one lease
expires on February 28, 2014 and provides the tenant with four five-year renewal
options. Office Depot, Inc. is a New York Stock Exchange listed
company and operates over 1,700 worldwide retail stores. The ten
leases provide for an aggregate current base rent of $4,435,000. The
lease rent for eight of the properties increases every five years by
10%. The lease rent for one property increases by 5% every five years
and the lease rent for one property increases by $20,000 every five
years. Pursuant to the leases, the tenant is responsible for
maintenance and repairs, and for real estate taxes and assessments on the
properties. The 2008 annual real estate taxes on the properties
aggregated $666,000.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance.
We have adopted an Amended and Restated
Business Code of Conduct and Ethics that applies to all directors, officers and
employees, including our principal executive officer, principal financial
officer and principal accounting officer. You can find our Business
Code of Conduct and Ethics on our web site by going to the following
address: www.onelibertyproperties.com. We will post any
amendments to our Amended and Restated Business Code of Conduct and Ethics as
well as any waivers that are required to be disclosed by the rules of either the
SEC or The New York Stock Exchange on our web site.
Our board of directors has adopted
corporate governance guidelines and charters for the audit, compensation and
nominating and corporate governance committees of our board of
directors. You can find these documents on our web site by going to
the following address: www.onelibertyproperties.com.
A printed copy of any of the materials
referred to above may be obtained by contacting us at the following address: One
Liberty Properties, Inc., 60 Cutter Mill Road, Great Neck, New
York 11021, Attention: Secretary, or telephone number:
800-450-5816.
Directors and Executive
Officers.
Pursuant to our bylaws, as amended, the
number of directors has been fixed at 10 by our board of
directors. The board is divided into three classes. Each
class is elected to serve a three year term and is to be as equal in size as is
possible. The classes are elected on a staggered basis.
Directors
who hold office until the 2009 Annual Meeting:
|
|
Principal
Occupation For The Past
Five
Years and other Directorships
or
Significant Affiliations
|
Joseph
A. DeLuca
63
Years
|
|
Director
since June 2004; Principal of MHD Capital Partners, LLC, an entity
engaged in real estate investing and consulting since March 2006;
Principal and sole shareholder of Joseph A. DeLuca, Inc., a company
engaged in real estate capital and investment consulting since September
1998, including serving as Director of Real Estate Investments for
Equitable Life Assurance Society of America under a consulting contract
from June 1999 to June 2002; Executive Vice President and head of Real
Estate Finance at Chemical Bank from September 1990 until its merger with
the Chase Manhattan Bank in 1996 and Managing Director and Group Head of
the Chase Real Estate Finance Group of the Chase Manhattan Bank from the
merger to April 1998.
|
Fredric
H. Gould
73
Years
|
|
Chairman
of our board since June 1989, Chief Executive Officer from December 1999
to December 2001 and from July 2005 to December 2007; Chairman of
Georgetown Partners, Inc., Managing General Partner of Gould
Investors L.P., a limited partnership engaged in real estate ownership,
since December 1997; Chairman of the board of BRT Realty Trust, a mortgage
real estate investment trust, since 1984 and President of REIT Management
Corp., adviser to BRT Realty Trust, since 1986; Director of EastGroup
Properties, Inc., a real estate investment trust engaged in the
acquisition, ownership and development of industrial properties, since
1998. Fredric H. Gould is the father of Jeffrey A. Gould and Matthew J.
Gould.
|
Eugene
I. Zuriff
69
Years
|
|
Director
since December 2005; Vice Chairman of PBS Real Estate LLC, real
estate brokers, since March 2008; President of The Smith &
Wollensky Restaurant Group, Inc., developer, owner and operator of a
diversified portfolio of white tablecloth restaurants in the United
States, from May 2004 to October 2007; consultant to The Smith &
Wollensky Restaurant Group, Inc., from February 1997 to May 2004 and
a Director of The Smith & Wollensky Restaurant Group, Inc.,
from 1997 to October 2007; Director of Doral Federal Savings Bank from
2001 to July 2007 and Chairman of the Audit Committee from 2001 to July
2003.
|
Directors
to continue in office until the 2010 Annual Meeting:
|
|
Principal
Occupation For The Past
Five
Years and other Directorships
or
Significant Affiliations
|
Joseph
A. Amato
73
Years
|
|
Director
since June 1989; Real estate developer; Managing partner of the Kent
Companies, an owner, manager and developer of income producing real estate
since 1970.
|
Jeffrey
A. Gould
43
Years
|
|
Director
since December 1999; Vice President of our company from 1989 to December
1999 and a Senior Vice President since December 1999; President and Chief
Executive Officer of BRT Realty Trust since January 2002; President and
Chief Operating Officer of BRT Realty Trust from March 1996 to December
2001; Trustee of BRT Realty Trust since 1997; Senior Vice President of
Georgetown Partners, Inc., since March 1996. Jeffrey A. Gould is the
son of Fredric H. Gould and brother of Matthew J.
Gould.
|
Matthew
J. Gould
49
Years
|
|
Director
since December 1999; President and Chief Executive Officer of our company
from June 1989 to December 1999 and a Senior Vice President since December
1999; President of Georgetown Partners, Inc. since 1996; Senior Vice
President of BRT Realty Trust since 1993 and Trustee since June 2004 and
from March 2001 to March 2004; Vice President of REIT Management Corp.
since 1986. Matthew J. Gould is the son of Fredric H. Gould and brother of
Jeffrey A. Gould.
|
J.
Robert Lovejoy
64
Years
|
|
Director
since 2004; Managing director of Groton Partners, LLC, merchant
bankers, since January 2006; Senior managing director of Ripplewood
Holdings, LLC, a private equity investment firm, from January 2000 to
December 2005; a managing director of Lazard
Freres & Co. LLC and a general partner of Lazard’s
predecessor partnership for over 15 years prior to January 2000;
Director of Orient-Express Hotels Ltd. since
2000.
|
Directors
who hold office until the 2011 Annual Meeting:
|
|
Principal
Occupation For The Past
Five
Years and other Directorships
or
Significant Affiliations
|
Charles
Biederman
75
Years
|
|
Director
since June 1989; Chairman since January 2008 of Universal Development
Company, a commercial general contractor engaged in turnkey hotel,
commercial and residential projects; Principal of Sunstone Hotel
Investors, LLC, a company engaged in the management, ownership and
development of hotel properties, from November 1994 to December 2007;
Executive Vice President of Sunstone Hotel Investors, Inc., a real
estate investment trust engaged in the ownership of hotel properties, from
September 1994 to November 1998 and Vice Chairman of Sunstone Hotel
Investors from January 1998 to November 1999.
|
James
J. Burns
69
Years
|
|
Director
since June 2000; Vice Chairman from March 2006 to the present and Senior
Vice President and Chief Financial Officer of Reis, Inc. and its
predecessor, Wellsford Real Properties, Inc., from October 1999 to
March 2006; Partner of Ernst & Young LLP, certified public
accountants, and predecessor firms from January 1977 to September 1999;
Director of Cedar Shopping Centers, Inc., a real estate investment
trust engaged in the ownership, management and leasing of retail
properties, since 2001.
|
Patrick
J. Callan, Jr.
46
Years
|
|
Director
since June 2002; President of our company since January 2006 and Chief
Executive Officer since January 2008; Senior Vice President of First
Washington Realty, Inc. from March 2004 to November 2005; Vice
President of Real Estate for Kimco Realty Corporation, a real estate
investment trust, from May 1998 to March
2004.
|
Information
concerning our executive officers is set forth in Part I of our Annual Report
filed with the SEC on March 13, 2009. The business history of our
executive officers who are also directors (Fredric H. Gould, Patrick J. Callan,
Jr., Matthew J. Gould and Jeffrey A. Gould) is set forth above in this Item
10. See Item 13, “Certain Relationships and Related Transactions, and
Director Independence,” below, for more information regarding family
relationships among our executive officers and directors.
Section 16(a) Beneficial
Ownership Reporting Compliance.
Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires our executive
officers and directors, and persons who beneficially own more than 10% of our
issued and outstanding capital stock, to file Initial Reports of Ownership and
Reports of Changes in Ownership with the Securities and Exchange Commission and
the New York Stock Exchange. Executive officers, directors and
greater than 10% beneficial owners are required by the rules and regulations
promulgated by the SEC to furnish us with copies of all Section 16(a) forms
they file. We prepare and file the requisite forms on behalf of our
executive officers and directors. Based on a review of information
supplied to us by our executive officers and directors, and public filings made
by any 10% beneficial owners, we believe that all Section 16(a) filing
requirements applicable to our executive officers, directors and 10% beneficial
owners with respect to fiscal 2008 were met, other than the failure to timely
file a Form 4 by our treasurer, Alysa Block, in December 2008.
Nominating
Committee
There have not been any changes to the
procedures by which security holders may recommend nominees to our board of
directors since disclosure of such procedures in our proxy statement dated April
29, 2008 for our Annual Meeting held on June 13, 2008.
Audit
Committee
Our audit
committee is a separately designated standing committee, the members of which
are Charles Biederman, James J. Burns and Joseph A. DeLuca. Our board
of directors has adopted an audit committee charter delineating the composition
and responsibilities of the audit committee.
The audit
committee charter requires that the audit committee be comprised of at least
three members, all of whom are independent directors and at least one of whom is
an “audit committee financial expert.” Our board of directors has determined
that all of the members of our audit committee are independent for the purposes
of Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended,
and Section 303.01 of the Listed Company Manual of the New York Stock
Exchange, that all members of the audit committee are financially literate and
that James J. Burns qualifies as an “audit committee financial expert,” as that
term is defined in Item 407(5)(ii) of Regulation S-K promulgated
pursuant to the Securities Exchange Act of 1934, as amended.
Item
11. Executive Compensation.
Compensation
Discussion and Analysis
This
compensation discussion and analysis describes our compensation objectives,
policies and decisions as applied to our executive officers in
2008. This discussion and analysis focuses on the information
contained in the compensation tables that follow this discussion and analysis,
but also describes our historic compensation structure for our executive
officers to enhance an understanding of our executive compensation disclosure.
Our compensation committee oversees our compensation program, recommends the
compensation of officers employed by us on a full-time basis to our board of
directors for its approval, approves the annual fee paid by us to the chairman
of our board, and approves the annual fees paid by us pursuant to a compensation
and services agreement to Majestic Property Management Corp., an affiliated
entity (hereinafter, “Majestic”), which results in the payment by Majestic of
compensation to our part-time officers including Fredric H. Gould, Matthew J.
Gould and David W. Kalish. Majestic is wholly-owned by Fredric H. Gould, the
chairman of our board.
Historically,
including in 2008, we have had two categories of officers: (i) officers who
devote their full business time to our affairs, and (ii) officers who
devote their business time to us on a part-time basis. The officers who devote
their full business time to our affairs are compensated directly and solely by
us. Prior to 2007, the basic compensation (base salary, bonus, if any, and
perquisites) of certain of our part-time officers, who perform primarily legal
and accounting services on our behalf, was allocated to us and other affiliated
entities pursuant to a shared services agreement and certain officers (including
officers who did not allocate any of their compensation to us and officers who
allocated their compensation to us) received compensation from Majestic, whose
gross revenues included fees paid by us for services performed on our behalf
(property management, sales and lease consulting and brokerage services,
mortgage brokerage services and construction supervisory
services). All of our part-time officers and other employees of
affiliated companies who perform services for us on a part-time basis receive
annual restricted stock awards approved by the compensation committee and the
board of directors.
In 2006,
in connection with a review of our allocation methods and our related party
transactions with affiliated entities, our audit committee recommended to our
compensation committee and board of directors a change in the manner in which
compensation is paid to those officers (and employees) who perform services for
us on a part-time basis, including legal and accounting services, as well as a
change in the manner in which any affiliated entity, primarily Majestic, is
compensated for services performed on our behalf. The services provided by
Majestic to us included billing and collection of rent and additional rent and
property management services, property acquisition review and analysis, sales
and lease consulting and brokerage services, consulting services in respect to
mortgage financings and construction supervisory services. The audit committee
recommended changes to the manner in which compensation is paid to part-time
officers and employees and the manner in which Majestic is compensated for
services performed on our behalf because, in its view, the changes would
simplify the compensation structure, limit the need for the audit committee, the
internal auditor and the independent auditor to review the allocations and limit
potential conflict issues which may arise as a result of related party
transactions. The audit committee, the compensation committee and the board of
directors were of the opinion that it was desirable for us to maintain the
services of those officers who perform services for us on a part-time basis, as
well as the services of Majestic, which performs necessary services on our
behalf.
In order
to effectuate our audit committee’s recommendation, we entered into
an agreement with Majestic, which was effective January 1, 2007,
under which Majestic assumed our obligations to make payments under the shared
services agreement and agreed to provide to us the services of all executive,
administrative, legal, accounting and clerical personnel that had previously
been utilized by us on a part-time basis and for which we paid, as
reimbursement, an allocated portion of the payroll expenses of such personnel in
accordance with a shared services agreement. Since Majestic now provides such
personnel for us, we no longer incur any allocated payroll expenses and the
payroll expenses of such executives and part-time employees is allocated to
Majestic. Under the terms of the agreement, Majestic also agreed to
continue to provide to us the property management services, property
acquisition, sales and lease consulting and brokerage services, consulting
services in respect to mortgage financings, and construction supervisory
services that it provided to us in the past and we, therefore, do not incur any
fees or expenses for such services, except for the annual fee referred to below.
As consideration for providing the services of such personnel to us, and for
providing property management services, property acquisition, sales and lease
consulting and brokerage services, consulting services in respect to mortgage
financings and construction supervisory services, we agreed to pay to Majestic a
fee of $2,025,000 for 2008. Majestic may earn a profit from payments
under the agreement. Majestic credits against the fee due to it any management
or other fees received by it from any of our joint ventures (except for fees
paid by the tenant-in-common on a property located in Los Angeles, CA). In
addition, under the agreement, we agreed to pay compensation to the chairman of
our board of $250,000 per annum and to make an additional payment to Majestic of
$175,000 in 2008 for our share of all direct office expenses, including rent,
telephone, computer services, internet usage, etc., previously allocated under
the shared services agreement and since 2007 allocated to Majestic. The annual
payments made by us to Majestic are to be reviewed and renegotiated by our audit
committee and Majestic annually and at other times as may be determined by our
audit committee.
For the
year ended December 31, 2008, our named executive officers are Patrick J.
Callan, Jr., president (and chief executive officer effective January 1,
2008) and Lawrence G. Ricketts, Jr., executive vice president (and chief
operating officer effective January 1, 2008), both of whom devote their
full time to our affairs, and Fredric H. Gould, chairman of our board (chief
executive officer through December 31, 2007), David W. Kalish, senior vice
president and chief financial officer, and Matthew J. Gould, a senior vice
president, who devote time to our affairs on a part-time basis.
Objectives
of our Compensation Program
The
overriding objective of our compensation program for full-time officers is to
ensure that the total compensation paid to such officers is fair, reasonable and
competitive. The compensation committee believes that relying on this principal
will permit us to both retain and motivate our officers. With respect to our
part-time officers, the compensation committee must be satisfied that such
officers provide us with sufficient time and attention to fully meet our needs
and fully perform their duties on our behalf. The compensation committee has
considered this issue and is of the opinion that our part-time officers devote
sufficient time and attention to our business needs, are able to fully meet our
needs and that this arrangement does not adversely affect their ability to
perform their duties effectively on our behalf. The compensation committee is of
the opinion that our part-time officers perform valuable services on our behalf,
are not distracted by their activities on behalf of affiliated entities and the
performance of activities on behalf of affiliated entities does not adversely
affect their ability to perform duties on our behalf. The compensation committee
is also of the opinion that utilizing the services of various senior officers
with diverse skills on a part-time basis enables us to benefit from a greater
degree of executive experience and competence than an organization of our size
could otherwise afford.
We have
historically experienced an extremely low level of officer and employee
turnover. Fredric H. Gould, Matthew J. Gould and David W. Kalish each has been
an officer with us for over 18 years and Mr. Lawrence G. Ricketts, Jr. has
been employed by us for approximately 10 years. Mr. Patrick J. Callan, Jr.
has been a member of our board of directors for seven years and has been our
president for in excess of three years.
Compensation
Setting Process
Our
compensation committee refers to the compensation survey prepared for the
National Association of Real Estate Investment Trusts (NAREIT) to understand the
base salary, bonus, long-term incentives and total compensation paid by other
REITs to their officers to assist it in providing a fair, reasonable and
competitive compensation package to our full-time officers. Although there are
many REITs engaged in acquiring and managing real estate portfolios, there are
few equity REITs which have a market capitalization comparable to ours. As a
result, the NAREIT compensation survey, although informative, does not provide
information which is directly applicable to us. Accordingly, we determine
compensation for our full-time officers, including our full-time named executive
officers, on a case-by-case basis. In addition, from time to time our
compensation committee retains an independent compensation consultant to provide
the committee with an analysis of the compensation paid to our executive
officers in comparison to a selected peer group (see “Compensation Consultant”
below). We do not utilize performance targets.
In
determining compensation for 2008, the recommendations of Fredric H. Gould,
chairman of our board (and formerly chief executive officer), played a
significant role in the compensation-setting process since, as the chairman of
the board, he was aware of each officer’s duties and responsibilities and was
most qualified to assess the level of each officer’s performance. The chairman
of our board, prior to making recommendations to the compensation committee
concerning each full-time officer’s compensation, consulted with certain senior
officers. During the process, they considered our overall performance for the
immediately preceding fiscal year, including, rental income, funds from
operations, net income and cash distributions paid to stockholders. None of
these measures of performance was given more weight than any other and they were
used to provide an overall view of our performance for the preceding year. The
chairman of the board and other senior officers also assessed each individual’s
performance in such year, which assessment was highly subjective. Positively
impacting the compensation decisions with respect to our full-time named
executive officers for 2008 was the recognition of certain corporate
accomplishments in 2007, including increases in rental income and funds from
operations. Also taken into consideration was the fact that, although
we had a decline in net income year over year, the decline was due primarily to
gains in 2006 on the disposition of real estate by unconsolidated joint
ventures, offset by mortgage prepayment premiums required as part of these
sales. During this process, the chairman of our board proposed to the
compensation committee with respect to each full-time named executive officer, a
base salary for the 2008 calendar year, a bonus applicable to the 2007 calendar
year (paid in 2008) and the number of shares of restricted stock to be awarded
to each individual full-time named executive officer. At its annual compensation
committee meeting, the compensation committee reviewed these recommendations.
The compensation committee has discretion to accept, reject or modify the
recommendations. The final decision by the compensation committee on
compensation matters related to all officers was reported to the board of
directors, which approved the actions of the committee.
We
believe that utilizing part-time officers pursuant to the shared services
agreement through December 31, 2006, and, since January 1, 2007 pursuant to
the compensation and services agreement, enables us to benefit from access to,
and the services of, a group of senior officers with experience and knowledge in
real estate ownership, operations and management and finance, legal, accounting
and tax matters that an organization our size could not otherwise afford. Our
chairman, in consultation with certain of our part-time senior officers,
determines the total annual base compensation, bonus, if any, and perquisites to
be paid by all parties to the shared services agreement to our part-time
officers.
Pursuant
to the compensation and services agreement, Majestic assumed our obligations
under the shared services agreement, and agreed to provide to us the services of
all affiliated executive, administrative, legal, accounting and clerical
personnel that we previously used on a part-time basis. For 2008, the portion of
our part-time officers’ compensation which was allocated to us in prior years
pursuant to the shared services agreement, and would have been allocated to us
in 2008 if the compensation and services agreement was not in effect, was
allocated to Majestic. The terms of the compensation and services agreement were
negotiated by our audit committee, approved by our compensation committee and
our board of directors and the agreement was effective as of January 1,
2007. For 2006, the audit committee reviewed the amount of
compensation of part-time officers allocated to us to determine if the
allocation process was performed in accordance with the shared services
agreement, and the compensation committee reviewed the reasonableness of the
compensation allocated to us. For 2006, the audit committee determined that each
part-time officer’s compensation was properly allocated to us in accordance with
the shared services agreement. The fee paid to Majestic in 2008 and 2007 under
the compensation and services agreement was negotiated by the audit
committee and management of Majestic and approved by our compensation committee
and board of directors. The compensation committee was advised of the
total compensation received by each part-time officer from Majestic and other
affiliated entities in 2008 and 2007.
In
October 2008, our compensation committee engaged an independent compensation
consultant, FPL Associates L.P., a nationally recognized compensation
consulting firm specializing in the real estate industry. FPL
Associates L.P. has no relationship with us or any of our affiliates,
except that it was also retained in 2008 as the independent compensation
consultant for BRT Realty Trust, which may be deemed an affiliate of
ours. The primary purpose of the engagement was for the compensation
consultant to conduct a comprehensive benchmarking analysis for our senior
executives, to enable our compensation committee to determine if the
compensation of our senior executive officers is fair and reasonable and to
assist our compensation committee in making any necessary adjustments to the
compensation components. The compensation consultant reviewed the compensation
of seven of our senior executive officers, including our named executive
officers other than Matthew J. Gould. Matthew J. Gould was
not included in the compensation consultant’s study since none of his basic
compensation (salary or bonus) is paid by us or allocated to
Majestic.
Prior to
commencing its benchmarking analysis, the compensation consultant and management
discussed and agreed upon a methodology for determining the comparative peer
groups. Based upon such discussions it was determined to use two peer groups as
follows:
|
•
|
A
Full-Time Peer Group; to be used for executives who dedicate all, or
substantially all, of their business time to our affairs. The Full Time
Peer Group includes public REITs active in the net lease space; public
real estate companies comparable in size to us (measured by market and
total capitalization); and/or public real estate companies located in New
York. The Full Time Peer Group selected for benchmarking
purposes consists of eleven public real estate companies with a market
capitalization which is generally larger than our
capitalization. The compensation consultant noted in its report
to the compensation committee that none of the specific peer group
companies are a perfect match to us, due to our small size position among
our most direct peers.
|
|
•
|
A
Shared Peer Group; to be used for executives who dedicate a portion of
their business time to our affairs and who also dedicate time to
affiliated companies (primarily BRT Realty Trust, a public company engaged
in mortgage originations). The Shared Peer Group exude similar
characteristics as described for the Full Time Peer Group and include
public REITs focused on the debt side of the business and consists of six
public equity REITs and six public debt REITs that are comparable to us in
terms of focus, size and/or geographic location. The market
capitalization of the peer group companies is generally larger than our
capitalization.
|
|
•
|
The
following is the full-time peer group companies used by the
consultant:
|
Agree
Realty Corporation
|
National
Retail Properties, Inc.
|
AmReit
|
Ramco-Gershenson
Properties Trust
|
CapLease,
Inc.
|
Realty
Income Corporation
|
Getty
Realty Corp.
|
Urstadt
Biddle Properties, Inc.
|
Lexington
Realty Trust
|
W.P.
Carey & Co. LLC.
|
Lodgian,
Inc.
|
|
|
•
|
The
following is the shared peer group companies used by the
consultant:
|
CapLease,
Inc.
|
Arbor
Realty Trust, Inc.
|
Cousins
Properties Incorporated
|
CapitalTrust,
Inc.
|
Getty
Realty Corp.
|
iStar
Financial Inc.
|
Lexington
Realty Trust
|
New
York Mortgage Trust, Inc.
|
Urstadt
Biddle Properties, Inc.
|
NorthStar
Realty Financing Corp.
|
W.P.
Carey and Co. LLC
|
RAIT
Financial Trust.
|
The
compensation consultant used the 25th percentile
as the market comparison in its conclusions because of our relatively smaller
size compared to the peer group companies. The compensation consultant also used
a plus/minus 15% threshold to define “in line” (competitive) with the market.
Based on its benchmarking analysis, the compensation consultant advised that in
2008: (i) the compensation paid by us to Patrick J. Callan, Jr., our
president and chief executive officer, is slightly above the 25th
percentile, (ii) the compensation paid by us to Lawrence G. Ricketts, Jr., our
executive vice president and chief operating officer, is in line with or
slightly below the 25th
percentile, (iii) the compensation of part-time senior executives (including
Fredric H. Gould, chairman of the board and David W. Kalish, a senior vice
president and chief financial officer paid) by us or allocated to Majestic is
below the 25th percentile,
(iv) the total compensation paid to Fredric H. Gould (including all
compensation paid by affiliated companies), and the total compensation paid to
part-time senior executives by us and affiliated companies (including David W.
Kalish) is above the 25th
percentile and (v) the equity awards we provide to all of our officers are
a smaller portion of total compensation compared to peers.
Components
of Executive Compensation
The
principal elements of our compensation program for our full-time officers
are:
|
•
|
long-term
equity incentive in the form of restricted stock;
and
|
|
•
|
special
benefits and perquisites.
|
Additional
benefits and perquisites which are provided to our full-time executive officers
consist of:
|
•
|
additional
disability insurance;
|
|
•
|
an
automobile allowance; and
|
|
•
|
automobile
maintenance and repairs.
|
Base
salary and annual bonus are cash-based, while long-term incentives consist of
restricted stock awards. In determining compensation, the compensation committee
does not have a specific allocation goal between cash and equity-based
compensation.
In 2008,
except for the $250,000 annual compensation we paid to the chairman of our board
pursuant to the compensation and services agreement, the only form of direct
compensation we provided to our part-time officers was the granting of long-term
equity incentives in the form of restricted stock awards. For services rendered
to us, our part-time officers are compensated by Majestic, which was paid a fee
of $2,025,000 (including $6,000 by one of our joint venture partners, but
excluding $175,000 for our share of direct office expenses) in 2008 pursuant to
the compensation and services agreement. The compensation committee was advised
of the amount allocated by each part-time officer to Majestic for service
rendered on our behalf and the total compensation received by each part-time
officer in 2008 from Majestic and other affiliated companies.
Base
salary is the basic, least variable form of compensation for the job an officer
performs and provides each officer with a guaranteed monthly
income.
Full-time
Officers: Base salaries of full-time officers are targeted to
be competitive with the salaries paid to officers at other REITs with a market
capitalization similar to ours. Any increase in base salary is determined on a
case by case basis, is not based upon a structured formula and is based upon,
among other considerations (i) our performance in the preceding fiscal
year, (ii) such officer’s current base salary, (iii) amounts paid by
peer group companies for officers performing substantially similar functions,
(iv) years of service, (v) current job responsibilities, (vi) the
individual’s performance and (vii) the recommendation of the chairman of
the board.
Part-time
Officers: The portion of our part-time officers’ base salary,
which would have been allocated to us in 2008 pursuant to the shared services
agreement, has been assumed by Majestic pursuant to the compensation and
services agreement and is paid by Majestic. Since the fee paid to Majestic was
approved by the compensation committee and the board of directors, the
compensation committee does not review the base salaries of our part-time
officers.
Full-time
Officers: We provide the opportunity for our full-time
officers to earn an annual cash bonus. We provide this opportunity both to
reward our personnel for past performance and to motivate and retain talented
people. We recognize that annual bonuses are almost universally provided by
other companies with which we might compete for talent. In view of the fact that
only two of our named executive officers devote their full-time to our affairs,
annual cash bonuses for such named executive officers are determined on a
case-by-case basis by our compensation committee. During the process we
considered our overall performance for the immediately preceding fiscal year,
including rental income, funds from operations, net income and cash
distributions paid to stockholders. None of these measures of performance is
given more weight than any other and they are used to provide an overall view of
our performance for the preceding year. Once it has approved the annual bonus to
be paid to each named executive officer, the compensation committee presents its
recommendations to the board of directors for their approval. Based on our
present structure and the small number of full-time officers, our compensation
committee has not adopted formulas or performance goals to determine cash
bonuses for our officers.
Part-time
Officers: The portion of our part-time officers’ annual bonus,
if any, which would have been allocated to us in 2008 pursuant to the shared
services agreement, has been assumed by Majestic pursuant to the compensation
and services agreement. Since the fee paid to Majestic was approved by the
compensation committee and the board of directors, the compensation committee
does not review the bonus, if any, paid to part-time officers.
We
provide the opportunity for our full-time and part-time officers to receive
long-term equity incentive awards. Our long-term equity incentive compensation
program is designed to recognize responsibilities, reward performance, motivate
future performance, align the interests of our officers with those of our
stockholders and retain our officers. The compensation committee reviews
long-term equity incentives for all our employees, including part-time officers
and employees of affiliates who perform services for us, at its regularly
scheduled annual meeting (usually held in December of each year) and makes
recommendations to our board of directors for the grant of equity awards. In
determining the long-term equity compensation component, the compensation
committee considers all relevant factors, including our performance and
individual performance. Existing ownership levels are not a factor in award
determinations. All equity awards are granted under our stockholder approved
Incentive Plan.
We do not
have a formal policy with respect to whether equity compensation should be paid
in the form of stock options or restricted stock. Prior to 2003, we awarded
stock options rather than restricted stock, but in 2003 a determination was made
to grant only restricted stock. The compensation committee believes restricted
stock awards are more effective in achieving our compensation objectives, as
restricted stock has a greater retention value and, because fewer shares are
normally awarded, it is potentially less dilutive. Additionally, before vesting,
cash dividends to stockholders are paid on all outstanding awards of restricted
stock as an additional element of compensation.
All the
restricted stock awards made to date contain a five-year “cliff” vesting
requirement. The compensation committee believes that restricted stock awards
with five-year “cliff” vesting provide a strong retention incentive and better
align the interests of our officers with those of our stockholders. We view our
capital stock as a valuable asset that should be awarded
judiciously.
We do not
have a formal policy on timing equity compensation grants in connection with the
release of material non-public information and in view of the five year “cliff”
vesting requirement, we do not believe such a formal policy is necessary. In
December, our board of directors, upon the compensation committee’s
recommendation, generally approves the granting of equity awards effective on or
about the last business day in February of the following year. In
December 2007, the board of directors, upon the compensation committee’s
recommendation, set the grant date for our restricted stock incentive awards
effective on February 28, 2008.
The
amount of restricted stock recommended by the compensation committee for
approval by the board of directors in December 2007 was related to the number of
shares of our common stock issued and outstanding at the time the awards were
approved by our compensation committee. The aggregate restricted stock
authorized in December 2007 and awarded by us in February 2008, 50,550 shares,
was approximately 0.5% of our issued and outstanding shares of common stock as
of December 31, 2007.
Chairman
of the Board’s Compensation
The
compensation and services agreement, which was approved by our audit committee
and board of directors in 2007, provides that we pay Fredric H. Gould, the
chairman of our board, annual compensation for his services to us. Our chairman
does not receive any additional direct compensation from us, other than any
long-term equity awards granted to him by our board of directors based upon our
compensation committee’s recommendation. Our chairman also receives compensation
from Majestic. In 2008, we paid our chairman compensation of $250,000 and
granted 3,000 shares of restricted stock to him valued at $52,500 ($17.50 per
share) on the date of the grant. In 2008, our chairman also received
compensation of $264,100 from Majestic. For additional information
regarding compensation of our chairman, see the “Summary Compensation Table,”
below.
Executive
Benefits and Perquisites
Full-time
Officers: We provide our full-time officers with a competitive
benefits and perquisites program. We recognize that similar benefits and
perquisites are commonly provided at other companies that we might compete with
for talent. We review our benefits and perquisites program periodically to
ensure it remains fair to our officers and employees and supportable to our
stockholders. For 2008, the benefits and perquisites we provided to our officers
were a small percentage of the compensation provided by us to them. The benefits
and perquisites we may provide to our full-time executive officers, in addition
to the benefits and perquisites we provide to all our full time employees,
consist of an automobile allowance, payments for automobile maintenance and
repairs, or payment of the premium for additional disability
insurance.
Part-time
Officers: Our chairman of the board, in consultation with
certain part-time senior officers, determines the perquisites of our part-time
officers. The portion of our part-time officers’ perquisites, which was
previously allocated to us pursuant to the shared services agreement, is paid,
effective as of January 1, 2007, by Majestic in accordance with the
compensation and services agreement. Since the fee we paid to Majestic was
approved by the compensation committee and the board of directors, the
compensation committee does not review the perquisites of our part-time
officers.
Severance
and Change of Control Agreements
Neither
our officers nor our employees have employment or severance agreements with us.
They are “at will” employees who serve at the pleasure of our board of
directors.
Except
for provisions for accelerated vesting of awards of our restricted stock in a
“change of control” transaction, we do not provide for any change of control
protection to our officers, directors or employees. Under the terms of each
restricted stock awards agreement, accelerated vesting occurs with respect to
each person who has been awarded restricted stock if (i) any person,
corporation or other entity purchases our stock for cash, securities or other
consideration pursuant to a tender offer or an exchange offer, without the prior
consent of our board, or (ii) any person, corporation or other entity shall
become the “beneficial owner” (as such term is defined in Rule 13-d-3 under
the Securities and Exchange Act of 1934, as amended), directly or indirectly, of
our securities representing 20% or more of the combined voting power of our then
outstanding securities ordinarily having the right to vote in the election of
directors, other than in a transaction approved by our board of
directors.
Deductibility
of Executive Compensation
Section 162(m)
of the Internal Revenue Code of 1986, as amended, imposes a limitation on the
deductibility of certain non-cash compensation in excess of $1 million
earned by each of the chief executive officer and the four other most highly
compensated officers of publicly held companies. In 2008, all compensation paid
to our full-time officers was deductible by us. The compensation committee
intends to preserve the deductibility of compensation payments and benefits to
the extent reasonably practicable. The compensation committee has not adopted a
formal policy that requires all compensation paid to the officers to be fully
deductible.
Analysis
In
accordance with the compensation setting process described above, the following
base salaries and bonuses were approved as follows for our full-time named
executive officers:
Name
|
|
2007
Base
Salary
($)(1)
|
2008
Base
Salary
($)(1)
|
Percentage
%
Salary
Increase
|
2007
Bonus
($)(2)
|
|
2008
Bonus
($)(2)
|
|
Percentage
%
Bonus
Increase
|
|
Patrick
J. Callan, Jr.
|
|
|
375,000 |
|
|
|
400,000 |
|
|
|
6.67 |
|
|
|
200,000 |
|
|
|
210,000 |
|
|
|
5 |
|
Lawrence
G. Ricketts, Jr.
|
|
|
205,000 |
|
|
|
230,000 |
|
|
|
12.20 |
|
|
|
25,000 |
|
|
|
35,000 |
|
|
|
40 |
|
(1)
|
The
compensation committee and board of directors determined 2007 base salary
in December 2006 and 2008 base salary in December 2007. The bonus amounts
correspond to performance in 2006 and 2007,
respectively.
|
(2)
|
The
bonuses for 2007 and 2008 were approved by the compensation committee and
the board of directors as of December 2006 and 2007, respectively, and the
bonus amounts correspond to performance in 2006 and 2007,
respectively.
|
The
increase in base salary for Patrick J. Callan, Jr. and Lawrence G. Ricketts,
Jr., and the increase in their respective bonuses were due in part to increases
in our rental income (14.3%), and funds from operations (36%) in 2007 compared
to 2006. These increases were also due to an evaluation of the
individual performance of each of them in 2007.
In 2008,
the total compensation of Patrick J. Callan, Jr., our president and chief
executive officer, is .96% greater (slightly less than 2x) than the total
compensation of Lawrence G. Ricketts, Jr., our executive vice president and
chief operating officer. We have not adopted a policy with regard to the
relationship of compensation among our executive officers or other employees.
The compensation committee has considered the differential in compensation and,
based upon their respective responsibilities and experience, concluded that the
differential was appropriate.
We
believe that our long-term equity compensation program, using restricted stock
awards with five-year cliff vesting, provides motivation for our officers and is
a beneficial retention tool. We are mindful of the potential dilution and
compensation cost associated with awarding shares of restricted stock and,
therefore our policy is to minimize dilution. In 2008, we awarded an
aggregate of 50,550 shares representing .5% of our issued and outstanding
shares. In the past five years, we have awarded an aggregate of
228,275 shares of common stock, representing an average of .46% per annum of our
outstanding shares of common stock. We believe the cumulative effect of the
awards is not overly dilutive and has created significant incentive for our
officers and employees.
After
reviewing the aggregate compensation received by our full-time named executive
officers, our performance in 2007, and the performance and responsibilities of
each named executive officer, and taking into account our policy of minimizing
stockholder dilution, in 2008 we awarded 6,000 shares of restricted stock to
Patrick J. Callan, Jr., 5,000 shares of restricted stock to Lawrence G.
Ricketts, Jr., and 3,000 shares of restricted stock to each of Fredric H. Gould,
David W. Kalish and Matthew J. Gould.
We intend
to continue to award restricted stock as we believe (i) restricted stock
awards align management’s interests and goals with stockholders’ interests and
goals and (ii) officers and employees are more desirous of participating in
a restricted stock award program and, therefore, it is an excellent motivator
and employee retention tool.
|
Equity
Compensation Policies
|
We do not
have any policy regarding ownership requirements for officers or directors. In
view of the fact that all of our officers and directors own our shares of common
stock (and many of our officers hold a significant number of shares of our
common stock), we do not believe there is a need to adopt of a policy regarding
ownership of shares of our common stock by our officers and
directors.
The
perquisites we provide to our full-time officers account for a small percentage
of the compensation paid by us to these officers. We believe that such
perquisites are competitive and appropriate.
|
Severance
and Change of Control Agreements
|
We do not
enter into employment agreements, severance agreements or change of control
agreements with any of our officers or employees as we believe such agreements
are not beneficial to us, and that we can provide sufficient motivation to
officers by using other types of compensation.
|
Potential
Payments upon Termination of Employment or Change of
Control
|
Except
for provisions for accelerated vesting of awards of our restricted stock in a
“change of control” transaction, we do not provide for any severance,
termination or change of control payment or protection to our officers,
directors or employees. Accordingly, upon a change of control, the restricted
stock issued to our officers, directors, employees and consultants would
automatically vest. This is the only automatic compensation benefit
our officers would receive in a change of control transaction. In the event that
a change of control occurred as of December 31, 2008, the restricted stock
held by our named executives officers would have automatically vested and the
value of each such officer’s restricted stock, based upon the closing price of
our stock on December 31, 2008, would have been as follows:
Name
|
Number
of Shares of Unvested
Restricted
Stock Held as of
December 31,
2008
|
Value
of Outstanding Shares of
Unvested
Restricted Stock Upon
a
Change of Control at
December 31,
2008($)(1)
|
Patrick
J. Callan, Jr.
|
18,000
|
158,400
|
Fredric
H. Gould
|
15,125
|
133,100
|
David
W. Kalish
|
15,125
|
133,100
|
Lawrence
G. Ricketts, Jr.
|
15,700
|
138,160
|
Matthew
J. Gould
|
15,125
|
133,100
|
(1)
|
The
closing price on the New York Stock Exchange for a share of our common
stock on December 31, 2008 was
$8.80.
|
SUMMARY
COMPENSATION TABLE
Name
and Principal Position
|
Year
|
Salary($)
|
Bonus($)
|
Stock
Awards($)
(1)
|
All
Other
Compensation
($)(2)(3)
|
Total
($)
|
Patrick
J. Callan, Jr., President and Chief Executive Officer(4)
|
2008
2007
2006
|
400,000
375,000
350,000
|
210,000
200,000
175,000
|
72,041
51,616
27,756
|
83,383(5)
85,384(5)
61,213
(5)
|
765,424
712,000
613,969
|
Fredric
H. Gould, Chairman of the Board(6)
|
2008
2007
2006
|
250,000
250,000
50,000
|
—
—
—
|
64,334
56,531
42,215
|
285,347(7)
475,059(7)
651,711(7)
|
599,681
781,590
743,926
|
David
W. Kalish, Senior Vice President and Chief Financial
Officer(8)
|
2008
2007
2006
|
—
—
111,742
|
—
—
—
|
64,334
56,531
42,215
|
160,247(9)
173,710(9)
281,216(9)
|
224,581
230,241
435,173
|
Lawrence
G. Ricketts, Jr., Executive Vice President and Chief Operating
Officer(4)
|
2008
2007
2006
|
230,000
205,000
180,000
|
35,000
25,000
90,000
(10)
|
62,896
46,281
27,193
|
62,305(10)
67,411(10)
49,587
(10)
|
390,201
343,692
346,780
|
Matthew
J. Gould, Senior Vice President(11)
|
2008
2007
2006
|
—
—
—
|
—
—
—
|
64,334
56,531
42,215
|
264,497(12)
319,737(12)
414,835(12)
|
328,831
376,268
457,050
|
(1)
|
Represents
the dollar amounts expensed for financial reporting purposes for the years
ended December 31, 2008, 2007 and 2006 in accordance with Statement
of Financial Accounting Standards No. 123R
(“SFAS 123R”). See Note 8 to the Consolidated
Financial Statements included in our Annual Report on Form 10-K for
the year ended December 31, 2008 for a discussion of restricted stock
awards.
|
(2)
|
We
maintain a tax qualified defined contribution plan for our full-time
officers and employees. We make an annual contribution to the plan for our
full-time officers and employees equal to 15% of such person’s annual
earnings, not to exceed $34,500 in 2008, $33,750 in 2007 and $33,000 in
2006. The entities which are subject to the shared services
agreement maintain substantially similar defined contribution plans and
make annual contributions to their respective plans for officers and
employees equal to 15% of such person’s annual earnings, not to exceed
$34,500 in 2008, $33,750 in 2007 and $33,000 in 2006. With
respect to Patrick J. Callan, Jr. and Lawrence G. Ricketts, Jr., the
amount set forth in the “All Other Compensation” column includes annual
contributions made on their behalf in 2008, 2007 and 2006 to the defined
contribution plan. With respect to David W. Kalish, the “All
Other Compensation” column for 2006 includes the amount allocated to us
for the contribution, in the maximum amount, made on his behalf by one of
the parties to the shared services agreement to its defined contribution
plan. With respect to Fredric H. Gould and Matthew J. Gould for
2008, 2007 and 2006 and to David W. Kalish for 2008 and 2007, no amount
was contributed for their benefit under our defined contribution plan and
no amount was allocated to us for contributions made to the defined
contribution plan of any affiliated entity. Any amounts which
would have been allocated to us in 2008 or 2007 was allocated to
Majestic. See Item 13, “Certain Relationships and Related
Transactions, and Director Independence”
below.
|
(3)
|
Majestic
Property Management Corp. provided services to us in 2008, 2007and
2006. See Item 13, “Certain Relationships and Related
Transactions, and Director Independence” below. Majestic also
provides services to other affiliated entities and to non-affiliated
entities. We accounted for approximately 40%, 40% and 34%, respectively,
of Majestic’s revenues in 2008, 2007 and 2006. Neither we nor
Majestic can estimate with any certainty the percentage of 2008, 2007 and
2006 net income of Majestic which resulted from its activities on our
behalf. Accordingly, we have included in the “All Other Compensation”
column for Fredric H. Gould, David W. Kalish and Matthew J. Gould 100% of
the compensation each received from Majestic in 2008, 2007 and 2006, even
though the amount attributable to their activities on our behalf would be
less than is set forth in the “All Other Compensation”
column.
|
(4)
|
All
compensation received by Patrick J. Callan, Jr. and Lawrence J. Ricketts,
Jr. is paid solely and directly by
us.
|
(5)
|
Includes
$34,500, $33,750 and $33,000, our contribution on behalf of
Patrick J. Callan, Jr. in 2008, 2007 and 2006, respectively, to our
defined contribution plan, and dividends of $23,940, $26,903 and $10,463
paid to Mr. Callan in 2008, 2007 and 2006, respectively, on
restricted stock awarded to him. Also includes perquisites totaling
$24,943, $24,731 and $17,750, of which $19,018, $18,806 and
$15,775 represents an automobile allowance and automobile
maintenance and repairs in 2008, 2007 and 2006, respectively, and $5,925,
$5,925 and $1,975 represents the annual premium paid by us for additional
disability insurance in each of 2008, 2007 and
2006.
|
(6)
|
We
paid annual compensation of $250,000, $250,000 and $50,000 directly to
Fredric H. Gould in 2008, 2007 and 2006, respectively, as a fee for
services as chairman of our board of directors. We did not pay,
nor were we allocated, any portion of his base salary, bonus, defined
contribution plan contributions or perquisites in 2008, 2007 or
2006.
|
(7)
|
Includes
dividends of $21,247, $30,226 and $15,289 paid to Fredric H. Gould in
2008, 2007 and 2006, respectively, on restricted stock awarded to him, and
compensation of $264,100, $444,833 and $636,422 paid to him in 2008, 2007
and 2006, respectively, by Majestic, which provided services to us in
2008, 2007 and 2006. See Item 13, “Certain Relationships and Related
Transactions, and Director Independence”
below.
|
(8)
|
We
did not pay, nor were we allocated, any portion of David W. Kalish’s base
salary, bonus, defined contribution plan payments or perquisites in 2008
or 2007. In 2006, pursuant to the shared services agreement, a
portion of the base salary, bonus, defined contribution plan contribution
and perquisites for David W. Kalish was allocated to us under the shared
services agreement. Pursuant to the compensation and services
agreement, which became effective as of January 1, 2007, Majestic assumed
our obligation to pay our portion of the compensation (other than
restricted stock awards) of David W. Kalish under the shared services
agreement.
|
(9)
|
Includes
dividends of $21,247, $30,226 and $15,289 paid to David W. Kalish in 2008,
2007 and 2006, respectively, on restricted stock awarded to him, and
compensation of $139,000, $143,484 and $253,080 paid to him in 2008, 2007
and 2006, respectively, by Majestic. Also includes in 2006
perquisites of $12,847, representing an allocation pursuant to the shared
services agreement of a contribution to the defined contribution plan of
one of the parties to the shared services agreement, an allocation
incurred for additional disability and long-term care insurance and an
automobile allowance and automobile maintenance and
repairs.
|
(10)
|
The
2006 bonus includes a $50,000 bonus paid to Lawrence G. Ricketts, Jr. by
two joint ventures in which we are a 50% member. Our share of
the $50,000 bonus was $25,000. The amount set forth in the “All
Other Compensation” column for Lawrence G. Ricketts, Jr. includes our
contribution on Lawrence G. Ricketts, Jr.’s behalf of $34,500, $33,750 and
$33,000, in 2008, 2007 and 2006, respectively, to our defined contribution
plan, dividends of $20,986, $24,265 and $10,125 paid to Lawrence G.
Ricketts, Jr. in 2008, 2007 and 2006, respectively, on restricted stock
awarded to him, and perquisites of $6,819, $9,396 and $6,462 in 2008, 2007
and 2006, respectively, representing an automobile
allowance.
|
(11)
|
We
did not pay, nor were we allocated, any portion of Matthew J. Gould’s base
salary, bonus, defined contribution plan payments or perquisites in 2008,
2007 or 2006.
|
(12)
|
Includes
dividends of $21,247, $30,226 and $15,289 paid to Matthew J. Gould in
2008, 2007 and 2006, respectively, on restricted stock awarded to him and
compensation of $243,250, $289,511 and $399,546 paid to him in 2008, 2007
and 2006, respectively, by Majestic. See Item 13,
“Certain Relationships and Related Transactions, and Director
Independence” below.
|
GRANT
OF PLAN-BASED AWARDS DURING 2008
|
|
|
Estimated
Future Payouts Under
Equity
Incentive Plan Awards
|
|
Name
|
Grant
Date
|
Committee
Action
Date
|
Threshold
(#)
|
Target(#)
(1)
|
Maximum
(#)
|
Grant
Date Fair Value
of
Stock and Option
Awards(2)($)
|
Patrick
J. Callan, Jr.
|
2/29/08
|
12/10/07
|
—
|
6,000
|
—
|
105,000
|
Fredric
H. Gould
|
2/29/08
|
12/10/07
|
—
|
3,000
|
—
|
52,500
|
David
W. Kalish
|
2/29/08
|
12/10/07
|
—
|
3,000
|
—
|
52,500
|
Lawrence
G. Ricketts, Jr.
|
2/29/08
|
12/10/07
|
—
|
5,000
|
—
|
87,500
|
Matthew
J. Gould
|
2/29/08
|
12/10/07
|
—
|
3,000
|
—
|
52,500
|
(1)
|
This
column represents the grant in 2008 of restricted stock to each of our
named executive officers. These shares of restricted stock were granted
pursuant to agreements which provide for “cliff” vesting five years from
the grant date.
|
(2)
|
Shown
is the aggregate grant date fair value computed in accordance with
SFAS 123R for restricted stock awards in 2008. On the date the fair
value was computed, the closing price on the New York Stock Exchange for a
share of our common stock was $17.50. By contrast, the amount shown for
restricted stock awards in the Summary Compensation Table is the amount
expensed by us for financial statement purposes for awards granted in 2008
and prior years to the named executive
officers.
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR END
|
Stock
Awards
|
Name
|
Number
of Shares
or
Units of Stock
That
Have Not
Vested
(#)(1)
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)(2)
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)
|
Patrick
J. Callan, Jr.
|
18,000
|
158,400
|
—
|
—
|
Fredric
H. Gould
|
15,125
|
133,100
|
—
|
—
|
David
W. Kalish
|
15,125
|
133,100
|
—
|
—
|
Lawrence
G. Ricketts, Jr.
|
15,700
|
138,160
|
—
|
—
|
Matthew
J. Gould
|
15,125
|
133,100
|
—
|
—
|
(1)
|
Since
2003, we have only issued shares of restricted stock under our 2003
Incentive Plan. All shares of restricted stock issued by us vest five
years from the date of grant. Such awards pay dividends on a current
basis.
|
(2)
|
The
closing price on the New York Stock Exchange on December 31, 2008 for
a share of our common stock was
$8.80.
|
None of the named executive officers
hold any stock options and none were granted to any of the named executive
officers during the year.
Option Exercises and Stock
Vested
None of
the named executive officers had any stock options outstanding in
2008.
The
following table sets forth shares of restricted common stock which vested in
2008:
|
Stock
Awards
|
Name
|
Number
of Shares
Acquired
on Vesting
(#)
|
Value
Realized on Vesting
($)
|
Patrick
J. Callan, Jr.
|
750
|
12,585
|
Fredric
H. Gould
|
2,200
|
36,916
|
David
W. Kalish
|
2,200
|
36,916
|
Lawrence
G. Ricketts, Jr.
|
800
|
13,424
|
Matthew
J. Gould
|
2,200
|
36,916
|
Pension
Benefits
Since the
only pension benefit plan we maintain is a tax qualified defined contribution
plan, a Pension Benefits Table is not provided. Contributions to the defined
contribution plan for Patrick J. Callan, Jr. and Lawrence G. Ricketts, Jr. is
included in the Summary Compensation Table. In 2008 and 2007, we
neither paid nor were allocated any contribution to a defined contribution plan
for the benefit of Fredric H. Gould, David W. Kalish or Matthew J.
Gould.
We have
adopted a tax qualified defined contribution pension plan covering all our
full-time employees. The plan is administered by Fredric H. Gould, Simeon
Brinberg and David W. Kalish (Simeon Brinberg and David W. Kalish are
non-director officers). Annual contributions are based on 15% of an employee’s
annual earnings (including any cash bonus), not to exceed, pursuant to IRS
limitations, $34,500 per employee in 2008. Partial vesting commences two years
after employment, increasing annually until full vesting is achieved at the
completion of six years of employment. The method of payment of benefits to
participants upon retirement is determined solely by the participant, who may
elect a lump sum payment or the purchase of an annuity, the amount of which is
based on the amount of contributions and the results of the plan’s investments.
For the year ended December 31, 2008, $34,500 was contributed for the
benefit of Patrick J. Callan, Jr., with three years of credited service and
$34,500 was contributed for the benefit of Lawrence G. Ricketts, Jr. with ten
years of credited service. The aggregate amount accumulated to date for Patrick
J. Callan, Jr. and Lawrence G. Ricketts, Jr. is approximately $89,000 and
$186,000, respectively.
Non-Qualified Deferred
Compensation
We do not
provide any non-qualified deferred compensation to our executive
officers. For a description of any potential payments upon
termination or change-in-control, see “Compensation Discussion and
Analysis─Analysis─Potential
Payments upon Termination of Employment or Change of Control,”
above.
Director
Compensation—2008
Name(1)
|
Fees
Earned or
Paid
in Cash
($)(2)
|
Stock
Awards
($)(3)
|
All
Other Compensation
($)(4)
|
Total
($)
|
Joseph
A. Amato
|
26,000
|
23,284(5)
|
7,690
|
56,974
|
Charles
Biederman
|
39,000
|
32,316(6)
|
10,290
|
81,606
|
James
J. Burns
|
45,500
|
32,316(6)
|
10,290
|
88,106
|
Joseph
A. DeLuca
|
34,000
|
30,347(7)
|
9,750
|
74,097
|
Jeffrey
A. Gould
|
—
|
64,334(8)
|
21,247
|
85,581
|
J.
Robert Lovejoy
|
27,500
|
21,315(9)
|
7,150
|
55,965
|
Eugene
I. Zuriff
|
36,500
|
13,903(10)
|
4,550
|
54,953
|
(1)
|
The
compensation received by Fredric H. Gould, chairman of the board, Patrick
J. Callan, Jr., president, and Matthew J. Gould, senior vice president,
directors of our company, is set forth in the Summary Compensation Table
and are not included in the above
table.
|
(2)
|
Includes
all fees earned or paid in cash for services as a director, including
annual retainer fees, committee and committee chairman fees and meeting
fees.
|
(3)
|
Sets
forth the amount expensed for financial statement reporting purposes for
2008 in accordance with
SFAS 123R.
|
The table
below shows the aggregate number of unvested restricted shares held by the
directors listed in the above table as of December 31, 2008, all of which
vest five years from the grant date.
|
|
|
Joseph
A. Amato
|
5,500
|
Charles
Biederman
|
7,500
|
James
J. Burns
|
7,500
|
Joseph
A. DeLuca
|
7,500
|
Jeffrey
A. Gould
|
15,125
|
J.
Robert Lovejoy
|
5,500
|
Eugene
I. Zuriff
|
3,500
|
(4)
|
Sets
forth the cash dividends paid to directors in 2008 on unvested restricted
shares awarded under the One Liberty Properties, Inc. 2003 Incentive
Plan. Does not include compensation of $243,250 received in 2008 by
Jeffrey A. Gould from Majestic Property Management Corp., an entity wholly
owned by Fredric H. Gould, which performs services on our
behalf. See Item 13, “Certain Relationships and Related
Transactions, and Director Independence,”
below.
|
(5)
|
On
April 15, 2004, we awarded 1,000 shares of restricted stock, with a
grant date fair value of $19,750. On April 15, 2005, we awarded 1,000
shares of restricted stock, with a grant date fair value of $19,050. On
February 24, 2006, we awarded 1,000 shares of restricted stock, with
a grant date fair value of $20,660. On February 28, 2007, we awarded
1,250 shares of restricted stock, with a grant date fair value of $30,625.
On February 28, 2008, we awarded 1,250 shares of restricted stock,
with a grant date fair value of $21,875. Each share of restricted stock
vests five years after the date of
grant.
|
(6)
|
On
April 15, 2004, we awarded 1,000 shares of restricted stock, with a
grant date fair value of $19,750. On April 15, 2005, we awarded 1,000
shares of restricted stock, with a grant date fair value of $19,050. On
February 24, 2006, we awarded 2,000 shares of restricted stock, with
a grant date fair value of $41,320. On February 28, 2007, we awarded
2,250 shares of restricted stock, with a grant date fair value of $55,125.
On February 28, 2008, we awarded 1,250 shares of restricted stock,
with a grant date fair value of $21,875. Each share of restricted stock
vests five years after the date of
grant.
|
(7)
|
On
June 14, 2004, we awarded 1,000 shares of restricted stock, with a
grant date fair value of $18,010. On April 15, 2005, we awarded 1,000
shares of restricted stock, with a grant date fair value of $19,050. On
February 24, 2006, we awarded 2,000 shares of restricted stock, with
a grant date fair value of $41,320. On February 28, 2007, we awarded
2,250 shares of restricted stock, with a grant date fair value of $55,125.
On February 28, 2008, we awarded 1,250 shares of restricted stock,
with a grant date fair value of $21,875. Each share of restricted stock
vests five years after the date of
grant.
|
(8)
|
All
of the directors in this table are non-management directors, except for
Jeffrey A. Gould. Jeffrey A. Gould was and continues to be an
officer of the Company. The award of shares to him was in his
capacity as an officer and not in his capacity as a
director. On April 15, 2004, we awarded 2,825 shares of
restricted stock, with a grant date fair value of $55,794. On
April 15, 2005, we awarded 3,300 shares of restricted stock, with a
grant date fair value of $62,865. On February 24, 2006, we awarded
3,000 shares of restricted stock, with a grant date fair value of $61,980.
On February 28, 2007, we awarded 3,000 shares of restricted stock,
with a grant date fair value of $73,500. On February 28, 2008, we
awarded 3,000 shares of restricted stock, with a grant date fair value of
$52,500. Each share of restricted stock vests five years after the date of
grant.
|
(9)
|
On
June 14, 2004, we awarded 1,000 shares of restricted stock, with a
grant date fair value of $18,010. On April 15, 2005, we awarded 1,000
shares of restricted stock, with a grant date fair value of $19,050. On
February 24, 2006, we awarded 1,000 shares of restricted stock, with
a grant date fair value of $20,660. On February 28, 2007, we awarded
1,250 shares of restricted stock, with a grant date fair value of $30,625.
On February 28, 2008, we awarded 1,250 shares of restricted stock,
with a grant date fair value of $21,875. Each share of restricted stock
vests five years after the date of
grant.
|
(10)
|
On
February 24, 2006, we awarded 1,000 shares of restricted stock, with
a grant date fair value of $20,660. On February 28, 2007, we awarded
1,250 shares of restricted stock, with a grant date fair value of $30,625.
On February 28, 2008, we awarded 1,250 shares of restricted stock,
with a grant date fair value of $21,875. Each share of restricted stock
vests five years after the date of
grant.
|
The
compensation for our non-management directors is essentially the same for each
non-management director. Non-management members of our board of
directors are paid an annual retainer of $20,000. In addition to
regular board fees, each member of the audit committee is paid an annual
retainer of $5,000, the chairman of the audit committee and the chairman of the
compensation committee is each paid an additional annual retainer of $2,000, the
audit committee financial expert is paid an additional annual retainer of
$7,500, each member of the compensation committee is paid an annual retainer of
$3,000 and each member of the nominating and corporate governance committee is
paid an annual retainer of $3,000. Each non-management director is also paid
$1,000 for each board and committee meeting attended in person and $500 for each
meeting attended by telephone conference, except for audit committee members who
are paid $1,000 for each audit committee meeting attended, whether in person or
by telephone conference. In each year the compensation committee has
awarded restricted shares to each director. In 2008 1,250 restricted
shares were awarded to each.
Compensation
of our non-management directors is reviewed by our compensation committee and
recommended by the committee to the board of directors, which makes the final
determination. On two occasions the compensation committee retained a
compensation consultant to provide information with respect to board of
directors’ compensation pay practices, comparing the compensation of our
directors to comparable companies. In November 2008, the committee
retained FPL Associates LP to provide compensation information with respect to
our board of directors. In December 2008, the compensation consultant
reported the following key findings to our compensation committee:
|
·
|
our
board compensation program generally ranks with market practices compared
to the peer group companies. The compensation consultant did
not recommend materially changing compensation levels of the director
compensation components, particularly given our smaller size compared to
our peers; and
|
|
·
|
from
a structural perspective our program is unique in that we pay committee
members retainers, which is not a prevalent practice among peer companies,
and we do not emphasize committee chair retainers (except audit
committee), which is a prevalent practice among peer
companies.
|
In comparing the compensation of our
directors to practices at comparable firms, the compensation consultant used the
full-time peer group it used in the executive compensation benchmarking
discussed under the caption “Executive Compensation – Compensation
Consultant.”
Jeffrey
A. Gould, a management director and an executive officer, was awarded 3,000
shares of restricted common stock under our Incentive Plan in
2008. With respect to the compensation of Patrick J. Callan, Jr., our
president and chief executive officer and a management director, Fredric H.
Gould, chairman of our board and a management director, and Matthew J. Gould, a
senior vice president and management director reference is made to “Executive
Compensation – Summary Compensation Table.”
Compensation Committee
Interlocks and Insider Participation
During 2008, Eugene I. Zuriff , J.
Robert Lovejoy and Charles Biederman served on our compensation committee. None
of these committee members were officers or employees of our company during
2008, or at any other time in the past. While serving on the committee, these
members were independent directors pursuant to applicable NYSE rules, and none
had any relationship requiring disclosure by the Company under any paragraph of
Item 404 (Transaction with Related Persons, Promoters and Certain Control
Persons).
Report of the Compensation
Committee
The
compensation committee of the board of directors has reviewed the Compensation
Discussion and Analysis, set forth herein, and discussed it with management, and
based on such review and discussions, recommends to the board of directors that
the Compensation Discussion and Analysis be included in this Annual
Report.
Compensation
Committee:
Eugene I.
Zuriff (chair)
J. Robert
Lovejoy
Charles
Biederman
Item
12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The
following table sets forth information as of March 24, 2009 concerning shares of
our common stock owned by (i) all persons known to own beneficially 5% or
more of our outstanding stock, (ii) all directors, (iii) each
executive officer named in the Summary Compensation Table, and (iv) all
directors and executive officers as a group.
|
|
Amount
of
Beneficial
Ownership(1)
|
|
Joseph
A. Amato
615
Route 32
Highland
Mills, NY 10930-0503
|
|
7,161
|
*
|
|
|
|
|
Charles
Biederman
5
Sunset Drive
Englewood,
CO 80110
|
|
17,399
|
*
|
|
|
|
|
James
J. Burns
390
Dogwood Lane
Manhasset,
NY 10030
|
|
10,476
|
*
|
|
|
|
|
Patrick
J. Callan, Jr.(2)
|
|
19,750
|
*
|
|
|
|
|
Joseph
A. DeLuca
154
East Shore Road
Huntington
Bay, NY 11743
|
|
9,300
|
*
|
Fredric
H. Gould(2)(3)(4)
|
|
1,510,912
|
14.8%
|
|
|
|
|
Jeffrey
A. Gould(2)(5)
|
|
170,853
|
1.7%
|
|
|
|
|
Matthew
J. Gould(2)(3)(6)
|
|
1,264,822
|
12.4%
|
|
|
|
|
Gould
Investors L.P.(2)(3)
|
|
1,031,806
|
10.1%
|
|
|
|
|
David
W. Kalish(2)(7)
|
|
203,623
|
2.0%
|
|
|
|
|
J.
Robert Lovejoy(8)
640
Fifth Avenue
New
York, NY 10019
|
|
6,523
|
*
|
|
|
|
|
Lawrence
G. Ricketts, Jr.(2)
|
|
25,500
|
*
|
|
|
|
|
Eugene
I. Zuriff
145
Central Park West
New
York, NY 10023
|
|
3,500
|
*
|
|
|
|
|
Barclays
Global Investors, N.A.(9)
400
Howard Street
San
Francisco, CA 94105
|
|
869,795
|
8.5%
|
|
|
|
|
Directors
and officers as a group (18 individuals)(10)
|
|
2,321,674
|
22.8%
|
(1)
|
Securities
are listed as beneficially owned by a person who directly or indirectly
holds or shares the power to vote or to dispose of the securities, whether
or not the person has an economic interest in the securities. In addition,
a person is deemed a beneficial owner if he has the right to acquire
beneficial ownership of shares within 60 days, whether upon the
exercise of a stock option or otherwise. The percentage of beneficial
ownership is based on 10,175,345 shares of common stock outstanding on
March 24, 2009.
|
(2)
|
Address
is 60 Cutter Mill Road, Great Neck, NY
11021.
|
(3)
|
Fredric
H. Gould is sole stockholder, sole director and chairman of the board of
the corporate managing general partner of Gould Investors L.P. and
sole member of a limited liability company which is the other general
partner of Gould Investors L.P. Matthew J. Gould is president of the
corporate managing general partner of Gould Investors L.P. Fredric H.
Gould and Matthew J. Gould have shared voting and dispositive power with
respect to the shares owned by Gould
Investors L.P.
|
(4)
|
Includes
333,393 shares of common stock owned directly, 1,031,806 shares of common
stock owned by Gould Investors L.P. and 145,713 shares of common
stock owned by entities and trusts over which Fredric H. Gould has sole or
shared voting and dispositive power. Does not include 49,566 shares of
common stock owned by Mrs. Fredric H. Gould, as to which shares Fredric H.
Gould disclaims any beneficial interest and Mrs. Gould has sole
voting and investment power.
|
(5)
|
Includes
160,153 shares of common stock owned directly and 10,700 shares of common
stock owned as custodian for minor children (as to which shares Jeffrey A.
Gould disclaims any beneficial
interest).
|
(6)
|
Includes
198,282 shares of common stock owned directly, 34,734 shares of common
stock owned as custodian for minor children (as to which shares Matthew J.
Gould disclaims any beneficial interest) and 1,031,806 shares of common
stock owned by Gould Investors L.P. Does not include 3,552 shares of
common stock owned by Mrs. Matthew J. Gould, as to which shares
Matthew J. Gould disclaims any beneficial interest and Mrs. Gould has
sole voting and investment power.
|
(7)
|
Includes
50,568 shares of common stock owned directly, 2,750 shares of common stock
owned by David W. Kalish’s IRA and profit sharing trust, of
which David W. Kalish is the sole beneficiary, and 150,305 shares of
common stock owned by pension trusts over which David W. Kalish has
shared voting and dispositive power. Does not include 416 shares of common
stock owned by Mrs. Kalish, as to which shares David W. Kalish
disclaims any beneficial interest and Mrs. Kalish has sole voting and
investment power.
|
(8)
|
Includes
6,223 shares of common stock owned directly and 300 shares of common stock
owned as custodian for minor children and another child (as to which
shares J. Robert Lovejoy disclaims any beneficial
interest).
|
(9)
|
Barclays
Global Investors, N.A., Barclays Global Fund Advisors, Barclays Global
Investors, Ltd., Barclays Global Investors Japan Limited,
Barclays Global Investors Canada Limited, Barclays Global Investors
Australia Limited and Barclays Global Investors (Deutschland) AG jointly
filed with the Securities and Exchange Commission a Schedule 13G,
dated February 6, 2009, reflecting the beneficial ownership of
869,795 shares of common stock with respect to which they have sole power
to vote 869,785 shares and sole power to dispose of 869,795 shares. The
above information has been obtained from such
Schedule 13G.
|
(10)
|
This
total is qualified by notes (3) through
(8).
|
Item
13. Certain Relationships and Related Transactions, and Director
Independence.
Introduction
Fredric
H. Gould, chairman of our board of directors, is chairman of the board of
trustees of BRT Realty Trust, a REIT engaged in mortgage lending. He
is also the chairman of the board of directors and sole stockholder of the
managing general partner of Gould Investors L.P. and sole member of a limited
liability company which is also a general partner of Gould Investors
L.P. Gould Investors L.P. owns approximately 10% of our outstanding
shares of common stock. Matthew J. Gould, a director and senior vice
president of our company, is a senior vice president of BRT Realty Trust and
president of the managing general partner of Gould Investors
L.P. Jeffrey A. Gould, a director and senior vice president of our
company, is president and chief executive officer of BRT Realty Trust and a
senior vice president of the managing general partner of Gould Investors
L.P. Matthew J. Gould and Jeffrey A. Gould are brothers and the sons
of Fredric H. Gould. In addition, David W. Kalish, Mark H. Lundy,
Simeon Brinberg and Israel Rosenzweig, each of whom is an officer of our
company, are officers of BRT Realty Trust and of the managing general partner of
Gould Investors L.P. Mark H. Lundy is Simeon Brinberg’s
son-in-law.
Related Party
Transactions
In 2006,
in connection with a review of our allocation policy and procedures under a
shared services agreement and our related party transactions with affiliated
entities, our audit committee recommended to the compensation committee and our
board of directors a change in the manner in which compensation is paid to our
part-time officers and employees. The audit committee proposed and,
after discussions with our part-time officers, our audit committee, compensation
committee and board of directors authorized and approved a compensation and
services agreement between us and Majestic, which became effective as of January
1, 2007. Pursuant to the compensation and services agreement, we
agreed to pay an annual fee to Majestic and annual compensation to the chairman
of our board, and Majestic agreed to assume all of our obligations under a
shared services agreement, and to provide to us the services of all affiliated
executive, administrative, legal, accounting and clerical personnel that we had
previously utilized on a part-time basis, as well as property management
services, property acquisition, sales and lease consulting and brokerage
services, consulting services in respect to mortgage financings and construction
supervisory services. In accordance with the compensation and
services agreement, we paid a fee of $2,025,000 to Majestic in 2008 for our
obligations under the shared services agreement and the provision of the
referenced services, of which $12,000 was paid by one of our joint ventures
($6,000 of this payment being attributable to us as a joint venture
partner). In addition, in accordance with the compensation and
services agreement, in 2008 we paid our chairman compensation of $250,000 and
paid Majestic an additional $175,000 for our share of direct office expenses,
including rent, telephone, computer services, internet usage. Majestic is wholly
owned by the chairman of our board, and certain of our part-time officers,
including our part-time named executive officers, are officers of, and receive
compensation from, Majestic. The annual payments made by us to Majestic pursuant
to the compensation and services agreement are reviewed and renegotiated by our
audit committee with our part-time officers annually and at other times as may
be determined by our audit committee. Any payments to Majestic are
approved by our compensation committee and board of directors.
Of the
amount paid by us and our joint venture in 2008 under the compensation and
services agreement, $175,000 represented a negotiated payment of our share of
direct office expenses, including rent, telephone, postage, computer services,
internet usage. Our full-time and part-time officers and employees
occupy space in an office building owned by a subsidiary of Gould Investors
L.P. The rent expense for this space is included in the $175,000
expenditure. We also lease under a direct lease with the subsidiary
of Gould Investors L.P. approximately 1,200 square feet of additional space in
the same office building at an annual rent of $43,000, which is competitive rent
for comparable office space in the area in which the building is
located.
The
amount paid by us and our joint venture to Majestic in 2008 pursuant to the
compensation and services agreement represented approximately 40% of the
revenues of Majestic in 2008. Majestic provides property management
services, property acquisition, sales and lease consulting and brokerage
services, consulting services in respect to mortgage financings, and
construction supervisory services for affiliated and non-affiliated
entities. In 2008, the following officers of ours (some of whom are
also officers of Majestic) received the following compensation from Majestic:
Fredric H. Gould, $264,100; Matthew J. Gould, $243,250; David W. Kalish,
$139,000; Jeffrey A. Gould, $243,250; Simeon Brinberg, $69,500; Mark H. Lundy,
$194,600 and Israel Rosenzweig, $180,700. A portion of the
compensation received by these individuals from Majestic results from services
performed and fees earned by Majestic from entities (both affiliated and
non-affiliated) other than us. Messrs. Fredric H. Gould, Matthew J.
Gould, David W. Kalish, Jeffrey A. Gould, Simeon Brinberg, Mark H. Lundy and
Israel Rosenzweig also received compensation in 2008 from other entities wholly
owned by Mr. Fredric H. Gould, all of which are parties to the shared services
agreement and none of which provided services to us in 2008.
Effective
January 1, 2007, we, Gould Investors L.P., BRT Realty Trust and Mr. Fredric H.
Gould (personally) purchased from Citation Share Sales, Inc., a fractional 6.25%
interest in an airplane. We purchased our fractional interest in
order to facilitate property site inspections by our officers. We
purchased 20% of the 6.25% of interest for $86,000 (depreciable over five
years), representing our pro rata share of the total purchase price and agreed
to pay our pro rata share of the operating costs, which totaled $45,000 in
2008. The management agreement for the airplane with Citation Share
Sales, Inc. is for a period of five years and provides for the monthly operating
costs to be adjusted annually, based upon a fixed schedule set forth in the
agreement. Georgetown Partners, Inc., managing general partner of
Gould Investors L.P., acting as nominee for the purchasers, executed the
purchase agreement and “management agreement.” We are allotted our
pro rata share of 250 hours of usage under the purchase agreement for the five
years of the agreement. The airplane (or any substitute airplane used
pursuant to the terms of the agreement) is used by us for business purposes
only. All payments made by us in this transaction are made directly
to the seller of the aircraft and the manager, both unrelated
parties. At the conclusion of each year, the parties which purchased
the fractional interest and pay a pro rata share of operating expenses “true up”
operating expenses in the event any participant uses hours in excess of those
allotted to it. In fiscal 2008, we incurred net maintenance charges
of $32,000 (after reimbursement to us of $13,000 after completion of the “true
up” process) and expensed depreciation of $17,000 with respect to the fractional
interest. The purchasers of the 6.25% fractional interest, as a
group, have the right to reconvey the interest to a seller at any time, twelve
months subsequent to the date that title to the aircraft is acquired, at a price
equal to the fair market value of the interest, determined by negotiation, and,
if the parties cannot agree on a price, then independent third party appraisals
are to be performed.
Policies and
Procedures
Any
transaction with affiliated entities raises the potential that we may not
receive terms as favorable as those that we would receive if the transactions
were entered into with unaffiliated entities or that our officers might
otherwise seek benefits for affiliated entities at our expense. Our amended and
restated code of business conduct and ethics, in the “Conflicts of Interest”
section, provides that we may enter into a contract or transaction with an
affiliated entity provided that any such transaction is approved by our audit
committee which is satisfied that the fees, charges and other payments made to
the affiliated entities are at no greater cost or expense to us then would be
incurred if we were to obtain substantially the same services from unrelated and
unaffiliated persons. The term “affiliated entities” is defined in the code as
all parties to the shared services agreement and other entities in which
officers and directors have an interest.
If a
related party transaction is entered into, our audit committee is advised of
such transaction and reviews the facts of the transaction and either approves or
disapproves the transaction. If a transaction relates to a member of our audit
committee, such member will not participate in the audit committee’s
deliberations. If our audit committee approves or ratifies, as the case may be,
a related party transaction, it will present the facts of the transaction to our
board of directors and recommend that our board of directors approve or ratify
such related party transaction. Our board of directors then reviews the
transaction and a majority of our board of directors, including a majority of
our independent directors, must approve/ratify or disapprove such related party
transaction. If a transaction relates to a member of our board of directors,
such member will not participate in the board’s deliberations.
Director
Independence
The board
has affirmatively determined that Joseph A. Amato, Charles Biederman, James J.
Burns, Joseph A. DeLuca, J. Robert Lovejoy and Eugene I. Zuriff, a majority of
our board of directors, are “independent” for the purposes of Section 303A of
the Listed Company Manual of the New York Stock Exchange; that the members of
our audit committee are independent for the purposes of Section 10A(m)(3) of the
Securities Exchange Act of 1934, as amended, and Section 303.01 of the Listed
Company Manual; and that the members of our compensation and our nominating and
corporate governance committees are independent under Section 303A of the Listed
Company Manual.
The board
based these determinations primarily on a review of the responses of the
directors to questions regarding employment and compensation history,
affiliations, family and other relationships and discussions with the directors.
To be considered independent a director must not have a material relationship
with us that could interfere with a director’s independent judgment and must be
“independent” within the meaning of the New York Stock Exchange’s requirements.
In determining the independence of each of the foregoing, the board considered
(i) a passive investment by Gould Investors L.P., an affiliate of the company,
in a real estate project sponsored and managed by an entity affiliated with Mr.
Biederman, which investment was liquidated in February 2006; (ii) Mr. DeLuca’s
rental of an office in a suite of offices from an affiliate of the company for
$800 per month, on a month to month basis, which rental was terminated in April
2006, and (iii) fees totaling $1,382,400 paid in 2007 to a merchant banking firm
in which Mr. Lovejoy is a managing director by BRT Realty Trust, an entity which
may be deemed an affiliate of ours, for investment banking services which such
firm performed for BRT Realty Trust.
Item
14. Principal Accounting Fees and Services.
The
following table presents the fees for professional audit services billed by
Ernst & Young LLP for the audit of our annual consolidated
financial statements for the years ended December 31, 2008 and 2007, and
fees billed for other services rendered to us by Ernst & Young LLP
for each of such years:
|
|
|
|
|
|
|
Audit
fees(1)
|
|
$ |
373,100 |
|
|
$ |
330,000 |
|
Audit-related
fees(2)
|
|
|
----- |
|
|
|
58,200 |
|
Tax
fees(3)
|
|
|
14,400 |
|
|
|
8,600 |
|
Total
fees
|
|
$ |
387,500 |
|
|
$ |
396,800 |
|
(1)
|
Audit
fees include fees for the audit of our annual consolidated financial
statements and for review of financial statements included in our
quarterly reports on Form 10-Q. Included in the audit fees
for Fiscal 2008 and 2007 are $94,500 and $105,000, respectively, for
services rendered in connection with our compliance with Section 404 of
the Sarbanes-Oxley Act of 2002.
|
(2)
|
Audit-related
fees include fees for audits performed for significant property
acquisitions and dispositions required by the rules and regulations of the
Securities and Exchange Commission and fees related to services rendered
in connection with registration statements filed with the Securities and
Exchange Commission.
|
(3)
|
Tax
fees consist of fees for tax advice, tax compliance and tax
planning.
|
The audit
committee has concluded that the provision of non-audit services listed above is
compatible with maintaining the independence of Ernst &
Young LLP.
Pre-Approval Policy for
Audit and Non-Audit Services
The audit
committee must pre-approve all audit and non-audit services involving our
independent registered public accounting firm.
In
addition to the audit work necessary for us to file required reports under the
Securities Exchange Act of 1934, as amended (i.e., quarterly reports on
Form 10-Q and annual reports on Form 10-K), our independent registered
public accounting firm may perform non-audit services, other than those
prohibited by the Sarbanes-Oxley Act of 2002, provided they are approved by the
audit committee. The audit committee approved all audit and non-audit services
performed by our independent registered public accounting firm in 2008 and
2007.
Approval
Process
Annually,
the audit committee reviews and approves the audit scope concerning the audit of
our consolidated financial statements for that year, including the proposed
audit fee associated with the audit and services in connection with our
compliance with Section 404 of the Sarbanes-Oxley Act of 2002. The audit
committee may, at the time it approves the audit scope or subsequently
thereafter, approve the provision of tax related non-audit services and the
maximum expenditure which may be incurred for such tax services for such year.
Any fees for the audit in excess of those approved and any fees for tax related
services in excess of the maximum established by the audit committee must
receive the approval of the audit committee.
Proposals
for any other non-audit services to be performed by the independent registered
public accounting firm must be approved by the audit committee.
PART
IV
(a) Documents
filed as part of this Report:
(1) The
following financial statements of the Company are included in this Report on
Form 10-K:
- Report
of Independent Registered Public Accounting Firm
|
|
F-1
and F-2
|
|
- Statements:
|
|
|
|
Consolidated
Balance Sheets
|
|
F-3
|
|
Consolidated
Statements of Income
|
|
F-4
|
|
Consolidated
Statements of Stockholders' Equity
|
|
F-5
|
|
Consolidated
Statements of Cash Flows
|
|
F-6
through F-7
|
|
Notes
to Consolidated Financial Statements
|
|
F-8
through F-29
|
|
(2) Financial
Statement Schedules:
- Schedule
III-Real Estate and Accumulated Depreciation
|
|
F-30 through F-32
|
|
(3) Exhibits:
Exhibits
unaffected by this Amendment No. 1 have been omitted.
|
23.1
|
Consent
of Ernst & Young LLP*
|
|
31.1
|
Certification
of President and Chief Executive
Officer*
|
|
31.2
|
Certification
of Senior Vice President and Chief Financial
Officer*
|
|
32.1
|
Certification
of President and Chief Executive
Officer*
|
|
32.2
|
Certification
of Senior Vice President and Chief Financial
Officer*
|
* Filed
herewith.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Exchange, the Registrant has
duly caused this report to be signed on its behalf of the undersigned, thereunto
duly authorized.
March 31,
2009
|
ONE
LIBERTY PROPERTIES, INC.
|
|
|
|
|
|
|
By:
|
/s/ Simeon
Brinberg |
|
|
|
Simeon
Brinberg
|
|
|
|
Senior
Vice President
|
|
|
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors and Stockholders of
One
Liberty Properties, Inc. and Subsidiaries
We have
audited One Liberty Properties, Inc. and Subsidiaries’ (the “Company”) internal
control over financial reporting as of December 31, 2008, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO
criteria). The Company’s management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting included in the
accompanying Management Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2008, based on the COSO criteria.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of One Liberty
Properties, Inc. and Subsidiaries as of December 31, 2008 and 2007, and the
related consolidated statements of income, stockholders’ equity, and cash flows
for each of the three years in the period ended December 31, 2008 of the Company
and our report dated March 10, 2009 expressed an unqualified opinion
thereon.
/s/ Ernst
& Young LLP
New York,
New York
March 10,
2009
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of
One
Liberty Properties, Inc. and Subsidiaries
We have
audited the accompanying consolidated balance sheets of One Liberty Properties,
Inc. and Subsidiaries (the "Company") as of December 31, 2008 and 2007, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31,
2008. Our audits also included the financial statement schedule
listed in the Index at Item 15(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of One Liberty
Properties, Inc. and Subsidiaries at December 31, 2008 and 2007, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2008, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), One Liberty Properties, Inc. and Subsidiaries’
internal control over financial reporting as of December 31, 2008, based on
criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report
dated March 10, 2009 expressed an unqualified opinion thereon.
/s/ Ernst
& Young LLP
New York,
New York
March 10,
2009
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated
Balance Sheets
(Amounts
in Thousands, Except Per Share Data)
ASSETS
|
|
December 31,
|
|
Real
estate investments, at cost
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Land
|
|
$ |
95,545 |
|
|
$ |
72,386 |
|
Buildings
and improvements
|
|
|
336,609 |
|
|
|
307,884 |
|
|
|
|
432,154 |
|
|
|
380,270 |
|
Less
accumulated depreciation
|
|
|
44,698 |
|
|
|
36,228 |
|
|
|
|
387,456 |
|
|
|
344,042 |
|
|
|
|
|
|
|
|
|
|
Investment
in unconsolidated joint ventures
|
|
|
5,857 |
|
|
|
6,570 |
|
Cash
and cash equivalents
|
|
|
10,947 |
|
|
|
25,737 |
|
Restricted
cash
|
|
|
- |
|
|
|
7,742 |
|
Unbilled
rent receivable
|
|
|
10,916 |
|
|
|
9,893 |
|
Unamortized
intangible lease assets
|
|
|
8,481 |
|
|
|
4,935 |
|
Escrow,
deposits and other receivables
|
|
|
1,569 |
|
|
|
2,465 |
|
Investment
in BRT Realty Trust at market (related party)
|
|
|
111 |
|
|
|
459 |
|
Unamortized
deferred financing costs
|
|
|
2,856 |
|
|
|
3,119 |
|
Other
assets (including available-for-sale securities at market
of
$297 and $1,024)
|
|
|
912 |
|
|
|
1,672 |
|
|
|
$ |
429,105 |
|
|
$ |
406,634 |
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages
and loan payable
|
|
$ |
225,514 |
|
|
$ |
222,035 |
|
Line
of credit
|
|
|
27,000 |
|
|
|
- |
|
Dividends
payable
|
|
|
2,239 |
|
|
|
3,638 |
|
Accrued
expenses and other liabilities
|
|
|
5,143 |
|
|
|
4,252 |
|
Unamortized
intangible lease liabilities
|
|
|
5,234 |
|
|
|
5,470 |
|
Total
liabilities
|
|
|
265,130 |
|
|
|
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;
9,962
and 9,906 shares issued and outstanding
|
|
|
9,962 |
|
|
|
9,906 |
|
Paid-in
capital
|
|
|
138,688 |
|
|
|
137,076 |
|
Accumulated
other comprehensive (loss) income – net unrealized
(loss)
gain on available-for-sale securities
|
|
|
(239 |
) |
|
|
344 |
|
Accumulated
undistributed net income
|
|
|
15,564 |
|
|
|
23,913 |
|
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
163,975 |
|
|
|
171,239 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
429,105 |
|
|
$ |
406,634 |
|
See
accompanying notes.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated
Statements of Income
(Amounts
in Thousands, Except Per Share Data)
|
|
Year
Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Rental
income
|
|
$ |
40,341 |
|
|
$ |
38,149 |
|
|
$ |
33,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
8,971 |
|
|
|
8,248 |
|
|
|
6,995 |
|
General
and administrative (including $2,188, $2,290
and
$1,317, respectively, to related parties)
|
|
|
6,508 |
|
|
|
6,430 |
|
|
|
5,250 |
|
Impairment
charge
|
|
|
5,983 |
|
|
|
- |
|
|
|
- |
|
Federal
excise tax
|
|
|
- |
|
|
|
91 |
|
|
|
490 |
|
Real
estate expenses
|
|
|
685 |
|
|
|
293 |
|
|
|
270 |
|
Leasehold
rent
|
|
|
308 |
|
|
|
308 |
|
|
|
308 |
|
Total
operating expenses
|
|
|
22,455 |
|
|
|
15,370 |
|
|
|
13,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
17,886 |
|
|
|
22,779 |
|
|
|
20,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
in earnings (loss) of unconsolidated joint ventures
|
|
|
622 |
|
|
|
648 |
|
|
|
(3,276 |
) |
Gain
on dispositions of real estate - unconsolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
joint
ventures
|
|
|
297 |
|
|
|
583 |
|
|
|
26,908 |
|
Interest
and other income
|
|
|
533 |
|
|
|
1,776 |
|
|
|
899 |
|
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
(15,645 |
) |
|
|
(14,931 |
) |
|
|
(12,524 |
) |
Amortization
of deferred financing costs
|
|
|
(631 |
) |
|
|
(638 |
) |
|
|
(595 |
) |
Gain
on sale of excess unimproved land and other gains
|
|
|
1,830 |
|
|
|
- |
|
|
|
413 |
|
Income
from continuing operations
|
|
|
4,892 |
|
|
|
10,217 |
|
|
|
31,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
- |
|
|
|
373 |
|
|
|
883 |
|
Net
gain on sale
|
|
|
- |
|
|
|
- |
|
|
|
3,660 |
|
Income
from discontinued operations
|
|
|
- |
|
|
|
373 |
|
|
|
4,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
4,892 |
|
|
$ |
10,590 |
|
|
$ |
36,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,183 |
|
|
|
10,069 |
|
|
|
9,931 |
|
Diluted
|
|
|
10,183 |
|
|
|
10,069 |
|
|
|
9,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share – basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
.48 |
|
|
$ |
1.01 |
|
|
$ |
3.21 |
|
Income
from discontinued operations
|
|
|
- |
|
|
|
.04 |
|
|
|
.46 |
|
Net
income per common share
|
|
$ |
.48 |
|
|
$ |
1.05 |
|
|
$ |
3.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
distributions per share of common stock
|
|
$ |
1.30 |
|
|
$ |
2.11 |
|
|
$ |
1.35 |
|
See
accompanying notes.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated
Statements of Stockholders’ Equity
For the
Three Years Ended December 31, 2008
(Amounts
in Thousands, Except Per Share Data)
|
|
Common
Stock
|
|
|
Paid-in
Capital
|
|
|
Accumulated
Other
Comprehen-
sive
Income
(Loss)
|
|
|
Unearned
Compen-
sation
|
|
|
Accumulated
Undistributed
Net
Income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2005
|
|
$ |
9,770 |
|
|
$ |
134,645 |
|
|
$ |
818 |
|
|
$ |
(1,250 |
) |
|
$ |
11,536 |
|
|
$ |
155,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
upon the adoption
of
FASB No. 123 (R)
|
|
|
- |
|
|
|
(1,250 |
) |
|
|
- |
|
|
|
1,250 |
|
|
|
- |
|
|
|
- |
|
Distributions
–
common
stock ($1.35 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(13,420 |
) |
|
|
(13,420 |
) |
Exercise
of options
|
|
|
9 |
|
|
|
101 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
110 |
|
Shares
issued through
dividend
reinvestment plan
|
|
|
44 |
|
|
|
815 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
859 |
|
Compensation
expense –
restricted
stock
|
|
|
- |
|
|
|
515 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
515 |
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
36,425 |
|
|
|
36,425 |
|
Other
comprehensive income –
net
unrealized gain on
available-for-sale
securities
|
|
|
- |
|
|
|
- |
|
|
|
117 |
|
|
|
- |
|
|
|
- |
|
|
|
117 |
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2006
|
|
|
9,823 |
|
|
|
134,826 |
|
|
|
935 |
|
|
|
- |
|
|
|
34,541 |
|
|
|
180,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
–
common
stock ($2.11 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(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 ($1.30 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(13,241 |
) |
|
|
(13,241 |
) |
Repurchase
of common stock
|
|
|
(125 |
) |
|
|
(1,702 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,827 |
) |
Shares
issued through
dividend
reinvestment plan
|
|
|
158 |
|
|
|
2,449 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,607 |
|
Restricted
stock vesting
|
|
|
23 |
|
|
|
(23 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Compensation
expense –
restricted
stock
|
|
|
- |
|
|
|
888 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
888 |
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,892 |
|
|
|
4,892 |
|
Other
comprehensive income-
net
unrealized loss on
available-for-sale
securities
|
|
|
- |
|
|
|
- |
|
|
|
(583 |
) |
|
|
- |
|
|
|
- |
|
|
|
(583 |
) |
Comprehensive
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2008
|
|
$ |
9,962 |
|
|
$ |
138,688 |
|
|
$ |
(239 |
) |
|
$ |
- |
|
|
$ |
15,564 |
|
|
$ |
163,975 |
|
See
accompanying notes.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated
Statements of Cash Flows
(Amounts
in Thousands)
|
|
Year
Ended December 31,
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
4,892 |
|
|
$ |
10,590 |
|
|
$ |
36,425 |
|
Adjustments
to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on sale of excess unimproved land, real estate and other
|
|
|
(1,830 |
) |
|
|
(122 |
) |
|
|
(4,181 |
) |
Increase
in rental income from straight-lining of rent
|
|
|
(1,023 |
) |
|
|
(1,674 |
) |
|
|
(1,763 |
) |
Increase
in rental income from amortization of
intangibles relating to leases
|
|
|
(371 |
) |
|
|
(250 |
) |
|
|
(187 |
) |
Impairment
charge
|
|
|
5,983 |
|
|
|
- |
|
|
|
- |
|
Amortization
of restricted stock expense
|
|
|
888 |
|
|
|
826 |
|
|
|
515 |
|
Change
in fair value of non-qualifying interest rate swap
|
|
|
650 |
|
|
|
- |
|
|
|
- |
|
Gain
on dispositions of real estate related to unconsolidated joint
ventures
|
|
|
(297 |
) |
|
|
(583 |
) |
|
|
(26,908 |
) |
Equity
in (earnings) loss of unconsolidated joint ventures
|
|
|
(622 |
) |
|
|
(648 |
) |
|
|
3,276 |
|
Distributions
of earnings from unconsolidated joint ventures
|
|
|
535 |
|
|
|
1,089 |
|
|
|
24,165 |
|
Depreciation
and amortization
|
|
|
8,971 |
|
|
|
8,248 |
|
|
|
7,091 |
|
Amortization
of financing costs
|
|
|
631 |
|
|
|
638 |
|
|
|
600 |
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
(increase) in escrow, deposits and other receivables
|
|
|
937 |
|
|
|
(92 |
) |
|
|
(945 |
) |
Increase
(decrease) in accrued expenses and other liabilities
|
|
|
93 |
|
|
|
(138 |
) |
|
|
839 |
|
Net
cash provided by operating activities
|
|
|
19,437 |
|
|
|
17,884 |
|
|
|
38,927 |
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of real estate and improvements
|
|
|
(60,009 |
) |
|
|
(423 |
) |
|
|
(79,636 |
) |
Net
proceeds from sale of excess unimproved land, real estate and
other
|
|
|
2,976 |
|
|
|
4 |
|
|
|
16,228 |
|
Investment
in unconsolidated joint ventures
|
|
|
(379 |
) |
|
|
(8 |
) |
|
|
(1,553 |
) |
Distributions
of return of capital from unconsolidated joint ventures
|
|
|
1,435 |
|
|
|
551 |
|
|
|
21,264 |
|
Net
proceeds from sale of securities
|
|
|
525 |
|
|
|
843 |
|
|
|
348 |
|
Purchase
of available-for-sale securities
|
|
|
- |
|
|
|
(551 |
) |
|
|
(1,364 |
) |
Net
cash (used in) provided by investing activities
|
|
|
(55,452 |
) |
|
|
416 |
|
|
|
(44,713 |
) |
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing
on bank line of credit, net
|
|
|
27,000 |
|
|
|
- |
|
|
|
- |
|
Proceeds
from mortgage financings
|
|
|
14,185 |
|
|
|
2,700 |
|
|
|
37,564 |
|
Payment
of financing costs
|
|
|
(366 |
) |
|
|
(695 |
) |
|
|
(916 |
) |
Repayment
of mortgages and loan payable
|
|
|
(13,476 |
) |
|
|
(8,588 |
) |
|
|
(4,070 |
) |
Change
in restricted cash
|
|
|
7,742 |
|
|
|
(333 |
) |
|
|
(7,409 |
) |
Cash
distributions - common stock
|
|
|
(14,640 |
) |
|
|
(21,167 |
) |
|
|
(13,088 |
) |
Exercise
of stock options
|
|
|
- |
|
|
|
- |
|
|
|
110 |
|
Repurchase
of common stock
|
|
|
(1,827 |
) |
|
|
(3,212 |
) |
|
|
- |
|
Issuance
of shares through dividend reinvestment plan
|
|
|
2,607 |
|
|
|
4,719 |
|
|
|
859 |
|
Net
cash provided by (used in) financing activities
|
|
|
21,225 |
|
|
|
(26,576 |
) |
|
|
13,050 |
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(14,790 |
) |
|
|
(8,276 |
) |
|
|
7,264 |
|
Cash
and cash equivalents at beginning of year
|
|
|
25,737 |
|
|
|
34,013 |
|
|
|
26,749 |
|
Cash
and cash equivalents at end of year
|
|
$ |
10,947 |
|
|
$ |
25,737 |
|
|
$ |
34,013 |
|
Continued
on next page.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated
Statements of Cash Flows (Continued)
(Amounts
in Thousands)
|
|
Year
Ended December 31,
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for interest expense
|
|
$ |
14,908 |
|
|
$ |
14,812 |
|
|
$ |
12,576 |
|
Cash
paid during the year for income taxes
|
|
|
81 |
|
|
|
35 |
|
|
|
16 |
|
Supplemental
schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumption
of mortgages payable in connection with purchase
of real estate
|
|
$ |
2,771 |
|
|
$ |
- |
|
|
$ |
26,957 |
|
Purchase
accounting allocations – intangible lease assets
|
|
|
4,362 |
|
|
|
- |
|
|
|
2,210 |
|
Purchase
accounting allocations – intangible lease liabilities
|
|
|
(451 |
) |
|
|
- |
|
|
|
(5,556 |
) |
Purchase
accounting allocations – mortgage payable discount
|
|
|
(40 |
) |
|
|
- |
|
|
|
- |
|
Reclassification
of 2005 deposit in connection with purchase
of real estate
|
|
|
- |
|
|
|
- |
|
|
|
2,525 |
|
See
accompanying notes.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements
December
31, 2008
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 furniture and office supply stores),
industrial, office, flex, health and fitness and other properties, a substantial
portion of which are under long-term net leases. As of December 31, 2008, OLP
owned 79 properties, three of which are vacant, and one of which is a 50%
tenancy in common interest. OLP’s joint ventures owned a total of five
properties, one of which is vacant. The 84 properties are located in 29
states.
NOTE
2 - SIGNIFICANT
ACCOUNTING POLICIES
Principles
of Consolidation
The
consolidated financial statements include the accounts and operations of OLP and
its wholly-owned subsidiaries. OLP and its subsidiaries are
hereinafter referred to as the Company. Material intercompany items
and transactions have been eliminated.
Investment
in Unconsolidated Joint Ventures
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. None of the joint
venture debt is recourse to the Company.
The
Company has elected to follow the cumulative earnings approach when assessing
for the statement of cash flows whether the distribution from the investee is a
return of the investor’s investment as compared to a return on its investment.
The source of the cash generated by the investee to fund the distribution is not
a factor in the analysis (that is, it does not matter whether the cash was
generated through investee refinancing, sale of assets or operating results).
Rather, the investor need only consider the relationship between the cash
received from the investee to its equity in the undistributed earnings of the
investee, on a cumulative basis, in assessing whether the distribution from the
investee is a return on or return of its investment. Cash received from
the unconsolidated entity is presumed to be a return on the investment to the
extent that, on a cumulative basis, distributions received by the investor are
less than its share of the equity in the undistributed earnings of the entity.
The Company monitors on a cumulative basis the distributions received versus the
cumulative equity earned in order to properly present the distribution in the
cash flow statement.
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States 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.
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Management
believes that the estimates and assumptions that are most important to the
portrayal of the Company’s financial condition and results of operations, in
that they require management’s most difficult, subjective or complex judgments,
form the basis of the accounting policies deemed to be most significant to the
Company. These significant accounting policies relate to revenues and
the value of the Company’s real estate portfolio. Management believes
its estimates and assumptions related to these significant accounting policies
are appropriate under the circumstances; however, should future events or
occurrences result in unanticipated consequences, there could be a material
impact on the Company’s future financial condition or results of
operations.
Revenue
Recognition
Rental
income includes the base rent that each tenant is required to pay in accordance
with the terms of their respective leases reported on a straight-line basis over
the term of the lease. In order for management to determine, in its judgment,
that the unbilled rent receivable applicable to each specific property is
collectible, management reviews unbilled rent receivables on a quarterly basis
and takes into consideration the tenant’s payment history and the financial
condition of the tenant. Some of the leases provide for additional contingent
rental revenue in the form of percentage rents and increases based on the
consumer price index. The percentage rents are based upon the level
of sales achieved by the lessee and are recorded once the required sales levels
are reached.
Gains or
losses on disposition of properties are recorded when the criteria for
recognizing such gains or losses under generally accepted accounting principles
have been met.
Purchase
Accounting for Acquisition of Real Estate
In
accordance with Statement of Financial Accounting Standards No. 141, or SFAS
141, “Business
Combinations,” the Company allocates the purchase price of real estate to
land and building and intangibles, such as the value of above, below and
at-market leases and origination costs associated with in-place leases. The
Company depreciates the amount allocated to building and intangible assets or
liabilities over their estimated useful lives, which generally range from two to
forty years. The values of the above and below market leases are
amortized and recorded as either an increase (in the case of below market
leases) or a decrease (in the case of above market leases) to rental income over
the remaining minimum term of the associated lease. The origination
costs are amortized as an expense over the remaining minimum term of the
lease. The Company assesses fair value of the lease intangibles based
on estimated cash flow projections that utilize appropriate discount rates and
available market information.
As a
result of its evaluation under SFAS 141 of the acquisitions made, the Company
recorded additional deferred intangible lease assets of $4,362,000, representing
the value of the acquired above market leases and assumed lease origination
costs during the year ended December 31, 2008. The Company also
recorded additional deferred intangible lease liabilities of $451,000,
representing the value of the acquired below market leases during the year ended
December 31, 2008. The Company did not acquire any properties during
the year ended December 31, 2007. The Company recognized a net
increase in rental revenue of $371,000 and $250,000 for the amortization of the
above/below market leases for the years ended 2008 and 2007, respectively. For
the years ended 2008 and 2007, the Company recognized amortization expense of
$499,000 and $290,000,
respectively, relating to the amortization of the assumed lease origination
costs. The year ended 2008 included $180,000 of additional
net rental revenue and $161,000 of additional amortization expense resulting
from the accelerated expiration of certain leases. At December
31, 2008 and 2007, accumulated amortization of intangible lease assets was
$1,813,000 and $1,213,000, respectively. At December 31, 2008 and
2007, accumulated amortization of intangible lease liabilities was $1,155,000
and $801,000, respectively.
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
The
unamortized balance of intangible lease assets as a result of acquired above
market leases at December 31, 2008 will be deducted from rental income through
2025 as follows:
2009
|
|
$ |
919,000 |
|
2010
|
|
|
835,000 |
|
2011
|
|
|
835,000 |
|
2012
|
|
|
835,000 |
|
2013
|
|
|
833,000 |
|
Thereafter
|
|
|
4,224,000 |
|
|
|
$ |
8,481,000 |
|
The
unamortized balance of intangible lease liabilities as a result of acquired
below market leases at December 31, 2008 will be added to rental income through
2022 as follows:
2009
|
|
$ |
407,000 |
|
2010
|
|
|
407,000 |
|
2011
|
|
|
407,000 |
|
2012
|
|
|
407,000 |
|
2013
|
|
|
407,000 |
|
Thereafter
|
|
|
3,199,000 |
|
|
|
$ |
5,234,000 |
|
Accounting
for Long-Lived Assets and Impairment
of Real Estate Owned
The
Company reviews its real estate portfolio on a quarterly basis to ascertain if
there are any indicators of impairment to the value of any of its real estate
assets, including deferred costs and intangibles, in order to determine if there
is any need for an impairment charge. In reviewing the portfolio, the
Company examines the type of asset, the economic situation in the area in which
the asset is located, the economic situation in the industry in which the tenant
is involved and the timeliness of the payments made by the tenant under its
lease, as well as any current correspondence that may have been had with the
tenant, including property inspection reports. For each real estate
asset owned for which indicators of impairment exist, if the undiscounted cash
flow analysis yields an amount which is less than the asset’s carrying amount,
an impairment loss is recorded to the extent that the estimated fair value
exceeds the asset’s carrying amount. The estimated fair value is
determined using a discounted cash flow model of the expected future cash flows
through the useful life of the property. Real estate assets that are
expected to be disposed of are valued at the lower of carrying amount or fair
value less costs to sell on an individual asset basis.
In
accordance with FIN 47, “Accounting for Conditional Asset
Retirement Obligations”, the Company records a conditional asset
retirement obligation (“CARO”) if the liability can be reasonable
estimated. A CARO is an obligation that is settled at the time the
asset is retired or disposed of and for which the timing and/or method of
settlement are conditional on future events. The Company currently is
not aware of any conditional asset retirement obligations that would require
remediation.
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash
and Cash Equivalents
Cash
equivalents consist of highly liquid investments with maturities of three months
or less when purchaed.
Restricted
Cash
Restricted
cash at December 31, 2007 consists of a cash deposit as required by a certain
loan payable agrement for collateral. (See Note 5)
Escrow,
Deposits and Other Receivables
Includes
$866,000 and $839,000 at December 31, 2008 and 2007, respectively, of restricted
cash relating to real estate taxes, insurance and other escrows.
Allowance
for Doubtful Accounts
The
Company maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of our tenants to make required rent
payments. If the financial condition of a specific tenant were to
deteriorate, resulting in an impairment of its ability to make payments,
additional allowances may be required. At December 31, 2008 and 2007,
the balance in allowance for doubtful accounts was $160,000 and zero,
respectively.
Depreciation
and Amortization
Depreciation
of buildings and improvements is computed on the straight-line method over an
estimated useful life of 40 years for commercial properties and 27 1/2 years for
the Company’s residential property. Depreciation ceases when a
property is deemed “held for sale”. If a property which was deemed
“held for sale” is reclassified to a “held and used” property, “catch-up”
depreciation is recorded. Leasehold interest is amortized over the initial lease
term of the leasehold position. Depreciation expense, including
amortization of the leasehold position and of lease origination costs, amounted
to $8,971,000, $8,248,000 and $6,995,000 for the three years ended December 31,
2008, 2007 and 2006, respectively.
Leasehold
Rent
Ground
lease payments on a leasehold position are computed on the straight line
method.
Deferred
Financing Costs
Mortgage
and credit line costs are deferred and amortized on a straight-line basis over
the terms of the respective debt obligations, which approximates the effective
interest method. At December 31, 2008 and 2007, accumulated
amortization of such costs was $3,069,000 and $2,464,000,
respectively.
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Federal
Income Taxes
The
Company has qualified as a real estate investment trust under the applicable
provisions of the Internal Revenue Code. Under these provisions, the
Company will not be subject to federal income taxes on amounts distributed to
stockholders providing it distributes substantially all of its taxable income
and meets certain other conditions.
Distributions
made during 2008 and 2007 included 3% and 82%, respectively, to be treated by
the stockholders as capital gain distributions, with the balance to be treated
as ordinary income.
Investment
in Equity Securities
The
Company determines the appropriate classification of equity securities at the
time of purchase and reassesses the appropriateness of the classification at
each reporting date. At December 31, 2008, all marketable securities
have been classified as available-for-sale and, as a result, are stated at fair
value. Unrealized gains and losses on available-for-sale securities
are recorded as accumulated other comprehensive income (loss) in the
stockholders' equity section.
The
Company's investment in 30,048 common shares of BRT Realty Trust ("BRT"), a
related party of the Company, (accounting for less than 1% of the total voting
power of BRT), purchased at a cost of $97,000, has a fair market value at
December 31, 2008 of $111,000. At December 31, 2008, the total cumulative
unrealized loss of $239,000 on all investments in equity securities is reported
as accumulated other comprehensive income (loss) in the stockholders' equity
section.
Realized
gains and losses are determined using the average cost method and is included in
“Interest and other income” on the income statement. During 2008,
2007 and 2006, sales proceeds and gross realized gains and losses on securities
classified as available-for-sale were:
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Sales
proceeds
|
|
$ |
6,000 |
|
|
$ |
161,000 |
|
|
$ |
348,000 |
|
Gross
realized losses
|
|
$ |
4,000 |
|
|
$ |
- |
|
|
$ |
3,000 |
|
Gross
realized gains
|
|
$ |
4,000 |
|
|
$ |
118,000 |
|
|
$ |
111,000 |
|
Fair
Value of Financial Instruments
The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments:
Cash and
cash equivalents: The carrying amounts reported in the balance sheet
for these instruments approximate their fair values.
Restricted
cash: The carrying amount reported in the balance sheet for this
instrument approximates its fair value.
Investment
in equity securities: Since these investments are considered
"available-for-sale", they are reported in the balance sheet based upon quoted
market prices.
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Mortgages
and loan payable: At December 31, 2008, the estimated fair value of
the Company's mortgages payable is less than their carrying value by
approximately $2,500,000, assuming a market interest rate of
6.25%. There was no outstanding loan payable at December 31,
2008.
Line of
credit: There is no material difference between the carrying amount
and fair value because the interest rate is at the lower of LIBOR plus 2.15% or
at the prime rate.
Considerable
judgment is necessary to interpret market data and develop estimated fair
value. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value
amounts.
Concentration
of Credit Risk
The
Company maintains accounts at various financial institutions. While
the Company attempts to limit any financial exposure, its deposit balances
exceed federally insured limits. The Company has not experienced any
losses on such accounts.
While the
Company’s properties are located in twenty-nine states, 15.8%, 16.0% and 17.9%
of the Company’s rental revenues were attributable to properties located in
Texas and 14.6%, 15.0% and 17.2% of the Company’s rental revenues were
attributable to properties located in New York for the years ended December 31,
2008, 2007 and 2006, respectively. No other state contributed over
10% to the Company’s rental revenues.
In April
2006, the Company acquired eleven retail furniture stores, located in six
states, net leased to Haverty Furniture Companies, Inc. pursuant to a
master lease. The basic term of the net lease expires August 2022,
with several renewal options. These properties which represented
13.6% of the depreciated book value of real estate investments, generated rental
revenues of $4,844,000, $4,845,000 and $3,559,000, or 12.0%, 12.7% and 10.7% of
the Company’s total revenues for the years ended December 31, 2008, 2007 and
2006, respectively.
In
September 2008, the Company acquired eight retail office supply stores, located
in seven states, net leased to Office Depot, Inc. pursuant to eight separate
leases which contain cross default provisions. The basic term of the
net leases expire September 2018, with several renewal options. These
eight properties plus two properties we already owned and leased to the same
tenant, represented 12.6% of the depreciated book value of real estate
investments and generated rental revenues of $1,551,000, or 3.8% of the
Company’s total revenues for the year ended December 31,
2008. Contractual rental income for these ten properties is
$4,435,000 for the year ended December 31, 2009.
Earnings
Per Common Share
Basic
earnings per share was determined by dividing net income for each year by the
weighted average number of shares of common stock outstanding, which includes
unvested restricted stock during each year.
Diluted
earnings per share reflects 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. Diluted earnings per share was
determined by dividing net income for each year by the total of the weighted
average number of shares of common stock outstanding plus the dilutive effect of
the Company’s outstanding
options (2,315 shares for the year ended 2006) using the treasury stock
method. There were no outstanding options in 2008 and
2007.
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Segment
Reporting
Virtually
all of the Company's real estate assets are comprised of real estate owned that
is net leased to tenants on a long-term basis. Therefore, the Company
operates predominantly in one industry segment.
Derivatives
and Hedging Activities
The
Company accounts for derivative financial instruments in accordance with SFAS
No. 133 “Accounting for
Derivative Instruments and Hedging Activities”, as amended by SFAS No.
138, which requires an entity to recognize all derivatives as either assets or
liabilities in the consolidated balance sheets and to measure those instruments
at fair value. The Company relies on quotations from a third party to
determine these fair values.
In the
normal course of business the Company may use a variety of derivative financial
instruments to manage, or hedge, interest rate risk. These derivative
financial instruments must be effective in reducing its interest rate risk in
order to qualify for hedge accounting. Any derivative instrument used
for risk management that does not meet the hedging criteria is marked-to-market
with the changes in value included in net income.
The fair
value of our interest rate swap which is a non-qualifying hedge was a liability
of $650,000 as of December 31, 2008 and is recorded in other liabilities in the
consolidated balance sheet. The Company did not hold any derivative
financial instruments as of December 31, 2007 and 2006. The change in
fair value of the non-qualifying hedge was $650,000 and is recorded as interest
expense on the consolidated income statement.
Consolidation
of Variable Interest Entities
In
January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, “Consolidation of Variable Interest
Entities”, which explains how to identify variable interest entities
(“VIE”) and how to assess whether to consolidate such entities. In
December 2003, a revision was issued (46R) to clarify some of the original
provisions. Management has reviewed its unconsolidated joint venture
arrangements and determined that none represent variable interest entities
pursuant to the interpretation.
Share
Based Compensation
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 and others receive shares of stock
or other equity instruments of the Company, or the Company 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.
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
New
Accounting Pronouncements
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 in fiscal years
beginning after December 15, 2008 and early adoption is not permitted. The
principal 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.
On March
20, 2008, the FASB issued Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No.
133” (“SFAS No. 161”) which provides for enhanced disclosures about how
and why an entity uses derivatives and how and where those derivatives and
related hedged items are reported in the entity’s financial
statements. SFAS No. 161 also requires certain tabular formats for
disclosing such information. SFAS No. 161 applies to all entities and
all derivative instruments and related hedged items accounted for under SFAS No.
133. Among other things, SFAS No. 161 requires disclosures of an
entity’s objectives and strategies for using derivatives by primary underlying
risk and certain disclosures about the potential future collateral or cash
requirements (that is, the effect on the entity’s liquidity) as a result of
contingent credit-related features. SFAS No.161 is effective for
fiscal years and interim periods beginning after November 15, 2008 with early
application encouraged. The Company will adopt beginning January 1,
2009. The primary effect that SFAS No. 161 will have on the Company’s
consolidated financial statements will be additional disclosure requirements
surrounding derivative instruments.
Reclassification
Certain
amounts reported in previous financial statements have been reclassified in the
accompanying 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 December 31, 2008 and to
reclassify such property’s operations from discontinued operations to continuing
operations. This property had been marketed for sale from August 2007
until May 2008 when the Company determined that the market was not favorable for
a sale of such property.
NOTE
3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS
During
the year ended December 31, 2008, the Company purchased twelve single tenant
properties in eight states for a total consideration of
$62,085,000. These purchases include a portfolio of eight properties
which are leased to the same tenant and was acquired in a sale-leaseback
transaction for a total purchase price, including closing costs, of
approximately $48,200,000, with approximately $14,200,000 paid in cash and
$34,000,000 borrowed under the Company’s line of credit. There were no property
acquisitions during the year ended December 31, 2007.
With the
exception of three vacant properties, the rental properties owned at December
31, 2008 are leased under noncancellable operating leases to corporate tenants
with current expirations ranging from 2009 to 2038, with certain tenant renewal
rights. Substantially all of the lease agreements are net lease
arrangements which require the tenant to pay not only rent but all the expenses
of the leased property including maintenance, taxes, utilities and
insurance. Certain lease agreements provide for periodic rental
increases and others provide for increases based on the consumer price
index.
The
minimum future rentals to be received over the next five years and thereafter on
the operating leases in effect at December 31, 2008 are as follows:
Year
Ending
December 31,
|
|
(In Thousands)
|
|
2009
|
|
$ |
41,953 |
|
2010
|
|
|
41,715 |
|
2011
|
|
|
41,032 |
|
2012
|
|
|
40,300 |
|
2013
|
|
|
38,886 |
|
Thereafter
|
|
|
221,880 |
|
Total
|
|
$ |
425,766 |
|
Included
in the minimum future rentals are rentals from a property not owned in fee
(ground lease) by an unrelated third party. The Company pays annual fixed
leasehold rent of $237,500 through July 2009 with 25% increases every five years
through March 3, 2020 and has a right to extend the lease for up to five 5-year
and one 7 month renewal options.
Excluded
from the minimum future rentals is the rent originally due from three of the
Company’s properties formerly leased to Circuit City Stores, Inc. (“Circuit
City”) which filed for protection under federal bankruptcy laws in November
2008. Although the Company has received its rent for January and
February 2009, it will not be receiving any additional rent since Circuit City
rejected the leases for these properties in March 2009.
At
December 31, 2008, the Company has recorded an unbilled rent receivable
aggregating $10,916,000, representing rent reported on a straight-line basis in
excess of rental payments required under the term of the respective leases. This
amount is to be billed and received pursuant to the lease terms during the next
seventeen years.
During
the year ended December 31, 2008, the Company wrote-off or recorded accelerated
amortization of $332,000 of unbilled "straight-line" rent receivable for six
retail properties, including five
properties formerly leased to Circuit City. During the year ended
December 31 2007, the Company wrote-off $322,000 of unbilled “straight-line”
rent receivable.
NOTE
3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued)
Impairment
Charge
During
the year ended December 31, 2008, the Company recorded an impairment charge of
$5,983,000 relating to four properties. An impairment charge of
$5,231,000 was recorded relating to three of the five Circuit City properties
the Company owns, two of which were vacant at December 31, 2008. The
Company performed an analysis and has determined that the remaining two Circuit
City properties did not require an impairment charge. Additionally,
the Company recorded an impairment charge of $752,000 on a property leased to a
retail furniture tenant. These impairment charges were recorded as a direct
write-down of the respective investments on the balance sheet with depreciation
calculated using the new basis.
After
giving effect to the impairment charge, the net book value of the five Circuit
City properties was $8,252,000. At December 31, 2008, the
non-recourse mortgage which is secured and cross collateralized by the five
Circuit City properties had an outstanding balance of $8,706,000. The
Company has not made any payments on this mortgage since December 1, 2008 and
has entered into negotiations with representatives of the mortgagee relating to
possible modifications of the mortgage. The Company continues to
accrue interest expense on this mortgage which matures in December
2014.
Sales
of Excess Unimproved Land and Other
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 July
2006, the Company sold excess acreage to an unrelated third party for a sales
price of $975,000 and realized a gain of $185,000. In February 2006,
the Company sold an option it owned to buy an interest in certain property
adjacent to one of the Company’s properties and realized a gain of
$228,000.
NOTE
4 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
In March
2008, one of the Company’s unconsolidated joint ventures sold its only property,
which was vacant, for a sales price 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).
In March
2007, another of the Company’s unconsolidated joint ventures sold its only
remaining property, a vacant parcel of land, for a sales price 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). In
September and October 2006, this joint venture and another joint venture sold
their portfolio of nine movie theater properties to a single unrelated purchaser
for an aggregate sales price of $152,658,000
and realized a gain, for book purposes, after expenses, fees and brokerage
commissions, of $55,665,000, of which the Company’s 50% share was
$27,832,000. The joint ventures paid a prepayment premium of
$10,538,000, of which the Company’s 50% share was $5,269,000, on the outstanding
mortgage loans secured by the properties which were sold, which was considered
as interest expense on the books of the joint ventures and was not netted
against the gain recognized on the sale.
NOTE
4 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)
The
remaining five unconsolidated joint ventures each own and operate one
property. At December 31, 2008 and 2007, the Company’s equity
investment in unconsolidated joint ventures totaled $5,857,000 and $6,570,000,
respectively. These balances are net of distributions, including
distributions of $1,970,000 and $1,640,000 received in 2008 and 2007,
respectively. In addition to the gain on sale of properties of $297,000 and
$583,000 for the years ended December 31, 2008 and 2007, respectively, the
unconsolidated joint ventures contributed $622,000 and $648,000 in equity
earnings, respectively. See Note 7 for related party fees paid by the
unconsolidated joint ventures.
NOTE
5 – DEBT OBLIGATIONS
Mortgages
Payable
At
December 31, 2008, there are 40 outstanding mortgages payable, all of which are
secured by first liens on individual real estate investments with an aggregate
carrying value before accumulated depreciation of $362,190,000. The
mortgage payments bear interest at fixed rates ranging from 5.44% to 8.8%, and
mature between 2009 and 2037. The weighted average interest rate was
6.33% and 6.30% for the years ended December 31, 2008 and 2007,
respectively.
Scheduled
principal repayments during the next five years and thereafter are as
follows:
Year
Ending
December 31,
|
|
(In Thousands)
|
|
2009
|
|
$ |
18,869 |
|
2010
|
|
|
22,532 |
|
2011
|
|
|
8,816 |
|
2012
|
|
|
37,806 |
|
2013
|
|
|
19,036 |
|
Thereafter
|
|
|
118,455 |
|
Total
|
|
$ |
225,514 |
|
See Note
3 for information regarding a $8,706,000 mortgage loan included in the above as
due in 2009 for which the Company has not made any payments on since December 1,
2008. The maturity date of the mortgage is in 2014.
Loan
Payable
On
October 31, 2008, the Company repaid in full its only loan payable, which had a
balance of $6,375,000, with cash held in escrow and shown on the balance sheet
as restricted cash. The excess escrow funds of $1,402,000 was
returned to the Company and is no longer restricted. The loan was
originally a mortgage collateralized by a movie theater property the Company
owned in California. During 2006, the property was sold and cash was
substituted for collateral of 110% of the principal balance at the date of
sale.
NOTE
5 – DEBT OBLIGATIONS (Continued)
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 March 31, 2010 and provides that
the Company pays interest at the lower of LIBOR plus 2.15% or the respective
bank’s prime rate on funds borrowed and has an unused facility fee of
¼%. At December 31, 2008, there was $27,000,000 outstanding under the
Facility.
The
Facility is guaranteed by all of the Company’s subsidiaries which own
unencumbered properties and is secured by the outstanding stock of subsidiary
entities. The Facility is available to pay off existing mortgages, to fund the
acquisition of additional properties, or to invest in joint
ventures. The Company is in compliance with all covenants. 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 the property.
NOTE
6 - ASSETS AND LIABILITIES MEASURED AT FAIR VALUE
On
January 1, 2008, the Company adopted Statement of Financial Accounting Standards
No. 157, “Fair Value
Measurements” (SFAS No. 157). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. SFAS No. 157 applies to reported balances
that are required or permitted to be measured at fair value under existing
accounting pronouncements; accordingly, the standard does not require any new
fair value measurements of reported balances.
SFAS No.
157 emphasizes that fair value is a market-based measurement, not an
entity-specific measurement. Therefore, a fair value measurement
should be determined based on the assumptions that market participants would use
in pricing the asset or liability. As a basis for considering market
participant assumptions in fair value measurements, SFAS No. 157 establishes a
fair value hierarchy that distinguishes between market participant assumptions
based on market data obtained from sources independent of the reporting entity
(observable inputs that are classified within Levels 1 and 2 of the hierarchy)
and the reporting entity’s own assumptions about market participant assumptions
(unobservable inputs classified within Level 3 of the hierarchy). In
February 2008, the FASB delayed the effective date of SFAS 157 for non-
financial assets and non-financial liabilities to fiscal years beginning after
November 15, 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 fair
value of the Company’s available-for-sale securities and derivative financial
instrument was determined using the following inputs as of December 31,
2008:
NOTE
6 - ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (Continued)
|
|
|
|
|
|
|
|
Fair
Value Measurements
Using
Fair Value Hierarchy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Financial
assets:
Available-for-sale
securities
|
|
$ |
412,000 |
|
|
$ |
412,000 |
|
|
$ |
412,000 |
|
|
$ |
- |
|
|
$ |
- |
|
Financial
liabilities:
Derivative
financial instrument
|
|
|
650,000 |
|
|
|
650,000 |
|
|
|
- |
|
|
|
650,000 |
|
|
|
- |
|
Available-for-sale
securities
All of
the Company’s marketable securities and its investment in common shares of BRT
Realty Trust are classified as available-for-sale securities. The
total cost of such securities is $651,000 and the aggregate amount of unrealized
losses is $239,000. Fair values are approximated on current market
quotes from financial sources that track such securities.
Derivative
financial instrument
During
the year ended December 31, 2008, the Company entered into an interest rate swap
to manage its interest rate risk in connection with one mortgage in the
principal amount of $10,675,000. The valuation of the
instrument is determined using widely accepted valuation techniques including
discounted cash flow analysis on the expected cash flows of the derivative. This
analysis reflects the contractual terms of the derivative, including the period
to maturity, and uses observable market-based inputs, including interest rate
curves, foreign exchange rates, and implied volatilities.
Although
the Company has determined that the majority of the inputs used to value its
derivative fall within Level 2 of the fair value hierarchy, the
credit valuation adjustments associated with its derivative utilize Level 3
inputs, such as estimates of current credit spreads to evaluate the likelihood
of default by itself and its counterparty. However, as of December
31, 2008, the Company has assessed the significance of the impact of the credit
valuation adjustments on the overall valuation of its derivative position and
has determined that the credit valuation adjustments are not significant to the
overall valuation of its derivative. As a result, the Company has
determined that its derivative valuation is classified in Level 2 of the fair
value hierarchy.
In
February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities” ("SFAS No. 159") which 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.
NOTE
7 – RELATED PARTY TRANSACTIONS
At
December 31, 2008 and 2007, Gould Investors L.P. (“Gould”), a related party,
owned 991,707 and 913,241 shares of the common stock of the Company or
approximately 9.7% and 9%, respectively, of the equity
interest. During 2008 and 2007, Gould purchased 78,466 and 82,330
shares, respectively, of the Company through the Company’s dividend reinvestment
plan.
Effective
as of January 1, 2007, the Company entered into a compensation and services
agreement with Majestic Property Management Corp. (“Majestic”), a company
wholly-owned by our Chairman and in which certain of the Company’s executive
officers are officers and from which they receive compensation. Under the terms
of the agreement, Majestic took over the Company’s obligations to make payments
to Gould (and other affiliated entities) under a shared services agreement and
agreed to provide to the Company the services of all affiliated executive,
administrative, legal, accounting and clerical personnel that the Company has
heretofore utilized on an as needed, part time basis and for which the Company
had paid, as a reimbursement, an allocated portion of the payroll expenses of
such personnel in accordance with the shared services agreement. Accordingly,
the Company, no longer incurs any allocated payroll expenses. Under
the terms of the agreement, Majestic (or its affiliates) continues to provide to
the Company certain property management services (including construction
supervisory services), property acquisition, sales and leasing services and
mortgage brokerage services that it has provided to the Company in
the past, some of which were capitalized, deferred or reduced net sales proceeds
in prior years. The Company does not incur any fees or expenses for
such services except for the annual fees described below. As
consideration for providing to the Company the services described above, the
Company paid Majestic an annual fee of $2,025,000 and $2,125,000 in 2008 and
2007, respectively, in equal monthly installments. Majestic credits
against the fee payments due to it under the agreement any management or other
fees received by it from any joint venture in which the Company is a joint
venture partner (exclusive of fees paid by the tenant in common on a property
located in Los Angeles, California). The agreement also provides for
an additional payment to Majestic of $175,000 in 2008 and 2007 for the Company’s
share of all direct office expenses, such as rent, telephone, postage, computer
services, internet usage, etc., previously allocated to the Company under the
shared services agreement. The annual payments the Company makes to
Majestic will be negotiated each year by the Company and Majestic, and will be
approved by the Company’s Audit Committee and the Company’s independent
directors. The Company also agreed to pay compensation to the Company’s Chairman
of $250,000 per annum effective January 2007. Previously, the Company’s Chairman
was paid $50,000 per annum.
For the
year ended December 31, 2006, the Company reimbursed Gould for allocated
expenses and paid fees to Majestic. The Company’s policy had been to receive
terms in transactions with affiliates that are at least as favorable to the
Company as similar transactions the Company would enter into with unaffiliated
persons. Such fees and costs paid directly by the Company are as
follows:
NOTE
7 – RELATED PARTY TRANSACTIONS (Continued)
|
|
Years
Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Compensation
and services agreement
(A)
|
|
$ |
2,188,000 |
|
|
$ |
2,288,000 |
|
|
$ |
- |
|
Allocated
expenses (A)
(B)
|
|
|
- |
|
|
|
- |
|
|
|
1,317,000 |
|
Mortgage
brokerage fees (C)
|
|
|
- |
|
|
|
- |
|
|
|
100,000 |
|
Sales
commissions (D)
|
|
|
- |
|
|
|
- |
|
|
|
152,000 |
|
Management
fees (E)
|
|
|
- |
|
|
|
- |
|
|
|
15,000 |
|
Supervisory
fees (F)
|
|
|
- |
|
|
|
- |
|
|
|
41,000 |
|
Total
fees
|
|
$ |
2,188,000 |
|
|
$ |
2,288,000 |
|
|
$ |
1,625,000 |
|
The
Company’s unconsolidated joint ventures paid the following fees to
Majestic. Such amounts represent 100% of the fees paid by the joint
ventures, of which the Company’s share is 50%:
|
|
Years
Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Sales
commissions (G)
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,277,000 |
|
Management
fees
(H)
|
|
|
12,000 |
|
|
|
12,000 |
|
|
|
97,000 |
|
Supervisory
fees (I)
|
|
|
- |
|
|
|
- |
|
|
|
8,000 |
|
Total
fees
|
|
$ |
12,000 |
|
|
$ |
12,000 |
|
|
$ |
1,382,000 |
|
(A) Does not include payments
under a direct lease, with a subsidiary of Gould, for approximately 1,200 square
feet, expiring in 2011, at an annual rent of $43,000, increasing 3% per
year.
(B) The Company
reimbursed Gould for allocated general and administrative expenses and payroll
based on estimated time incurred by various employees pursuant to a Shared
Services Agreement.
(C) Fees paid to
Majestic relating to mortgages placed on nine of the Company’s properties for
mortgages in the aggregate amount of $12,900,000. Substantially all
fees were based on 1% of the principal balances of the
mortgages. These fees were deferred and are being amortized over the
life of the respective mortgages.
(D) Fee paid to
Majestic relating to the sale of one property for a sales price of
$15,227,000. This fee was based on 1% of the sales price and reduced
the net sales proceeds.
(E) Fees paid to Majestic
relating to management of one of the Company’s properties. Such fees
were based on 2% of rent collections and were charged to
operations.
(F) Fees paid to
Majestic for supervision of improvements to properties. Such fees
were based on 8% of the cost of the improvements and were
capitalized.
(G) Fee paid to Majestic
relating to the sale by two of the Company’s joint ventures of eight movie
theater properties at approximately 1% of the aggregate sales
price. These fees reduced the net sales proceeds from the
dispositions of real estate of unconsolidated joint ventures. See
Note 4 for further information regarding the Company’s unconsolidated joint
ventures.
NOTE
7 – RELATED PARTY TRANSACTIONS (Continued)
(H) Fees paid to
Majestic for the management of various joint venture properties at 1% of rent
collections for the years ended December 31, 2008, 2007 and 2006, respectively
and were charged to operations.
(I) Fee
paid to Majestic for supervision of improvements to a property at 8% of the cost
of the improvements and was capitalized.
NOTE
8 - RESTRICTED STOCK AND STOCK OPTIONS
The
Company’s 2003 Stock Incentive Plan (the “Incentive Plan”), approved by the
Company’s stockholders in June 2003, permits the Company to grant stock options
and restricted stock to its employees, officers, directors and
consultants. 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.
|
|
Years
Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Restricted
share grants
|
|
|
50,550 |
|
|
|
51,225 |
|
|
|
50,050 |
|
Average
per share grant price
|
|
$ |
17.50 |
|
|
$ |
24.50 |
|
|
$ |
20.66 |
|
Recorded
as deferred compensation
|
|
$ |
885,000 |
|
|
$ |
1,255,000 |
|
|
$ |
1,034,000 |
|
Total
charge to operations, all outstanding restricted
grants
|
|
$ |
888,000 |
|
|
$ |
826,000 |
|
|
$ |
515,000 |
|
Non-vested
shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested
beginning of period
|
|
|
186,300 |
|
|
|
140,175 |
|
|
|
92,725 |
|
Grants
|
|
|
50,550 |
|
|
|
51,225 |
|
|
|
50,050 |
|
Vested
during period
|
|
|
(22,650 |
) |
|
|
(5,050 |
) |
|
|
- |
|
Forfeitures
|
|
|
(575 |
) |
|
|
(50 |
) |
|
|
(2,600 |
) |
Non-vested
end of period
|
|
|
213,625 |
|
|
|
186,300 |
|
|
|
140,175 |
|
Through
December 31, 2008, a total of 243,075 shares were issued and 31,925 shares
remain available for grant pursuant to the Incentive Plan, and approximately
$2,177,000 remains as deferred compensation and will be charged to expense over
the remaining weighted average vesting period of approximately 2.4
years. As of December 31, 2008, there are no options outstanding
under the Incentive Plan.
During
the year ended December 31, 2006, the options to purchase 9,000 shares of common
stock outstanding at December 31, 2005 were exercised. There were no
additional grants, forfeitures or expiration of options occurring during
2006. These options had been granted under the Company’s 1996 Stock
Option Plan, which terminated in 2006.
NOTE
9 - DISTRIBUTION REINVESTMENT PLAN
On
December 9, 2008, the Company suspended its Dividend Reinvestment Plan (the
“Plan”). The Plan had provided owners of record the opportunity to reinvest cash
dividends paid on the Company’s common stock in additional shares of its common
stock, at a discount of 0% to 5% from the market price. The discount
was determined at the Company’s sole discretion and had been offered at a 5%
discount from market. Under the Plan, the Company issued 158,242 and
236,645 common shares during the years ended December 31, 2008 and 2007,
respectively.
NOTE
10 – STOCK REPURCHASE PROGRAM
In
November 2008, the Company announced that its Board of Directors had authorized
a common stock repurchase program of up to 500,000 shares of the Company’s
common stock in open market transactions. (All purchases will be
executed in accordance with applicable federal securities laws.) The timing and
exact number of shares purchased will be determined at the Company’s discretion
and will depend upon market conditions. The stock repurchase program
will continue for twelve months and may be suspended or terminated by the
Company at any time. During November 2008, the Company repurchased
32,000 shares of common stock for a consideration of $263,000. The
Company has not purchased any additional shares of common stock since November
2008. In August 2007, the Company announced that its Board of
Directors had authorized a twelve month common stock repurchase program, which
allowed for the repurchase of up to 500,000 shares of the Company’s common stock
in open market transactions. From January 2008 through July 2008 and
from August 2007 through December 2007, the Company repurchased 93,000 and
159,000 shares of common stock for consideration of $1,564,000 and $3,212,000,
respectively.
NOTE
11 – DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
In
accordance with SFAS No. 144, “Accounting for Impairment or
Disposal of Long Lived Assets,” the Company reports as discontinued
operations assets held for sale (as defined by SFAS No. 144) as of the end of
the current period and assets sold subsequent to the adoption of SFAS No.
144. All results of these discontinued operations are included in a
separate component of income on the Consolidated Statements of Income under the
caption Discontinued Operations. This has resulted in certain
reclassification of 2008, 2007 and 2006 financial statement
amounts. During 2008, an asset previously presented as held for sale
at December 31, 2007 was reclassified and presented as a real estate investment
at December 31, 2008.
The
components of income from discontinued operations for each of the three years in
the period ended December 31, 2008, are shown below. These include
the results of operations through the date of the sale for one property sold
during 2006 and includes settlements relating to properties sold in a prior year
(amounts in thousands):
NOTE
11 – DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE (Continued)
|
|
Years
Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Revenues,
primarily rental income and settlements
|
|
$ |
- |
|
|
$ |
405 |
|
|
$ |
1,362 |
|
Depreciation
and amortization
|
|
|
- |
|
|
|
- |
|
|
|
97 |
|
Real
estate expenses
|
|
|
- |
|
|
|
32 |
|
|
|
47 |
|
Interest
expense
|
|
|
- |
|
|
|
- |
|
|
|
335 |
|
Total
expenses
|
|
|
- |
|
|
|
32 |
|
|
|
479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations before gain on
sale
|
|
|
- |
|
|
|
373 |
|
|
|
883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
gain on sale of discontinued operations
|
|
|
- |
|
|
|
- |
|
|
|
3,660 |
(A) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations
|
|
$ |
- |
|
|
$ |
373 |
|
|
$ |
4,543 |
|
(A) The
$3,660 gain has been deferred for federal tax purposes in accordance with
Section 1031 of the Internal Revenue Code of 1986, as
amended.
NOTE
12 – COMMITMENTS AND CONTINGENCIES
The
Company maintains a non-contributory defined contribution pension plan covering
eligible employees. Contributions by the Company are made through a
money purchase plan, based upon a percent of qualified employees’ total salary
as defined. Pension expense approximated $107,000, $100,000 and
$90,000 for the years ended December 31, 2008, 2007 and 2006,
respectively.
In the
ordinary course of business the Company is party to various legal actions which
management believes are routine in nature and incidental to the operation of the
Company’s business. Management believes that the outcome of the
proceedings will not have a material adverse effect upon the Company’s
consolidated statements taken as a whole.
The
Company elected to be taxed as a real estate investment trust (REIT) under the
Internal Revenue Code, commencing with its taxable year ended December 31,
1983. To qualify as a REIT, the Company must meet a number of
organizational and operational requirements, including a requirement that it
currently distribute at least 90% of its adjusted taxable income to its
stockholders. It is management’s current intention to adhere to these
requirements and maintain the Company’s REIT status. As a REIT, the Company
generally will not be subject to corporate level federal, state and local income
tax on taxable income it distributes currently to its stockholders. If the
Company fails to qualify as a REIT in any taxable year, it will be subject to
federal, state and local income taxes at regular corporate rates (including any
applicable alternative minimum tax) and may not be able to qualify as a REIT for
four subsequent taxable years. Even though the Company qualifies for
taxation as a REIT, the Company is subject to certain state and local taxes on
its income and property, and to federal income and excise taxes on its
undistributed taxable income.
NOTE
13 – TAXES (Continued)
On
January 1, 2007, the Company adopted the provisions of Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes” (“FIN 48”). This
interpretation, among other things, creates a two step approach for evaluating
uncertain tax positions. Recognition (step one) occurs when an
enterprise concludes that a tax position, based solely on its technical merits,
is more-likely-than-not to be sustained upon examination. Measurement
(step two) determines the amount of benefit that more-likely-than-not will be
realized upon settlement. Derecognition of a tax position that was
previously recognized would occur when a company subsequently determines that a
tax position no longer meets the more-likely-than-not threshold of being
sustained. FIN 48 specifically prohibits the use of a valuation
allowance as a substitute for derecognition of tax positions, and it has
expanded disclosure requirements. The adoption of FIN 48 had no
material effect on the Company’s consolidated financial statements.
The
Company recorded $91,000 and $490,000 of federal excise tax which is based on
taxable income generated but not yet distributed for the years ended December
31, 2007 and 2006, respectively. There was no federal excise tax for
the year ended December 31, 2008. Included in general and
administrative expenses for the years ended December 31, 2008, 2007 and 2006 are
state tax expense of $162,000, $226,000 and $143,000, respectively.
Reconciliation
between Financial Statement Net Income and Federal Taxable Income:
The
following unaudited table reconciles financial statement net income to federal
taxable income for the years ended December 31, 2008, 2007 and 2006 (amounts in
thousands):
|
|
2008
Estimate
|
|
|
2007
Actual
|
|
|
2006
Actual
|
|
Net
income
|
|
$ |
4,892 |
|
|
$ |
10,590 |
|
|
$ |
36,425 |
|
Straight
line rent adjustments
|
|
|
(1,023 |
) |
|
|
(1,600 |
) |
|
|
(269 |
) |
Excess
of capital losses over capital gains
|
|
|
- |
|
|
|
868 |
|
|
|
- |
|
Financial
statement gain on sale in excess of tax gain (A)
|
|
|
(1,685 |
) |
|
|
(1,581 |
) |
|
|
(3,976 |
) |
Rent
received in advance, net
|
|
|
(82 |
) |
|
|
95 |
|
|
|
(33 |
) |
Financial
statement impairment charge
|
|
|
5,983 |
|
|
|
- |
|
|
|
780 |
|
Federal
excise tax, non-deductible
|
|
|
- |
|
|
|
91 |
|
|
|
490 |
|
Financial
statement adjustment for above/below market leases
|
|
|
(371 |
) |
|
|
(285 |
) |
|
|
(223 |
) |
Non-deductible
portion of restricted stock expense
|
|
|
507 |
|
|
|
710 |
|
|
|
515 |
|
Financial
statement adjustment of fair value of derivative
|
|
|
650 |
|
|
|
- |
|
|
|
- |
|
Financial
statement depreciation in excess of tax depreciation
|
|
|
1,267 |
|
|
|
702 |
|
|
|
773 |
|
Other
adjustments
|
|
|
(81 |
) |
|
|
2 |
|
|
|
(83 |
) |
Federal
taxable income
|
|
$ |
10,057 |
|
|
$ |
9,592 |
|
|
$ |
34,399 |
|
(A)
For the year ended December 31, 2006, amount includes $3,660 GAAP gain on sale
of real estate which was deferred for federal tax purposes in accordance with
Section 1031 of the Internal Revenue Code of 1986, as amended.
NOTE
13 – TAXES (Continued)
Reconciliation
between Cash Dividends Paid and Dividends Paid Deduction:
The
following unaudited table reconciles cash dividends paid with the dividends paid
deduction for the years ended December 31, 2008, 2007 and 2006 (amounts in
thousands):
|
|
2008
Estimate
|
|
|
2007
Actual
|
|
|
2006
Actual
|
|
Cash
dividends paid
|
|
$ |
13,241 |
|
|
$ |
21,218 |
|
|
$ |
13,420 |
|
Dividend
reinvestment plan (B)
|
|
|
96 |
|
|
|
268 |
|
|
|
59 |
|
|
|
|
13,337 |
|
|
|
21,486 |
|
|
|
13,479 |
|
Less:
Spillover dividends designated to previous year
(C)
|
|
|
(5,861 |
) |
|
|
(17,705 |
) |
|
|
- |
|
Plus:
Spillover dividends designated from prior year
|
|
|
- |
|
|
|
- |
|
|
|
3,265 |
|
Plus:
Dividends designated from following year (C)
|
|
|
2,631 |
|
|
|
5,861 |
|
|
|
17,705 |
|
Dividends
paid deduction (D)
|
|
$ |
10,107 |
|
|
$ |
9,642 |
|
|
$ |
34,449 |
|
(B)
Amount
reflects the 5% discount on the Company's common shares purchased through the
dividend reinvestment plan.
(C)
Includes
a special dividend paid on October 2, 2007 of $.67 per share or $6,731, which
represents the remaining undistributed portion of the taxable income recognized
by the Company in 2006 primarily from gains on sale by two of its 50% owned
joint ventures of their portfolio of movie theater
properties.
(D)
Dividends
paid deduction is slightly higher than federal taxable income in 2008, 2007 and
2006 so as to account for adjustments made to federal taxable income as a result
of the impact of
the alternative minimum tax.
NOTE
14 – SUBSEQUENT EVENT
In
February 2009, the Company entered into a $400,000 lease termination agreement
with a retail tenant of a Texas property who had been paying its rent on a
current basis, but had vacated the property in 2006. On March 5,
2009, the Company sold this property to an unrelated party for consideration of
$1,900,000. As a result of the lease termination agreement and sale
of the property, the Company will recognize during the quarter ended March 31,
2009, net income for accounting purposes of approximately $200,000, after taking
into account an impairment charge of $752,000 taken by the Company during the
quarter ended June 30, 2008. As of December 31, 2008, this property
had a net book value of $2,072,000 and was classified as a real estate
investment.
NOTE
15 - QUARTERLY FINANCIAL DATA (Unaudited):
|
(In
Thousands, Except Per Share Data)
|
|
|
Quarter
Ended
|
|
|
|
|
2008
|
|
March
31
|
|
|
June
30
|
|
|
Sept.
30
|
|
|
Dec.
31
|
|
|
Total
For
Year
|
|
Rental revenues as
previously reported
|
|
$ |
9,398 |
|
|
$ |
9,686 |
|
|
$ |
9,950 |
|
|
$ |
10,954 |
|
|
$ |
39,988 |
|
Revenues from
discontinued operations (A)
|
|
|
353 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
353 |
|
Revenues
|
|
$ |
9,751 |
|
|
$ |
9,686 |
|
|
$ |
9,950 |
|
|
$ |
10,954 |
|
|
$ |
40,341 |
|
Income (loss)from
continuing operations (B)
|
|
$ |
2,779 |
|
|
$ |
3,246 |
|
|
$ |
2,468 |
|
|
$ |
(3,601 |
) |
|
$ |
4,892 |
|
Income from
discontinued operations (B)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
income
|
|
$ |
2,779 |
|
|
$ |
3,246 |
|
|
$ |
2,468 |
|
|
$ |
(3,601 |
) |
|
$ |
4,892 |
|
Weighted average
number of common shares outstanding -
basic and diluted
|
|
|
10,152 |
|
|
|
10,219 |
|
|
|
10,169 |
|
|
|
10,192 |
|
|
|
10,183 |
|
Net income per
common share –basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)from
continuing operations (B)
|
|
$ |
.27 |
|
|
$ |
.32 |
|
|
$ |
.24 |
|
|
$ |
(.35 |
) |
|
$ |
.48 |
(C) |
Income from
discontinued operations (B)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
income (loss)
|
|
$ |
.27 |
|
|
$ |
.32 |
|
|
$ |
.24 |
|
|
$ |
(.35 |
) |
|
$ |
.48 |
(C) |
(A) Adds
back revenues from a property which was presented as held for sale at March 31,
2008. At June 30, 2008, the operations of this property was
reclassified to continuing operations.
(B) Amounts
have been adjusted to give effect to the reclassification of income from a
property previously presented as held for sale. The 10Q for the
period ended March 31, 2008 had reported income from continuing operations of
$2,431,000 and income from discontinued operations of $348,000 for a total net
income of $2,779,000.
(C) Calculated
on weighted average shares outstanding for the year.
|
|
Quarter
Ended
|
|
|
|
|
2007
|
|
March
31
|
|
|
June
30
|
|
|
Sept.
30
|
|
|
Dec.
31
|
|
|
Total
For
Year
|
|
Rental
revenues as previously reported
|
|
$ |
9,263 |
|
|
$ |
9,311 |
|
|
$ |
9,238 |
|
|
$ |
8,993 |
|
|
$ |
36,805 |
|
Reclassification of
revenues (D)
|
|
|
330 |
|
|
|
331 |
|
|
|
330 |
|
|
|
353 |
|
|
|
1,344 |
|
Revenues
(E)
|
|
$ |
9,593 |
|
|
$ |
9,642 |
|
|
$ |
9,568 |
|
|
$ |
9,346 |
|
|
$ |
38,149 |
|
Income
from continuing operations
|
|
$ |
3,040 |
|
|
$ |
2,536 |
|
|
$ |
2,464 |
|
|
$ |
2,177 |
|
|
$ |
10,217 |
|
Income
(loss) from discontinued operations
|
|
|
106 |
|
|
|
(4 |
) |
|
|
115 |
|
|
|
156 |
|
|
|
373 |
|
Net
income
|
|
$ |
3,146 |
|
|
$ |
2,532 |
|
|
$ |
2,579 |
|
|
$ |
2,333 |
|
|
$ |
10,590 |
|
Weighted
average number of common
shares
outstanding - basic and diluted
|
|
|
10,001 |
|
|
|
10,055 |
|
|
|
10,078 |
|
|
|
10,140 |
|
|
|
10,069 |
|
Net
income per common share – basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
.30 |
|
|
$ |
.25 |
|
|
$ |
.25 |
|
|
$ |
.21 |
|
|
$ |
1.01 |
(F) |
Income
from discontinued operations
|
|
|
.01 |
|
|
|
- |
|
|
|
.01 |
|
|
|
.02 |
|
|
|
.04 |
(F) |
Net
income
|
|
$ |
.31 |
|
|
$ |
.25 |
|
|
$ |
.26 |
|
|
$ |
.23 |
|
|
$ |
1.05 |
(F) |
NOTE
15 - QUARTERLY FINANCIAL DATA (Continued)
(D)
Adds back
revenues from a property which was presented as held for sale at December 31,
2007. At June 30, 2008, the operations of this property was
reclassified to continuing operations.
(E)
Amounts
have been adjusted to give effect to the Company’s discontinued operations in
accordance with Statement No. 144.
(F)
Calculated
on weighted average shares outstanding for the year.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Schedule
III - Consolidated Real Estate and Accumulated Depreciation
December
31, 2008
(Amounts
in Thousands)
|
|
|
|
|
Initial
Cost To
Company
|
|
|
Cost
Capitalized
Subsequent
to
Acquisition
|
|
|
Gross
Amount at Which Carried at
December
31, 2008
|
|
|
Accumulated Depreciation
|
|
Date of Construction
|
Date
Acquired
|
|
Life
on Which Depreciation in Latest Income Statement is Computed
(Years)
|
|
|
|
Encumbrances
|
|
|
Land
|
|
|
Buildings
|
|
|
Improvements
|
|
|
Land
|
|
|
Buildings
and
Improvements
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Free
Standing
Retail
Locations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
Properties – Note
1
|
|
$ |
2,860 |
|
|
$ |
19,929 |
|
|
$ |
29,720 |
|
|
$ |
- |
|
|
$ |
19,929 |
|
|
$ |
29,720 |
|
|
$ |
49,649 |
|
|
$ |
749 |
|
Various
|
Various
|
|
|
40 |
|
11
Properties – Note
2
|
|
|
25,399 |
|
|
|
10,286 |
|
|
|
45,414 |
|
|
|
- |
|
|
|
10,286 |
|
|
|
45,414 |
|
|
|
55,700 |
|
|
|
3,075 |
|
Various
|
04/07/06
|
|
|
40 |
|
Miscellaneous
|
|
|
78,474 |
|
|
|
33,179 |
|
|
|
114,029 |
|
|
|
1,010 |
|
|
|
33,179 |
|
|
|
115,039 |
|
|
|
148,218 |
|
|
|
19,206 |
|
Various
|
Various
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flex
Buildings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous
|
|
|
11,816 |
|
|
|
2,993 |
|
|
|
15,125 |
|
|
|
683 |
|
|
|
2,993 |
|
|
|
15,808 |
|
|
|
18,801 |
|
|
|
3,089 |
|
Various
|
Various
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
Buildings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parsippany,
NJ
|
|
|
15,989 |
|
|
|
6,055 |
|
|
|
23,300 |
|
|
|
- |
|
|
|
6,055 |
|
|
|
23,300 |
|
|
|
29,355 |
|
|
|
1,917 |
|
1997
|
09/16/05
|
|
|
40 |
|
Miscellaneous
|
|
|
16,235 |
|
|
|
3,537 |
|
|
|
13,688 |
|
|
|
2,524 |
|
|
|
3,537 |
|
|
|
16,212 |
|
|
|
19,749 |
|
|
|
2,901 |
|
Various
|
Various
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartment
Building:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous
|
|
|
4,223 |
|
|
|
1,110 |
|
|
|
4,439 |
|
|
|
- |
|
|
|
1,110 |
|
|
|
4,439 |
|
|
|
5,549 |
|
|
|
2,347 |
|
1910
|
06/14/94
|
|
|
27.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baltimore,
MD - Note
3
|
|
|
23,000 |
|
|
|
6,474 |
|
|
|
25,282 |
|
|
|
- |
|
|
|
6,474 |
|
|
|
25,282 |
|
|
|
31,756 |
|
|
|
1,291 |
|
1960
|
12/20/06
|
|
|
40 |
|
Miscellaneous
|
|
|
31,937 |
|
|
|
9,749 |
|
|
|
40,828 |
|
|
|
779 |
|
|
|
9,749 |
|
|
|
41,607 |
|
|
|
51,356 |
|
|
|
5,749 |
|
Various
|
Various
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theater:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous
|
|
|
6,060 |
|
|
|
- |
|
|
|
8,328 |
|
|
|
- |
|
|
|
- |
|
|
|
8,328 |
|
|
|
8,328 |
|
|
|
2,360 |
|
2000
|
08/10/04
|
|
|
15.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health
Clubs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous
|
|
|
9,521 |
|
|
|
2,233 |
|
|
|
8,729 |
|
|
|
2,731 |
|
|
|
2,233 |
|
|
|
11,460 |
|
|
|
13,693 |
|
|
|
2,014 |
|
Various
|
Various
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$ |
225,514 |
|
|
$ |
95,545 |
|
|
$ |
328,882 |
|
|
$ |
7,727 |
|
|
$ |
95,545 |
|
|
$ |
336,609 |
|
|
$ |
432,154 |
|
|
$ |
44,698 |
|
|
|
|
|
|
|
Note 1 –
These ten properties are retail office supply stores net leased to the same
tenant, pursuant to separate leases. Eight of these leases contain
cross default provisions. They are located in eight states (Florida, Illinois,
Louisiana, North Carolina, Texas, California, Georgia and Oregon) and no
individual property is greater than 5% of the Company’s total
assets.
Note 2 –
These 11 properties are retail furniture stores covered by one master lease and
one loan that is secured by crossed mortgages. They are located in
six states (Georgia, Kansas, Kentucky, South Carolina, Texas and Virginia) and
no individual property is greater than 5% of the Company’s total
assets.
Note 3 –
Upon purchase of the property in December 2006, a $416,000 rental reserve was
posted for the Company’s benefit, since the property was not producing
sufficient rent at the time of acquisition. The Company recorded the
receipt of this rental reserve as a reduction to land and building.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes to
Schedule III
Consolidated
Real Estate and Accumulated Depreciation
(a) Reconciliation of “Real
Estate and Accumulated Depreciation”
(Amounts
In Thousands)
|
|
Year
Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Investment
in real estate:
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of year
|
|
$ |
380,270 |
|
|
$ |
380,111 |
|
|
$ |
280,047 |
|
Addition:
Land, buildings and improvements
|
|
|
59,015 |
|
|
|
576 |
|
|
|
112,462 |
|
Deductions:
Cost
of properties sold
|
|
|
(1,148 |
)
|
|
|
(1 |
)
|
|
|
(12,398 |
)
|
Impairment
charge (c)
|
|
|
(5,983 |
)
|
|
|
- |
|
|
|
- |
|
Rental
reserve received (see Note 3 above)
|
|
|
- |
|
|
|
(416 |
) |
|
|
- |
|
Balance,
end of year
|
|
$ |
432,154 |
|
|
$ |
380,270 |
|
|
$ |
380,111 |
|
Accumulated
depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of year
|
|
$ |
36,228 |
|
|
$ |
28,270 |
|
|
$ |
21,925 |
|
Addition:
Depreciation
|
|
|
8,470 |
|
|
|
7,958 |
|
|
|
6,857 |
|
Deduction:
Accumulated depreciation related to property
sold
|
|
|
- |
|
|
|
- |
|
|
|
(512 |
) |
Balance,
end of year
|
|
$ |
44,698 |
|
|
$ |
36,228 |
|
|
$ |
28,270 |
|
(b) The
aggregate cost of the properties is approximately $9,324 lower for federal
income tax purposes at December 31, 2008.
(c) During
the year ended December 31, 2008, the Company recorded an impairment charge
totaling $5,983.
F-32