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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
[ X] Annual Report Pursuant to Section l3 or l5(d)
of the Securities Exchange Act of l934
For the fiscal year ended December 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 0-11083
ONE LIBERTY PROPERTIES, INC.
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(Exact name of Registrant as specified in its charter)
MARYLAND 13-3147497
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
60 Cutter Mill Road, Great Neck, New York 11021
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (5l6)466-3l00
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Securities registered pursuant to Section
l2(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $1.00 American Stock Exchange
$16.50 Cumulative Convertible
Preferred Stock, par value $1.00 American Stock Exchange
Securities registered pursuant to Section l2(g) of the Act:
NONE
Indicate by check mark whether the Registrant (l) has filed all reports required
to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during
the preceding l2 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
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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 [ ].
As of March 6, 2001 the aggregate market value of all voting stock (Common Stock
and Preferred Stock) held by non-affiliates of the Registrant was approximately
$25,906,000.
As of March 6, 2001, the Registrant had 3,010,219 shares of Common Stock and
648,058 shares of $16.50 Cumulative Convertible Preferred Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The proxy statement for the Registrant's Annual Meeting of Stockholders,
scheduled for June 11, 2001, will be filed with the Securities and Exchange
Commission within 120 days after the end of the Registrant's fiscal year covered
by this Form 10-K. The information required by Part III (Item 10-Directors and
Executive Officers of the Registrant, Item 11 -Executive Compensation, Item 12 -
Security Ownership of Certain Beneficial Owners and Management, and Item 13 -
Certain Relationships and Related Transactions) will be incorporated by
reference from the definitive proxy statement to be filed by the Registrant
pursuant to Regulation 14A under the Securities Exchange Act of 1934.
PART I
Item 1. Business
General
One Liberty Properties, Inc. (the "Company") is a self administered and self
managed real estate investment trust ("REIT") incorporated under the laws of
Maryland on December 20, 1982. Prior to the year 2000, the Company's focus was
the acquisition, ownership and management of improved real property leased to
retail businesses under long-term commercial net leases. Although prior to 2000,
the Company to a limited extent, acquired, owned and managed improved commercial
real estate (office buildings, industrial building and specific purpose
buildings) net leased to corporations or governmental agencies, it expanded its
activities in this area in 2000.
Under the typical net lease, rental and other payments to be made by the lessee
are payable without diminution. The lessee, in addition to its rent obligation,
is generally responsible for payment of all charges attributable to the
property, such as real estate taxes and assessments, water and sewer rents and
charges, governmental charges and all utility and other charges incurred in the
operation of the property. The lessee is also generally responsible for
maintaining the property, including ordinary maintenance and repair and
restoration following a casualty or partial condemnation. Under some net leases
the lessor is responsible for structural items, such as foundation and slab, and
roof repair and/or replacement. In a typical net lease, the tenant is also
responsible for casualty, rent loss and liability insurance. The rental
provisions in a net lease transaction may include, but may not be limited to,
rent payable on a stepped basis (rentals increase at specified intervals), an
indexed basis (rentals increase pursuant to a formula such as the consumer price
index), a percentage basis (minimum rental payments plus additional rental in
the form of participation in the sales derived from the business conducted at
the property), or a combination of the foregoing.
The Company pursues a national operating strategy. At December 31, 2000, the
Company owned fee title to 35 properties and a leasehold position with respect
to one property. The 36 properties are located in 13 states. Twenty-five of the
36 properties are net-leased to various retail operators. Six of the properties
are improved with industrial type buildings net leased to corporations and a
government agency, two of the properties are flex type buildings (office,
research and development and warehouse) net leased to corporations, two of the
properties are health and fitness facilities net leased to a non-profit hospital
and one property is a residential apartment building leased under a long-term
ground lease to an operator.
Investment Policy
The Company's business strategy has been focused on acquiring improved,
commercial property subject to a long-term net lease which has scheduled rent
increases and this strategy will continue to be the Company's focus. Prior to
the 2000 fiscal year, the Company emphasized the acquisition and ownership of
properties improved with free standing buildings and net-leased on a long term
basis to retail operations. The Company will continue to acquire free standing
commercial properties net leased to retailers. In fiscal 2000, the Company
expanded its investment focus by more actively seeking and acquiring commercial
properties net leased to corporations and it intends to continue to focus on
such investments in the future. The Company's investment policies are as
follows:
Types of Investments - Pursuant to its by-laws, the Company is permitted to
invest in any type of real property, mortgage loans (and in both cases in
interests therein) and other investments of any nature, without limitation,
provided such investment does not adversely affect the Company's ability to
qualify as a REIT under the Internal Revenue Code. No limitation is set on the
number of properties or mortgage loans in which the Company may invest, the
amount or percentage of the Company's assets which may be invested in any
specific property or on the concentration of investments in any geographic area
in the United States. The Company may consider investments in any type of real
property and in mortgage loans secured by real property; however, as stated
above, the investment policy of the Company is to invest in improved, commercial
real estate (free standing retail buildings, industrial and commercial
properties, office buildings, apartment buildings and special purpose buildings)
provided the property is subject to a net lease arrangement. Although the
Company has not acquired undeveloped acreage in the past, it may purchase, in
the future, undeveloped acreage if the purchase is in connection with the
development of a facility to be net leased to a retail operation or corporation
upon completion of development. In prior years, the Company acquired mortgages
receivable for investment. The Company has no present plans to invest in or to
originate loans to other persons whether or not secured by real property.
Although it has not done so in the past, the Company may issue securities in
exchange for properties which fit its investment criteria. The Company pursues a
national operating strategy, but does not intend to purchase properties located
outside of the United States and Puerto Rico.
After termination of any lease relating to any of the Company's properties
(either at lease expiration or early termination), the Company will seek to
relet or sell such property in a manner which will maximize the return to the
Company, considering the income and residual potential of such property.
Although the Company acquires properties for long-term investment for income
purposes and does not engage in the turnover of investments, the Company may
consider the sale or other disposition of any of the properties prior to
termination of the relevant lease if such sale or other disposition appears
advantageous. The Company may take a purchase money mortgage as part payment in
lieu of cash in connection with any sale and may take into account local custom
and prevailing market conditions in negotiating the terms of repayment. It will
be the Company's policy to use any cash realized from the sale or other
disposition of properties, net of any required distribution to shareholders to
maintain its REIT status, to pay down amounts due under loan agreements
(excluding real estate mortgage loans), if any, and in the acquisition of
additional properties.
Incurrence of Debt - The directors of the Company, in the exercise of their
business judgment, are permitted to determine the level of debt and the terms
and conditions of any financing or refinancing. There is no limitation on the
level of debt which the Company may incur. The Company has in the past and
intends in the future to borrow money, on a secured and unsecured basis.
Mortgaging specific properties on a non-recourse basis enhances the Company's
cash on cash return on its investment. The proceeds of borrowings are used for
property acquisitions, to pay down other debt and for working capital purposes.
The investment objectives of the Company are (i) to protect the Company's
capital, (ii) to provide current income; and (iii) to provide the opportunity
for increases in income and capital appreciation. In evaluating potential net
lease investments, the Company considers, among other factors (i) the intrinsic
value of the property, given its location and use, (ii) local demographics
(population, occupancy levels, rental trends), (iii) the lessee's adequacy from
a financial point of view to meet operational needs and lease obligations, (iv)
the return on equity to the Company, and (v) potential for income and capital
appreciation. The intrinsic value of the property, essentially its location and
local demographics, are given greater weight in the acquisition process than the
tenant's credit worthiness, although the tenant's financial condition and credit
worthiness is a factor given consideration in the acquisition process.
From time to time, the Company invests in publicly traded shares of other
REIT's. The Company may invest, on a limited basis, in the shares of an entity
not involved in real estate investments, provided that any such investment does
not adversely affect the Company's ability to qualify as a REIT under the
Internal Revenue Code. Investments by the Company in shares of another entity
are made in such a way so that the Company will not be treated as an investment
company under the Investment Company Act of 1940. The Company has not in the
past invested in the securities of another entity for the purpose of exercising
control, and it has no present plans to invest in the securities of another
entity for such purpose. However, subject to Board of Director approval, the
Company, in the future, may acquire shares of another entity with a view to
gaining control. The Company does not intend to underwrite the securities of
other issuers.
Credit Agreement
On March 24, 2000, the Company entered into a Revolving Credit Agreement
("Credit Agreement") with European American Bank ("EAB"). Borrowings under the
Credit Agreement can be used to acquire commercial real estate and to pay down
existing mortgage debt. The Credit Agreement matures March 24, 2002 with a right
for the Company to extend the Credit Agreement through March 24, 2003. EAB has
agreed to advance up to $15,000,000 on a revolving basis. The Company pays
interest on borrowings made under the Credit Agreement at the prime rate
(currently 8%) on an interest only basis, and a one-quarter of one percent
unused facility fee. Net proceeds from the sale or the financing of any property
for which the proceeds of funds taken down under the Credit Agreement were used
to purchase or finance must be applied to reduce the loan. As collateral
security for any advances taken by the Company under the Credit Agreement, the
Company has pledged the stock of each of its subsidiaries. The Company has
agreed that it and its affiliates will maintain on deposit with EAB at least 10%
of the average outstanding annual principal balance of take downs under the
Credit Agreement. If minimum balances are not maintained by the Company and its
affiliates, a deficiency fee is charged to the Company.
Executive Officers of the Company
The following sets forth information with respect to the executive officers of
the Company:
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
Fredric H. Gould 65 Chairman of the Board and
Chief Executive Officer
Jeffrey Fishman 42 President and Chief Operating
Officer
Jeffrey Gould 35 Senior Vice President
Matthew Gould 41 Senior Vice President
Israel Rosenzweig 53 Senior Vice President
Simeon Brinberg 67 Vice President
David W. Kalish 54 Vice President and Chief
Financial Officer
Mark H. Lundy 39 Secretary
Seth D. Kobay 46 Vice President and Treasurer
Karen Dunleavy 42 Vice President, Financial
Lawrence G. Ricketts 24 Vice President, Acquisitions
Each of the above listed executive officers will hold office until the next
annual meeting of the Board of Directors, scheduled for June 11, 2001, or until
their respective successors are elected and shall qualify. The information below
sets forth the business experience of the officers of the Company for at least
the past five years.
Fredric H. Gould. Mr. Gould has been Chairman of the Board of the Company since
1989 and Chief Executive Officer since December, 1999. Mr. Gould has served as
Chairman of the Board of Trustees of BRT Realty Trust, a real estate investment
trust, ("BRT") since 1984 and Chief Executive Officer of BRT since 1996. Since
1985 Mr. Gould has been an executive officer (currently Chairman of the Board)
of the managing general partner of Gould Investors L.P., a limited partnership
primarily engaged in the ownership and operation of real properties and he also
serves as a general partner of Gould Investors L.P. He is President of the
advisor to BRT, a director of East Group Properties, Inc. and a director of
Yonkers Financial Corporation and its subsidiary Yonkers Savings and Loan
Association, F.A.
Jeffrey Fishman. Mr. Fishman has been President and Chief Operating Officer of
the Company since December, 1999. From 1996 to December 1999 Mr. Fishman was a
Senior Managing Director of Cogswell Properties, LLC, a real estate property
owner and manager. For more than five years prior to 1996, he was President of
Britannia Management Services, Inc., a real estate property owner and manager.
Jeffrey Gould. Mr. Gould has been a Vice President of the Company since 1989 and
a Senior Vice President and Director of the Company since December, 1999. Mr.
Gould was Executive Vice President and Chief Operating Officer of BRT from March
1993 to March 1996, and he has been President and Chief Operating Officer of BRT
since March 1996. Mr. Gould has served as a Trustee of BRT since March 1997. He
is also a Senior Vice President of the managing general partner of Gould
Investors L.P. since 1996.
Matthew Gould. Mr. Gould served as President and Chief Executive Officer of the
Company from 1989 to December, 1999 and became a Senior Vice President and
Director of the Company in December 1999. He has been a Vice President of BRT
since 1986, a Vice President of the managing general partner of Gould Investors
L.P. from 1986 to 1996 and President since 1996. He also serves as a Vice
President of the advisor to BRT.
Israel Rosenzweig. Mr. Rosenzweig has served as Senior Vice President of the
Company since June, 1997. He has been a Senior Vice President of BRT since March
1998. From November 1994 to April 1997 he was a Senior Vice President and Chief
Lending Officer of Bankers Federal Savings and Loan Association. For more than
five years prior to March 1995, he served as President of BRT. He also serves as
a Vice President of the managing general partner of Gould Investors L.P. Mr.
Rosenzweig is a director of Nautica Enterprises, Inc.
Simeon Brinberg. Mr. Brinberg has served as Vice President of the Company since
1989. He has been Secretary of BRT since 1983, a Senior Vice President of BRT
since 1988 and a Vice President of the managing general partner of Gould
Investors L.P. since 1988. Mr. Brinberg is an attorney-at-law and a member of
the New York Bar.
David W. Kalish. Mr. Kalish has served as Vice President and Chief Financial
Officer of the Company since June 1990. Mr. Kalish is also Senior Vice
President, Finance of BRT and Vice President and Chief Financial Officer of the
managing general partner of Gould Investors L.P. Mr. Kalish is a certified
public accountant.
Mark H. Lundy. In addition to being Secretary of the Company since June 1993,
Mr. Lundy has been a Vice President of BRT since April 1993 and a Vice President
of the managing general partner of Gould Investors L.P. since July 1990. He is
an attorney-at-law and a member of the New York and District of Columbia Bars.
Seth D. Kobay. Mr. Kobay has been Vice President and Treasurer of the Company
since August 1994. He has been Vice President and Treasurer of BRT since March
1994 and Vice President of Operations of the managing general partner of Gould
Investors L.P. since 1986. Mr. Kobay is a certified public accountant.
Karen Dunleavy. Ms. Dunleavy has been Vice President, Financial of the Company
since August 1994. She has served as Treasurer of the managing general partner
of Gould Investors L.P. since 1986. Ms. Dunleavy is a certified public
accountant.
Lawrence G. Ricketts. Mr. Ricketts has been Vice President, Acquisitions of the
Company since December 1999 and has been employed by the Company since January
1999. From May 1998 to January, 1999 he was employed as an analyst by BRT
Funding Corp., a subsidiary of BRT. He graduated from Fairfield University in
May 1998.
Matthew Gould and Jeffrey Gould are Fredric H. Gould's sons.
Item 2. Properties
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General
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The Company, at December 31, 2000, owned fee title to 35 properties and a
leasehold position with respect to one property. The 36 properties are located
in 13 states. Eight of the properties are located in the State of Texas, eight
in the State of New York, four in the State of Illinois and three in the State
of Florida. The 36 properties are collectively referred to herein as the
"Properties" and individually as a "Property".
The Company pursues a national operating strategy. In seeking retail properties
the Company concentrates on locations which are on main thoroughfares or
arteries. With respect to industrial and commercial properties, the Company
seeks properties located relatively close to the entrances/exits of main
arteries. Twenty-five of the thirty-six Properties owned by the Company are net
leased to various retail operators under long term leases and except for two of
the Properties, are net leased to a single tenant. One of the two Properties is
net leased to four separate tenants pursuant to separate leases and the other is
net leased to two separate tenants pursuant to separate leases. Most of the
retail tenants operate on a national basis and include, among others, The Kroger
Company, Barnes & Noble Superstores, Inc., Payless Shoe Source, Inc., Ames
Department Stores, Best Buy, Inc., and Petco Animal Supplies, Inc. Six of the
Properties are industrial type buildings net leased to corporations and one
government agency, two of which are used as frozen food warehouses, and two of
the Properties are flex type buildings (office, research and development and
warehouse) leased to corporations. Two of the Properties are health and fitness
facilities net leased to a non-profit hospital. Each location has adequate
parking for the building constructed on the site. One of the Properties is
subject to a long-term ground lease held by the Company as ground lessor upon
which is situated a residential apartment building containing 126 rental units
and six retail stores. The occupancy rate for the Properties has been in excess
of 97% for fiscal years 2000, 1999, 1998, 1997 and 1996. The current occupancy
rate for all Properties is over 99%.
Although the Company acquires properties for long-term investment and does not
engage in a turn over of investments, the Company considers the sale of a
property prior to termination of the lease if such sale appears advantageous. In
October 2000, the Company sold to the lessee the 13 gas, service station and
convenience store properties leased to Total Petroleum, Inc. all located in the
State of Michigan. The gross sale price for these properties was $12,000,000 and
resulted in a gain of $3,603,000 for financial statement purposes. The Company
used the sales proceeds from the disposition of these thirteen properties to
acquire two net leased properties on a tax deferred exchange basis in accordance
with Internal Revenue Code Section 1031. The two properties were acquired in
December, 2000 and include an 89,000 square foot flex building located in
Ronkonkoma, New York and a 149,870 square foot flex building located in
Hauppauge, New York.
It is the policy of the Company to obtain mortgages on substantially all of its
properties. In most instances, the mortgage financing is consummated at the time
of acquisition of a property or committed for prior to or soon after
acquisition. By obtaining a mortgage commitment at or about the time a property
is acquired, the Company can determine the return which will be realized from
ownership of the property during the term (or a significant portion of the term)
of the lease. On occasion, the Company acquires a property subject to a mortgage
or elects not to obtain mortgage financing on a specific property.
At December 31, 2000, the Company had placed first mortgages on 21 of the 36
Properties it owned as of that date. At December 31, 2000, the Company had
$64,123,000 principal amount of mortgages outstanding, bearing interest at rates
ranging from 6.9% to 9.1%. Substantially all mortgages contain prepayment
penalties. The following table sets forth scheduled principal mortgage payments
due for the Properties as of December 31, 2000 (assuming no payment is made on
principal on any outstanding mortgage in advance of its due date):
PRINCIPAL PAYMENTS DUE
YEAR IN YEAR INDICATED
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2001 $ 965,000
2002 2,380,000
2003 9,788,000
2004 3,866,000
2005 9,127,000
2006 and thereafter 37,997,000
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$64,123,000
Significant Properties
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As of December 31, 2000, two of the Properties owned by the Company either had a
book value equal to or greater than 10% of the total assets of the Company or
revenues which accounted for more than 10% of the Company's aggregate gross
revenues. The following sets forth the information concerning these two
properties.
El Paso, Texas Property
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Description of El Paso, Texas Property
- --------------------------------------
The El Paso Texas Property is owned in fee by the Company. It was constructed in
1974, substantially renovated in 1995 and acquired by the Company in March, 2000
and is located at 9521 and 9531 Viscount Boulevard in the Viscount Village
Shopping Center, off Exit 27 on Interstate 10 in El Paso, Texas. The 7.83 acre
parcel is improved with a 102,829 square foot single story retail building
occupied by Comp USA, Barnes & Noble and Best Buy and a separate 7,350 square
foot single story retail building occupied by The Mattress Firm. The two
buildings are suitable and adequate for its current use and there are no
proposed programs in place for renovation or improvement of the Property.
Description of Leases
- ---------------------
Comp USA Stores L.P., Barnes & Noble Booksellers (Texas) L.P. and Best Buys
Stores L.P., occupy 26,593, 45,974 and 30,262 square feet, respectively, in the
102,829 square foot building. Each retail store has a separate entrance.
The Comp USA lease is for a term expiring December 31, 2015, with four 5-year
renewal options and provides for a current basic rent of $389,055 per annum,
($14.63 per square foot), with increases effective January 1, 2006 and January
1, 2011. Comp USA maintains the interior of its premises, its signage, all
systems serving its premises and all glass and doors. The landlord is
responsible for maintaining the exterior of the building, the roof, foundation
and structure.
The Barnes & Noble lease is for a term expiring February 28, 2011, with three
5-year renewal options and provides for a current basic rent of $484,192 per
annum, ($10.53 per square foot), with an increase effective December 1, 2005. In
addition, the tenant pays a percentage rent equal to 3% of gross sales (as
defined) for each fiscal year in excess of fixed rent for such fiscal year.
Barnes & Noble maintains its premises and the systems serving its premises and
all glass and doors. The landlord is responsible for structural repairs
(foundation, bearing walls and roof) and for maintaining the exterior of the
building.
The Best Buy lease is for a term expiring January 31, 2015, with three 5-year
renewal options and provides for a current basic rent of $482,727 per annum,
($15.95 per square foot), with an increase effective February 1, 2010. Best Buy
maintains the interior of its premises and the systems serving its premises. The
landlord is responsible for all structural repairs and the exterior.
The Mattress Venture L.P. d/b/a The Mattress Firm, occupies the 7,350 square
foot building located on an out parcel situated in front of the larger retail
building. It occupies the building under a lease which expires October 31, 2002,
with two five-year renewal options at an annual rent of $107,970, ($14.69 per
square foot). The tenant maintains the premises and landlord is responsible for
the foundation, exterior walls and roof.
Each tenant at the El Paso, Texas Property pays for all utilities serving its
premises, and each is responsible for a pro rata share of real property taxes
and assessments, insurance expenses and common area maintenance expenses. The
Property has been 100% occupied since the Company acquired it in March, 2000.
The realty tax rate for this Property is $2.8862 per $100 and the annual real
estate taxes are $145,350.
Mortgage
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On March 29, 2000, the Company obtained a $10,000,000 non-recourse first
mortgage secured by the El Paso, Texas Property. The mortgage loan bears
interest at 8.03% per annum, matures April 1, 2010 and is being amortized based
on a 30 year amortization schedule. Assuming no additional payments are made on
the principal in advance of the maturity date, the principal balance due at
maturity will be approximately $8,955,000. The Company has the right to prepay
this mortgage provided it pays yield maintenance to the mortgagee and can prepay
the mortgage during the ninety (90) day period prior to maturity without
penalty.
Hauppauge, NY Property
- ----------------------
Description of Hauppauge, NY Property
- -------------------------------------
The Hauppauge NY Property, owned in fee by the Company, was constructed in 1981
and acquired by the Company in December, 2000. It is located in an industrial
park, approximately one mile north of the Long Island Expressway in Suffolk
County, New York. The Hauppauge Property, a 17.4 acre parcel, is improved with a
149,870 square foot flex building. The landlord has the right to subdivide five
acres delineated in the lease and sell, lease or develop the five acres. The
Property is suitable and adequate for its current use and there are no plans in
place for renovations or improvements to the Property.
Description of Lease
- --------------------
The entire building is occupied by L-3 Communications Corporation, a wholly
owned subsidiary of L-3 Communications Holdings, Inc. (NYSE), under a lease
which expires December 31, 2014, with three 5-year renewal options and provides
for a current base rent of $1,480,000 per annum ($9.88 per square foot)
increasing each calendar year during the term and any extended term. The tenant
maintains and repairs the premises. The tenant utilizes the facility for
offices, research and development and light manufacturing. The current tenant
and its predecessor has occupied the Property for more than the past five years.
The realty tax rate for this Property is $1.08417 per $1,000 and the annual real
estate taxes are $289,690.
Mortgage
- --------
The Company currently owns this Property on a free and clear basis. It has
received a mortgage commitment for a $9,900,000 first mortgage loan, bearing
interest at 7.9% per annum, maturing in December, 2014, with a 25 year
amortization schedule.
Leases
- ------
The Company's policy has been to enter into long-term leases with its tenants,
and the leases generally afford the tenant one or more renewal options. The
Company acquires properties subject to existing leases and on occasion the lease
in place at the time of acquisition does not have as long a term as a lease term
usually negotiated by the Company. All leases are net leases, under which the
lessee, in addition to its rental obligation, is responsible for all charges
attributable to the property, such as real estate taxes and assessments, water
and sewer rents and charges. The lessee is also generally responsible for
maintaining the property, including maintenance and repair, and for restoration
following a casualty or partial condemnation. Under some net leases the Company
is responsible for structural repairs, including foundation and slab, and roof
repair or replacement.
The following table sets forth scheduled lease expirations for all leases for
the Properties as of December 31, 2000.
Current
Net Rentable Annual % of Rents
Square Feet Rents Under Represented
Year of Lease Number of Leases Subject to Expiring By Expiring
Expiration (1) Expiring Expiring Leases Leases (2) Leases
-------------- -------- --------------- ---------- --------
2001 6 30,416 $315,009 2.23%
2002 3 76,422 977,938 6.91
2003 1 3,062 64,528 .46
2004 1 100,220 243,000 1.72
2005 2 112,948 667,863 4.72
2006 1 72,897 359,640 2.54
2007 2 26,550 485,543 3.43
2008 2 468,921 1,356,152 9.59
2009 2 89,000 237,000 1.67
2010 4 455,200 853,630 6.03
2011 and thereafter 17 986,794 8,587,245 60.70
-- ------- --------- ---------
41 2,422,430 $14,147,548 100.00%
== ========= =========== =======
(1) Lease expirations assume tenants do not exercise existing renewal options.
(2) Reflects monthly base rent provided for under terms of each expiring lease
as in effect on December 31, 2000 multiplied by 12 and does not take into
account any contractual rent escalations.
Competition
- -----------
The Company faces competition for the acquisition of net leased properties from
other REITs, investment companies, insurance companies, pension funds and
private individuals, some of whom have greater resources than the Company. The
Company also faces indirect competition from institutions that provide or
arrange for other types of commercial financing, such as traditional mortgage
financing and traditional bank financing. The Company believes that its
management's experience in real estate, mortgage lending, credit underwriting
and transaction structuring allows it to compete effectively for properties.
Environmental Matters
- ---------------------
Under various federal, state and local environmental laws, regulations and
ordinances, current or former owners of real estate, may be required to
investigate and clean up hazardous or toxic chemicals, substances or waste or
petroleum products or waste (collectively, "Hazardous Materials") released on,
under, in or from such property, and may be held liable to governmental entities
or to third parties for certain damage and for investigation and clean-up costs
incurred by such parties in connection with the release or threatened release of
Hazardous Materials. Such laws typically impose responsibility and liability
without regard to whether the owner knew of or was responsible for the presence
of Hazardous Materials, and the liability under such laws has been interpreted
to be joint and several under such circumstances. The Company's leases generally
provide that the tenant is responsible for all environmental liability and for
compliance with environmental regulations relating to the tenant's operations.
Such a contractual arrangement does not eliminate the Company's statutory
liability or preclude claims against the Company by governmental authorities or
persons who are not a party to such an arrangement. Contractual arrangements in
the Company's leases may provide a basis for the Company to recover from the
tenant damages or costs for which the Company has been found liable.
The cost of investigation and clean-up of Hazardous Materials on, under, in or
from property can be substantial, and the fact that the property has had a
release of Hazardous Materials, even if remediated, may adversely affect the
value of the property and the owner's ability to sell or lease the property or
to borrow using the property as collateral. In addition, some environmental laws
create a lien on a property in favor of the government for damages and costs it
incurs in connection with the release or threatened release of Hazardous
Materials, and certain state environmental laws provide that such a lien has
priority over all other encumbrances on the property or that a lien can be
imposed on other property owned by the responsible party. Finally, the presence
of Hazardous Materials on a property could result in a claim by a private party
for personal injury or a claim by a neighboring property owner for property
damage.
Other federal, state and local laws and regulations govern the removal or
encapsulation of asbestos-containing material when such material is in poor
condition or in the event of building remodeling, renovation or demolition.
Still other federal, state and local statutes, regulations and ordinances may
require the removal or upgrading of underground storage tanks that are out of
service or out of compliance. In addition, federal, state and local laws,
regulations and ordinances may impose prohibitions, limitations and operational
standards on, or require permits, approvals and notifications in connection with
the discharge of wastewater and other water pollutants, the emission of air
pollutants and operation of air polluting equipment, the generation and
management of Hazardous Materials, and workplace health and safety.
Non-compliance with environmental or health and safety requirements may also
result in the need to cease or alter operations at a property, which could
affect the financial health of a tenant and its ability to make lease payments.
Furthermore, if there is a violation of such requirement in connection with a
tenant's operations, it is possible that the Company, as the owner of the
property, could be held accountable by governmental authorities for such
violation and could be required to correct the violation.
The Company typically undertakes an investigation of potential environmental
risks when evaluating an acquisition. Where warranted, Phase I and/or Phase II
assessments are performed by independent environmental consulting and
engineering firms. Phase I assessments do not involve subsurface testing,
whereas Phase II assessments involve some degree of soil and/or groundwater
testing. The Company may acquire a property which is known to have had a release
of Hazardous Materials in the past, subject to a determination of the level of
risk and potential cost of remediation. The Company normally requires property
sellers to indemnify it against any environmental problem existing as of the
date of purchase. Additionally, the Company normally structures its leases to
require the tenant to assume all responsibility for environmental compliance or
environmental remediation relating to the tenants operations at the Property.
Except for one non-compliance issue, the Company has not been notified by any
governmental authority of or become aware of non-compliance, liability or other
claims in connection with any of the Properties. With respect to one of the
Properties, the Company is aware of an oil spill which occurred and which,
although remediated in the past, requires additional remediation. The tenant is
responsible for the remediation, at its cost. The Company has retained an
environmental consultant to oversee the remediation. In addition, the tenant's
financial obligation for the remediation is insured and the Company is a named
insured under the policy. Accordingly, the Company has no financial exposure
with respect to the one known environmental issue.
Regulations and Insurance
- -------------------------
Americans With Disabilities Act and Similar Laws. Under the Americans with
Disabilities Act of 1990 (the "ADA"), all places of public accommodation are
required to meet certain Federal requirements related to access and use by
disabled persons. These requirements became effective in 1992. Although
management of the Company believes that the Properties are substantially in
compliance with present requirements of the ADA, the Company has not conducted
and does not presently intend to conduct an audit or investigation to determine
its compliance. There can be no assurance that the Company will not incur
additional costs in complying with the ADA.
Additional legislation may place further burdens or restrictions on owners with
respect to access by disabled persons. The ultimate amount of the cost of
compliance with the ADA or such legislation is not currently ascertainable, but
are not expected to have a material effect on the Company.
Insurance. Under substantially all leases, the Company's tenants are responsible
for maintaining and paying for adequate insurance on the Properties leased by
them, including all risk insurance for the full replacement cost and liability
insurance. The Company monitors compliance by its tenants with the obligation to
insure the Properties. The Company believes all the Properties are covered by
adequate fire, flood, property, and liability insurance.
Item 3. Legal Proceedings
-----------------
Neither the Company nor the Properties are presently subject to any material
litigation nor, to the Company's knowledge, is any material litigation
threatened against the Company or the Properties, other than routine litigation
arising in the ordinary course of business, which collectively are not expected
to have a material adverse effect on the business, financial condition or
results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
There were no matters submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Form 10-K.
Part II
Item 5. Market for the Registrant's Common Equity and Related
-----------------------------------------------------
Stockholder Matters
-------------------
The following table sets forth the high and low prices for the Common Stock and
the Convertible Preferred Stock of the Company as reported by the American Stock
Exchange and the per share cash distributions paid by the Company on the Common
Stock and Preferred Stock during each quarter of the years ended December 31,
2000 and 1999.
COMMON STOCK PREFERRED STOCK
------------ ---------------
DISTRIBUTIONS DISTRIBUTIONS
2000 HIGH LOW PER SHARE HIGH LOW PER SHARE
- ---- ---- --- --------- ---- --- ----------
First Quarter 13 10 11/16 $.30 15 7/8 14 5/8 $.40
Second Quarter 11 3/4 10 5/8 $.30 14 5/16 12 1/4 $.40
Third Quarter 12 10 15/16 $.30 14 5/8 12 1/4 $.40
Fourth Quarter 11 3/8 10 1/8 $.30 14 1/4 13 5/16 $.40
1999
First Quarter 12 3/4 12 1/16 $.30 17 3/8 15 15/16 $.40
Second Quarter 13 1/2 12 1/4 $.30 17 1/8 16 3/16 $.40
Third Quarter 15 1/4 13 3/8 $.30 16 13/16 15 3/4 $.40
Fourth Quarter 14 1/2 12 3/4 $.30 16 7/8 15 7/16 $.40
The Common Stock and Convertible Preferred Stock of the Company trade on the
American Stock Exchange, under the symbols OLP and OLP Pr, respectively. As of
March 9, 2001 there were 407 common and 144 preferred stockholders of record and
the Company estimates that at such date there were approximately 900 and 1,000
beneficial owners of the Company's Common and Preferred Stock, respectively.
The Company, from time-to-time, repurchases its preferred shares. In 2000 it
acquired 6,600 shares of its Preferred Stock at an average cost of $13.75 per
share.
Item 6. Selected Financial Data
-----------------------
The following are highlights of the Company's operations which are derived from
the audited financial statements of the Company for the years ended December 31,
2000, 1999, 1998, 1997 and 1996.
YEAR ENDED DECEMBER 31,
-----------------------
INCOME STATEMENT DATA 2000 1999 1998 1997 1996
- --------------------- ---- ---- ---- ---- ----
(Amounts in Thousands, Except Per Share Data)
Revenues $12,669 $10,180 $10,133 $6,285 $5,512
Gain on Sale of Real Estate and Securities 3,790 126 1,132 599 -
Provision for Valuation Adjustment of Real Estate (125) - (157) - (659)
Net Income 7,932 4,879 6,418 2,984 2,174
Calculation of Net Income
Applicable to Common Stockholders:
Net Income 7,932 4,879 6,418 2,984 2,174
Less: Dividends and Accretion on
Preferred Stock 1,044 1,247 1,452 1,450 1,448
Net Income Applicable to Common Stockholders $6,888 $ 3,632 $4,966 $1,534 $726
Weighted Average Number of Common
Shares Outstanding:
Basic 2,993 2,960 2,297 1,523 1,447
Diluted 3,528 2,963 2,298 1,529 1,459
Net Income Per Common Share:
Basic $2.30 $1.23 $2.16 $1.01 $.50
Diluted $2.25 $1.23 $2.16 $1.00 $.50
Cash Distributions Per Share of:
Common Stock $1.20 $1.20 $1.20 $1.20 $1.20
Preferred Stock $1.60 $1.60 $1.60 $1.60 $1.60
BALANCE SHEET DATA
- ------------------
Total Real Estate Investments, Net $121,620 $70,770 $59,831 $48,317 $42,889
Mortgages and Note Receivables 240 80 228 5,943 6,049
Total Assets 128,219 85,949 82,678 57,648 52,523
Mortgages Payable 64,123 35,735 29,422 20,545 16,847
Line of Credit 10,000 - - 4,605 3,900
Total Liabilities 74,843 36,147 30,960 26,337 21,988
Redeemable Convertible Preferred Stock (Note b) - - 13,225 13,107 12,951
Total Stockholders' Equity 53,376 49,802 38,495 18,204 17,443
OTHER DATA
- ----------
Funds from Operations (Note c) $5,324 $4,334 $3,276 $1,743 $2,124
Cash Flow Provided by (used in):
Operating Activities 5,872 5,839 5,810 2,977 4,232
Investing Activities (39,356) (10,756) (6,705) (5,959) (16,987)
Financing Activities 24,306 (2,926) 18,378 2,110 11,388
Note a: Reference is made to Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations which discusses the Company's
acquisitions and dispositions during the year ended December 31, 2000.
Note b: Each preferred shareholder of the Company had a one-time right, which
expired in September, 1999, to "put" the Preferred Stock to the Company at
$16.50 per share. Accordingly, effective September 30, 1999, the preferred stock
is included in "Stockholders' Equity".
Note c: Management generally considers Funds From Operations ("FFO") to be one
measure of financial performance of an equity REIT. The Company has adopted the
National Association of Real Estate Investment Trusts ("NAREIT") definition of
FFO, which was effective on January 1, 2000. Under the definition, FFO
represents income (loss) before minority interest (computed in accordance with
generally accepted accounting principles ("GAAP")), excluding gains (losses)
from debt restructuring and sales of property, plus real estate related
depreciation and amortization (excluding amortization of financing costs), and
after adjustment for unconsolidated partnerships and joint ventures. Therefore,
FFO does not represent cash generated from operating activities in accordance
with GAAP and should not be considered an alternative to net income as an
indication of the Company's performance or to cash flows from operating
activities as a measure of liquidity or the ability to pay distributions.
Item 7. Management's Discussion And Analysis Of Financial Condition
-----------------------------------------------------------
And Results Of Operations
-------------------------
Liquidity and Capital Resources
- -------------------------------
The Company's primary sources of liquidity are cash and cash equivalents
($2,069,000 at December 31, 2000), a $15,000,000 revolving credit facility and
cash generated from operating activities. On March 24, 2000 the Company entered
into an agreement with European American Bank ("EAB") to provide a $15,000,000
revolving credit facility ("Facility"). The Facility is used primarily to
finance the acquisition of commercial real estate. The Facility matures on March
24, 2002 with an option to extend through March 24, 2003. Borrowings under the
Facility bear interest at EAB's prime rate and there is an unused facility fee
of one-quarter of 1%. Net proceeds received from the sale or refinance of
properties are required to be used to repay amounts outstanding under the
Facility if proceeds from the Facility were used to purchase the property. The
Facility is guaranteed by all Company subsidiaries which own unencumbered
properties. At December 31, 2000, $10,000,000 was outstanding under the
Facility.
On October 20, 2000, the Company sold thirteen locations it owned in Michigan
that were net leased to Total Petroleum for a gross sales price of $12,000,000.
The sale resulted in a gain of $3,603,000 for financial statement purposes. The
Company used the sales proceeds to acquire two properties on a tax-deferred
basis in accordance with Internal Revenue Code Section 1031; accordingly, the
Company will not realize a gain on the sale for federal income tax purposes. The
two properties were purchased during December 2000 for a total consideration of
$18,886,000, of which $11,700,000 was derived from the proceeds of the Total
Petroleum sale and the balance was funded from the credit line. Both properties
are flex buildings located in Suffolk County, New York and are net leased to
corporate tenants.
In August 2000, the Company acquired two properties located in Grand Rapids,
Michigan for a consideration of $7,100,000, of which $7,000,000 was funded from
the Facility. During December 2000, the Company placed two mortgage loans on
these properties totaling $5,000,000. The proceeds from these mortgage loans
were used to pay down the Facility. The properties and all of the improvements
are triple net leased to a non-profit hospital and are being operated as health
and fitness facilities.
In April 2000, the Company acquired a property located in Hanover, Pennsylvania
for a consideration of $11,767,000, of which $2,500,000 was funded from the
Facility, a portion of which was subsequently repaid. In connection with this
acquisition, the Company assumed a first mortgage with an outstanding principal
balance of $9,015,000. The building is net leased to a manufacturing company.
During the three months ended March 31, 2000, the Company acquired three
properties for a total consideration of $23,123,000. First mortgages totaling
$15,000,000 were placed on two of these properties and the balance of $8,123,000
was paid in cash.
The Company is currently in discussions concerning the acquisition of additional
net leased properties. Cash provided from operations and the Company's cash
position will provide funds for cash distributions to shareholders and operating
expenses. These sources of funds, as well as funds available from the Facility
will provide funds for future property acquisitions. It will continue to be the
Company's policy to make sufficient cash distributions to shareholders in order
for the Company to maintain its real estate investment trust status under the
Internal Revenue Code.
On July 6, 2000, the Company announced that its Board of Directors had
authorized the purchase of its outstanding preferred stock from time-to-time in
the open market and in private transactions. The Board of Directors of the
Company allocated $1,000,000 to this repurchase program. To date, 6,600 shares
of preferred stock have been repurchased at a total cost of $91,000.
Results of Operations
- ---------------------
Comparison of Years Ended December 31, 2000 and 1999
- ----------------------------------------------------
Rental income increased by $3,502,000 to $12,333,000 for the year ended December
31, 2000, as compared to the year ended December 31, 1999. Increases of
$3,385,000 and $178,000 were due to the acquisition of eight and four properties
during the years ended December 31, 2000 and 1999, respectively. These increases
were partially offset by a $214,000 decrease in revenues resulting from the sale
of thirteen Total Petroleum properties during October 2000.
Interest and other income decreased by $1,013,000 for the year ended December
31, 2000 to $336,000, primarily because in the 1999 fiscal year $793,000 of
unused escrow funds were returned to the Company. Interest and other income also
decreased in the year ended December 31, 2000 due to a reduction in interest
earned on cash and cash equivalents available for investment, as cash and cash
equivalents were used to fund property acquisitions.
The increase in depreciation and amortization expense of $711,000 for the year
ended December 31, 2000 to $2,356,000 results primarily from depreciation on the
eight properties acquired during the year ended December 31, 2000.
The increase in interest-mortgages payable to $4,261,000 for the year ended
December 31, 2000 from $2,543,000 for the year ended December 31, 1999 is due to
mortgages placed on nine properties acquired during 2000 and 1999. Interest-line
of credit amounted to $340,000 during the year ended December 31, 2000 resulting
from borrowings under the credit facility. There were no such borrowings during
the prior year.
General and administrative expenses increased by $268,000 for the year ended
December 31, 2000. This increase was primarily due to an increase in payroll and
payroll related expenses.
Real estate expenses were $67,000 in the year ended December 31, 2000 and
$129,000 in the year ended December 31, 1999. The decrease is due to a refund of
real estate taxes received by the Company during the current year. The related
expense had been included in the year ended December 31, 1999.
During the year ended December 31, 2000, the Company determined that the
estimated fair value of two properties were lower than their carrying amounts
and thus, the Company recorded a provision for the differences. There was no
comparable provision in the year ended December 31, 1999.
Gain on sale of real estate during the year ended December 31, 2000 results
substantially from the sale of thirteen Total Petroleum locations which resulted
in a gain of $3,603,000 for financial statement purposes. The Company also
recognized a gain of $43,000 on the sale of a property located in Kansas during
May, 2000 and a gain of $156,000 on the sale of a property located in South
Carolina during February, 2000.
Comparison of Years Ended December 31, 1999 and 1998
- ----------------------------------------------------
Rental income increased by $1,744,000 to $8,831,000 for the year ended December
31, 1999 as compared to the year ended December 31, 1998 primarily due to the
acquisition of four properties in 1999 and the inclusion of rental income on
four properties acquired in 1998 for a full year.
On September 6, 1998, the Company received a payoff in full of the related party
mortgage receivable, which had previously been acquired at a discount. Included
in interest from related party for the year ended December 31, 1998 is
$2,081,000, which represents the unamortized balance of the discount. There is
no comparable income item in the year ended December 31, 1999.
Interest and other income increased by $963,000 to $1,349,000 for the year ended
December 31, 1999 of which $793,000 is due to the return of unused escrow funds
upon completion of the Company's responsibility with respect to environmental
cleanup at certain locations net leased to Total Petroleum. Interest and other
income also increased in the year ended December 31, 1999 due to interest earned
on the increase in cash and cash equivalents available for investment. The
increase in cash and cash equivalents resulted from the sale of common shares by
the Company through a rights offering (consummated in June, 1998) and from the
approximate $7,600,000 the Company received from the payoff of a mortgage
receivable in September 1998.
The increase in depreciation and amortization expense of $267,000 for the year
ended December 31, 1999 to $1,645,000 results primarily from depreciation on the
eight properties acquired during 1999 and 1998.
The increase in interest-mortgages payable to $2,543,000 for the year ended
December 31, 1999 from $2,075,000 for the year ended December 31, 1998 is due to
mortgages placed on seven of the properties acquired during 1999 and 1998.
Interest-bank amounted to $258,000 for the year ended December 31, 1998
resulting from borrowings under the Credit Agreement. Borrowings under the
Credit Agreement were made to facilitate property acquisitions. There was no
comparable expense in the year ended December 31, 1999.
General and administrative expenses increased by $255,000 to $933,000 for the
year ended December 31, 1999. This increase was due to a combination of factors,
including increases in professional fees, payroll and miscellaneous expenses
related to properties.
During the year ended December 31, 1998 the Company had determined that the
estimated fair value of certain properties were lower than their carrying
amounts and thus, the Company had taken a provision for the differences. The
total provision taken on these three properties amounted to $157,000 in the year
ended December 31, 1998. There was no comparable provision in the year ended
December 31, 1999.
Gain on sale of real estate during the year ended December 31, 1999 results from
the sale of one of the three properties the Company had taken a provision on
during 1998. The Company sold the property to the lessee and realized a gain of
$62,000 based on the adjusted basis. The 1998 gain on sale of real estate
results from the sale of a property located in the State of Washington. The
Company realized a gain of $1,102,000.
Item 7a. Qualitative and Quantitative Disclosures About Market Risk
----------------------------------------------------------
The Company has considered the effects of derivatives and exposures to market
risk relating to interest rate, foreign currency exchange rate, commodity price
and equity price risk. The Company's mortgages payable bear fixed interest rates
and therefore there is no material market risk associated with these
instruments. The Company's exposure to market risk relates to its variable rate
unsecured credit facility, with the initial borrowing occurring during March,
2000. This variable rate indebtedness had a weighted average interest rate of
9.9% for the period ended December 31, 2000 and the Company believes that a 1%
change in interest rates would not have a material effect on income.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The financial statements and supplementary data listed in Items 14(a)(1) and
14(a)(2) hereof are included herein.
Item 9. Changes in and Disagreements with Accountants on Accounting
-----------------------------------------------------------
and Financial Disclosure
------------------------
None
PART III
Information required by Part III (Item 10 - "Directors and Executive Officers of
the Registrant", Item 11 - "Executive Compensation", Item 12 -"Security
Ownership of Certain Beneficial Owners and Management" and Item 13 -"Certain
Relationships and Related Transactions") will be contained in the definitive
proxy statement to be filed within 120 days of the end of the Company's fiscal
year.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
(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:
Page
----
- Report of Independent Auditors F-1
- Statements:
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-3
Consolidated Statements of Stockholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6 through F-17
2. Financial Statement Schedules:
- Schedule III-Real Estate
and Accumulated Depreciation F-18 through F-19
All other schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or the notes
thereto.
3. Exhibits
--------
3.1 Articles of Incorporation, as amended, of the Company, filed as Exhibit 3.1
to the Company's Form 10-Q for the quarter ended September 30, 1985, which
Exhibit is incorporated herein by reference.
3.2 Amendment to Articles of Incorporation, filed as an Exhibit to the
Company's Form 10-Q for the quarter ended June 30, 1989, which Exhibit is
incorporated herein by reference.
3.3 Amendment to Articles of Incorporation, filed as an Exhibit to the
Company's Form 10-Q for the quarter ended June 30, 1990, which Exhibit is
incorporated herein by reference.
3.4 By-Laws of the Company, as amended, filed as an Exhibit to the Company's
Form 10-Q for the quarter ended June 30, 1989, which Exhibit is
incorporated herein by reference.
3.5 Amendment to By-Laws filed as an Exhibit to the Company's Form 10-Q for the
quarter ended June 30, 1990, which Exhibit is incorporated herein by
reference.
21.1 Subsidiaries of Registrant (filed herewith)
(b) A Form 8-K was filed by the Registrant during the last quarter
of the period covered by this report, (on October 24, 2000) to
report the sale of the thirteen Total Petroleum gas, service
and convenience store centers.
A Form 8-K was filed by the Registrant on January 4, 2001 to
report the acquisition on December 28, 2000 of a property
located in Hauppauge, NY.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf of the undersigned, thereunto duly authorized.
ONE LIBERTY PROPERTIES, INC.
Dated: March 26, 2001 By:s/ Jeffrey Fishman
---------------------
Jeffrey Fishman, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities indicated on the dates indicated.
Signature Title Date
--------- ----- ----
s/ Fredric H. Gould
- -------------------
Fredric H. Gould Chairman of the March 26, 2001
Board of Directors and
Chief Executive Officer
s/ Jeffrey Fishman
- ------------------
Jeffrey Fishman President and
Chief Operating Officer March 26, 2001
s/ Joseph A. Amato
- -----------------
Joseph A. Amato Director March 26, 2001
s/ Charles Biederman
- --------------------
Charles Biederman Director March 26, 2001
s/ James Burns
- --------------
James Burns Director March 26, 2001
s/ Jeffrey Gould
- ----------------
Jeffrey Gould Director March 26, 2001
s/ Matthew Gould
- ----------------
Matthew Gould Director March 26, 2001
s/ Arthur Hurand
- ----------------
Arthur Hurand Director March 26, 2001
s/ Marshall Rose
- ----------------
Marshall Rose Director March 26, 2001
s/ David W. Kalish
- ------------------
David W. Kalish Vice President and
Chief Financial Officer March 26, 2001
Exhibit 21.1
SUBSIDIARIES OF THE COMPANY
Company State of Incorporation
------- ----------------------
OLP Action, Inc. Michigan
OLP Arby's II South Carolina
OLP Iowa, Inc. Delaware
OLP Texas, Inc. Texas
OLP-TSA Georgia, Inc. Georgia
OLP Dixie Drive Houston, Inc. Texas
OLP Greenwood Village, Colorado, Inc. Colorado
OLP Ft. Myers, Inc. Florida
OLP Rabro Drive Corp. New York
OLP Chattanooga, Inc. Tennessee
OLP Columbus, Inc. Ohio
OLP Mesquite, Inc. Texas
OLP South Highway Houston, Inc. Texas
OLP Selden, Inc. New York
OLP Palm Beach, Inc. Florida
OLP New Hyde Park, Inc. New York
OLP Champaign, Inc. Illinois
OLP Batavia, Inc. New York
OLP Hanover PA, Inc. Pennsylvania
OLP Grand Rapids, Inc. Michigan
OLP El Paso, Inc. Texas
OLP Plano, Inc. Texas
OLP Hamilton, Inc. New York
OLP Hauppauge, LLC New York
OLP Ronkonkoma, LLC New York
OLP Plano 1, L.P. Texas
OLP El Paso 1, L.P. Texas
OLP Plano, LLC Delaware
OLP El Paso 1, LLC Delaware
OLP Hanover 1, LLC Pennsylvania
ONE LIBERTY PROPERTIES, INC.
and SUBSIDIARIES
Consolidated Financial Statements
December 31, 2000
REPORT OF INDEPENDENT AUDITORS
------------------------------
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, 2000 and
1999, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
2000. Our audits also included the financial statement schedule listed in the
Index at Item 14(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 auditing standards generally accepted
in the 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 consolidated 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, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States. 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.
/s/ Ernst & Young LLP
New York, New York
February 26, 2001
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in Thousands, Except Per Share Data)
ASSETS
December 31,
---------------------------
2000 1999
---- ----
Real estate investments, at cost (Notes 3, 4, and 6)
Land $ 26,279 $ 16,639
Buildings 101,585 59,269
--------- ---------
127,864 75,908
Less accumulated depreciation 6,244 5,138
--------- ---------
121,620 70,770
Cash and cash equivalents 2,069 11,247
Unbilled rent receivable (Note 3) 1,615 1,737
Rent, interest, deposits and other receivables 976 733
Notes receivable - officer (Note 8) 240 80
Investment in BRT Realty Trust - (related party) (Note 2) 240 240
Deferred financing costs 1,154 732
Other (including available-for-sale securities
of $228 and $352) (Note 2) 305 410
---------- ----------
$ 128,219 $ 85,949
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable (Note 6) $ 64,123 $ 35,735
Line of credit (Note 6) 10,000 -
Accrued expenses and other liabilities 720 412
----------- -----------
Total liabilities 74,843 36,147
---------- ---------
Commitments and contingencies - -
Stockholders' equity (Notes 7,9,10 and 11):
Redeemable Convertible Preferred Stock,
$1 par value; $1.60 cumulative annual dividend;
2,300 shares authorized; 648 and 655 shares issued;
liquidation and redemption values of $16.50 10,693 10,802
Common Stock, $1 par value; 25,000 shares authorized;
3,010 and 2,980 shares issued and outstanding 3,010 2,980
Paid-in capital 31,650 31,338
Accumulated other comprehensive income - net unrealized
gain on available-for-sale securities (Note 2) 76 33
Accumulated undistributed net income 7,947 4,649
--------- ----------
Total stockholders' equity 53,376 49,802
--------- ---------
$ 128,219 $ 85,949
========= =========
See accompanying notes.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Amounts in Thousands, Except Per Share Data)
Year Ended December 31,
----------------------------------
2000 1999 1998
---- ---- ----
Revenues:
Rental income (Note 3) $ 12,333 $ 8,831 $ 7,087
Interest from related party (Note 5) - - 2,660
Interest and other income (Note 3) 336 1,349 386
-------- -------- -------
12,669 10,180 10,133
-------- -------- -------
Expenses:
Depreciation and amortization 2,356 1,645 1,378
Interest - mortgages payable (Note 6) 4,261 2,543 2,075
Interest - line of credit (Note 6) 340 - 258
Leasehold rent 289 289 289
General and administrative (Note 8) 1,089 821 628
Real estate expenses 67 129 62
Provision for valuation adjustment of
real estate (Note 4) 125 - 157
-------- -------- --------
8,527 5,427 4,847
-------- -------- --------
Income before gain on sale 4,142 4,753 5,286
-------- -------- --------
Gain on sale of real estate (Note 3) 3,802 62 1,102
Loss (gain) on sale of available-for-sale securities (12) 64 30
--------- -------- --------
3,790 126 1,132
--------- -------- --------
Net income $ 7,932 $ 4,879 $ 6,418
========= ======== ========
Calculation of net income applicable to common stockholders:
Net income $ 7,932 $ 4,879 $ 6,418
Less dividends and accretion on preferred stock 1,044 1,247 1,452
--------- --------- ---------
Net income applicable to common stockholders $ 6,888 $ 3,632 $ 4,966
========= ======== ========
Weighted average number of common shares outstanding:
Basic 2,993 2,960 2,297
===== ===== =====
Diluted 3,528 2,963 2,298
===== ===== =====
Net income per common share (Notes 2, 9 and 11):
Basic $ 2.30 $ 1.23 $ 2.16
========= ======== =========
Diluted $ 2.25 $ 1.23 $ 2.16
========= ======== =========
Cash distributions per share:
Common Stock $ 1.20 $ 1.20 $ 1.20
========= ========= =========
Preferred Stock $ 1.60 $ 1.60 $ 1.60
========= ========= =========
See accompanying notes.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the Three Years Ended December 31, 2000
(Amounts in Thousands, Except Per Share Data)
Accumulated
Other Accumulated
Preferred Common Paid-in Comprehensive Undistributed
Stock Stock Capital Income Net Income Total
----- ----- ------- ------ ---------- -----
Balances, December 31, 1997 $ - $ 1,561 $14,420 $ 147 $ 2,076 $18,204
Distributions - Common Stock
($1.20 per share) - - - - (2,710) (2,710)
Distributions - Preferred Stock
($1.60 per share) - - - - (1,294) (1,294)
Accretion on Preferred Stock - - (158) - - (158)
Shares issued through rights offering - 1,332 16,139 - - 17,471
Shares issued through dividend
reinvestment plan - 47 564 - - 611
Net income - - - - 6,418 6,418
Other comprehensive income -
net unrealized loss on available-
for-sale securities (Note 2) - - - (47) - (47)
---------
Comprehensive income - - - - - 6,371
--------- --------- ---------- ---------- --------- ---------
Balances, December 31, 1998 - 2,940 30,965 100 4,490 38,495
Distributions - Common Stock
($1.20 per share) - - - - (3,552) (3,552)
Distributions - Preferred Stock
($1.60 per share) - - - - (1,168) (1,168)
Preferred Stock (Note 7) 10,802 - - - - 10,802
Accretion on Preferred Stock - - (79) - - (79)
Preferred shares converted to
Common Stock - 1 7 - - 8
Shares issued through dividend
reinvestment plan - 39 445 - - 484
Net income - - - - 4,879 4,879
Other comprehensive income -
net unrealized loss on available-
for-sale securities (Note 2) - - - (67) - (67)
--------
Comprehensive income - - - - - 4,812
-------- --------- -------- --------- -------- --------
Balances, December 31, 1999 10,802 2,980 31,338 33 4,649 49,802
Distributions - Common Stock
($1.20 per share) - - - - (3,590) (3,590)
Distributions - Preferred Stock
($1.60 per share) - - - - (1,044) (1,044)
Preferred Stock (Note 7) (109) - 18 - - (91)
Shares issued through dividend
reinvestment plan - 30 294 - - 324
Net income - - - - 7,932 7,932
Other comprehensive income -
net unrealized gain on available-
for-sale securities (Note 2) - - - 43 - 43
--------
Comprehensive income - - - - - 7,975
------- -------- -------- --------- -------- --------
Balances, December 31, 2000 $10,693 $ 3,010 $31,650 $ 76 $ 7,947 $53,376
======= ======== ======= ========= ======== =======
See accompanying notes.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in Thousands)
Year Ended December 31,
----------------------------------------------
2000 1999 1998
---- ---- -----
Cash flows from operating activities:
Net income $ 7,932 $ 4,879 $ 6,418
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of real estate (3,802) (62) (1,102)
(Gain) loss on sale of available-for-sale securities 12 (64) (30)
Increase in rental income from straight-lining of rent (669) (572) (500)
Provision for valuation adjustment 125 - 157
Depreciation and amortization 2,356 1,645 1,378
Changes in assets and liabilities:
Increase in rent, interest, deposits and
other receivables (422) (82) (461)
Increase (decrease) in accrued expenses
and other liabilities 340 95 (50)
---------- ---------- ---------
Net cash provided by operating activities 5,872 5,839 5,810
--------- --------- -------
Cash flows from investing activities:
Additions to real estate (51,994) (11,499) (13,172)
Net proceeds from sale of real estate 12,514 210 1,419
Net proceeds from sale of available-for-sale securities 156 1,203 282
Collection of mortgages receivable - (including $5,653
from related party in 1998) - 228 5,715
Purchase of available-for-sale securities - (885) (935)
Payments to minority interest by subsidiary (32) (13) (14)
----------- ---------- ----------
Net cash used in investing activities (39,356) (10,756) (6,705)
--------- -------- ---------
Cash flows from financing activities:
Proceeds (repayments) from bank borrowings 10,000 - (4,605)
Proceeds from mortgages payable 20,162 5,775 9,236
Payment of financing costs (666) (238) (345)
Repayment of mortgages payable (789) (528) (359)
Cash distributions - Common Stock (3,590) (4,434) (2,297)
Cash distributions - Preferred Stock (1,044) (1,491) (1,294)
Proceeds from issuance of shares through rights offering - - 17,471
Repurchase of preferred stock, which was cancelled (91) (2,494) (40)
Issuance of shares through dividend reinvestment plan 324 484 611
--------- ---------- ---------
Net cash provided by (used in) financing activities 24,306 (2,926) 18,378
--------- ---------- ---------
Net (decrease) increase in cash and cash equivalents (9,178) (7,843) 17,483
Cash and cash equivalents at beginning of year 11,247 19,090 1,607
-------- -------- -------
Cash and cash equivalents at end of year $ 2,069 $11,247 $19,090
========= ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for interest expense $ 4,464 $ 2,546 $ 2,438
Supplemental schedule of non cash investing and financing activities:
Assumption of mortgage payable in connection
with purchase of real estate $ 9,015 $ 1,065 $ -
See accompanying notes.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000
NOTE 1 - ORGANIZATION AND BACKGROUND
One Liberty Properties, Inc. (the "Company") was incorporated in
1982 in the state of Maryland. The Company is a self-managed Real
Estate Investment Trust ("REIT") which currently participates in
net leasing transactions and has engaged in other real property
transactions and invested in real property mortgages. The Company
owns thirty-six properties located in thirteen states.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts
of One Liberty Properties, Inc., its wholly-owned subsidiaries
and a majority-owned limited liability company. Material inter-
company items and transactions have been eliminated. One Liberty
Properties, Inc., its subsidiaries and the limited liability com-
pany are hereinafter referred to as the Company.
Use of Estimates
The preparation of the 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.
Income 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 initial term of the
lease. Mortgage receivable discount was amortized over the
remaining life, utilizing the interest method, based on the
Company's evaluation of the collectibility of the carrying amount
of the mortgage.
Depreciation
Depreciation of buildings is computed on the straight-line method
over an estimated useful life of 40 years for commercial
properties and 27 and one half years for residential properties.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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.
Total distributions made during 2000 and 1999 included
approximately 1% and 21%, respectively, attributable to capital
gains, with the balance to ordinary income.
Investments in Debt and Equity Securities
The Company determines the appropriate classification of
securities at the time of purchase and reassesses the
appropriateness of the classification at each report date. At
December 31, 2000, 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 a separate component of stockholders' equity.
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, 2000 of
$240,000. The net unrealized holding gain of $143,000 is excluded
from earnings. In addition, the Company has invested $295,000 in
various other equity securities which have a fair market value of
$228,000 at December 31, 2000. The aggregate net unrealized
holding loss of $67,000 on these investments is also excluded from
earnings. At December 31, 2000, the cumulative unrealized gain of
$76,000 on these investments is reported as a separate component
of stockholders' equity.
Realized gains and losses are determined using the average cost
method. During 2000 and 1999, sales proceeds and gross realized
gains and losses on securities classified as available-for-sale
were:
2000 1999
---- ----
Sales proceeds $ 156,000 $1,203,000
========== ==========
Gross realized losses $ (12,000) $ (4,000)
=========== ===========
Gross realized gains $ - $ 68,000
========== ==========
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Notes receivable - officer: The carrying amount of the notes
receivable reported on the balance sheet is their face value. The
notes carry an interest rate equal to the prime rate and thus the
outstanding balance approximates their 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.
Mortgages payable: There is no material difference between the
carrying amount and the fair value because interest rates
approximate current market rates.
Accretion on Preferred Stock
The Company has Preferred Stock outstanding which is both
redeemable and convertible. The stock was initially recorded in
the financial statements at its fair value based upon the initial
average trades on the American Stock Exchange. The amount by which
the redemption value exceeded the carrying value was accreted
using the interest method through July 1, 1999. (See Note 7.)
Earnings Per Common Share
Basic earnings per share was determined by dividing net income
applicable to common stockholders for each year by the weighted
average number of shares of Common Stock outstanding during each
year.
Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue Common Stock
were exercised or converted into Common Stock or resulted in the
issuance of Common Stock that then shared in the earnings of the
Company. For the year ended December 31, 2000, diluted earnings
per share was determined by dividing net income by the total of
the weighted average number of shares of Common Stock outstanding
plus the dilutive effect of the Company's outstanding options (495
shares) plus the dilutive effect of the Company's Preferred Stock
using the if-converted method. For the years ended December 31,
1999 and 1998, diluted earnings per share was determined by
dividing net income applicable to common stockholders 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 (3,376 and 710 shares for the years ended 1999
and 1998, respectively) using the treasury stock method. The
Preferred Stock was not considered for the purpose of computing
diluted earnings per share for the years ended December 31, 1999
and 1998 because their assumed conversion was antidilutive.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Options to purchase 47,500, 40,000 and 40,500 shares of Common
Stock at $12.375, $14.50 and $13.50 per share, which were granted
during March 1999, 1998 and 1997, respectively, were not included
in the computation of diluted earnings per share for the year
ended December 31, 2000 because the exercise price of these
options is greater than the average market price of the common
shares and, therefore, the effect would be antidilutive. Options
to purchase 49,500 shares of Common Stock at $11.125 per share,
which were granted during March 2000, were also not included in
the computation of diluted earnings per share for the three months
ended December 31, 2000, but were included for the interim 2000
quarters when the exercise price of the options were lower than
the average market price of the common shares.
Options to purchase 40,000 shares of Common Stock $14.50 per
share, which were granted during March 1998, were not included in
the computation of diluted earnings per share for the years ended
December 31, 1999 and 1998 because the exercise price of these
options is greater than the average market price of the common
shares and, therefore, the effect would be antidilutive. Options
to purchase 40,500 shares of Common Stock at $13.50 per share,
which were granted during March 1997, were also not included in
the computation of diluted earnings per share, except for the
three months ended September 1999, June 1998 and March 1998 when
the exercise price of the options were lower than the average
market price of the common shares.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with
maturities of three months or less when purchased.
Valuation Allowance on Real Estate Owned
The Company reviews each real estate asset owned for which
indicators of impairment are present to determine whether the
carrying amount of the asset will be recovered. Recognition of
impairment is required if the undiscounted cash flows estimated to
be generated by those assets are less than the assets' carrying
amount. Measurement is based upon the fair market value of the
asset. 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.
Comprehensive Income
Effective January 1, 1998, the Company adopted the Financial
Accounting Standards Board's Statement No. 130, Reporting Compre-
hensive Income. Statement No. 130 established standards for the
reporting and display of comprehensive income and its components.
Statement 130 requires unrealized gains or losses on the Company's
available-for-sale securities to be included in other comprehen-
sive income. At December 31, 2000, accumulated other comprehensive
income, which is solely comprised of the net unrealized gain on
available-for-sale securities was $76,000.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Segment Reporting
Effective January 1, 1998, the Company adopted the Financial
Accounting Standards Board's Statement No. 131, Disclosure About
Segments of an Enterprise and Related Information. Statement No.
131 established standards for the way that public business
enterprises report information about operating segments in annual
financial statements and requires that those enterprises report
selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major
customers. As the Company operates predominantly in one industry
segment, Statement No. 131 did not have a material impact on the
Company's financial statements.
Derivative Instruments and Hedging Activities
The Financial Accounting Standards Board issued Statement No. 137,
Accounting for Derivative Instruments and Hedging Activities-
Deferral of the Effective Date of FASB Statement No. 133.
Statement No. 137 deferred for one year the effective date of
Statement No. 133, Accounting for Derivatives Instruments and
Hedging Activities. The rule applies to fiscal years beginning
after June 15, 2000. Because of the Company's minimal use of
derivatives, management does not anticipate that the adoption
of the new statement will have a significant effect on earnings
or the financial position of the Company.
Reclassification
Certain amounts reported in previous financial statements have
been reclassified in the accompanying financial statements to
conform to the current year's presentation.
NOTE 3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS
During the year ended December 31, 2000, the Company purchased
eight properties in four states for a total consideration of
$61,009,000. First mortgages totaling $29,015,000 were placed on
five of these properties, a net $10,000,000 was funded from the
credit line, $11,700,000 was from the proceeds of the sale of the
Total Petroleum properties and the balance was paid in cash.
During the year ended December 31, 1999, the Company purchased
four properties in two states for a total consideration of
$12,565,000. First mortgages totaling $6,840,000 were placed on
the properties with the balance paid in cash.
The rental properties owned at December 31, 2000 are leased under
noncancellable operating leases to corporate tenants with current
expirations ranging from 2001 to 2038, with certain tenant renewal
rights. The majority of 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.
NOTE 3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued)
The minimum future rentals to be received over the next five years
and thereafter on the operating leases in effect at December 31,
2000 are as follows:
Year Ending
December 31, (In Thousands)
------------ --------------
2001 $ 14,195
2002 13,892
2003 13,309
2004 13,376
2005 13,301
Thereafter 113,535
-------
Total $181,608
========
Included in the minimum future rentals are rentals from a property
owned in fee by an unrelated third party. The Company pays annual
fixed leasehold rent of $289,000 through April 2010 and has a
right to extend the lease for up to three 15 year and one 14 year
renewal options.
At December 31, 2000, the Company has recorded an unbilled rent
receivable aggregating $1,615,000, representing rent reported on a
straight-line basis in excess of rental payments required under
the initial term of the respective leases. This amount is to be
billed and received pursuant to the lease terms over the next
seventeen years. The minimum future rentals presented above
include amounts applicable to the repayment of these unbilled rent
receivables.
Sale of Real Estate
On October 20, 2000, the Company sold the thirteen locations it
owned in Michigan that were net leased to Total Petroleum, Inc.
The gross sales price was $12,000,000 which resulted in a gain of
$3,603,000 for financial statement purposes (net of accumulated
unbilled rent receivable in the amount of $791,000 written off in
connection with the sale). The Company used the sales proceeds to
acquire two additional properties on a tax deferred basis in
accordance with Internal Revenue Code Section 1031. Therefore, the
Company will not realize a gain for federal income tax purposes on
the sale.
Included in other income for the year ended December 31, 1999 is
$793,000 which represents the return to the Company of unused
escrow funds by the escrow agent pursuant to the lease agreement
with Total Petroleum, Inc. (entered into in 1991).
In February and May, 2000, the Company sold two properties for a
total sales price of $890,000 and recognized gains totaling
$199,000.
On July 22, 1999, the Company sold a property for a sales price of
$225,000 and recognized a gain of $62,000.
On October 30, 1998, the Company sold a property for a sales price
of $1,500,000 and recognized a gain of $1,102,000. In addition, a
second mortgage receivable the Company held on the property was
paid off as part of the sale. The outstanding balance of this
mortgage receivable was $36,000 at the time of the sale.
NOTE 4 - PROVISION FOR VALUATION ADJUSTMENT
During the years ended December 31, 2000 and 1998, the Company
determined that the estimated fair value of five properties were
lower than their carrying amounts and thus, the Company recorded a
provision for the differences. The total provision taken on two of
these properties amounted to $125,000 during the year ended
December 31, 2000 and a $157,000 provision was taken on three
properties during the year ended December 31, 1998. The provisions
taken in 2000 and 1998 have been presented as a reduction to real
estate investments on the balance sheet.
NOTE 5 - INTEREST FROM RELATED PARTY
In September, 1998, the Company received an early payoff in full
of a mortgage receivable in the amount of $7,582,000. The office
building which secured this mortgage is owned by a partnership in
which Gould Investors L.P. ("Gould"), a related party, is the
General Partner and in which Gould owns substantially all of the
partnership interests. The discount of $3,738,000 was being
amortized by the Company over the original life of the mortgage.
In September, 1998, the unamortized balance of the discount (which
the Company realized as interest income) was $2,081,000. Interest
income recognized, including amortization of the discount of
$2,321,000 amounted to $2,660,000 for the year ended 1998.
At December 31, 2000 and 1999, Gould owned 542,397 and 749,172
shares of the common stock of the Company or 18% and 25.1% of the
equity interest and held 16.3% and 22.7% of the voting rights,
respectively.
See Note 8 for other related party transaction information.
NOTE 6 - DEBT OBLIGATIONS
Mortgages Payable
At December 31, 2000, there are twenty-one outstanding mortgages
payable, all of which are secured by first liens on individual
real estate investments with an aggregate carrying value of
$92,412,000 before accumulated depreciation. The mortgages bear
interest at rates ranging from 6.9% to 9.1%, and mature between
2002 and 2017.
Scheduled principal repayments during the next five years and
thereafter are as follows:
Year Ending
December 31, (In Thousands)
------------ --------------
2001 $ 965
2002 2,380
2003 9,788
2004 3,866
2005 9,127
2006 and thereafter 37,997
--------
Total $64,123
=======
NOTE 6 - DEBT OBLIGATIONS (Continued)
Line of Credit
On March 24, 2000 the Company entered into an agreement with
European American Bank ("EAB") to provide for a two year
$15,000,000 credit facility ("Facility"). The Facility provides
that the Company pay interest at EAB's prime rate on funds
borrowed and an unused facility fee of 1/4%. The Company paid
$175,000 in fees and closing costs which are being amortized over
the term of the loan. The Company has the option to extend the
term for one year. The Facility is guaranteed by all of the
Company's subsidiaries which own unencumbered properties. The
Company has agreed that it and its affiliates will maintain on
deposit with EAB at least 10% of the average outstanding annual
principal balance of take downs under the Facility. If minimum
balances are not maintained by the Company and its affiliates, a
deficiency fee is charged to the Company.
The Facility is being used primarily to finance the acquisition of
commercial real estate. The Company is required to comply with
certain covenants. Net proceeds received from the sale or
refinance of properties are required to be used to repay amounts
outstanding under the Facility if proceeds from the Facility were
used to purchase the property.
In 1998 the Company paid interest under a revolving credit
agreement with Bank Leumi Trust Company of New York, at the rate
of prime plus 1/2% on funds borrowed on an interest only basis,
plus a 1/4% servicing fee on the outstanding balance to Bank
Leumi. This agreement matured on February 28, 1999.
NOTE 7 - REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Preferred Stock has the following rights, qualifications and
conditions: (i) a cumulative dividend preference of $1.60 per
share per annum; (ii) a liquidation preference of $16.50 per
share; (iii) a right to convert each share of Preferred Stock at
any time into .825 of a share of Common Stock; (iv) redeemable by
the Company at $16.50 per share and (v) one-half vote per share.
Pursuant to the Company's certificate of incorporation, as
amended, each preferred shareholder of the Company had a one-time
right to "put" the Preferred Stock to the Company at $16.50 per
share for a period of ninety (90) days commencing July 1, 1999.
During this period, preferred shareholders "put" 137,268 preferred
shares to the Company for a total payment by the Company of
$2,265,000. The preferred shareholders no longer have any rights
to "put" their shares to the Company.
During the years ended December 31, 2000 and 1999 the Company
repurchased 6,600 and 13,950 shares of Preferred Stock for an
aggregate consideration of $91,000 and $228,000, respectively.
NOTE 8 - OTHER RELATED PARTY TRANSACTIONS
Gould charged the Company $272,000, $248,000 and $202,000 during
the years ended December 31, 2000, 1999 and 1998, respectively,
for allocated general and administrative expenses and payroll
based on time incurred by various employees.
NOTE 8 - OTHER RELATED PARTY TRANSACTIONS (Continued)
The Company paid a company controlled by the Chairman of the Board
of Directors and certain officers of the Company brokerage fees
totaling $200,000 and $102,000 during the year ended December 31,
2000 and 1999 relating to mortgages placed on three and five of
the Company's properties, respectively. These fees were deferred
and are being amortized over the lives of the respective loans.
During the year ended December 31, 2000, this company was paid a
brokerage fee of $300,000 relating to the sale of the Total
Petroleum properties and was also paid a $4,000 fee for
supervision of repair work at a property. During the year ended
December 31, 1998, this company was paid $45,000 also relating to
the sale of real estate.
During February 2000, January 2000 and December 1999, the Company
made three loans aggregating $240,000 to its president providing
for an interest rate equal to the prime rate and maturing in
December, 2004. These loans are secured by shares of the Company
purchased with the proceeds and personally guaranteed by this
individual and his wife.
During October 1998, Gould made a $350,000 loan to the same
individual and his wife bearing interest at 9% and maturing in
October, 2001. The loan is secured by interests in several real
estate partnerships in which Gould and the Company are the
majority partners, and the wife of the Company's president is the
minority partner. The loan is also personally guaranteed. The
outstanding balance at December 31, 2000 is $117,000.
See Note 5 for other related party transaction information.
NOTE 9 - STOCK OPTIONS
On November 17, 1989, the directors of the Company adopted the
1989 Stock Option Plan. Stock options under the 1989 Stock Option
Plan are granted at per share amounts at least equal to their fair
market value at the date of grant. A maximum of 225,000 common
shares were reserved for issuance under the 1989 Stock Option
Plan, of which none are available for grant at December 31, 2000.
On December 6, 1996, the directors of the Company adopted the 1996
Stock Option Plan (Incentive/Nonstatutory Stock Option Plan).
Incentive stock options are granted at per share amounts at least
equal to their fair market value at the date of grant, whereas for
nonstatutory stock options the exercise price may be any amount
determined by the Board of Directors. Options granted under the
Plan will expire no later than ten years after the date on which
the option is granted. The options granted under the Plans are
cumulatively exercisable at a rate of 25% per annum, commencing
six months after the date of grant, and expire five years after
the date of grant. A maximum of 125,000 shares of common stock of
the Company are reserved for issuance to employees, officers,
directors, consultants and advisors to the Company, of which
42,500 are available for grant at December 31, 2000.
NOTE 9 - STOCK OPTIONS (Continued)
Changes in the number of common shares under all option
arrangements are summarized as follows:
Year Ended December 31,
-------------------------------------
2000 1999 1998
---- ---- ----
Outstanding at beginning of period 128,000 80,500 40,500
Granted 49,500 47,500 40,000
Option prices $11.125 $12.375 $14.50
Exercisable at end of period 106,625 62,250 30,250
Exercised - - -
Expired - - -
Outstanding at end of period 177,500 128,000 80,500
Option price per share outstanding $11.125-$14.50 $12.375-$14.50 $13.50-$14.50
As of December 31, 2000, the outstanding options had a weighted
average remaining contractual life of approximately 2.82 years and
a weighted average exercise price of $12.76.
The Company adopted Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), and related
interpretations in accounting for its employee stock options.
Under APB 25, no compensation expense is recognized because the
exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant. The
alternative fair value accounting provided for under FASB No. 123,
Accounting for Stock-Based Compensation, is not applicable because
it requires use of option valuation models that were not developed
for use in valuing employee stock options.
Pro forma information regarding net income and earnings per share
is required by FASB No. 123, and has been determined as if the
Company had accounted for its employee stock options under the
fair value method. The fair value for these options was estimated
at the date of the grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 2000 and
1999, respectively: risk free interest rate of 5.22% and 6.41%,
dividend yield of 11.03% and 9.7%, volatility factor of the
expected market price of the Company's Common Stock based on
historical results of .116; and expected lives of 5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective
assumptions including expected stock price volatility. Because the
Company's employee stock options have characteristics
significantly different from those of traded options, and changes
in the subjective input assumptions can materially affect the fair
value estimate, management believes the existing models do not
necessarily provide a reliable single measure of the fair value of
its employee stock options. Had the fair value method of
accounting been applied to the Company's stock plan, which
requires recognition of compensation cost ratably over the vesting
period, pro forma net income applicable to common stockholders
would have been $3,610 which would result in pro forma earnings of
$1.22 per share in 1999.
NOTE 10 - DISTRIBUTION REINVESTMENT PLAN
In May, 1996, the Company implemented a Distribution Reinvestment
Plan (the "Plan"). The Plan provides owners of record of 100
shares or more of its common and/or preferred stock the
opportunity to reinvest cash distributions in newly-issued common
stock of the Company at a five percent discount from the market
price. No open market purchases are made under the Plan. During
the years ended December 31, 2000 and 1999, the Company issued
30,532 and 39,074 common shares, respectively, under the Plan.
NOTE 11 - RIGHTS OFFERING
On June 22, 1998, the Company sold 1,331,733 shares of Common
Stock at $13.25 per share in a rights offering to its
stockholders. The Company had issued one nontransferable right for
each common and/or preferred share owned of record as of March 24,
1998 entitling the holder to purchase one share of Common Stock
for a price of $13.25 per share and certain over-subscription
privileges. Gould purchased 769,232 shares or 57.7% of the total
shares issued. The offer expired on June 15, 1998.
NOTE 12 - PRO FORMA RESULTS (Unaudited)
The following unaudited pro forma operating results of the Company
for the years ended December 31, 2000 and 1999 have been prepared
as if the property acquisitions and dispositions made during 2000
and 1999 had occurred on January 1, 1999. No recognition of any
gain on sale of real estate is included. Unaudited pro forma
financial information is presented for informational purposes only
and may not be indicative of what the actual results of operations
of the Company would have been had the events occurred as of
January 1, 1999, nor does it purport to represent the results of
operations for future periods.
(In Thousands, Except Per Share Data)
2000 1999
---- ----
Pro forma revenues $15,114 $15,001
======= =======
Pro forma net income $4,957 $4,974
====== ======
Pro forma net income
applicable to common
stockholders $3,913 $3,727
====== ======
Pro forma net income per
common share - basic
and diluted $1.31 $1.26
===== =====
NOTE 13 - QUARTERLY FINANCIAL DATA (UNAUDITED):
(In Thousands, Except Per Share Data)
Quarter Ended
-------------
Total
March 31 June 30 September 30 December 31 For Year
-------- ------- ------------ ----------- --------
2000
- ----
Revenues $2,559 $3,295 $3,356 $3,459 $12,669
Net income 1,140 1,156 1,081 4,555(a)(b) 7,932
Net income applicable to
common stockholders 878 894 820 4,296(a)(b) 6,888
Net income per common share:
Basic .29 .30 .27 1.43 2.30(c)
Diluted .29 .30 .27 1.29 2.25(c)
(a) Net income reflects a provision for valuation adjustment of real estate
amounting to $125 for the quarter ending December 31, 2000.
(b) Includes $3,603, (or $1.20 and $1.06 per common share, basic and diluted,
respectively)from the sale of the Total Petroleum properties. See Note 3.
(c) Calculated on weighted average shares outstanding for the year.
Quarter Ended
-------------
Total
March 31 June 30 September 30 December 31 For Year
-------- ------- ------------ ----------- --------
1999
- ----
Revenues $2,198 $3,172(d) $2,426 $2,384 $10,180
Net income 951 1,798(d) 1,125 1,005 4,879
Net income applicable to
common stockholders 589 1,438(d) 862 743 3,632
Net income per common share:
Basic .20 .49 .29 .25 1.23(e)
Diluted .20 .49 .29 .25 1.23(e)
(d) Includes $793 representing the return to the Company of unused escrow funds.
See Note 3.
(e) 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, 2000
(Amounts in Thousands)
Initial Cost Gross Amount at Which Carried At Life on Which
to Company December 31, 2000 Depreciation in
----------- ----------------- Latest Income
Date Of Statement Is
Accumulated Construc- Date Computed
Encumbrances Land Buildings Land Buildings Total Depreciation tion Acquired (Years)
------------ ---- --------- ---- --------- ----- ------------ ---- -------- --------
Free Standing
Retail Locations:
- -----------------
Columbus, OH $ 4,207 $ 1,445 $ 5,781 $ 1,445 $ 5,781 $ 7,226 $ 452 1996 November 19, 1997 40
Plano, TX 4,976 1,536 6,145 1,536 6,145 7,681 134 1998 February 10, 2000 40
El Paso, TX 9,950 2,821 11,373 2,821 11,373 14,194 225 1974 March 29, 2000 40
Miscellaneous 20,956 9,570 33,929 9,471 33,731 43,202 3,465 Various Various 40
Flex Buildings:
- ---------------
Hauppauge, NY - 2,738 10,951 2,738 10,951 13,689 11 1981 December 28, 2000 40
Miscellaneous - 1,039 4,159 1,039 4,159 5,198 4 1986 December 22, 2000 40
Office Building:
- ----------------
New York, NY 4,359 1,344 5,300 1,344 5,300 6,644 370 1973 March 31, 1998 40
Miscellaneous - 181 724 181 724 905 40 1978 October 2, 1998 40
Apartment Building:
- -------------------
New York, NY 4,803 1,110 4,439 1,110 4,439 5,549 1,056 1910 June 14, 1994 27.5
Industrial:
- -----------
Hanover, PA 8,925 2,354 9,414 2,354 9,414 11,768 167 1968 April 11, 2000 40
Miscellaneous 947 815 3,865 815 3,865 4,680 266 Various Various 40
Health Clubs:
- -------------
Miscellaneous 5,000 1,425 5,703 1,425 5,703 7,128 54 Various August 23, 2000 40
----- ----- ----- ----- ----- ----- --
$64,123 $26,378 $101,783 $26,279 $101,585 $127,864 $6,244
======= ======= ======== ======= ======== ======== ======
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes To Schedule III
Consolidated Real Estate And Accumulated Depreciation
(a) Reconciliation of "Real Estate and Accumulated Depreciation"
(In Thousands)
Year Ended December 31,
2000 1999
---- ----
Investment in real estate:
Balance, beginning of year $75,908 $63,550
Addition: Land and buildings 61,008 12,564
Deductions:
Cost of properties sold (8,927) (206)
Valuation allowance (c) (125) -
-------- --------
Balance, end of year $127,864 $ 75,908
======== ========
Accumulated depreciation:
Balance, beginning of year $ 5,138 $ 3,719
Addition: depreciation 2,112 1,477
Deduction: accumulated
depreciation related to
properties sold (1,006) (58)
--------- ---------
Balance, end of year $ 6,244 $ 5,138
========= =========
(b) The aggregate cost of the properties is approximately $4,096 lower
for federal income tax purposes.
(c) During the year ended December 31, 2000, the Company took a provision
for valuation adjustment of real estate totaling $125. See Note 4 to
the consolidated financial statements for other information.