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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant
to Section 13 or 15(d) of
the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2004
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 001-09279
ONE LIBERTY PROPERTIES, INC.
----------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 13-3147497
-----------------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
60 Cutter Mill Road, Great Neck, New York 11021
---------------------------------------------------------------
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (516) 466-3100
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
As of May 6, 2004, the registrant had 9,725,599 shares of Common Stock
outstanding.
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except Per Share Data)
March 31, December 31,
2004 2003
---- ----
(Unaudited)
Assets
Real estate investments, at cost
Land $ 42,498 $ 37,880
Buildings and improvements 172,037 153,591
--------- ---------
214,535 191,471
Less accumulated depreciation 15,147 14,155
--------- ---------
199,388 177,316
Investment in unconsolidated joint ventures 24,495 24,441
Cash and cash equivalents 28,834 45,944
Unbilled rent receivable 4,461 4,264
Rent, interest, deposits and other receivables 3,514 3,323
Investment in BRT Realty Trust-(related party) 717 867
Deferred financing costs 1,943 1,962
Other assets (including available-for-sale securities
of $160 and $146) 1,328 972
-------- --------
Total assets $264,680 $259,089
======== ========
Liabilities and Stockholders' Equity
Liabilities:
Mortgages payable $ 112,692 $106,133
Dividends payable 3,193 3,400
Accrued expenses and other liabilities 3,234 3,587
--------- ----------
Total liabilities 119,119 113,120
--------- --------
Commitments and contingencies - -
Stockholders' equity:
Common stock, $1 par value; 25,000 shares
authorized; 9,650 and 9,605 shares
issued and outstanding 9,650 9,605
Paid-in capital 131,468 130,863
Accumulated other comprehensive income - net
unrealized gain on available-for-sale securities 689 823
Unearned compensation (423) (447)
Accumulated undistributed net income 4,177 5,125
-------- ---------
Total stockholders' equity 145,561 145,969
-------- ---------
Total liabilities and stockholders' equity $264,680 $259,089
======== ========
See accompanying notes to consolidated financial statements.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
March 31,
2004 2003
---- ----
Revenues:
Rental income $ 5,558 $ 4,478
Interest and other income (including $145
in 2003 from an affiliated joint venture) 92 166
------- -------
5,650 4,644
------- -------
Expenses:
Depreciation and amortization 1,024 772
Interest - mortgages payable 2,011 1,579
Interest - line of credit 51 113
General and administrative 855 540
Real estate expenses 140 96
------- -------
4,081 3,100
------- -------
Earnings before equity in earnings of unconsolidated
joint ventures and gain on sale 1,569 1,544
Equity in earnings of unconsolidated joint ventures 675 654
Gain on sale of available-for-sale securities 1 -
------- -------
Net income $ 2,245 $ 2,198
======= =======
Calculation of net income applicable to common stockholders:
Net income $ 2,245 $ 2,198
Less: dividends on preferred stock - 259
------- -------
Net income applicable to
common stockholders $ 2,245 $ 1,939
======= =======
Weighted average number of common shares outstanding:
Basic 9,635 5,636
===== =====
Diluted 9,669 5,667
===== =====
Net income per common share:
Basic $ .23 $ .34
======= =======
Diluted $ .23 $ .34
======= =======
Cash distributions per share:
Common stock $ .33 $ .33
======= =======
Preferred stock $ - $ .40
======= =======
See accompanying notes to consolidated financial statements.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the three month period ended March 31, 2004 (unaudited)
and the year ended December 31, 2003
(Amounts in Thousands)
Accumulated
Other Unearned Accumulated
Preferred Common Paid-in Comprehensive Compen- Undistributed
Stock Stock Capital Income sation Net Income Total
----- ----- ------- ------ ------ ---------- -----
Balances, January 1, 2003 $10,693 $ 5,626 $65,646 $ 312 $ - $ 6,417 $88,694
Distributions -
common stock - - - - - (8,780) (8,780)
Distributions - preferred stock - - - - - (1,037) (1,037)
Exercise of options - 67 801 - - - 868
Shares issued through
public offering - 3,737 60,811 - - - 64,548
Shares issued through
dividend reinvestment plan - 61 943 - - - 1,004
Redemption of preferred stock (10,693) 114 2,174 - - - (8,405)
Issuance of restricted stock - - 488 - (488) - -
Comprehensive expense -
restricted stock - - - - 41 - 41
Net income - - - - - 8,525 8,525
Other comprehensive income-
net unrealized gain on
available-for-sale securities - - - 511 - - 511
-------
Comprehensive income 9,036
-------- ------- -------- ------- ------- ---------- -----
Balances, December 31, 2003 - 9,605 130,863 823 (447) 5,125 145,969
Distributions -
common stock - - - - - (3,193) (3,193)
Exercise of options - 27 299 - - - 326
Shares issued through
dividend reinvestment plan - 18 306 - - - 324
Compensation expense -
restricted stock - - - - 24 - 24
Net income - - - - - 2,245 2,245
Other comprehensive income-
net unrealized (loss) on
available-for-sale securities - - - (134) - - (134)
------
Comprehensive income 2,111
-------- ------- -------- ------- ---------- ----------- ------
Balances, March 31, 2004 $ - $ 9,650 $131,468 $ 689 $ (423) $ 4,177 $145,561
======== ======= ======== ======= ======== ======== ========
See accompanying notes to consolidated financial statements.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Three Months Ended
March 31,
2004 2003
---- ----
Cash flows from operating activities:
Net income $ 2,245 $ 2,198
Adjustments to reconcile net income
to net cash provided by operating activities:
Gain on sale of available-for-sale securities (1) -
Increase in rental income from straight-lining of rent (197) (322)
Decrease in rental income from above/below market leases 7 -
Restricted stock expense 24 -
Equity in earnings of unconsolidated joint ventures (675) (654)
Distributions from unconsolidated joint ventures 621 632
Payments to minority interest by subsidiary - (9)
Depreciation and amortization 1,024 772
Amortization of financing costs included in interest expense 91 70
Changes in assets and liabilities:
(Increase) decrease in rent, interest, deposits and other receivables (236) 236
Decrease in accrued expenses and other liabilities (353) (162)
-------- --------
Net cash provided by operating activities 2,550 2,761
-------- --------
Cash flows from investing activities:
Additions to real estate (16,316) (1,630)
Net proceeds from condemnation of real estate - 32
Investment in unconsolidated joint ventures - (10)
Collection of mortgages receivable (including $61
from an affiliated joint venture) - 317
Net proceeds from sale of available-for-sale securities 3 -
Purchase of available-for-sale securities - (10)
-------- --------
Net cash used in investing activities (16,313) (1,301)
--------- ---------
Cash flows from financing activities:
Repayment of mortgages payable (525) (355)
Payment of financing costs (72) (325)
Proceeds from bank line of credit, net - 1,526
Cash distributions - common stock (3,400) (1,856)
Cash distributions - preferred stock - (259)
Proceeds from the exercise of stock options 326 451
Issuance of shares through dividend reinvestment plan 324 78
Collection of note receivable - officer - 2
-------- --------
Net cash used in financing activities (3,347) (738)
--------- --------
Net (decrease) increase in cash and cash equivalents (17,110) 722
Cash and cash equivalents at beginning of period 45,944 2,624
------- --------
Cash and cash equivalents at end of period $28,834 $ 3,346
======= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 1,938 $ 1,624
Supplemental schedule of non-cash investing and financing activities:
Assumption of mortgages payable in connection with purchase of real estate $ 7,085 $ 1,305
See accompanying notes to consolidated financial statements.
One Liberty Properties, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Basis of Preparation
The accompanying interim unaudited consolidated financial statements as of March
31, 2004 and for the three months ended March 31, 2004 and 2003 reflect all
normal recurring adjustments which are, in the opinion of management, necessary
for a fair presentation of the results for such interim periods. The results of
operations for the three months ended March 31, 2004 are not necessarily
indicative of the results for the full year.
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.
The consolidated financial statements include the accounts of One Liberty
Properties, Inc., its wholly-owned subsidiaries and a majority-owned limited
liability company ("LLC"), in which the Company held a 95% interest until
September 8, 2003 when it purchased the 5% minority owned interest.
The Company accounts for its investments in unconsolidated joint ventures under
the equity method of accounting as the Company exercises significant influence
over, but does not control, these entities. One Liberty Properties, Inc., its
subsidiaries and the LLC are hereinafter referred to as the "Company". Material
intercompany items and transactions have been eliminated.
Certain amounts reported in previous consolidated financial statements have been
reclassified in the accompanying consolidated financial statements to conform to
the current year's presentation.
These statements should be read in conjunction with the consolidated financial
statements and related notes which are included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2003.
Note 2 - Earnings Per Common Share
For the three months ended March 31, 2004 and 2003 basic earnings per share was
determined by dividing net income applicable to common stockholders for the
period by the weighted average number of shares of the Company's Common Stock
outstanding during each period.
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 three month periods ended March 31, 2004
and 2003 diluted earnings per share was determined by dividing net income
applicable to common stockholders for the period by the total of the weighted
average number of shares of Common Stock outstanding plus the dilutive effect of
the Company's outstanding options and restricted stock (33,367 and 30,591 for
the three months ended March 31, 2004 and 2003, respectively) using the treasury
stock method. The Preferred Stock was not considered for the purpose of
computing diluted earnings per share in 2003 because their assumed conversion
was antidilutive.
One Liberty Properties, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Note 3 - Investment in Unconsolidated Joint Ventures
The Company is a member in four unconsolidated joint ventures which own and
operate twelve properties. Summaries of the two most significant joint ventures,
in which the Company was designated the managing member, are below.
The following tables present unaudited condensed financial statements for these
two joint ventures (amounts in thousands):
Joint Venture #1
Condensed Balance Sheets March 31, 2004 December 31, 2003
- ------------------------ -------------- -----------------
(audited)
Cash and cash equivalents $ 597 $ 695
Real estate investments, net 55,397 55,684
Deferred financing costs 580 597
Unbilled rent receivable 816 712
Other assets - 9
--------- --------
Total assets $ 57,390 $ 57,697
======== ========
Mortgage loans payable $ 33,216 $ 33,414
Other liabilities 597 696
Equity 23,577 23,587
-------- --------
Total liabilities and equity $ 57,390 $ 57,697
======== ========
Company's equity investment $ 12,756 $ 12,765
======== ========
Three Months Ended
March 31,
Condensed Statements of Operations 2004 2003
- ---------------------------------- ---- ----
Revenues, primarily rental income $ 1,834 $ 1,835
------- -------
Depreciation and amortization 288 288
Mortgage interest 669 590
Operating expenses 75 92
------- -------
Total expenses 1,032 970
------- -------
Net income attributable to members $ 802 $ 865
======= =======
Company's share of net income $ 401 $ 216
======= =======
Amount recorded in income statement (A) $ 396 $ 216
======= =======
Distributions received by the Company:
From operations $ 405 $ 233
======= =======
From mortgage proceeds $ - $ -
======= =======
(A) The difference between the carrying amount of the Company's investment
in Joint Venture # 1 and the underlying equity in net assets is
amortized as an adjustment to equity in earnings of unconsolidated
joint ventures over 40 years.
One Liberty Properties, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Note 3 - Investment in Unconsolidated Joint Ventures (Continued)
Joint Venture #2
Condensed Balance Sheets March 31, 2004 December 31, 2003
- ------------------------ -------------- -----------------
(audited)
Cash and cash equivalents $ 579 $ 799
Real estate investments, net 41,448 41,532
Deferred financing costs 475 478
Unbilled rent receivable 969(A) 830
Other assets 209 21
-------- --------
Total assets $ 43,680 $ 43,660
======== ========
Mortgage loans payable $ 26,027 $ 26,171
Other liabilities 637 686
Equity 17,016 16,803
-------- --------
Total liabilities and equity $ 43,680 $ 43,660
======== ========
Company's equity investment $ 8,402 $ 8,296
======== ========
Three Months Ended
March 31,
Condensed Statements of Operations 2004 2003
- ---------------------------------- ---- ----
Revenues, primarily rental income $ 1,241(A) $ 1,278
------- -------
Depreciation and amortization 202 201
Mortgage interest 519 355(B)
Operating expenses 14 13
------- -------
Total expenses 735 569
------- -------
Net income attributable to members $ 506 $ 709
======= =======
Company's share of net income $ 253 $ 355
======= =======
Distributions received by the Company:
From operations $ 146 $ 322
======= =======
From mortgage proceeds $ - $ -
======= =======
(A) For the three months ended March 31, 2004, a $142 reserve was taken
against the $177 unbilled rent receivable that was accrued during the
three months ended March 31, 2004 relating to two movie theaters leased
to operators under common control.
(B) Includes $145 for the three months ended March 31, 2003 of interest on
three mortgages receivable held by the Company which were secured by one
movie theater property. These mortgages were refinanced on May 2, 2003
and the joint venture paid in full the outstanding balance, totaling
$6,179, due to the Company.
The Company participates in two other unconsolidated joint ventures, each of
which owns one property. At March 31, 2004 and December 31, 2003 the Company's
equity investment in these two joint ventures totaled $3,337,000 and $3,380,000,
respectively and they contributed $26,000 and $83,000 in equity earnings for the
three months ended March 31, 2004 and 2003, respectively.
One Liberty Properties, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Note 4 - Property Acquisitions
On March 1, 2004 and March 31, 2004, the Company purchased two single tenant
properties in California and Tennessee, for a total consideration of
approximately $23,100,000. The Company assumed a pre-existing first mortgage of
$7,085,000 on one of these properties. In connection with the purchase price
allocations for these acquisitions, the Company identified acquired intangible
assets totaling in the aggregate $337,000. These intangibles are being amortized
over the term of the respective underlying lease terms and the unamortized
balance has been reflected in Other Assets in the accompanying consolidated
balance sheets.
Note 5 - Common Stock Dividend Distributions
On March 10, 2004, the Board of Directors declared its regular quarterly cash
distribution of $.33 per share on the Company's Common Stock which was paid on
April 1, 2004 to stockholders of record on March 22, 2004.
Note 6 - Comprehensive Income
Comprehensive income for the three month periods ended March 31, 2004 and 2003
are as follows (amounts in thousands):
Three Months Ended
March 31,
2004 2003
---- ----
Net income $ 2,245 $ 2,198
Other comprehensive income -
Unrealized gain (loss) on
available-for-sale securities (134) 18
-------- --------
Comprehensive income $ 2,111 $ 2,216
======== ========
Accumulated other comprehensive income, which is solely comprised of the net
unrealized gain on available-for-sale securities, was $689,000 and $330,000 at
March 31, 2004 and 2003, respectively.
Note 7 - Restricted Stock
During the year ended December 31, 2003, the Company awarded 26,350 shares of
restricted stock under its 2003 Incentive Plan. The 2003 Incentive Plan was
approved by the Company's stockholders at the Annual Meeting of Stockholders
held in June 2003. The total number of shares issuable under this Plan is
275,000. The restricted shares vest five years from the date of issuance and
under certain circumstances may vest earlier. For accounting purposes, the
restricted stock is not included in the outstanding shares shown on the balance
sheet until they vest. The Company records compensation expense over the vesting
period, measuring the compensation cost based on the market value of the shares
on the date awarded. For the three months ended March 31, 2004, the Company
recorded $24,000 of compensation expense.
During April 2004, an additional 33,700 restricted shares were awarded under the
2003 Incentive Plan.
One Liberty Properties, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Note 8 - Unaudited Pro Forma Information
The following table summarizes, on an unaudited pro forma basis, the combined
results of operations of the Company for the three months ended March 31, 2004
as though the acquisitions of two properties in March 2004 were completed
on January 1, 2004. The information does not purport to be indicative of what
the operating results of the Company would have been had the acquisitions been
consummated on January 1, 2004. (Amounts in thousands, except per share data.)
Pro forma revenues $ 6,098
Pro forma net income 2,480
Pro forma common shares - basic 9,635
Pro forma common share and common
share equivalents - diluted 9,669
Basic $ .26
Diluted $ .26
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations
Forward-Looking Statements
With the exception of historical information, this quarterly report on Form 10-Q
contains certain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933. We intend such forward-looking statements to be
covered by the safe harbor provision for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995 and include this statement
for purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words "may", "will", "believe", "expect", "intend", "anticipate", "estimate",
"project", or similar expressions or variations thereof. Forward-looking
statements should not be relied on since they involve known and unknown risks,
uncertainties and other factors which are, in some cases, beyond our control and
which could materially affect actual results, performance or achievements.
Investors are cautioned not to place undue reliance on any forward-looking
statements.
General
We are a self-administered real estate investment trust (REIT) and we primarily
own real estate that we net lease to tenants. We currently own 38 properties,
participate in four joint ventures that own a total of 12 properties and hold a
50% tenancy in common interest in one property. These 51 properties are located
in 17 states.
We have elected to be taxed as a REIT under the Internal Revenue Code. To
qualify as a REIT, we must meet a number of organizational and operational
requirements, including a requirement that we distribute currently at least 90%
of ordinary taxable income to our stockholders. We intend to comply with these
requirements and to maintain our REIT status.
Our principal business strategy is to acquire improved, commercial properties
subject to long-term net leases. We acquire properties for their value as
long-term investments and for their ability to generate income over an extended
period of time. We borrow funds on a secured and unsecured basis to finance the
purchase of real estate and we intend to continue to do so in the future.
Our rental properties are generally leased to corporate tenants under operating
leases substantially all of which are noncancellable. Substantially all of our
lease agreements are net lease arrangements that require the tenant to pay not
only rent, but also substantially all of the operating expenses of the leased
property including maintenance, taxes, utilities and insurance. A majority of
our lease agreements provide for periodic rental increases and certain of our
other leases provide for increases based on the consumer price index.
During March 2004, we purchased two single tenant properties, including one
megaplex stadium-style movie theater, located in two states, for a total
consideration of $23.1 million. We assumed a pre-existing first mortgage of
$7.1 million on one of these properties.
We are a venturer in two joint ventures organized to acquire and own megaplex
stadium-style movie theaters. We own a 50% equity interest in each of these
ventures with the same co-venturer. These joint ventures have acquired one
partial stadium-style movie theater, one stadium-style movie theater under
construction and eight megaplex stadium-style movie theaters for a total
consideration of $100 million. Our equity investment in these ventures at March
31, 2004 was approximately $21 million, net of distributions from the joint
ventures.
At March 31, 2004, excluding mortgages payable of our unconsolidated joint
ventures, we had 28 outstanding mortgages payable, aggregating approximately
$113 million in principal amount, each of which is secured by a first lien on
individual real estate investments with an aggregate carrying value of
approximately $169 million before accumulated depreciation. The mortgages bear
interest at fixed rates ranging from 5.125% to 8.8%, and mature between 2005 and
2023.
Results of Operations
Comparison of Three Months Ended March 31, 2004 and 2003
Revenues
Our revenues consist primarily of rental income from tenants in our rental
properties. Rental income increased by $1.1 million, or 24.1%, to $5.6 million
for the three months ended March 31, 2004 from $4.5 million for the three months
ended March 31, 2003. The rental income increase is primarily due to $1.1
million of rental revenues earned on seven properties acquired by us between
February 2003 and March 2004. There were also minor increases in rental income
at several of our other properties which were offset by rents that were not
received from one vacant property and from a tenant that filed for bankruptcy
protection. The tenant that filed for protection under Chapter XI of the
Bankruptcy Act is currently paying post-petition rent.
Interest and other income decreased by $74,000, or 44.6%, to $92,000 for the
three months ended March 31, 2004 from $166,000 for the three months ended March
31, 2003. The primary reason for the decrease was the loss of $145,000 in
interest earned during the three months ended March 31, 2003 on short-term
mortgages receivable acquired by us in connection with a movie theater
acquisition by one of our joint ventures. The mortgages were paid in full in
May, 2003. Offsetting this decrease was a $66,000 increase in interest earned on
our investment of the balance of the net proceeds received from our October 2003
public offering in cash equivalents and treasury bills.
Our equity in earnings of unconsolidated joint ventures increased by $21,000, or
3.2%, to $675,000 for the three months ended March 31, 2004 from $654,000 for
the three months ended March 31, 2003. The increase is due to a combination of
factors including our purchase of an additional 25% interest in one of our movie
theater joint ventures as of October 1, 2003, offset in part by an increase in
mortgage interest expense in the other movie theater joint venture. There was
also a decrease in rental income at another joint venture due to the bankruptcy
filing by its tenant.
We will continue to acquire, solely for our own account, improved commercial
properties in accordance with our business and investment strategies. We may
from time to time acquire other properties with joint venture partners.
Expenses
Depreciation and amortization expense increased by $252,000, or 32.6%, to
$1,024,000 for the three months ended March 31, 2004 from $772,000 for the three
months ended March 31, 2003. The increase in depreciation and amortization
expense was primarily due to the acquisition of seven properties between
February 2003 and March 2004.
Interest-mortgages payable increased by $432,000, or 27.4%, to $2,011,000 for
the three months ended March 31, 2004, from $1,579,000 for the three months
ended March 31, 2003. This increase resulted from two mortgages placed on two
properties in October 2003, the assumption of mortgages in connection with the
purchase of four properties between February 2003 and September 2003 and the
refinancing of one property.
Interest-line of credit, which includes amortization of deferred mortgage costs
in 2004 and a 1/4% unused facility fee in both years, decreased by $62,000 to
$51,000 for the three months ended March 31, 2004 from $113,000 for the three
months ended March 31, 2003. This decrease resulted from our repayment of all of
the outstanding indebtedness under our line of credit during 2003 using the
proceeds received from our sale of securities in October 2003.
General and administrative expenses increased $315,000, or 58.3%, to $855,000
for the three months ended March 31, 2004 from $540,000 for the three months
ended March 31, 2003. This increase was primarily due to a $101,000
non-recurring fee for the initial listing of our common stock on the New York
Stock Exchange in January 2004. (Prior to that, our stock traded on the American
Stock Exchange.) In addition, general and administrative expenses increased due
to a $67,000 increase in payroll and payroll expenses for the three months ended
March 31, 2004, including an increase of approximately $42,000 for executive and
support personnel, primarily for legal and accounting services, allocated to us
pursuant to a Shared Services Agreement among us and related entities. This
increase in the allocated payroll expenses resulted from an increase in our
level of business activity, primarily property acquisitions, the negotiation of
an increased revolving credit facility, mortgage refinancings, compliance with
the Sarbanes-Oxley Act and new accounting pronouncements. The increase in
payroll expenses is also due to a $25,000 increase in the annual base salary and
an increase of $50,000 in the annual bonus to our president and chief executive
officer. Also included in the three months ended March 31, 2004 is compensation
expense of $24,000 relating to the issuance of restricted stock, with no
comparable expense in the March 31, 2003 quarter. The balance of the increase in
general and administrative expenses for the three months ended March 31, 2004 is
due to an increase in a number of items including professional fees of
approximately $63,000, an increase in state taxes of approximately $14,000 and
travel and other miscellaneous expenses of approximately $46,000, all primarily
due to our increased business activity.
Real estate expenses increased by $44,000, or 45.8%, to $140,000 for the three
months ended March 31, 2004, from $96,000 for the three months ended March 31,
2003. This increase was primarily due to legal fees relating to properties, as
well as utilities and real estate tax expense on one vacant property.
Additionally, the three months ended March 31, 2004 includes the amortization of
leasing commissions and non-recurring landlord repairs.
Liquidity and Capital Resources
We had cash and cash equivalents of $28.8 million at March 31, 2004. Our primary
sources of liquidity are cash and cash equivalents, our revolving credit
facility and cash generated from operating activities, including mortgage
financings. We have a $30 million revolving credit facility with Valley National
Bank, Merchants Bank Division and Bank Leumi, USA. This facility is available to
us to pay down existing mortgages, to fund the acquisition of properties or to
invest in joint ventures. The facility matures on March 21, 2005. Borrowings
under the facility bear interest at the bank's prime rate, currently 4%, and
there is an unused facility fee of one-quarter of 1% per annum. Net proceeds
received from the sale or refinancing of properties are required to be used to
repay amounts outstanding under the facility if proceeds from the facility were
used to purchase or refinance the properties. There is currently no balance
outstanding under the facility. We are currently negotiating for an increase in
the amount available under the credit facility.
We are involved in various stages of negotiation with respect to the acquisition
of additional net leased properties. We will use cash provided from operations,
cash provided from mortgage financings, the balance of the funds available from
the recently completed public offering and funds available under our credit
facility to fund additional acquisitions.
The following sets forth our contractual cash obligations as of March 31, 2004,
all of which relate to interest and amortization payments and balances due at
maturity under outstanding mortgages secured by our properties, for the periods
indicated (amounts in thousands):
Less than 1 - 3 4 - 5 More than
Contractual Obligations Total 1 Year Years Years 5 Years
- ----------------------- ----- ------ ----- ----- --------
Mortgages payable -
Interest and amortization $ 99,418 $ 10,105 $ 19,354 $ 18,332 $ 51,627
Mortgages payable -
Balances due at maturity 74,544 - 10,522 7,984 56,038
-------- -------- -------- -------- --------
Total $173,962 $ 10,105 $ 29,876 $ 26,316 $107,665
As of March 31, 2004, we had outstanding approximately $113 million in long-term
mortgage indebtedness (excluding mortgage indebtedness of our unconsolidated
joint ventures), all of which is non-recourse (subject to standard carve-outs).
We expect that debt service payments of approximately $29.5 million due in the
next three years will be paid primarily from cash generated from our operations.
We anticipate that loan maturities of approximately $10.5 million due in the
next three years will be paid primarily from mortgage financings or
refinancings. If we are not successful in refinancing our existing indebtedness
or financing our unencumbered properties, our cash flow, funds available under
our credit facility and available cash, if any, may not be sufficient to repay
all maturing debt when payments become due, and we may be forced to sell
additional equity or dispose of properties on disadvantageous terms.
We had no outstanding contingent commitments, such as guarantees of
indebtedness, or any other contractual cash obligations at March 31, 2004.
Cash Distribution Policy
We have elected to be taxed as a REIT under the Internal Revenue Code. To
qualify as a REIT, we must meet a number of organizational and operational
requirements, including a requirement that we distribute currently at least 90%
of our ordinary taxable income to our stockholders. It is our current intention
to comply with these requirements and maintain our REIT status. As a REIT, we
generally will not be subject to corporate federal, state or local income taxes
on taxable income we distribute currently (in accordance with the Internal
Revenue Code and applicable regulations) to our stockholders. If we fail to
qualify as a REIT in any taxable year, we will be subject to federal, state and
local income taxes at regular corporate rates and may not be able to qualify as
a REIT for four subsequent tax years. Even if we qualify for federal taxation as
a REIT, we may be subject to certain state and local taxes on our income and to
federal income and excise taxes on our undistributed taxable income (i.e.,
taxable income not distributed in the amounts and in the time frames prescribed
by the Internal Revenue Code and applicable regulations thereunder).
It is our intention to pay to our stockholders within the time periods
prescribed by the Internal Revenue Code no less than 90% and, if possible, 100%
of our annual taxable income, including gains from the sale of real estate and
recognized gains on the sale of securities. It will continue to be our policy to
make sufficient cash distributions to stockholders in order for us to maintain
our REIT status under the Internal Revenue Code.
Item 3. - Quantitative and Qualitative Disclosures About Market Risks
All of our long-term mortgage debt bears interest at fixed rates and
accordingly, the effect of changes in interest rates would not impact the amount
of interest expense that the Company incurs under these mortgages. The Company's
credit line is a variable rate facility which is sensitive to interest rates.
However, at March 31, 2004, no amounts were outstanding under the facility.
Item 4. - Controls and Procedures
As required under Rules 13a-15 (e) and 15d-15 (e) under the Securities Exchange
Act of 1934, we carried out an evaluation under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934). Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures as of March 31, 2004 are effective.
There were no changes in our internal control over financial reporting (as
defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the
first quarter of the fiscal year ending December 31, 2004 that materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 31.1 Certification of President and Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Exhibit 31.2 Certification of Senior Vice President and Chief
Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Certification of President and Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Exhibit 32.2 Certification of Senior Vice President and Chief
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
A Form 8-K was filed on January 6, 2004 to (a) report the redemption
of all of the Company's outstanding shares of preferred stock and (b)
to announce that the Company had applied for listing of its common
stock on the New York Stock Exchange.
A Form 8-K was filed on March 12, 2004 which attached the press
release issued on March 11, 2004 disclosing information regarding the
results of operations for the quarter and year ended December 31,
2003 and financial condition at December 31, 2003.
ONE LIBERTY PROPERTIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
One Liberty Properties, Inc.
----------------------------
(Registrant)
May 10, 2004 /s/ Jeffrey Fishman
- ------------ --------------------
Date Jeffrey Fishman
President and
Chief Executive Officer
(authorized officer)
May 10, 2004 /s/ David W. Kalish
- ------------ -------------------------------
Date David W. Kalish
Senior Vice President and
Chief Financial Officer
(principal financial officer)
EXHIBIT 31.1
CERTIFICATION
I, Jeffrey Fishman, President and Chief Executive Officer of One Liberty
Properties, Inc. certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2004 of One Liberty Properties, Inc.
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 10, 2004
/s/ Jeffrey Fishman
-------------------
Jeffrey Fishman
President and Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION
I, David W. Kalish, Senior Vice President and Chief Financial Officer of
One Liberty Properties, Inc. certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2004 of One Liberty Properties, Inc.
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 10, 2004 /s/ David W. Kalish
------------------------
David W. Kalish
Senior Vice President
and Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
The undersigned, Jeffrey Fishman, President and Chief Executive Officer of One
Liberty Properties, Inc., (the "Registrant"), does hereby certify, pursuant to
18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that based upon a review of the Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 2004 of the Registrant, as filed with the
Securities and Exchange Commission on the date hereof (the "Report").
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
Date: May 10, 2004 /s/ Jeffrey Fishman
----------------------
Jeffrey Fishman
President and Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION OF SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
The undersigned, David W. Kalish, Senior Vice President and Chief Financial
Officer of One Liberty Properties, Inc. (the "Registrant"), does hereby certify,
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that based upon a review of the Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2004 of the Registrant, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report").
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
Date: May 10, 2004 /s/ David W. Kalish
--------------------------------
David W. Kalish
Senior Vice President
and Chief Financial Officer