Back to GetFilings.com
UNITED STATES
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 EXCHANGE ACT OF 1934
[ X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of l934
For the fiscal year ended December 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 offices) (Zip Code)
Registrant's telephone number, including area code: (516) 466-3100
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange
Title of each class on which registered
------------------- -------------------
Common Stock, par value $1.00 New York Stock Exchange
per share
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 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 [ ].
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2).
Yes X No
--- ---
As of June 30, 2004 (the last business day of the registrant's most
recently completed second quarter), the aggregate market value of all common
equity held by non-affiliates of the registrant, computed by reference to the
price at which common equity was last sold on said date, was approximately
$138.8 million.
As of March 2, 2005, the aggregate market value of all common equity
held by non-affiliates of the registrant was approximately $146.7 million.
As of March 2, 2005, the registrant had 9,793,240 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual meeting of shareholders
of One Liberty Properties, Inc., to be filed pursuant to Regulation 14A not
later than April 30, 2005, are incorporated by reference into Part III of this
Form 10-K.
Forward-Looking Statements
This Annual Report on Form 10-K, together with other statements and
information publicly disseminated by One Liberty Properties, Inc., contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. We intend such forward-looking statements to be covered
by the safe harbor provision for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 and include this statement for
purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words "may," "will," "believe," "expect," "intend," "anticipate," "estimate,"
"project" or similar expressions or variations thereof. You should not rely on
forward-looking statements since they involve known and unknown risks,
uncertainties and other factors which are, in some cases, beyond our control and
which could materially affect actual results, performance or achievements.
Factors which may cause actual results to differ materially from current
expectations include, but are not limited to:
o general economic and business conditions;
o general and local real estate conditions;
o the financial condition of our tenants and the performance of
their lease obligations;
o changes in governmental laws and regulations relating to real
estate and related investments;
o the level and volatility of interest rates;
o competition in our industry;
o accessibility of debt and equity capital markets;
o the availability of and costs associated with sources of
liquidity; and
o the other risks described under "Risks Related to Our Company"
and "Risks Related to the REIT Industry".
Accordingly, there can be no assurance that our expectations will be
realized.
PART I
Item 1. Business
--------
We maintain a website at www.onelibertyproperties.com. Our annual
reports on Form 10-K, our quarterly reports on Form 10-Q and our periodic
reports on Form 8-K (and any amendments to these reports) are available free of
charge on our website as soon as reasonably practical after we file these
reports with the Securities and Exchange Commission (SEC).
General
- -------
We are a self-administered and self-managed real estate investment
trust (REIT). We were incorporated under the laws of the State of Maryland on
December 20, 1982. We acquire, own and manage a geographically diversified
portfolio of retail, industrial, office, movie theater, health and fitness and
other properties, a substantial portion of which are under long-term leases.
Substantially all of our leases are "net leases", under which the tenant is
typically responsible for real estate taxes, insurance and ordinary maintenance
and repairs. As of January 31, 2005, we owned 46 properties, participated in six
joint ventures that owned a total of 14 properties and held a 50% tenancy in
common interest in one property. Our properties are located in 23 states and
have an aggregate of approximately 5.4 million square feet of space (including
all space for properties in which we have a joint venture participation, our
tenancy in common interest and five properties that we acquired in one
transaction in January 2005).
Under the terms of our current leases, our 2005 contractual rental
income will be approximately $34.8 million. Our 2005 contractual rental income
includes rental income that is payable to us during 2005 for properties owned at
December 31, 2004, our share of the rental income payable to our joint ventures,
rental income payable on our tenancy in common interest and rental income that
is payable to us during 2005 for the five properties acquired in January 2005,
but does not include rent that we would receive if any of our vacancies are
rented. On December 31, 2004, the occupancy rate of our property portfolio is
approximately 98% based on square footage. The weighted average remaining term
of the leases in our portfolio is 11.8 years based on our 2005 contractual
rental income.
We acquire our properties by balancing real estate analysis with tenant
credit evaluation. The main focus of our analysis is the intrinsic value of a
property, determined primarily by its location, local demographics and potential
for alternative use. We also evaluate a tenant's financial ability to meet lease
obligations and operational needs and the return that will be realized on our
investment in a property. Most of our retail tenants operate on a national basis
and include, among others, Barnes & Noble, Inc., Walgreen Co., The Sports
Authority, Inc., Best Buy Co., Inc., OfficeMax Inc., Party City Corporation,
Circuit City Stores, Inc., Petco Animal Supplies, Inc. and CarMax Auto
Superstores, Inc.
The properties in our portfolio typically have the following
attributes:
o Net leases. Substantially all of our leases are net leases under which
the tenant is typically responsible for real estate taxes, insurance
and ordinary maintenance and repairs. We believe that investments in
net leased properties offer more predictable returns than investments
in properties that are not net leased;
o Long-term leases. We generally acquire properties that are subject to
long-term leases. Leases representing approximately 82% of our 2005
contractual rental income expire after 2010, and leases representing
approximately 56% of our 2005 contractual rental income expire after
2014; and
o Scheduled rent increases. Leases representing approximately 81% of our
2005 contractual rental income provide for either scheduled rent
increases or periodic contractual rent increases based on the consumer
price index.
We share facilities, personnel and other resources with several
affiliated entities including, among others, Gould Investors L.P., a partnership
which owns 8% of our common shares at December 31, 2004 and is involved in the
ownership and operation of a diversified portfolio of real estate, and BRT
Realty Trust, a mortgage lending REIT. It is our policy, and the policy of our
affiliated entities, that any investment opportunity presented to us or to any
of our affiliated entities that involves primarily the acquisition of a net
leased property will first be offered to us and declined by us before any of our
affiliated entities may pursue the opportunity. Jeffrey Fishman, our president
and chief executive officer, and Lawrence G. Ricketts, Jr., our vice president,
acquisitions, devote substantially all of their business time to our company,
while our other management personnel share their services on a part-time basis
with us and other affiliated entities that share our executive offices. We
believe that this sharing arrangement provides us access to a group of senior
executives with real estate and financial knowledge and experience to which a
company of our size would not otherwise have access. For a description of the
background of our management, please see the information under the heading
"Executive Officers" in Part I of this Annual Report.
Our Business Objectives and Growth Strategy
- -------------------------------------------
Our business objective is to maintain and increase the cash available
for distribution to our stockholders by:
o acquiring a diversified portfolio of net leased properties subject to
long-term leases;
o obtaining mortgage indebtedness on favorable terms and increasing
access to capital to finance property acquisitions; and
o managing assets effectively through property acquisitions, lease
extensions and opportunistic property sales.
Our growth strategy includes the following elements:
o to maintain, renew and enter into new long-term leases that contain
provisions for contractual rent increases;
o to acquire additional properties within the United States that are
subject to long-term net leases and that satisfy our other investment
criteria; and
o to acquire properties in market or industry sectors that we identify,
from time to time, as offering superior risk-adjusted returns.
Our acquisition strategy is to pursue properties that are subject to
long-term leases which include periodic contractual rental increases. We believe
that long-term leases provide a predictable income stream over the term of the
lease, making fluctuations in market rental rates and in real estate values less
significant to achieving our overall investment objectives. Long-term leases
also make it easier for us to obtain longer-term, fixed-rate mortgage financing
with principal amortization, thereby moderating the interest rate risk
associated with financing or refinancing our property portfolio by reducing the
outstanding principal balance over time. In addition, we believe that long-term
leases minimize management time required and transaction costs incurred while we
own a property. Although we regard long-term leases as a central element of our
acquisition strategy, we will acquire a property that is subject to a short-term
lease where we believe the property represents a good opportunity for recurring
income and residual value.
We generally expect that the properties we acquire will also provide
internal growth derived from scheduled rent increases. Our goal is to continue,
as often as possible, to acquire properties that are subject to long-term net
leases that include periodic contractual rental increases. Periodic contractual
rental increases provide reliable increases in future rent payments, while rent
increases based on the consumer price index provide protection against
inflation.
Generally, we intend to hold the properties we acquire for an extended
period of time. Our investment criteria are intended to identify properties from
which increased asset value and overall return can be realized from an extended
period of ownership. Accordingly, we tend to pursue a lease renewal or a new
lease upon lease termination or expiration in preference to disposing of a
property. Although our investment criteria favor an extended period of ownership
of our properties, we may dispose of a property following a lease termination or
expiration or even during the term of a lease if we regard the disposition of
the property as an opportunity to realize the overall value of the property
sooner or to avoid future risks by achieving a determinable return from the
property.
Our Investment Strategy
- -----------------------
In evaluating potential net lease investments, we consider, among other
criteria, the following:
o an evaluation of the property and improvements, given its location and use;
o the current and projected cash flow of the property;
o the estimated return on equity to us;
o local demographics (population and rental trends);
o the ability of the tenant to meet operational needs and lease obligations;
o the terms of tenant leases, including the relationship between current rents
and market rents;
o the projected residual value of the property;
o potential for income and capital appreciation; and
o occupancy of and demand for similar properties in the market area.
Our Tenants
- -----------
The following table shows information about the diversification of our
tenants and the tenants of our joint ventures by industry sector as of January
31, 2005:
Percentage of
Type of Number of 2005 Contractual 2005 Contractual
Property Tenants Rental Income (1) Rental Income
- -------- -------- ----------------- -------------
Retail 37 $13,537,168 38.8%
Flex 4 3,917,566 11.2
Industrial 8 4,822,388 13.8
Movie Theater 11 8,067,492 23.2
Health & Fitness 3 1,591,644 4.6
Office 2 2,254,693 6.5
Residential 1 650,000 1.9
-- ----------- -----
TOTAL 66 $34,840,951 100.0%
== =========== =====
- -----------
(1) 2005 contractual rental income includes rental income that is payable to
us during 2005 under existing leases, including our share of the rental
income payable to our joint ventures and the rental income payable to us
on our tenancy in common interest, and the rental income payable to us
during 2005 under leases related to five retail properties acquired by us
in January 2005, but does not include rent that we would receive if any
of our vacancies is rented.
Although we focus on property value in analyzing our potential property
acquisitions, we also review the ability of the tenant to meet its lease
obligations and operational needs. Typically our tenants are not rated or are
rated below investment grade. Of our properties owned as of January 31, 2005,
thirty are net leased to various retail operators under long-term leases and,
except for four of the retail properties, are net leased to single tenants. Of
the four properties net leased to multiple retail operators, one is net leased
to four separate tenants pursuant to separate leases, two are net leased to two
separate tenants pursuant to separate leases and one is net leased to three
separate tenants pursuant to separate leases. Eight of our properties are
industrial-type buildings, of which two are used as frozen food warehouses.
Three of our properties, with four tenants, are flex-type buildings (office,
research and development and warehouse) and three are health and fitness
facilities. Finally, we have two office properties, one residential property,
and twelve movie theaters, including one which was under construction (ten owned
by two joint ventures and two by us). At December 31, 2004, two of our retail
properties, one owned by us and representing 21,043 square feet and one owned by
a venture in which we have a 50% economic interest and representing 17,108
square feet, were vacant. One of our properties, which contains 189,146 square
feet of flex space, has 78,042 square feet which is vacant. One of our retail
properties, containing 38,448 square feet of space, is subject to a lease that
will terminate March 31, 2005. One of the tenants that occupies 74,500 square
feet of space at one of our flex properties (which contains 89,500 square feet
of space) is subject to a lease which will terminate December 31, 2005. No
assurance can be given that we will find tenants for any of these vacancies.
Movie Theater Joint Ventures
- ----------------------------
At December 31, 2004, we owned a 50% equity interest, with the same
venturer, in two joint ventures that own movie theaters in which we had
approximately $21.4 million invested. At December 31, 2004 these joint ventures
owned ten movie theater properties currently having a total of 163 screens.
Eight of the movie theaters owned by the joint ventures are megaplex theaters
with stadium-style seating, one movie theater is an "in-town" multi-screen
theater with partial stadium seating and one movie theater property was under
construction. Our joint venture and the future operator of the movie theater
under construction mutually agreed to terminate the lease to this theater and
our joint venture suspended construction while the joint venture seeks another
operator. No assurance can be given that it will find a suitable operator to
lease this theater. Megaplex movie theaters have multiple screens. Stadium-style
seating provides for seating with elevation between rows to provide unobstructed
viewing. The movie theaters owned by our movie theater joint ventures are
equipped with electronics and technology that are intended to enhance the audio
and visual experience for the patron.
We are designated the "Managing Member" under each movie theater
venture operating agreement. Each operating agreement provides that Majestic
Property Management Corp., a company owned by the chairman of our board and in
which certain of our executive officers are officers, receives a management fee
equal to 1% of all rents received by the movie theater joint ventures from
single-tenant properties and a management fee equal to 3% of all rents received
by the joint ventures from multi-tenant properties. Majestic will receive
leasing and mortgage brokerage fees for services rendered with respect to any
property owned by either joint venture at a rate equal to 80% of the commissions
we reasonably determine as being charged by third parties for comparable
services in the market where the properties are located. Majestic will also
receive a construction supervisory fee equal to 8% of the cost of any capital
improvements to any property and sale commissions equal to 1% of the sales price
of any properties that are sold. During the year ended December 31, 2004,
Majestic received an aggregate of $107,000 (representing management fees) from
the movie theater joint ventures.
The following table provides certain information with respect to the
ten movie theaters owned by our two movie theater joint ventures.
Expiration
No. of Purchase of Initial
Location Screens Operator Price (1) Lease Term
- --------- ------- -------- ---------- ----------
(in millions)
Norwalk, CA 20 American Multi-Cinema, Inc. $12.5 2021
Austell, GA 22 Regal Cinemas, Inc. 11.8 2019
Beavercreek, OH 20 Regal Cinemas, Inc. 9.7 2015
Morrow, GA 24 American Multi-Cinema, Inc. 14.1 2017
Roanoke, VA 16 Consolidated Theaters 9.0 2020
Holdings, G.P.
Lubbock, TX 17 Cinemark USA, Inc. 7.9 2018
Live Oak, TX 18 Regal Cinemas, Inc. 12.5 2019
Henrietta, NY 18 Regal Cinemas, Inc. 10.5 2022
Brooklyn, NY (2) 8 Pritchard Square Cinema LLC 9.5 2022
Monroe, NY (3) - --- 3.0 -
--- ------
163 $100.5
=== ======
(1) Purchase price represents the total purchase price for each property without
giving effect to closing costs.
(2) "In town" multi-screen theater with partial stadium-style seating. The
operator assigned its interest in this property to ADM Cinema Corporation
effective February 11, 2005.
(3) A five screen theater with stadium style seating was under construction. The
lease with the former operator was terminated by mutual agreement and
construction suspended while our joint venture seeks another operator.
Our Leases
- ----------
Substantially all of our leases are net leases (including the leases
entered into by our joint ventures) under which the tenant, in addition to its
rental obligation, typically is responsible for expenses attributable to the
operation of the property, such as real estate taxes and assessments, water and
sewer rents and other charges. The tenant is also generally responsible for
maintaining the property, including non-structural repairs, and for restoration
following a casualty or partial condemnation. The tenant is typically obligated
to indemnify us for claims arising from the property and is responsible for
maintaining insurance coverage for the property it leases. Under some net
leases, we are responsible for structural repairs, including foundation and
slab, roof repair or replacement and restoration following a casualty event, and
at several properties we are responsible for certain expenses related to the
operation and maintenance of the property.
Our typical lease provides for contractual rent increases periodically
throughout the term of the lease. Some of our other leases provide for rent
increases pursuant to a formula based on the consumer price index. While some of
our leases also provide for minimum rents supplemented by additional payments
based on sales derived from the property subject to the lease, such additional
payments were not a material part of our 2004 rental revenues and are not
expected to be a material part of our 2005 rental revenues.
Our policy has been to acquire properties that are subject to existing
long-term leases or to enter into long-term leases with our tenants. Our leases
generally provide the tenant with one or more renewal options.
The following table sets forth scheduled lease expirations of all leases for our
properties as of January 31, 2005 (excluding two vacant properties which contain
a total of 38,151 square feet of space, a 78,042 square foot vacancy at a
property which contains 189,146 square feet of space and a partially constructed
movie theater):
2005 % of 2005
Approximate Contractual Contractual
Square Rental Income Rental Income
Year of Lease Number of Expiring Feet Subject to Under Expiring Represented By
Expiration (1) Leases Expiring Leases (2) Leases (3) Expiring Leases
-------------- ------ --------------- ---------- ----------------
2005 2 112,948 $ 640,447 1.8%
2006 2 87,897 548,335 1.6
2007 1 12,000 216,000 .6
2008 3 520,272 1,850,996 5.3
2009 4 311,572 2,500,113 7.2
2010 4 415,038 504,312 1.5
2011 3 193,428 1,789,476 5.1
2012 - - - -
2013 4 94,942 1,333,263 3.8
2014 and thereafter 43 3,554,199 25,458,009 73.1
-- --------- ----------- ----
Total 66 5,302,296 $34,840,951 100.0%
== ========= =========== ======
(1) Lease expirations assume tenants do not exercise existing renewal options.
(2) Includes all square footage in properties that are owned by our joint
ventures and our tenancy in common interest.
(3) Contractual rental income includes rental income that is payable to us
during 2005 under existing leases, our share of the rental income payable to our
joint ventures, the rental income payable on our tenancy in common interest, and
the rental income that is payable to us during 2005 for the five properties
acquired in January 2005, but does not include rent that we would receive if any
of our vacancies are rented.
Our Acquisition Policies
- ------------------------
We seek to acquire properties throughout the United States that have
locations, demographics and other investment attributes that we believe to be
attractive. We seek to acquire properties that we believe will provide
attractive current returns from leases with tenants that operate profitably,
even if our tenants are typically either not rated or are rated below investment
grade. We identify properties where we believe that the quality of the
underlying real estate mitigates the risk that may be associated with any
default by the tenant.
We identify properties generally through the network of contacts of our
senior management and our affiliates, which includes real estate brokers,
private equity firms, banks and law firms. In addition, we attend industry
conferences and engage in direct solicitations.
There is no limit on the number of properties in which we may invest, the
amount or percentage of our assets that may be invested in any specific property
or property type, or on the concentration of investments in any geographic area
in the United States. We do not intend to acquire properties located outside of
the United States. We may continue to form entities to acquire interests in real
properties, either alone or with other investors, and we may acquire interests
in joint ventures or other entities that own real property.
Financing, Re-Renting and Disposition of Our Properties
- -------------------------------------------------------
There is no limit on the level of debt that we may incur. We borrow funds
on a secured and unsecured basis and intend to continue to do so in the future.
We mortgage specific properties on a non-recourse basis (subject to standard
carve-outs) to enhance the return on our investment in a specific property. We
maintain a $62.5 million revolving credit line that is a full recourse
obligation. The proceeds of mortgage loans and amounts drawn on our credit line
may be used for property acquisitions, investments in joint ventures or other
entities that own real property, to reduce bank debt and for working capital
purposes.
With respect to properties we acquire on a free and clear basis, we
typically seek to obtain long-term fixed-rate mortgage financing shortly after
the acquisition of such property to avoid the risk of movement of interest rates
and fluctuating supply and demand in the mortgage markets. We also will acquire
a property that is subject to a fixed-rate mortgage. Substantially all of our
mortgages provide for amortization of part of the principal balance during the
term, thereby reducing the refinancing risk at maturity. Some of our properties
may be financed on a cross-defaulted or cross-collateralized basis, and we may
collateralize a single financing with more than one property.
After termination or expiration of any lease relating to any of our
properties (either at lease expiration or early termination), we will seek to
re-rent or sell such property in a manner that will maximize the return to us,
considering, among other factors, the income potential and market value of such
property. We acquire properties for long-term investment for income purposes and
do not typically engage in the turnover of investments. We will consider the
sale of a property prior to termination or expiration of the relevant lease if a
sale appears advantageous in view of our investment objectives. We may take a
purchase money mortgage as partial payment in lieu of cash in connection with
any sale and may consider local custom and prevailing market conditions in
negotiating the terms of repayment. It is our policy to use any cash realized
from the sale of properties, net of any distributions to stockholders to
maintain our REIT status, to pay down amounts due under our line of credit
(excluding real estate mortgage loans), if any, and for the acquisition of
additional properties.
Other Types of Investments
- --------------------------
From time to time we have invested, on a limited basis, in publicly
traded shares of other REITs and may make such investments on a limited basis in
the future. We also may invest, on a limited basis, in the shares of entities
not involved in real estate investments, provided that no such investment
adversely affects our ability to qualify as a REIT under the Internal Revenue
Code of 1986, as amended. We do not have any plans to invest in or to originate
loans to other persons whether or not secured by real property. Although we have
not done so in the past, we may issue securities in exchange for properties that
fit our investment criteria. We have not, in the past, invested in the
securities of another entity for the purpose of exercising control, and we do
not have any present plans to invest in the securities of another entity for
such purpose.
Competition
- -----------
We face competition for the acquisition of net leased properties from a
variety of investors including domestic and foreign corporations and real estate
companies, financial institutions, insurance companies, pension funds,
investment funds, other REITs and individuals, some of which have significant
advantages over us including a larger, more diverse group of properties and
greater financial and other resources than we have. We believe that our
management's experience in real estate, mortgage lending, credit underwriting
and transaction structuring allows us to compete effectively for properties.
Risks Related to Our Company
- ----------------------------
The financial failure of our tenants would be likely to cause significant
- -------------------------------------------------------------------------
reductions in our revenues and our equity in earnings of unconsolidated joint
- -----------------------------------------------------------------------------
ventures and in the value of our real estate portfolio.
- -------------------------------------------------------
Substantially all of our revenues are derived from rental income
generated by our properties, and 88% of our properties, based on 2005
contractual rental income, are leased to single tenants. Accordingly, the
financial failure or other default of a tenant in non-payment of rent or
property-related expenses or the termination of a lease could cause a
significant reduction in our revenues. Additionally, approximately 48% of our
total revenues (excluding revenues from our movie theater and other joint
ventures) for the year ended December 31, 2004 was derived from retail tenants
and approximately 39% of our 2005 contractual rental income will be derived from
retail tenants. We also anticipate that significant revenues will be realized in
2005 by our two movie theater joint ventures. Weakening economic conditions in
the retail or theater industries could result in the financial failure, or other
default, of a significant number of our tenants and tenants of our joint
ventures. One of our former retail tenants filed for protection under the
federal bankruptcy laws in March 2004. A 21,043 square foot building owned by us
and a 17,108 square foot building owned by a joint venture in which we have a
50% economic interest, both of which were leased to this bankrupt tenant, have
been vacant since June 2004. In November 2004 and January 2005 two other retail
tenants, each of which leases a property from us, filed for protection under the
federal bankruptcy laws and we do not know, as of this date, if either lease
will be assumed or rejected. Pending this determination, the tenants have paid
the monthly rent since the month following their bankruptcy filing on a current
basis. It is possible that other tenants could file for protection under federal
bankruptcy laws or state insolvency proceedings or could face similar
difficulties in the future. In the event of a default by a tenant, we may
experience delays in enforcing our rights as landlord and sustain a loss of
revenues and substantial costs in protecting our investment. We may also face
liabilities arising from the tenant's actions or omissions that would reduce our
revenues and the value of our portfolio. Also, if we are unable to re-rent any
property when an existing lease terminates, we would receive no revenues from
such property and could experience a decline in the value of the property.
A significant portion of our revenues and/or our 2005 contractual rental income
- -------------------------------------------------------------------------------
is derived from four tenants. The default, financial distress or failure of any
- -------------------------------------------------------------------------------
of these tenants could significantly reduce our revenues.
- ---------------------------------------------------------
GE Medical Systems Information Technologies, Inc., L-3 Communications
Corp. and Barnes & Noble, Inc. (a tenant at three separate properties) accounted
for approximately 8.5%, 6.8% and 5.7%, respectively, of our total revenues
(excluding revenues from our movie theater and other joint ventures) for the
year ended December 31, 2004 and account for 4.5%, 4.7% and 4.1%, respectively,
of our 2005 contractual rental income. Regal Cinemas, Inc., a tenant at four
theaters owned by our movie theater joint ventures and one theater owned
directly by us, accounted for 3.9% of our total revenues and 48.9% of the total
revenues of our two movie theater joint ventures for the year ended December 31,
2004 and accounts for 10.7% of our 2005 contractual rental income. Contractual
rental income for 2005 includes rental income that is payable to us during the
year ended December 31, 2005 under existing leases from all properties owned by
us on December 31, 2004, our share of the rental income payable to our joint
ventures and the rental income payable on our tenancy in common interest, plus
the rental income that is payable to us during the year ended December 31, 2005
from five properties acquired in January 2005. The default, financial distress
or bankruptcy of any of these tenants could cause interruptions in the receipt
or the loss of a significant amount of rental income and result in the vacancy
of the property occupied by the defaulting tenant, which would significantly
reduce our rental income and net income until the property is re-rented, and
could decrease the ultimate sale value of the property.
GE Medical Systems Information Technologies, Inc. (GE) exercised its
right under its lease with us to terminate its lease effective December 20,
2004. Prior to the date of cancellation, we entered into a new lease with GE
pursuant to which GE leased 111,104 square feet of space in the 189,146 square
foot facility, and we have entered into an exclusive agreement with a national
real estate brokerage firm to lease the balance of the space at the property.
The lease with GE is for a five year term and we will expend approximately
$500,000 in tenant improvements to segregate and improve the property for GE's
occupancy.
The inability to repay our indebtedness could reduce cash available for
- -----------------------------------------------------------------------
distributions and cause losses.
- -------------------------------
As of December 31, 2004, we had outstanding approximately $124 million in
long-term mortgage indebtedness, all of which is non-recourse (subject to
standard carve-outs). As of December 31, 2004, our ratio of mortgage debt to
total assets was approximately 44%. In addition, at December 31, 2004, our movie
theater joint ventures had approximately $58 million in long-term mortgage
indebtedness outstanding secured by nine megaplex theaters. The risks associated
with our debt include the risk that our cash flow will be insufficient to meet
required payments of principal and interest. Further, if a property or
properties are mortgaged to collateralize payment of indebtedness and we are
unable to make mortgage payments on the secured indebtedness, the lender could
foreclose upon the property or properties resulting in a loss of revenues to us
and a decline in the value of our portfolio. Even with respect to non-recourse
indebtedness, the lender may have the right to recover deficiencies from us
under certain circumstances that could result in a reduction in the amount of
cash available to meet expenses and to make distributions to our stockholders
and in a deterioration of our financial condition.
If we are unable to refinance our borrowings at maturity at favorable rates or
- ------------------------------------------------------------------------------
otherwise raise funds, our net income may decline or we may be forced to sell
- -----------------------------------------------------------------------------
properties on disadvantageous terms, which would result in the loss of revenues
- -------------------------------------------------------------------------------
and in a decline in the value of our portfolio.
- -----------------------------------------------
Only a small portion of the principal of our mortgage indebtedness will
be repaid prior to maturity and we do not plan to retain sufficient cash to
repay such indebtedness at maturity. Accordingly, in order to meet these
obligations, we will have to use funds available under our credit line, if any,
to refinance debt or seek to raise funds through the financing of unencumbered
properties, sale of properties or sale of additional equity. Between January
2005 and December 31, 2008, we will have to refinance an aggregate of
approximately $18.5 million of maturing debt, of which approximately $8.2 will
have to be refinanced in 2005 and approximately $2.3 million will have to be
refinanced in 2006. We can give no assurance that we will be able to refinance
this debt or arrange additional debt financing on unencumbered properties on
terms as favorable as the terms of existing indebtedness, or at all. If
prevailing interest rates or other factors at the time of refinancing result in
interest rates higher than the interest rates we are paying, our interest
expense would increase, which would adversely affect our net income, financial
condition and the amount of cash available for distribution to stockholders. If
we are not successful in refinancing our existing indebtedness or financing our
unencumbered properties, selling properties on favorable terms or selling
additional equity, our cash flow will not be sufficient to repay all maturing
debt when payments become due, and we may be forced to dispose of properties on
disadvantageous terms, which would result in the loss of revenues and in a
decline in the value of our portfolio.
As of December 31, 2004, we had approximately $7.6 million outstanding on
our revolving credit facility. The facility is guaranteed by all of our
subsidiaries which own unencumbered properties and the shares of stock of all
other subsidiaries are pledged as collateral. The risks associated with our
revolving credit facility include the risk that our cash flow will be
insufficient to meet required payments of interest. Also we may be unable to
negotiate a new facility at the maturity date and also may be unable to pay off
the amount then outstanding. This could result in a reduction in the amount of
cash available to meet expenses and to make distributions to holders of our
common stock.
Increased borrowings could result in increased risk of default on our repayment
- -------------------------------------------------------------------------------
obligations and increased debt service requirements.
- ----------------------------------------------------
Our governing instruments do not contain any limitation on the amount of
indebtedness we may incur. Accordingly, increased leverage could result in
increased risk of default on our payment obligations related to borrowings and
in an increase in debt service requirements which would reduce our net income
and the amount of cash available to meet expenses and to make distributions to
holders of our common stock.
If we are unable to re-rent properties upon the expiration of our leases, it
- ----------------------------------------------------------------------------
could adversely affect our revenues and ability to make distributions and could
- -------------------------------------------------------------------------------
reduce the value of our portfolio.
- ----------------------------------
Substantially all of our revenues are derived from rental income paid by
tenants at our properties. We cannot predict whether current tenants will renew
their leases upon the expiration of their terms. In addition, we cannot predict
whether current tenants will attempt to terminate their leases, (including
taking advantage of provisions of the federal bankruptcy laws), or whether
defaults by tenants may result in termination of their leases prior to the
expiration of their current terms. If tenants terminate or fail to renew their
leases, or if leases terminate due to defaults or in the course of a bankruptcy
proceeding, we may not be able to locate qualified replacement tenants and, as a
result, we would lose a source of revenue while remaining responsible for the
payment of our mortgage obligations and the expenses related to the properties,
including real estate taxes. Even if tenants decide to renew their leases or we
find replacement tenants, the terms of renewals or new leases, including the
cost of required renovations or concessions to tenants, or the expense of
reconfiguration of a single tenancy property for use by multiple tenants, may be
less favorable than current lease terms and could reduce the amount of cash
available to meet expenses and to make distributions to holders of our common
stock.
Uninsured and underinsured losses may affect the revenues generated by, the
- ---------------------------------------------------------------------------
value of, and the return from, a property affected by a casualty or other claim.
- --------------------------------------------------------------------------------
Substantially all of our tenants obtain, for our benefit, comprehensive
insurance covering our properties in amounts that are intended to be sufficient
to provide for the replacement of the improvements at each property. However,
the amount of insurance coverage maintained for any property may not be
sufficient to pay the full replacement cost of the improvements at the property
following a casualty event. In addition, the rent loss coverage under the policy
may not extend for the full period of time that a tenant may be entitled to a
rent abatement as a result of, or that may be required to complete restoration
following, a casualty event. In addition, there are certain types of losses,
such as those arising from earthquakes, floods, hurricanes and terrorist
attacks, that may be uninsurable or that may not be economically insurable.
Changes in zoning, building codes and ordinances, environmental considerations
and other factors also may make it impossible or impracticable for us to use
insurance proceeds to replace damaged or destroyed improvements at a property.
If restoration is not or cannot be completed to the extent, or within the period
of time specified in certain of our leases, the tenant may have the right to
terminate the lease. If any of these or similar events occur, it may reduce our
revenues, or the value of, or our return from, an affected property.
Our revenues and the value of our portfolio are affected by a number of factors
- -------------------------------------------------------------------------------
that affect investments in real estate generally.
- -------------------------------------------------
We are subject to the general risks of investing in real estate. These
include adverse changes in economic conditions and local conditions such as
changing demographics, retailing trends and traffic patterns, declines in the
rental rates we are able to obtain, changes in the supply and price of quality
properties and the market supply and demand of competing properties, the impact
of environmental laws, security concerns, prepayment penalties applicable under
mortgage financing, changes in tax, zoning, building code, fire safety and other
laws, the type of insurance coverages available in the market, and changes in
the type, capacity and sophistication of building systems. Any of these
conditions could have an adverse effect on our results of operations, liquidity
and financial condition.
Our revenues and the value of our portfolio are affected by a number of factors
- -------------------------------------------------------------------------------
that affect investments in leased real estate generally.
- --------------------------------------------------------
We are subject to the general risks of investing in leased real estate.
These include the non-performance of lease obligations by tenants, improvements
that will be costly or difficult to remove should it become necessary to re-rent
the leased space for other uses, covenants in certain retail leases that limit
the types of tenants to which available space can be rented (which may limit
demand or reduce the rents realized on re-renting), rights of termination of
leases due to events of casualty or condemnation affecting the leased space or
the property or due to interruption of the tenant's quiet enjoyment of the
leased premises, and obligations of a landlord to restore the leased premises or
the property following events of casualty or condemnation. Any of these
conditions could have an adverse impact on our results of operations, liquidity
and financial condition.
Our real estate investments are relatively illiquid and their values may
- ------------------------------------------------------------------------
decline.
- --------
Real estate investments are relatively illiquid. Therefore, we will be
limited in our ability to reconfigure our real estate portfolio in response to
economic changes. We may encounter difficulty in disposing of properties when
tenants vacate either at the expiration of the applicable lease or otherwise. If
we decide to sell any of our properties, our ability to sell these properties
and the prices we receive on their sale may be affected by many factors,
including the number of potential buyers, the number of competing properties on
the market and other market conditions, as well as whether the property is
leased and if it is leased, the terms of the lease. As a result, we may be
unable to sell our properties for an extended period of time without incurring a
loss, which would adversely affect our results of operations, liquidity and
financial condition.
The concentration of our properties in certain geographic areas may make our
- ----------------------------------------------------------------------------
revenues and the value of our portfolio vulnerable to adverse changes in local
- ------------------------------------------------------------------------------
economic conditions.
- --------------------
We do not have specific limitations on the total percentage of our real
estate properties that may be located in any one area. Consequently, properties
that we own may be located in the same or a limited number of geographic
regions. Approximately 43.3% of our total revenues (excluding revenues from our
movie theater and other joint ventures) for the year ended December 31, 2004
were, and approximately 34.7% of our 2005 contractual rental income will be,
derived from properties located in New York and Texas. As a result, a decline in
the economic conditions in these geographic regions, or in geographic regions
where our properties may be concentrated in the future, may have an adverse
effect on the rental and occupancy rates for, and the property values of, these
properties, which could lead to a reduction in our revenues and in the value of
these properties.
Our inability to control our joint ventures could result in diversion of time
- -----------------------------------------------------------------------------
and effort by our management and the inability to achieve the goals of the joint
- --------------------------------------------------------------------------------
venture or the tenancy in common.
- ---------------------------------
We presently are a venturer in six joint ventures which own 14 properties
and we own 50% of another property as tenant in common with a group of investors
pursuant to a tenancy in common agreement. The six joint venture investments
represent an equity investment of $37 million by us and the tenancy in common
interest represents an equity investment of approximately $4 million by us.
These investments may involve risks not otherwise present in investments made
solely by us, including that our co-investors may have different interests or
goals than we do, or that our co-investors may not be able or willing to take an
action that is desired by us. Disagreements with or among our co-investors could
result in substantial diversion of time and effort by our management team and
the inability of the joint venture or the tenancy in common to successfully
operate, finance, lease or sell properties as intended by our joint venture
agreements or tenancy in common agreement. In addition, since there is no
limitation under our organizational documents as to the amount of funds that may
be invested in joint ventures or tenancies in common, we may invest a
significant amount of our funds into joint ventures or tenancy in common
positions which ultimately may not be profitable as a result of disagreements
with or among our co-investors.
Our joint venture agreements and tenancy in common agreement contain provisions
- -------------------------------------------------------------------------------
related to the transfer of our interest, resolution of disputes and future
- --------------------------------------------------------------------------
capital contributions that could limit our ability to liquidate our interest or
- -------------------------------------------------------------------------------
adversely affect the value of our investments.
- ----------------------------------------------
The joint venture agreements entered into for each of our ventures generally
provide that we cannot finance or transfer our interest in the venture without
the consent of the other venturers. If we are unable to obtain the consent of
our co-venturers to a proposed financing or transfer of our interest, we may be
unable to dispose of such interest on favorable terms. The tenancy in common
agreement provides each party with a right of first refusal in the event the
other party decides to transfer its tenancy in common interest. The right of
first refusal may make it more difficult for us to sell our interest in the
property. In addition, the tenancy in common agreement requires the consent of
the other parties to a proposed financing of the property. Our joint venture
agreements and tenancy in common agreement also contain provisions governing
disputes that could obligate us to acquire the interest of co-investors on
unfavorable terms or without adequate time to obtain satisfactory financing or
force us to sell our interest on terms that may be disadvantageous. In addition,
if we fail to contribute any additional capital that we are required to
contribute in the future to any of these investments, our interest may be
reduced disproportionately, or a co-investor may elect to fund our portion of
the capital contribution, which would result in that co-investor acquiring a
preferred rate of return and a right to receive interest on the amount of such
contribution. The occurrence of any of these events would adversely affect the
value of our investment.
Competition in the real estate business is intense and could reduce our revenues
- --------------------------------------------------------------------------------
and harm our business.
- ----------------------
We compete for real estate investments with all types of investors,
including domestic and foreign corporations and real estate companies, financial
institutions, insurance companies, pension funds, investment funds, other REITs
and individuals. Many of these competitors have significant advantages over us,
including a larger, more diverse group of properties and greater financial and
other resources. Our failure to compete successfully with these competitors
could result in our inability to identify and acquire valuable properties and to
achieve our growth objectives.
Compliance with environmental regulations and associated costs could adversely
- ------------------------------------------------------------------------------
affect our liquidity.
- ---------------------
Under various federal, state and local laws, ordinances and regulations,
an owner or operator of real property may be required to investigate and clean
up hazardous or toxic substances or petroleum product releases at the property
and may be held liable to a governmental entity or to third parties for property
damage and for investigation and cleanup costs incurred in connection with
contamination. The cost of investigation, remediation or removal of hazardous or
toxic substances may be substantial, and the presence of such substances, or the
failure to properly remediate a property, may adversely affect our ability to
sell or rent the property or to borrow money using the property as collateral.
In connection with our ownership, operation and management of real properties,
we may be considered an owner or operator of the properties and, therefore,
potentially liable for removal or remediation costs, as well as certain other
related costs, including governmental fines and liability for injuries to
persons and property, not only with respect to properties we own now or may
acquire, but also with respect to properties we have owned in the past.
We cannot provide any assurance that existing environmental studies with
respect to any of our properties reveal all potential environmental liabilities,
that any prior owner of a property did not create any material environmental
condition not known to us, or that a material environmental condition does not
otherwise exist, or may not exist in the future, as to any one or more of our
properties. If a material environmental condition does in fact exist, or exists
in the future, it could have a material adverse impact upon our results of
operations, liquidity and financial condition.
Our senior management and other key personnel are critical to our business and
- ------------------------------------------------------------------------------
our future success depends on our ability to retain them.
- ---------------------------------------------------------
We depend on the services of Fredric H. Gould, chairman of our board of
directors, Jeffrey Fishman, our president and chief executive officer, and other
members of our senior management to carry out our business and investment
strategies. Only two officers, Mr. Fishman and Lawrence G. Ricketts, Jr., our
vice president, acquisitions, devote substantially all of their business time to
our company. The remainder of our management personnel share their services on a
part-time basis with entities affiliated with us and located in the same
executive offices under a Shared Services Agreement. In addition, Messrs.
Fishman and Ricketts devote a limited amount of their business time to entities
affiliated with us. As we expand, we will continue to need to attract and retain
qualified senior management and other key personnel, both on a full-time and
shared basis. The loss of the services of any of our senior management or other
key personnel, or our inability to recruit and retain qualified personnel in the
future, could impair our ability to carry out our business and investment
strategies.
Our transactions with affiliated entities involve conflicts of interest.
- ------------------------------------------------------------------------
We have entered into a number of transactions with persons and entities
affiliated with us and with certain of our officers and directors and we intend
to enter into transactions with such persons in the future. In particular,
during the year ended December 31, 2004, Majestic Property Management Corp., a
company owned by our Chairman of the Board and in which certain of our executive
officers are officers, received an aggregate of $107,000 for management fees
from our movie theater joint ventures. In addition, we paid Majestic $253,000
for mortgage brokerage, sales commission, management and supervisory fees during
2004. Although our policy is to insure that we receive terms in transactions
with affiliates that are at least as favorable to us as similar transactions we
would enter into with unaffiliated persons, these transactions raise the
potential that we may not receive terms as favorable as those that we would
receive if the transactions were entered into with unaffiliated entities.
We are required by certain of our net lease agreements to pay property related
- ------------------------------------------------------------------------------
expenses that are not the obligations of our tenants.
- -----------------------------------------------------
Under the terms of substantially all of our net lease agreements, in
addition to satisfying their rent obligations, our tenants are responsible for
the payment of real estate taxes, insurance and ordinary maintenance and
repairs. However, in the case of certain leases, we may pay some expenses, such
as the costs of environmental liabilities, structural repairs, insurance and
certain non-structural repairs and repairs and maintenance. If our properties
incur significant expenses that must be paid by us under the terms of our lease
agreements, our business, financial condition and results of operations will be
adversely affected and the amount of cash available to meet expenses and to make
distributions to holders of our common stock may be reduced.
Compliance with the Americans with Disabilities Act could be costly.
- --------------------------------------------------------------------
Under the Americans with Disabilities Act of 1990, all public
accommodations must meet federal requirements for access and use by disabled
persons. A determination that our properties do not comply with the Americans
with Disabilities Act could result in liability for both governmental fines and
damages. If we are required to make unanticipated major modifications to any of
our properties to comply with the Americans with Disabilities Act, which are
determined not to be the responsibility of our tenants, we could incur
unanticipated expenses that could have an adverse impact upon our results of
operations, liquidity and financial condition.
We cannot assure you of our ability to pay dividends in the future.
- -------------------------------------------------------------------
We intend to pay quarterly dividends and to make distributions to our
stockholders in amounts such that all or substantially all of our taxable income
in each year, subject to certain adjustments, is distributed. This, along with
other factors, should enable us to quality for the tax benefits accorded to a
REIT under the Internal Revenue Code. We have not established a minimum dividend
payment level and our ability to pay dividends may be adversely affected by the
risk factors described in this Annual Report. All distributions will be made at
the discretion of our board of directors and will depend on our earnings, our
financial condition, maintenance of our REIT status and such other factors as
our board of directors may deem relevant from time to time. We cannot assure you
that we will be able to pay dividends in the future.
Risks Related to the REIT Industry
- ----------------------------------
Failure to qualify as a REIT would result in material adverse tax consequences
- ------------------------------------------------------------------------------
and would significantly reduce cash available for distributions.
- ----------------------------------------------------------------
We believe that we operate so as to qualify as a REIT under the Internal
Revenue Code. Qualification as a REIT involves the application of technical and
complex legal provisions for which there are limited judicial and administrative
interpretations. The determination of various factual matters and circumstances
not entirely within our control may affect our ability to qualify as a REIT. In
addition, no assurance can be given that legislation, new regulations,
administrative interpretations or court decisions will not significantly change
the tax laws with respect to qualification as a REIT or the federal income tax
consequences of such qualification. If we fail to quality as a REIT, we will be
subject to federal, state and local income tax (including any applicable
alternative minimum tax) on our taxable income at regular corporate rates and
would not be allowed a deduction in computing our taxable income for amounts
distributed to stockholders. In addition, unless entitled to relief under
certain statutory provisions, we would be disqualified from treatment as a REIT
for the four taxable years following the year during which qualification is
lost. The additional tax would reduce significantly our net income and the cash
available for distributions to stockholders.
We are subject to certain distribution requirements that may result in our
- --------------------------------------------------------------------------
having to borrow funds at unfavorable rates.
- --------------------------------------------
To obtain the favorable tax treatment associated with being a REIT, we
generally are required, among other things, to distribute to our stockholders at
least 90% of our ordinary taxable income (subject to certain adjustments) each
year. To the extent that we satisfy these distribution requirements, but
distribute less than 100% of our taxable income we will be subject to federal
corporate tax on our undistributed taxable income. In addition, we will be
subject to a 4% nondeductible excise tax on the amount, if any, by which certain
distributions paid by us with respect to any calendar year are less than the sum
of 85% of our ordinary income, 95% of our capital gain net income and 100% of
our undistributed income from prior years.
As a result of differences in timing between the receipt of income and
the payment of expenses, and the inclusion of such income and the deduction of
such expenses in arriving at taxable income, and the effect of nondeductible
capital expenditures, the creation of reserves and the timing of required debt
service (including amortization) payments, we may need to borrow funds on a
short-term basis in order to make the distributions necessary to retain the tax
benefits associated with qualifying as a REIT, even if we believe that then
prevailing market conditions are not generally favorable for such borrowings.
Such borrowings could reduce our net income and the cash available for
distributions to holders of our common stock.
Compliance with REIT requirements may hinder our ability to maximize profits.
- -----------------------------------------------------------------------------
In order to qualify as a REIT for federal income tax purposes, we must
continually satisfy tests concerning among other things, our sources of income,
the amounts we distribute to our stockholders and the ownership of our stock. We
may also be required to make distributions to stockholders at disadvantageous
times or when we do not have funds readily available for distribution.
Accordingly, compliance with REIT requirements may hinder our ability to operate
solely on the basis of maximizing profits.
In order to qualify as a REIT, we must also ensure that at the end of
each calendar quarter, at least 75% of the value of our assets consists of cash,
cash items, government securities and qualified REIT real estate assets. Any
investment in securities cannot include more than 10% of the outstanding voting
securities of any one issuer or more than 10% of the total value of the
outstanding securities of any one issuer. In addition, no more than 5% of the
value of our assets can consist of the securities of any one issuer, other than
a qualified REIT security. If we fail to comply with these requirements, we must
dispose of such portion of these securities in excess of these percentages
within 30 days after the end of the calendar quarter in order to avoid losing
our REIT status and suffering adverse tax consequences. This requirement could
cause us to dispose of assets for consideration that is less than their true
value and could lead to a material adverse impact on our results of operations
and financial condition.
Executive Officers
The following sets forth information with respect to our executive officers:
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
Fredric H. Gould 69 Chairman of the Board *
Jeffrey Fishman 46 President and Chief Executive
Officer
Jeffrey A. Gould 39 Senior Vice President *
Matthew J. Gould 45 Senior Vice President*
Israel Rosenzweig 57 Senior Vice President
Simeon Brinberg 71 Senior Vice President **
David W. Kalish 58 Senior Vice President and
Chief Financial Officer
Mark H. Lundy 42 Vice President and Secretary**
Seth D. Kobay 50 Vice President and Treasurer
Karen Dunleavy 46 Vice President, Financial
Lawrence G. Ricketts, Jr. 28 Vice President, Acquisitions
* Matthew J. Gould and Jeffrey A. Gould are Fredric H. Gould's sons.
** Mark H. Lundy is Simeon Brinberg's son-in-law.
Fredric H. Gould. Mr. Gould has served as Chairman of the Board of One Liberty
Properties since 1989 and as Chief Executive Officer from December 1999 to
December 31, 2001. Mr. Gould has served as Chairman of the Board of Trustees of
BRT Realty Trust, a real estate investment trust that focuses on mortgage
lending, since 1984 and Chief Executive Officer of BRT Realty Trust from 1996 to
December 31, 2001. 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 serves as sole member of a limited liability company which is
the other general partner of Gould Investors L.P. He is President of the advisor
to BRT Realty Trust and a director of EastGroup Properties, Inc. EastGroup
Properties, Inc. is a real estate investment trust that focuses on ownership of
industrial properties in major sunbelt markets throughout the United States.
Jeffrey Fishman. Mr. Fishman was President and Chief Operating Officer of One
Liberty Properties from December 1999 until December 2001 and has been President
and Chief Executive Officer since January 1, 2002. 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 A. Gould. Mr. Gould has been a Vice President of One Liberty Properties
since 1989 and a Senior Vice President and Director since December 1999. He
was President and Chief Operating Officer of BRT Realty Trust from March 1996
to December 2001 and has been President and Chief Executive Officer of BRT
Realty Trust since January 1, 2002. Mr. Gould has served as a Trustee of BRT
Realty Trust since March 1997. He is also a Senior Vice President of the
managing general partner of Gould Investors L.P. since 1996.
Matthew J. Gould. Mr. Gould served as President and Chief Executive Officer of
One Liberty Properties from 1989 to December 1999 and became a Senior Vice
President and Director of One Liberty Properties in December 1999. He has served
as President of the managing general partner of Gould Investors L.P. since 1996.
He has been a Vice President of BRT Realty Trust since 1986, has served as a
Trustee of BRT since March 1997 and he serves as a Vice President of the advisor
to BRT Realty Trust.
Israel Rosenzweig. Mr. Rosenzweig has been a Senior Vice President of One
Liberty Properties since June 1997 and a Senior Vice President of BRT Realty
Trust since March 1998. He has been a Vice President of the managing general
partner of Gould Investors L.P. since May 1997 and President of GP Partners,
Inc., a sub-advisor to a registered investment advisor, since 2000.
Simeon Brinberg. Mr. Brinberg has served as a Senior Vice President of One
Liberty Properties since 1989. He has been Secretary of BRT Realty Trust
since 1983, a Senior Vice President of BRT Realty Trust since 1988 and a Vice
President of the managing general partner of Gould Investors L.P. since 1988.
Mr. Brinberg, an attorney-at-law, is a member of the bar of New York.
David W. Kalish. Mr. Kalish has served as Senior Vice President and Chief
Financial Officer of One Liberty Properties since June 1990. Mr. Kalish has
served as Senior Vice President, Finance of BRT Realty Trust since August
1998 and Vice President and Chief Financial Officer of the managing general
partner of Gould Investors L.P. since June 1990. Mr. Kalish is a certified
public accountant.
Mark H. Lundy. In addition to being Secretary of One Liberty Properties since
June 1993 and a Vice President since June 2000, Mr. Lundy has been a Vice
President of BRT Realty Trust since April 1993 and a Senior 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 bars of New York and District of Columbia.
Seth D. Kobay. Mr. Kobay has been Vice President and Treasurer of One Liberty
Properties since August 1994. He has been Vice President and Treasurer of BRT
Realty Trust 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 One
Liberty Properties 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, Jr. Mr. Ricketts has been Vice President, Acquisitions
of One Liberty Properties since December 1999 and has been employed by One
Liberty Properties, Inc. since January 1999.
Item 2. Properties
As of January 31, 2005, we owned 46 properties, participated in six joint
ventures that owned a total of 14 properties and held a 50% tenancy in common
interest in one property. The following table sets forth information as of
January 31, 2005 concerning each property in which we currently own an equity
interest. Except as otherwise noted, we own 100% of each property. We and our
joint ventures own fee title to each property, except for the movie theater
located in Greensboro, North Carolina in which we own a ground lease as ground
lessee through March 2020 with five options to renew, each for a five year
period.
Percentage
of 2005 Approx.
Type of Contractual Building Square
Location Property Rental Income (1) Feet
- -------- -------- ----------------- ----
Hauppauge, NY Flex 4.69% 149,870
Jupiter, Fl Flex 4.54 189,146
St. Cloud, MN Industrial 4.41 338,000
El Paso, TX Retail 4.27 110,179
Hanover, PA Industrial 3.90 458,560
Plano, TX Retail 3.60 112,389
Greensboro, NC Theater 3.52 60,400
Chula Vista, CA Theater 3.32 60,000
Los Angeles, CA (2) Office 3.30 106,262
Brooklyn, NY Office 3.17 66,000
Knoxville, TN Retail 2.88 35,330
Columbus, OH Retail 2.55 96,924
Plano, TX Retail 2.52 51,018
Morrow, GA (3) Theater 2.27 88,000
Tucker, GA Health & Fitness 2.27 58,800
Norwalk, CA (3) Theater 2.27 80,000
Live Oak, TX (3) Theater 2.07 81,836
Austell, GA (3) Theater 2.03 88,660
Ronkonkoma, NY Flex 2.01 89,500
Lake Charles, LA Retail 1.90 54,229
Manhattan, NY Residential 1.87 125,000
Lincoln, NE (3) Retail 1.73 51,222
Beavercreek, OH (3) Theater 1.73 75,149
Brooklyn, NY (3) Theater 1.62 33,120
Milwaukee, WI (3) Industrial 1.61 927,685
Henrietta, NY (3) Theater 1.58 76,315
Roanoke, VA (3) Theater 1.53 112,260
Columbus, OH Industrial 1.49 100,220
Ft. Myers, FL Retail 1.47 29,993
Grand Rapids, MI Health & Fitness 1.47 130,000
Newark, DE Retail 1.45 23,547
Atlanta, GA Retail 1.41 50,400
Athens, GA Retail 1.30 41,280
Chattanooga, TN Retail 1.29 72,897
Lubbock, TX (3) Theater 1.23 60,732
Greenwood Village, CO Retail 1.21 45,000
Champaign, IL Retail 1.18 50,530
Onalaska, WI Retail 1.15 63,919
Melville, NY Industrial 1.11 51,351
Mesquite, TX Retail 1.10 22,900
Selden, NY Retail .94 14,550
Grand Rapids, MI Health & Fitness .83 72,000
Antioch, TN Retail .83 34,059
Batavia, NY Retail .75 23,483
Somerville, MA Retail .72 12,054
St. Louis, MO Retail .66 30,772
Fairview Hts., IL Retail .64 31,252
Houston, TX Retail .62 12,000
New Hyde Park, NY Industrial .58 89,000
Ferguson, MO Retail .57 32,046
Cedar Rapids, IA Retail .55 15,400
Killeen, TX Retail .47 8,000
Miami, FL (3) Industrial .44 396,000
Florence, KY Retail .43 31,252
Rosenberg, TX Retail .37 8,000
West Palm Beach, FL Industrial .30 10,361
Seattle, WA Retail .17 3,038
Houston, TX Retail .11 38,448
Shreveport, LA (3) Retail - 17,108
Lewisville, TX Retail - 21,043
Monroe, NY (3) Theater - -
------ ---------
Total: 100.00% 5,418,489
====== =========
(1) Percentage of our 2005 contractual rental income payable to us pursuant
to leases as of January 31, 2005.
(2) An undivided 50% interest in this property is owned by us as tenant in
common with an unrelated entity. Percentage of contractual rental
income indicated represents our share of the rental income. Approximate
square footage indicated represents the total rentable square footage
of the property.
(3) This property is owned by a joint venture in which we are a venture
partner. Percentage of contractual rental income indicated represents
our share of the rental income of the joint venture. Approximate square
footage indicated represents the total rentable square footage of the
property owned by the joint venture.
The occupancy rate for our properties, based on total rentable square
footage was approximately 98% as of January 31, 2005 and December 31, 2004 and
approximately 99% as of December 31, 2003.
Our properties are located in 23 states. The following table sets forth certain
information, presented by state, related to our properties as of January 31,
2005.
Number of 2005 Contractual Approximate Building
State Properties Rental Income (1) Square Feet
----- ---------- ----------------- -----------
New York 11 $6,380,414 718,189 (2)
Texas 11 5,696,721 526,545 (3)
Georgia 5 3,235,170 327,140 (4)
Florida 4 2,357,036 625,500 (5)
Ohio 3 2,008,435 272,293 (6)
California 3 3,094,093 246,262 (7)
Tennessee 3 1,745,119 142,286
Other 21 10,323,963 2,560,274 (8)
-- ---------- ----------
Total: 61 $34,840,951 5,418,489
== =========== =========
-------------------
(1) Reflects 2005 contractual rental income including our share of
the rental income payable to our joint ventures, rental income
on our tenancy in common interest and rental income on the
five properties acquired in January 2005 and does not include
rent that we would receive if any of our vacancies are rented.
(2) Includes the entire 109,435 rentable square footage of two
properties that are owned by a joint venture. Does not include
the movie theater owned by one of our joint ventures that was
under construction.
(3) Includes the entire 142,568 rentable square footage of
two properties that are owned by a joint venture.
(4) Includes the entire 176,660 rentable square footage of
two properties that are owned by a joint venture.
(5) Includes the entire 396,000 rentable square footage of one
property that is owned by a joint venture.
(6) Includes the entire 75,149 rentable square footage of one
property that is owned by a joint venture.
(7) Includes the entire 80,000 rentable square footage of one
property that is owned by a joint venture.
(8) Includes the entire 1,108,275 rentable square footage of four
properties that are owned by a joint venture.
At January 31, 2005, we had first mortgages on 30 of the 47
properties we owned as of that date (including our 50% tenancy in
common interest, but excluding properties owned by our joint ventures).
At January 31, 2005, we had $131.3 million principal amount of
mortgages outstanding, bearing interest at rates ranging from 5.1% to
8.8%. Substantially all mortgages contain prepayment penalties. The
following table sets forth scheduled principal mortgage payments due
for our properties as of December 31, 2004 (assumes no payment is made
on principal on any outstanding mortgage in advance of its due date;
the five properties acquired in January 2005 are unencumbered as of the
filing of this Annual Report):
PRINCIPAL PAYMENTS DUE
YEAR IN YEAR INDICATED
---- (Amounts in Thousands)
----------------------
2005 $ 10,796
2006 5,046
2007 6,788
2008 7,227
2009 7,713
2010 and thereafter 86,449
------
Total $124,019
========
As of December 31, 2004, no property owned by us had a book value equal
to or greater than 10% of our total assets and no property owned by us had
revenues in the year ended December 31, 2004 which accounted for more than 10%
of our aggregate annual gross revenues.
Item 3. Legal Proceedings
-----------------
Neither we nor our properties are presently subject to any material
litigation in which we are defendant nor, to our knowledge, is any material
litigation threatened against us or our properties, other than routine
litigation arising in the ordinary course of business, which collectively are
not expected to have a material adverse effect on our business, financial
condition or results of operations.
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 Annual Report on Form 10-K.
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
-----------------------------------------------------------------
Matters
-------
Since January 15, 2004, our Common Stock has been listed on the New York
Stock Exchange. Prior to January 15, 2004, our Common Stock was listed on the
American Stock Exchange. The following table sets forth the high and low prices
for our Common Stock as reported by the New York Stock Exchange for 2004 and the
American Stock Exchange for 2003 and the per share cash distributions paid on
our Common Stock during each quarter of the years ended December 31, 2004 and
2003.
DISTRIBUTIONS
2004 HIGH LOW PER SHARE
---- ---- --- ---------
First Quarter $24.05 $19.80 $.33
Second Quarter $22.66 $16.30 $.33
Third Quarter $19.20 $17.45 $.33
Fourth Quarter $20.81 $17.98 $.33 *
DISTRIBUTIONS
2003 HIGH LOW PER SHARE
---- ---- --- ---------
First Quarter $17.50 $15.21 $.33
Second Quarter $18.75 $16.55 $.33
Third Quarter $19.20 $16.90 $.33
Fourth Quarter $20.05 $18.25 $.33 *
* A cash distribution of $.33 was paid on our Common Stock on January 1, 2004
and January 3, 2005.
As of March 3, 2005, there were 367 common stockholders of record and we
estimate that at such date there were approximately 2,800 beneficial owners of
our Common Stock.
We qualify as a REIT for federal income tax purposes. In order to
maintain that status, we are required to distribute to our shareholders at least
90% of our annual ordinary taxable income. The amount and timing of future
distributions will be at the discretion of the Board of Directors and will
depend upon our financial condition, earnings, business plan, cash flow and
other factors. We intend to pay cash distributions in an amount at least equal
to that necessary for us to maintain our status as a real estate investment
trust for federal income tax purposes.
Equity Compensation Plan Information
- ------------------------------------
The following table provides information as of December 31, 2004
with respect to shares of our Common Stock that may be issued under the One
Liberty Properties, Inc. 1996 Stock Option Plan and the One Liberty Properties,
Inc. 2003 Incentive Plan:
Number of
Securities
Remaining
Available for
Number of Future
Securities Issuance Under
to be Issued Weighted- Equity
Upon Exercise Average Compensation
of Outstanding Exercise Price Plans (Excluding
Options, of Outstanding Securities
Warrants and Options, Warrants Reflected in
Rights and Rights Column(a))
------ ---------- ----------
(a) (b) (c)
Equity compensation
plans approved by
security holders 19,500 $11.75 212,950
Equity compensation - - -
plans not approved
by security holders _____ _____ _______
Total 19,500 $11.75 212,950
====== ====== =======
Item 6. Selected Financial Data
-----------------------
The following table sets forth the selected consolidated statement of operations
data for each of the periods indicated, all of which are derived from our
audited consolidated financial statements and related notes. The selected
financial data for each of the three years in the period ended December 31, 2004
and as of December 31, 2003 and 2004 should be read together with our
consolidated financial statements and related notes appearing elsewhere in this
Annual Report on Form 10-K and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
As of and for the Year Ended
December 31
(Amounts in Thousands, Except Per Share Data)
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
OPERATING DATA
- --------------
Revenues $26,527 $19,796 $15,705 $15,237 $12,669
Earnings before equity in earnings of unconsolidated
joint ventures and gain on sale 8,030 6,100 4,813 4,671 4,142
Equity in earnings of unconsolidated joint ventures 2,869 2,411 1,078 83 -
Net gain (loss) on sale of real estate and gain on
sale of available-for-sale securities 75 14 (11) 112 3,790
Net income 10,974 8,525 5,880 4,866 7,932
Calculation of net income
applicable to common stockholders (Note a):
Net income 10,974 8,525 5,880 4,866 7,932
Less: dividends and accretion on preferred stock - 1,037 1,037 1,037 1,044
Net income applicable to common stockholders $10,974 $7,488 $4,843 $3,829 $6,888
Weighted average number of common
shares outstanding:
Basic 9,728 6,340 4,614 3,019 2,993
Diluted 9,744 6,372 4,644 3,036 3,528
Net income per common share:
Basic $1.13 $1.18 $1.05 $1.27 $2.30
Diluted $1.13 $1.18 $1.04 $1.26 $2.25
Cash distributions per share of:
Common Stock $1.32 $1.32 $1.32 $1.20 $1.20
Preferred Stock (Note a) - $1.60 $1.60 $1.60 $1.60
BALANCE SHEET DATA
- ------------------
Real estate investments, net $228,536 $177,316 $140,437 $118,564 $121,620
Investment in unconsolidated joint ventures 37,023 24,441 23,453 6,345 -
Cash and cash equivalents 6,051 45,944 2,624 2,285 2,069
Total assets 284,386 259,089 179,609 132,939 128,219
Mortgages payable 124,019 106,133 77,367 76,587 64,123
Line of credit 7,600 - 10,000 - 10,000
Total liabilities 138,271 113,120 90,915 78,591 74,843
Total stockholders' equity 146,115 145,969 88,694 54,348 53,376
OTHER DATA
- ----------
Funds from operations applicable to
common stockholders (Note b) $16,789 $11,776 $7,757 $6,303 $5,199
Funds from operations per common share:
Basic $1.73 $1.86 $1.68 $2.09 $1.74
Diluted $1.72 $1.85 $1.67 $2.08 $1.74
Cash flow provided by (used in):
Operating activities $16,363 $11,606 $8,344 $6,764 $5,840
Investing activities (61,577) (18,614) (48,056) (5,702) (39,324)
Financing activities 5,321 50,328 40,051 (846) 24,306
Note a: On December 30, 2003, we redeemed of all of our outstanding
preferred stock.
Note b: We consider funds from operations (FFO) to be a relevant and
meaningful supplemental measure of our performance because it is predicated on a
cash flow analysis, contrasted with net income, a measure predicated by GAAP,
which gives effect to non-cash items such as depreciation and amortization. FFO
does not represent cash generated from operations as defined by GAAP and is not
indicative of cash available to fund all cash needs, including distributions. It
should not be considered as an alternative to net income for the purpose of
evaluating our performance or to cash flows as a measure of liquidity.
We compute FFO in accordance with the "White Paper" on FFO published by
the National Association of Real Estate Investment Trusts (NAREIT), which
defines FFO as net income (computed in accordance with GAAP), excluding gains
(or losses) from sales of property, plus real estate related depreciation and
amortization (including amortization of deferred leasing costs, but excluding
amortization of financing costs) and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures are computed to reflect FFO on the same basis. In computing FFO,
we do not add back to net income the amortization of costs incurred in
connection with our financing activities, or depreciation of non-real estate
assets, but those items that are defined as "extraordinary" under GAAP are added
back to net income. Since the NAREIT White Paper only provides guidelines for
computing FFO, the computation of FFO may vary from one company to another.
The table below provides a reconciliation of net income in accordance
with GAAP to FFO, as calculated under the current NAREIT definition of FFO, for
each of the years in the five year period ended December 31, 2004.
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
Net income $10,974 $ 8,525 $5,880 $ 4,866 $ 7,932
Add: depreciation of properties 4,758 3,473 2,617 2,584 2,113
Add: our share of depreciation in unconsolidated
joint ventures 1,075 790 268 16 -
Add: amortization of deferred leasing costs 55 39 - - -
Deduct: (gain) loss on sale of real estate (73) (14) 29 (126) (3,802)
Deduct: preferred distributions - (1,037) (1,037) (1,037) (1,044)
------- ------- ------- ------- -------
Funds from operations applicable to common stockholders $16,789 $11,776 $7,757 $ 6,303 $ 5,199
======= ======= ====== ======= =======
Item 7. Management's Discussion And Analysis Of Financial Condition And Results
- -------------------------------------------------------------------------------
Of Operations.
- --------------
General
- -------
We are a self-administered and self-managed REIT and we primarily own
real estate that we net lease to tenants. As of December 31, 2004, we owned 41
properties, participated in six joint ventures that owned a total of 14
properties and held a 50% tenancy in common interest in one property. In January
2005 we acquired five additional properties. These 61 properties are located in
23 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 currently distribute at least 90%
of ordinary taxable income to our stockholders. We intend to comply with these
requirements and to maintain our REIT status.
Our principal business strategy is to acquire improved, commercial
properties subject to long-term net leases. We acquire properties for their
value as long-term investments and for their ability to generate income over an
extended period of time. We have borrowed funds in the past to finance the
purchase of real estate and we expect to do so in the future.
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 the year ended December 31, 2004, we purchased five single tenant
properties and one property with two tenants, in six states, for a total
consideration of $58 million. We assumed pre-existing first mortgages
aggregating $9.9 million on two of these properties. An aggregate of $10.4
million of first mortgage financing was completed with respect to two of the
other properties. In January 2005, we purchased five additional single tenant
properties for a total consideration of approximately $15 million.
We are a venturer in two joint ventures organized for the purpose of
acquiring and owning megaplex stadium-style movie theaters. We own a 50% equity
interest and are the managing member in each of these ventures with the same
co-venturer. These joint ventures own one partial stadium-style theater, one
stadium-style theater under construction (construction has been suspended
pending leasing the site to an operator), and eight megaplex stadium-style movie
theaters for a total consideration of approximately $100 million. Our equity
investment in these movie theater ventures at December 31, 2004 was $21.4
million, net of distributions from the joint ventures. We are also a joint
venturer in four additional joint ventures, each of which was organized to
acquire one single-tenanted property. Our equity investment in these four joint
ventures at December 31, 2004 was $15.6 million, net of distributions.
At December 31, 2004, excluding mortgages payable of our unconsolidated
joint ventures, we had 31 outstanding mortgages payable, aggregating $124
million in principal amount, all of which are secured by first liens on
individual real estate investments with an aggregate carrying value, as adjusted
for intangibles, of approximately $190.3 million before accumulated
depreciation. The mortgages bear interest at fixed rates ranging from 5.13% to
8.8%, and mature between 2005 and 2023.
Results of Operations
- ---------------------
Outlook
- -------
In May 2002 and in October and November 2003 we completed two public
offerings of our Common Stock resulting in net proceeds to us of approximately
$35 million and $64.5 million, respectively. A major portion of the net proceeds
from the May 2002 offering was applied to acquire five properties, both directly
by us and through joint ventures. Through December 31, 2004, we had used
substantially all of the net proceeds from the 2003 offering as follows: $8.4
million to redeem all of our outstanding preferred stock; $14 million to pay
down our credit line and the balance to acquire five properties both directly by
us and through joint ventures. In 2005, we anticipate that we will use our
available cash funds derived from mortgages placed on our unencumbered
properties and our credit line to acquire additional properties, either directly
or through joint ventures. As a result, we will own more properties in 2005 and
unless we experience an unusual number of lease terminations and/or
cancellations in 2005 (taking into consideration the lease expirations and
terminations that we know will occur in 2005, and without giving effect to any
re-letting of such properties), we anticipate that our revenues and possibly our
net income will increase in 2005.
Comparison of Years Ended December 31, 2004 and December 31, 2003
- -----------------------------------------------------------------
Revenues
- --------
Our revenues consist primarily of rental income from tenants in our
rental properties. Rental income increased by $6.5 million, or 33.7%, to $25.8
million for the year ended December 31, 2004 from $19.3 million for the year
ended December 31, 2003. The increase in rental income is primarily due to $5.4
million of rental revenues earned during the year ended December 31, 2004 on
eleven properties acquired by us during 2003 and 2004. The increase in rental
income also includes $767,000 received from the sale of our bankruptcy claim in
connection with the bankruptcy proceedings involving a retail tenant which
disaffirmed its lease and vacated the property. There were also increases in
rental income at several of our other properties.
Interest and other income increased by $223,000, or 43.6%, to $735,000
for the year ended December 31, 2004 from $512,000 for the year ended December
31, 2003. The primary reason for the increase was $350,000 received in 2004 from
the settlement of a claim made by us regarding the purchase of one of our
properties. The increase in interest and other income also includes $134,000 of
net acquisition fees received by us from a joint venture we recently organized.
The net acquisition fee, calculated pursuant to the joint venture agreement at
2% of the purchase price of the acquired property, reflects a 50% reduction
based on our share of ownership in the joint venture. To a lesser extent, the
increase is due to interest earned on our investment of the balance of the net
proceeds received from our October 2003 offering. These increases were offset in
part by the receipt in the year ended 2003 of $355,000 of interest earned on
short-term mortgages receivable acquired or originated by us to facilitate
acquisitions.
Our equity in earnings of unconsolidated joint ventures increased by
$458,000, or 19%, to $2.9 million for the year ended December 31, 2004. This
increase resulted primarily from our purchase of an additional 25% interest in
one of our movie theater joint ventures as of October 1, 2003, resulting in an
increase in our equity in earnings of this joint venture of $590,000 for the
year ended December 31, 2004. Another joint venture in which we have a 50%
interest received $859,000 from the sale of its bankruptcy claim in connection
with the bankruptcy proceeding involving its retail tenant which disaffirmed its
lease and vacated the property. Our equity in earnings from this joint venture
increased $211,000 for the year ended December 31, 2004. We also participate in
two joint ventures, one organized in August 2004 and one organized in November
2004. These joint ventures each purchased one property, and in 2004 we
recognized income of $165,000 and $61,000, respectively, from these joint
ventures. These increases were offset in part as a result of a $1 million direct
write off of unbilled rent receivable balances by one of our joint ventures in
which we have a 50% interest that were previously recorded relating to two movie
theaters under common control. We executed a lease termination agreement
regarding one of these theaters (which was under construction) and since
September 2004, rent was paid in compliance with a stipulation relating to the
other theater. During February 2005, the operator of this movie theater sold its
business to an independent third party and the arrearages of rent and other
miscellaneous charges of approximately $670,000 that were due in August 2005
were accelerated. In exchange for the joint venture's agreement to consent to
the lease assignment and lease amendment and to waive the requirement for a
security deposit under the amended lease, the joint venture received 40,000
restricted shares of Class A common stock of the tenant's parent company, which
trades on the American Stock Exchange. Our equity in earnings of this joint
venture decreased by $569,000 for the year ended December 31, 2004.
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 $1.3 million, or 37%,
to $4.8 million for the year ended December 31, 2004 from $3.5 million for the
year ended December 31, 2003 . The increase in depreciation and amortization
expense was primarily due to the acquisition of eleven properties during 2003
and 2004.
Interest-mortgages payable increased by $1.6 million, or 23.2%, to $8.4
million for the year ended December 31, 2004 from $6.8 million for the year
ended December 31, 2003. The increase results from mortgages placed on two
properties during 2003 and two properties during the last few months of 2004,
the assumption of mortgages in connection with the purchase of five properties
during 2003 and 2004 and refinancing the mortgage on one property in May 2003.
Interest-line of credit, which includes amortization of deferred line of
credit costs in 2004 and a 1/4% unused facility fee in both years, decreased by
$97,000, or 17.2%, to $467,000 for the year ended December 31, 2004. This
decrease resulted from our repayment of all of the outstanding indebtedness
under our line of credit during 2003. We subsequently borrowed $12.6 million
under our line of credit during October and November 2004, which was used to
purchase a property and to fund our contribution to a joint venture which
purchased a property. During December 2004, $5 million of the borrowings were
repaid with the proceeds from a mortgage financing of one of our properties.
General and administrative expenses increased by $924,000, or 41.9%, to
$3.1 million for the year ended December 31, 2004 from $2.2 million for the year
ended December 31, 2003. The increase was due to a number of factors, including
a $101,000 non-recurring fee for the initial listing of our common stock on the
New York Stock Exchange in January 2004. Also, payroll and payroll expenses
increased by $264,000 for the year ended December 31, 2004, including an
increase of approximately $129,000, 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. The 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 financings and compliance with the
Sarbanes-Oxley Act of 2002, including Section 404 requirements. The increase in
payroll expenses is due to a $125,000 increase in the annual base salaries and
bonuses paid to our principal executive officers and additional staff. Also
included in the year ended December 31, 2004 is compensation expense of $221,000
compared to $41,000 in the prior year relating to the restricted stock program
which was established in July 2003. The balance of the increase in general and
administrative expenses for the year ended December 31, 2004 is due to an
increase in a number of items including professional fees of approximately
$180,000 relating to costs associated with the internal control audit, including
the review of the internal control documentation and testing relating to
compliance with Section 404 of the Sarbanes-Oxley Act, legal expenses relating
to compliance with the Sarbanes-Oxley Act and legal fees relating to
transactions that were not consummated. Additionally, for the year ended
December 31, 2004, state taxes increased by approximately $56,000, director and
officer insurance and directors' fees increased by approximately $69,000, and
travel and other miscellaneous expenses increased by approximately $74,000 due
to our increased business activity.
Real estate expenses increased by $687,000, or 127%, to $1.2 million for
the year ended December 31, 2004. This increase was primarily due to real estate
operating expenses of approximately $343,000 incurred at one of our properties.
With respect to this property, we entered into a lease with the tenant effective
July 1, 2004, after the tenant had exercised its right to terminate its prior
lease. According to the new lease, we pay the first lease year operating costs
and the tenant is to pay operating costs over and above the current year costs.
Real estate operating expenses also include approximately $163,000 of utilities
and operating expenses on a property which became vacant on July 1, 2004 when
the tenant did not renew its lease. This property was re-let as of November 15,
2004. The increase was also due to real estate expenses on another vacant
property in which the tenant filed for bankruptcy protection and disaffirmed its
lease.
During the year ended December 31, 2004, we determined that the estimated
fair value of a property was lower than the carrying amount and we recorded a
$366,000 provision for valuation allowance. In early 2004, the retail tenant at
this property filed for bankruptcy protection, disaffirmed its lease and vacated
this store. There was no comparable provision in the year ended December 31,
2003.
Net Income
- ----------
For the year ended December 31, 2004, net income applicable to common
stockholders increased by $2.5 million to $11 million. However, due to the
issuance of 3.7 million common shares in October 2003 in an underwritten public
offering, net income per common share decreased by $.05 to $1.13, for the year
ended December 31, 2004 as compared to the year ended December 31, 2003.
Comparison of Years Ended December 31, 2003 and December 31, 2002
- -----------------------------------------------------------------
Revenues
- --------
Our revenues consist primarily of rental income from tenants in our
rental properties. Rental income increased by $4.4 million, or 29.6%, to $19.3
million for the year ended December 31, 2003 from $14.9 million for the year
ended December 31, 2002. The increase in rental income is due to $4.6 million of
rental income earned on eight properties acquired by us between September 2002
and September 2003, offset to the extent of $124,000 due to the vacancy of one
of our retail properties.
Interest and other income decreased by $314,000, or 38%, to $512,000 for
the year ended December 31, 2003 from $826,000 for the year ended December 31,
2002. The primary reason for the decrease was the receipt in the year ended
December 31, 2002 of non-recurring net acquisition fees from our movie theater
joint ventures of $268,000, compared to $5,000 of such fees in the year ended
December 31, 2003, and the receipt in 2002 of other non-recurring income of
$73,000. We also experienced a $106,000 decrease in interest income in the year
ended December 31, 2003 due to the investment in cash equivalents and treasury
bills of the balance of the net proceeds received from our May 2002 public
offering, a significant portion of which was utilized for property acquisitions
by December 31, 2002. The net proceeds from our October 2003 public offering
were invested for the two months remaining in fiscal 2003. Offsetting these
decreases in interest and other income was a $125,000 increase in the year ended
December 31, 2003 in interest earned on short-term mortgages receivable which
were acquired or originated by us to facilitate acquisitions.
Our equity in earnings of unconsolidated joint ventures increased by $1.3
million, or 124%, to $2.4 million for the year ended December 31, 2003 from $1.1
million for the year ended December 31, 2002. The increase is due to the
purchase of nine movie theaters by our two movie theater joint ventures at
various times between April 2002 and July 2003 and our purchase of an additional
25% interest in one of the movie theater joint ventures on October 3, 2003. The
increase is also due to the purchase of a retail property by another joint
venture in December 2002.
Expenses
- --------
Depreciation and amortization expense increased by $856,000, or 32.7%, to
$3.5 million for the year ended December 31, 2003 from $2.6 million for the year
ended December 31, 2002. The increase in depreciation and amortization expense
was primarily due to the acquisition of eight properties between September 2002
and September 2003.
Interest on mortgages payable increased by $642,000, or 10.4%, to $6.8
million for the year ended December 31, 2003 from $6.2 million for the year
ended December 31, 2002 as a result of increased borrowings related to property
acquisitions. This increase resulted from mortgages placed on three properties
in December 2002 and October 2003, the assumption of mortgages in connection
with the purchase of three properties between February 2003 and September 2003
and the refinancing of one property.
Interest-line of credit increased by $489,000 to $564,000 for the year
ended December 31, 2003 from $75,000 for the year ended December 31, 2002. This
increase resulted from increased borrowings under our line of credit to
facilitate the purchase of several properties. The borrowings were repaid with
the proceeds of two mortgage financings and with a portion of the proceeds
received from our public offering in October 2003.
General and administrative expenses increased $528,000, or 31.5%, to $2.2
million for the year ended December 31, 2003 from $1.7 million for the year
ended December 31, 2002. This increase was primarily due to a $311,000 increase
in payroll and payroll expenses in the year ended December 31, 2003, including
an increase of approximately $219,000 for executive and support personnel,
primarily for legal and accounting services, allocated to us pursuant to a
Shared Services Agreement between us and related entities. This increase in the
allocated payroll expenses resulted from a significant increase in our level of
business activity, primarily property acquisitions, the negotiation and
consummation of a revolving credit facility, mortgage refinancings, lease
negotiations and corporate governance matters. General and administrative
expenses in 2003 also reflects an increase in direct payroll expenses resulting
from a $25,000 increase in the annual base salary and a $25,000 bonus to our
president and chief executive officer. Also included in the year ended December
31, 2003 is compensation expense of $41,000 relating to the issuance of
restricted stock. The general and administrative expenses for the year ended
December 31, 2002 is net of a $75,000 partial reimbursement from one of our
movie theater joint ventures for legal services allocated to us under the Shared
Services Agreement relating to movie theater acquisitions and mortgage
financing. The balance of the increase in general and administrative expenses
for the year ended December 31, 2003 is due to an increase in a number of items
including professional fees of approximately $62,000 and travel expenses of
approximately $29,000, a major portion of which is related to our property
acquisition activities.
In October and November, 2003, we sold 3.7 million shares of our common
stock (including 487,500 shares subject to the underwriters' over-allotment
option) in a public offering in which we raised approximately $64.5 million.
Allocated payroll and payroll related expenses of $69,000 (primarily for legal
and accounting services resulting from time expended by various executive and
administrative personnel in connection with the preparation and filing of a
shelf registration statement on Form S-3 on September 12, 2003, declared
effective by the SEC on October 2, 2003, and the related prospectus supplement)
have been included in "Public Offering Expenses" for the year ended December 31,
2003. In the year ended December 31, 2002, $125,000 of public offering expenses
were allocated to us in connection with an offering consummated in May 2002
pursuant to which we raised approximately $35 million.
Real estate expenses increased by $369,000, or 212%, to $543,000 for the
year ended December 31, 2003 from $174,000 for the year ended December 31, 2002.
This increase was primarily due to legal fees relating to properties, as well as
utility and real estate tax expense on our vacant property. Additionally, the
2003 real estate expenses include amortization of a commission relating to a
renegotiated lease, non-recurring landlord repairs and an increase in insurance
expense.
Liquidity and Capital Resources
- -------------------------------
Our primary sources of liquidity are cash and cash equivalents, our
revolving credit facility and cash generated from operating activities,
including mortgage financings. We are a party to a credit agreement with Valley
National Bank, Merchants Bank Division, Bank Leumi, USA, Manufacturers and
Traders Trust Company and Israel Discount Bank of New York which provides for a
$62.5 million revolving credit facility. The credit facility is available to us
to pay down existing mortgages, to fund the acquisition of additional properties
or to invest in joint ventures. The facility matures on March 31, 2007.
Borrowings under the facility bear interest at the lower of LIBOR plus 2.5% or
at the bank's prime rate and there is an unused facility fee of one-quarter of
1% per annum. Net proceeds received from the sale or refinancing of properties
are required to be used to repay amounts outstanding under the facility if
proceeds from the facility were used to purchase or refinance the property. The
facility is guaranteed by our subsidiaries that own unencumbered properties and
is secured by the outstanding stock of subsidiary entities. There is currently
$17,500,000 outstanding under the facility.
We are actively engaged in seeking additional property acquisitions and
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 and funds available under our credit
facility to fund acquisitions.
The following sets forth our contractual cash obligations as of December
31, 2004, which relate to interest and amortization payments and balances due at
maturity under outstanding mortgages secured by our properties, and an
outstanding credit line balance, for the periods indicated (amounts in
thousands):
Payment due by period
Less than 1-3 4-5 More than
Contractual Obligations Total 1 Year Years Years 5 Years
- ----------------------- ----- ------ ----- ----- -------
Mortgages payable - $109,763 $10,565 $21,256 $21,477 $56,465
interest and amortization
Mortgages payable - 77,274 8,255 6,102 7,087 55,830
balances due at maturity
Credit line -
balance due at maturity 7,600 - 7,600 - -
-------- -------- ------- ------- -------
Total $194,637 $18,820 $34,958 $28,564 $112,295
======== ======= ======= ======= ========
As of December 31, 2004, we had outstanding approximately $124 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
$31.8 million due in the next three years will be paid primarily from cash
generated from our operations. We anticipate that loan maturities of
approximately $14.4 million due in the next three years will be paid primarily
from mortgage financings or refinancings. In addition, the $7.6 million
outstanding under our credit facility will be repaid 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.
In addition, we, as ground lessee, are obligated under a ground lease for
a property owned in fee by an unrelated third party. The annual fixed leasehold
rent expense is as follows:
More than
Total 2005 2006 2007 2008 2009 5 Years
----- ---- ---- ---- ---- ---- -------
$4,698,976 $237,500 $237,500 $237,500 $237,500 $262,240 $3,486,736
We had no outstanding contingent commitments, such as guarantees of
indebtedness, or any other contractual cash obligations at December 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 taxable 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.
Off-Balance Sheet Arrangements
- ------------------------------
We do not have any off-balance sheet arrangements.
Significant Accounting Policies
- -------------------------------
Our significant accounting policies are more fully described in Note 2 to
our consolidated financial statements. Certain of our accounting policies are
particularly important to an understanding of our financial position and results
of operations and require the application of significant judgment by our
management; as a result they are subject to a degree of uncertainty. These
significant accounting policies include:
Revenues
- --------
Our revenues, which are substantially derived from rental income, include
rental income that our tenants pay in accordance with the terms of their
respective leases reported on a straight line basis over the initial term of
each lease. Since many of our leases provide for rental increases at specified
intervals, straight line basis accounting requires us to record as an asset and
include in revenues, unbilled rent receivables which we will only receive if the
tenant makes all rent payments required through the expiration of the initial
term of the lease. Accordingly, our management must determine, in its judgment,
that the unbilled rent receivable applicable to each specific tenant is
collectible. We review unbilled rent receivables on a quarterly basis and take
into consideration the tenant's payment history, the financial condition of the
tenant, business conditions in the industry in which the tenant is engaged and
economic conditions in the area in which the property is located. In the event
that the collectability of an unbilled rent receivable is in doubt, we would be
required to take a reserve against the receivable or a direct write off of the
receivable, which would have an adverse affect on net income for the year in
which the reserve or direct write off is taken and would decrease total assets
and stockholders' equity. At December 31, 2004, one of the movie theater joint
ventures, in which we are a 50% venturer, took a $1,000,000 direct write off
against unbilled rent receivable balances relating to two movie theaters
initially leased to operators under common control.
Value of Real Estate Portfolio
- ------------------------------
We review our real estate portfolio on a quarterly basis to ascertain if
there has been any impairment in the value of any of our real estate assets in
order to determine if there is any need for a provision for valuation
adjustment. In reviewing the portfolio, we examine the type of asset, its
location, the economic situation in the area in which the asset is located, the
economic situation in the industry in which the tenant is involved and the
timeliness of the payments made by the tenant under its lease, as well as any
current correspondence that may have been had with the tenant, including
property inspection reports. We also ascertain appropriate capitalization rates
for the real estate asset in the area in which the property is located and apply
such capitalization rate to the net operating income derived from that asset.
For each real estate asset owned for which indicators of impairment exist,
recognition of impairment is required if the calculated value is less than the
asset's carrying amount. We do not obtain any independent appraisals in
determining value but rely on our own analysis and valuations. Any provision
taken with respect to any part of our real estate portfolio will reduce our net
income and reduce assets and stockholders' equity to the extent of the amount of
the valuation adjustment, but it will not affect our cash flow until such time
as the property is sold. We took a provision for valuation adjustment in 2004 of
$366,000 with respect to one property where the retail tenant had filed for
bankruptcy protection, disaffirmed its lease and vacated the store.
The fair value of the real estate acquired is allocated to the acquired
tangible assets, consisting of land and building, and identified intangible
assets and liabilities, consisting of the value of above-market and below-market
leases and other value of in-place leases based in each case on their fair
values. The fair value of the tangible assets of an acquired property (which
includes land and building) is determined by valuing the property as if it were
vacant, and the "as-if-vacant" value is then allocated to land and building
based on management's determination of relative fair values of these assets. The
allocation made by management may have a positive or negative effect on net
income and may have an effect on the assets and liabilities on the balance
sheet. During the year ended December 31, 2004 the effect on the financial
statements was not material.
Item 7A. Qualitative and Quantitative Disclosures About Market Risk
----------------------------------------------------------
All of our long-term mortgage debt bears interest at fixed rates and
accordingly, the effect of changes in interest rates would not impact the amount
of interest expense that we incur under these mortgages. Our credit line is a
variable rate facility which is sensitive to interest rates. However, for the
year ended December 31, 2004, due to a low average balance outstanding on the
credit line, we do not believe that the effect of changes in interest rates
would materially impact the amount of interest expense incurred.
The fair market value (FMV) of our long term debt is estimated based on
discounting future cash flows at interest rates that our management believes
reflect the risks associated with long term debt of similar risk and duration.
The following table sets forth our long-term debt obligations by
scheduled principal cash flow payments and maturity date, weighted average
interest rates and estimated FMV at December 31, 2004 (amounts in thousands):
For the Year Ended December 31,
There-
2005 2006 2007 2008 2009 after Total FMV
---- ---- ---- ---- ---- ----- ----- ---
Long term debt:
Fixed rate $10,796 $5,046 $6,788 $7,227 $7,713 $86,449 $124,019 $129,240
Weighted
average
interest rate 7.17% 7.13% 7.12% 7.13% 7.17% 7.02% 7.06%
Variable rate $ - $ - $7,600 $ - $ - $ - $ 7,600 $ 7,600
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
This information appears in Item 15(a) of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
None.
Item 9A. Controls and Procedures
-----------------------
A review and evaluation was performed by our management, including our
Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this Annual Report on Form
10-K. Based on that review and evaluation, the CEO and CFO have concluded that
our current disclosure controls and procedures, as designed and implemented,
were effective. There have been no significant changes in our internal controls
or in other factors that could significantly affect our internal controls
subsequent to the date of their evaluation. There were no significant material
weaknesses identified in the course of such review and evaluation and,
therefore, we took no corrective measures.
Management Report on Internal Control Over Financial Reporting
- --------------------------------------------------------------
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over financial
reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the
Securities Exchange Act of 1934, as amended, as a process designed by, or under
the supervision of, a company's principal executive and principal financial
officers and effected by a company's board, management and other personnel to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with GAAP and includes those policies and procedures that:
o pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of the assets of a company;
o provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with GAAP, and that receipts and expenditures of a company are being
made only in accordance with authorizations of management and directors
of a company; and
o provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of a company's assets
that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risks that controls may
become inadequate because of changes in conditions or that the degree of
compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over
financial reporting as of December 31, 2004. In making this assessment, our
management used criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on its assessment, our management believes that, as of December
31, 2004, our internal control over financial reporting was effective based on
those criteria.
Our independent auditors, Ernst & Young, LLP, have issued an audit
report on management's assessment of our internal control over financial
reporting. This report appears on page F1 of this Annual Report on Form 10-K.
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
We have a Code of Business Conduct and Ethics that applies to all
directors, officers and employees, including our principal executive officer,
principal financial officer and principal accounting officer. You can find our
Code of Business Conduct and Ethics on our website by going to the following
address: www.onelibertyproperties.com. We will post any amendments to the
Business Code of Conduct and Ethics as well as any waivers that are required to
be disclosed by the rules of either the Securities and Exchange Commission or
The New York Stock Exchange, on our website.
Our Board of Directors has adopted Corporate Governance Guidelines and
Charters for the Audit, Compensation and Nominating and Corporate Governance
Committees of the Board of Directors. You can find these documents on our
website by going to the following address: www.onelibertyproperties.com.
You can also obtain a printed copy of any of the materials referred to
above by contacting us at the following address: One Liberty Properties, Inc.,
60 Cutter Mill Road, Great Neck, New York 11021, Attention: Secretary, telephone
number (1-800-450-5816).
The Audit Committee of our Board of Directors is an "Audit Committee"
for the purposes of Section 3(a) (58) of the Securities Exchange Act. The
members of that Committee are: Charles Biederman, Chairman, Joseph A. DeLuca and
James J. Burns.
Apart from certain information concerning our Executive Officers which
is set forth in Part I of this Annual Report, the other information required by
this item is incorporated herein by reference to the applicable information in
the proxy statement for our 2005 Annual Meeting of Stockholders including the
information set forth under the captions "Election of Directors, Section 16(a)
Beneficial Ownership Reporting Compliance and Governance of the Company - Audit
Committee."
Item 11. Executive Compensation
----------------------
The information concerning our executive compensation required by Item
11 shall be included in the Proxy Statement to be filed relating to our 2005
Annual Meeting of Stockholders and is incorporated herein by reference,
including the information set forth under the caption "Executive Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The information concerning our beneficial owners required by Item 12
shall be included in the Proxy Statement to be filed relating to our 2005 Annual
Meeting of Stockholders and is incorporated herein by reference, including the
information set forth under the caption "Share Ownership of Certain Beneficial
Owners, Directors and Officers."
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The information concerning certain relationships and related
transactions required by Item 13 shall be included in the Proxy Statement to be
filed relating to our 2005 Annual Meeting of Stockholders and is incorporated
herein by reference, including the information set forth under the caption
"Certain Relationships and Related Transactions."
Item 14. Principal Accounting Fees and Services
--------------------------------------
The information concerning our principal accounting fees required by
Item 14 shall be included in the Proxy Statement to be filed relating to our
2005 Annual Meeting of Stockholders and is incorporated herein by reference,
including the information set forth under the caption "Independent Auditors."
PART IV
Item 15. 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
----
- Reports of Independent Registered F-1 through
Public Accounting Firm F-2
- Statements:
Consolidated Balance Sheets F-3
Consolidated Statements of Income F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 through F-23
(2) Financial Statement Schedules: - Schedule III-Real Estate
and Accumulated Depreciation F-24 through F-25
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 Restated Articles of Incorporation of the Company, filed as Exhibit 3.1
to the Company's Form 10-Q for the quarter ended June 30, 2004, which
Exhibit is incorporated herein by reference.
3.4 By-Laws of the Company, as amended. *
4.1 One Liberty Properties, Inc. 1996 Stock Option Plan, filed as
an Exhibit to the Company's Registration Statement on Form S-2,
Registration No. 333-86850, declared effective on May 24, 2002,
which Exhibit is incorporated herein by reference.
4.2 One Liberty Properties, Inc. 2003 Incentive Plan, filed as an Exhibit
to the Company's Registration Statement on Form S-8, Registration
No. 333-107038, effective July 11, 2003, which Exhibit is incorporated
herein by reference.
4.3 Form of Common Stock Certificate, filed as an Exhibit to the Company's
Registration Statement on Form S-2, Registration No. 333-86850,
declared effective on May 24, 2002, which Exhibit is incorporated
herein by reference.
10.1 Amended and Restated Loan Agreement with Valley National Bank,
Merchants Bank Division, Bank Leumi USA, Israel Discount Bank of New
York and Manufacturers and Traders Trust Company dated as of June 4,
2004, filed as an Exhibit to the Company's Form 8-K dated June 4, 2004,
which Exhibit is incorporated herein by reference.
10.2 Shared Services Agreement by and among the Company, Gould Investors
L.P., BRT Realty Trust, Majestic Property Management Corp., Majestic
Property Affiliates, Inc. and REIT Management Corp., filed as Exhibit
15 to the Company's Form 10-K from the year ended December 31, 2002,
which Exhibit is incorporated herein by reference.
14.1 Code of Ethics *
21.1 Subsidiaries of Registrant *
23.1 Consent of Ernst & Young LLP *
31.1 Certification of President and Chief Executive Officer *
31.2 Certification of Senior Vice President and Chief Financial Officer *
32.1 Certification of President and Chief Executive Officer *
32.2 Certification of Senior Vice President and Chief Financial Officer *
* Filed herewith
(b) Reports on Form 8-K. The following reports on Form 8-K were filed during the
last quarter of the 2004 fiscal year:
- - A Form 8-K was filed on October 19, 2004 to report the
acquisition of a property in Saint Cloud, Minnesota and
the borrowing of $7,000,000 under the Company's credit
facility to consummate the acquisition.
- - A Form 8-K was filed on November 9, 2004 which attached
the press release issued on November 8, 2004 disclosing
information regarding the results of operations for the
three months ended September 30, 2004 and financial
condition as of September 30, 2004.
- - A Form 8-K was filed on December 1, 2004 to report
information under Item 7.01 - Regulation FD Disclosure.
- - A Form 8-K was filed on December 21, 2004 to report the
execution of a material agreement relating to the sale of
"air rights" relating to the Company's property located in
Brooklyn, New York.
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 15, 2005
By:s/Jeffrey Fishman
---------------------
Jeffrey Fishman, President and
Chief Executive Officer
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 Chairman of the
- ------------------ Board of Directors March 15, 2005
Fredric H. Gould
s/Jeffrey Fishman President, Chief
- ----------------- Executive Officer and
Jeffrey Fishman Director March 15, 2005
s/Joseph A. Amato
- -----------------
Joseph A. Amato Director March 15, 2005
s/Charles Biederman
- -------------------
Charles Biederman Director March 15, 2005
s/James J. Burns
- ----------------
James J. Burns Director March 15, 2005
s/Jeffrey A. Gould
- ------------------
Jeffrey A. Gould Director March 15, 2005
s/Matthew J. Gould
- ------------------
Matthew J. Gould Director March 15, 2005
s/Marshall Rose
- ---------------
Marshall Rose Director March 15, 2005
s/Patrick Callan Jr.
- --------------------
Patrick Callan Jr. Director March 15, 2005
s/Joseph De Luca
- ----------------
Joseph De Luca Director March 15, 2005
s/ J. Robert Lovejoy
- --------------------
J. Robert Lovejoy Director March 15, 2005
s/David W. Kalish
- -----------------
David W. Kalish Senior Vice President and
Chief Financial Officer March 15, 2005
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
One Liberty Properties, Inc. and Subsidiaries
We have audited management's assessment, included in the accompanying Management
Report on Internal Control over Financial Reporting in Item 9A, Controls and
Procedures, for Form 10-K, that One Liberty Properties, Inc. and Subsidiaries
(the "Company") maintained effective internal control over financial reporting
as of December 31, 2004, based on criteria established in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). The Company's
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the Company's
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our opinion, management's assessment that One Liberty Properties, Inc. and
Subsidiaries maintained effective internal control over financial reporting as
of December 31, 2004, is fairly stated, in all material respects, based on the
COSO criteria. Also, in our opinion, One Liberty Properties, Inc. and
Subsidiaries maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2004, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
One Liberty Properties, Inc. and Subsidiaries as of December 31, 2004 and 2003,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 2004 of
One Liberty Properties, Inc. and Subsidiaries and our report dated March 2, 2005
expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
New York, New York
March 2, 2005
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
One Liberty Properties, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of One Liberty
Properties, Inc. and Subsidiaries (the "Company") as of December 31, 2004 and
2003, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
2004. Our audits also included the financial statement schedule listed in the
Index at Item 15(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of One Liberty
Properties, Inc. and Subsidiaries at December 31, 2004 and 2003, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2004, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of One Liberty
Properties, Inc. and Subsidiaries' internal control over financial reporting as
of December 31, 2004, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated March 2, 2005 expressed an unqualified
opinion thereon.
/s/ Ernst & Young LLP
New York, New York
March 2, 2005
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in Thousands, Except Per Share Data)
ASSETS
December 31,
------------
2004 2003
---- ----
Real estate investments, at cost
Land $ 47,447 $ 37,880
Buildings and improvements 199,736 153,591
-------- --------
247,183 191,471
Less accumulated depreciation 18,647 14,155
-------- --------
228,536 177,316
Investment in unconsolidated joint ventures 37,023 24,441
Cash and cash equivalents 6,051 45,944
Unbilled rent receivable 5,301 4,264
Escrow, deposits and other receivables 2,285 3,323
Investment in BRT Realty Trust at market (related party) 731 867
Deferred financing costs 2,408 1,962
Other (including available-for-sale securities at market
of $173 and $146) 2,051 972
-------- --------
$284,386 $259,089
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable $124,019 $106,133
Line of credit 7,600 -
Dividends payable 3,230 3,400
Accrued expenses and other liabilities 3,422 3,587
-------- --------
Total liabilities 138,271 113,120
-------- --------
Commitments and contingencies - -
Stockholders' equity:
Common Stock, $1 par value; 25,000 shares authorized;
9,728 and 9,605 shares issued and outstanding 9,728 9,605
Paid-in capital 133,350 130,863
Accumulated other comprehensive income - net unrealized
gain on available-for-sale securities 717 823
Unearned compensation (926) (447)
Accumulated undistributed net income 3,246 5,125
-------- --------
Total stockholders' equity 146,115 145,969
-------- --------
$284,386 $259,089
======== ========
See accompanying notes.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Amounts in Thousands, Except Per Share Data)
Year Ended December 31,
----------------------------------
2004 2003 2002
---- ---- ----
Revenues:
Rental income $ 25,792 $ 19,284 $ 14,879
Interest and other income (including $0, $194
and $231 from an affiliated joint venture) 735 512 826
-------- -------- --------
26,527 19,796 15,705
-------- -------- --------
Expenses:
Depreciation and amortization 4,758 3,473 2,617
Interest - mortgages payable 8,430 6,844 6,202
Interest - line of credit 467 564 75
Leasehold rent 119 - 24
General and administrative (including $980, $832
and $592 to related party) 3,127 2,203 1,675
Public offering expenses - related party - 69 125
Real estate expenses 1,230 543 174
Provision for valuation adjustment of real estate 366 - -
-------- -------- --------
18,497 13,696 10,892
-------- -------- --------
Earnings before equity in earnings of unconsolidated
joint ventures and gain (loss) on sale 8,030 6,100 4,813
Equity in earnings of unconsolidated joint ventures 2,869 2,411 1,078
Gain (loss) on sale of real estate 73 14 (29)
Gain on sale of available-for-sale securities 2 - 18
-------- -------- -------
Net income $ 10,974 $ 8,525 $ 5,880
======== ======== =======
Calculation of net income applicable
to common stockholders:
Net income $10,974 $ 8,525 $ 5,880
Less dividends on preferred stock - 1,037 1,037
------- -------- -------
Net income applicable to common stockholders $10,974 $ 7,488 $ 4,843
======= ======== =======
Weighted average number of common
shares outstanding:
Basic 9,728 6,340 4,614
===== ===== =====
Diluted 9,744 6,372 4,644
===== ===== =====
Net income per common share:
Basic $ 1.13 $ 1.18 $ 1.05
====== ====== ======
Diluted $ 1.13 $ 1.18 $ 1.04
====== ====== ======
Cash distributions per share:
Common Stock $ 1.32 $ 1.32 $ 1.32
====== ====== ======
Preferred Stock $ - $ 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, 2004
(Amounts in Thousands, Except Per Share Data)
Accum-
ulated Accum-
Other ulated
Compre- Unearned Undis-
Preferred Common Paid-in hensive Compen- tributed
Stock Stock Capital Income sation Net Income Total
----- ----- ------- ------ ------ ---------- -----
Balances, December 31, 2001 $ 10,693 $ 3,058 $ 32,192 $ 261 $ - $ 8,144 $ 54,348
Distributions - Common Stock
($1.32 per share) - - - - - (6,570) (6,570)
Distributions - Preferred Stock
($1.60 per share) - - - - - (1,037) (1,037)
Exercise of options - 48 562 - - - 610
Shares issued through public offering - 2,500 32,621 - - - 35,121
Shares issued through dividend
reinvestment plan - 20 271 - - - 291
Net income - - - - - 5,880 5,880
Other comprehensive income -
net unrealized gain on available-
for-sale securities - - - 51 - - 51
-------
Comprehensive income - - - - - - 5,931
-------- ------- ------- ------- ------ -------- --------
Balances, December 31, 2002 10,693 5,626 65,646 312 - 6,417 88,694
Distributions - Common Stock
($1.32 per share) - - - - - (8,780) (8,780)
Distributions - Preferred Stock
($1.60 per share) - - - - - (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) - -
Compensation 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
($1.32 per share) - - - - - (12,853) (12,853)
Exercise of options - 49 543 - - - 592
Shares issued through dividend
reinvestment plan - 72 1,247 - - - 1,319
Issuance of restricted stock - - 699 - (699) - -
Restricted stock vesting - 2 (2) - - - -
Compensation expense -
restricted stock - - - - 220 - 220
Net income - - - - - 10,974 10,974
Other comprehensive income -
net unrealized loss on available-
for-sale securities - - - (106) - - (106)
--------
Comprehensive income - - - - - - 10,868
-------- ------- -------- ------ ----- ------- --------
Balances, December 31, 2004 $ - $ 9,728 $133,350 $ 717 $(926) $ 3,246 $146,115
======== ======= ======== ====== ====== ======= ========
See accompanying notes.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in Thousands)
Year Ended December 31,
----------------------------------------------
2004 2003 2002
---- ---- -----
Cash flows from operating activities:
Net income $ 10,974 $ 8,525 $ 5,880
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) loss on sale of real estate (73) (14) 29
Gain on sale of available-for-sale securities (2) - (18)
Increase in rental income from straight-lining of rent (1,037) (1,058) (765)
Decrease in rental income from amortization of intangibles
relating to leases 43 54 -
Provision for valuation adjustment 366 - -
Amortization of restricted stock expense 220 41 -
Equity in earnings of unconsolidated joint ventures (2,869) (2,411) (1,078)
Distributions from unconsolidated joint ventures 3,437 2,407 1,177
Payments to minority interest by subsidiary - (18) (16)
Depreciation and amortization 4,758 3,473 2,617
Amortization of financing costs included in interest expense 503 325 259
Changes in assets and liabilities:
Increase in escrow deposits and other receivables (848) (478) (362)
Increase in accrued expenses and other liabilities 891 760 621
-------- ------- --------
Net cash provided by operating activities 16,363 11,606 8,344
-------- ------- --------
Cash flows from investing activities:
Additions to real estate (49,734) (24,327) (25,880)
Net proceeds from sale of real estate 1,302 159 281
Net proceeds from condemnation of real estate - 32 -
Investment in unconsolidated joint ventures, net (13,149) (984) (19,538)
Sale of portion of interest in unconsolidated joint venture - - 3,150
Investment in mortgages receivable - (including $6,340
due from an affiliated joint venture in 2002) - (7,000) (6,340)
Collection of mortgages receivable (including $6,260
and $80 from an affiliated joint venture) - 13,516 84
Net proceeds from sale of available-for-sale securities 4 - 344
Purchase of available-for-sale securities - (10) (157)
-------- -------- --------
Net cash used in investing activities (61,577) (18,614) (48,056)
-------- -------- --------
Cash flows from financing activities:
Proceeds (repayments) from bank line of credit, net 7,600 (10,000) 10,000
Proceeds from mortgages payable 12,150 13,508 3,350
Payment of financing costs (949) (1,215) (84)
Repayment of mortgages payable (2,368) (1,612) (2,570)
Collection of notes receivable - officer - 166 -
Proceeds from issuance of shares through public offering - 68,160 38,011
Underwriters' discounts and commissions and other
public offering costs - (3,613) (2,890)
Cash distributions - Common Stock (13,023) (7,496) (5,630)
Cash distributions - Preferred Stock - (1,037) (1,037)
Exercise of stock options 592 868 610
Redemption of preferred stock (8,405) -
Issuance of shares through dividend reinvestment plan 1,319 1,004 291
-------- ------- --------
Net cash provided by financing activities 5,321 50,328 40,051
-------- ------- --------
Net (decrease) increase in cash and cash equivalents (39,893) 43,320 339
Cash and cash equivalents at beginning of year 45,944 2,624 2,285
-------- -------- --------
Cash and cash equivalents at end of year $ 6,051 $45,944 $ 2,624
======== ======= ========
Continued on next page
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Amounts in Thousands)
Year Ended December 31,
----------------------------------------------
2004 2003 2002
---- ---- -----
Supplemental disclosures of cash flow information:
Cash paid during the year for interest expense $ 8,347 $ 7,156 $ 6,015
Supplemental schedule of non cash investing and financing activities:
Assumption of mortgages payable in connection with
purchase of real estate $ 9,854 $ 15,121 $ -
Additions to real estate included in other liabilities (1,413) 1,413 -
Conversion of preferred stock to common stock - 2,284 -
Contribution of real property to unconsolidated joint venture - - 819
Mortgage taken back upon sale of real estate - - 260
See accompanying notes.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2004
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-administered
and self-managed real estate investment trust ("REIT"). The
Company acquires, owns and manages a geographically diversified
portfolio of retail, industrial, office, movie theater, health and
fitness and other properties, a substantial portion of which are
under long-term net leases. The Company owns forty-one properties,
participates in six joint ventures which own a total of fourteen
properties and holds a 50% tenancy in common interest in one
property. The fifty-six properties are located in twenty-one
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
limited liability company ("LLC"), in which the Company held a 95%
interest until September 8, 2003 when it purchased the 5% minority
owned interest. One Liberty Properties, Inc., its subsidiaries and
the LLC are hereinafter referred to as the Company. Material
intercompany items and transactions have been eliminated.
Investment in Unconsolidated Joint Ventures
The Company accounts for its investments in unconsolidated joint
ventures under the equity method of accounting as the Company
exercises significant influence over, but does not control these
entities. These investments are recorded initially at cost, as
investments in unconsolidated joint ventures, and subsequently
adjusted for equity in earnings and cash contributions and
distributions. Any difference between the carrying amount of these
investments on the balance sheet of the Company and the underlying
equity in net assets is amortized as an adjustment to equity in
earnings of unconsolidated joint ventures over 40 years. See Note
4. None of the joint venture debt is recourse to the Company.
Use of Estimates
The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.
Management believes that the estimates and assumptions that are
most important to the portrayal of the Company's financial
condition and results of operations, in that they require
management's most difficult, subjective or complex judgments, form
the basis of the accounting policies deemed to be most significant
to the Company. These significant accounting policies relate to
revenues and the value of the Company's real estate portfolio.
Management believes its estimates and assumptions related to these
significant accounting policies are appropriate under the
circumstances; however, should future events or occurrences result
in unanticipated consequences, there could be a material impact on
the Company's future financial condition or results of operations.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
Rental income includes the base rent that each tenant is required
to pay in accordance with the terms of their respective leases
reported on a straight-line basis over the initial term of the
lease. Some of the leases provide for additional contingent rental
revenue in the form of percentage rents and increases based on the
consumer price index. The percentage rents are based upon the
level of sales achieved by the lessee and are recorded once the
required sales levels are reached.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with
maturities of three months or less when purchased.
Purchase Accounting for Acquisition of Real Estate
In accordance with Statement of Financial Accounting Standards No.
141, or SFAS 141, "Business Combinations," the Company allocates
the purchase price of real estate to land and building and, if
determined to be material, intangibles, such as the value of
above, below and at-market leases and origination costs associated
with in-place leases. The Company depreciates the amount allocated
to building and intangible assets over their estimated useful
lives, which generally range from sixteen to forty years. The
values of the above and below market leases are amortized and
recorded as either an increase (in the case of below market
leases) or a decrease (in the case of above market leases) to
rental income over the remaining term of the associated lease. The
tenant improvements and origination costs are amortized as an
expense over the remaining life of the lease (or charged against
earnings if the lease is terminated prior to its contractual
expiration date). The Company assesses fair value of the leases
based on estimated cash flow projections that utilize appropriate
discount rates and available market information.
As a result of its evaluation under SFAS 141 of the acquisitions
made, the Company recorded deferred assets of $1,105,000 and
$431,000, which is included in other assets on the balance sheet,
representing the net value of the acquired above and below market
leases and assumed lease origination costs for the years ended
2004 and 2003, respectively. The Company recognized a reduction in
rental revenue of $43,000 and $54,000, for the amortization of the
above/below market leases and amortization expense of $145,000 and
$99,000 relating to lease origination costs, resulting from the
reallocation of the purchase price of the acquired properties for
the years ended 2004 and 2003, respectively. For the year ended
December 31, 2004, the Company also recorded a deferred liability
of $187,000 representing the value of a mortgage loan assumed at
an above market rate. The Company recognized a $3,000 reduction of
interest expense for the amortization of the above market mortgage
for the year ended December 31, 2004.
The unamortized balance of intangible lease assets at December 31,
2004 will be deducted from future operations as follows:
2005 $ 104,000
2006 104,000
2007 104,000
2008 104,000
2009 92,000
Thereafter 687,000
----------
$1,195,000
==========
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation and Amortization
Depreciation of buildings is computed on the straight-line method
over an estimated useful life of 40 years for commercial
properties and 27 1/2 years for residential properties. Leasehold
interest is amortized over the initial lease term of the leasehold
position.
Deferred Financing Costs
Mortgage and credit line costs are deferred and amortized on a
straight-line basis over the terms of the respective debt
obligations, which approximates the effective interest method.
Such amortization is included in interest expense in the
accompanying consolidated statements of income.
Federal Income Taxes
The Company has qualified as a real estate investment trust under
the applicable provisions of the Internal Revenue Code. Under
these provisions, the Company will not be subject to federal
income taxes on amounts distributed to stockholders providing it
distributes substantially all of its taxable income and meets
certain other conditions.
Distributions made during 2004 included approximately 10% to be
treated by the stockholders as return of capital and less than 1%
as capital gain distributions, with the balance to be treated as
ordinary income. All distributions made during 2003 were
attributable to ordinary income.
Investment in Equity Securities
The Company determines the appropriate classification of
securities at the time of purchase and reassesses the
appropriateness of the classification at each reporting date. At
December 31, 2004, all marketable securities have been classified
as available-for-sale and, as a result, are stated at fair value.
Unrealized gains and losses on available-for-sale securities are
recorded as accumulated other comprehensive income in the
stockholders' equity section.
The Company's investment in 30,048 common shares of BRT Realty
Trust ("BRT"), a related party of the Company, (accounting for
less than 1% of the total voting power of BRT), purchased at a
cost of $97,000, has a fair market value at December 31, 2004 of
$731,000. At December 31, 2004, the total cumulative unrealized
gain of $717,000 on all investments in equity securities is
reported as accumulated other comprehensive income in the
stockholders' equity section.
Realized gains and losses are determined using the average cost
method. During 2004, 2003 and 2002, sales proceeds and gross
realized gains and losses on securities classified as
available-for-sale were:
2004 2003 2002
---- ---- ----
Sales proceeds $ 4,100 $ - $ 344,000
========= ======== =========
Gross realized losses $ - $ - $ (3,000)
========= ======== =========
Gross realized gains $ 2,000 $ - $ 21,000
========= ======== =========
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments:
Cash and cash equivalents: The carrying amounts reported in the
balance sheet for these instruments approximate their fair values.
Investment in equity securities: Since these investments are
considered "available-for-sale", they are reported in the balance
sheet based upon quoted market prices.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Mortgages payable: At December 31, 2004, the estimated fair value
of the Company's mortgages payable exceeded its carrying value by
approximately $5,221,000, assuming a market interest rate of
6.25%.
Line of credit: There is no material difference between the
carrying amounts and fair value because the interest rate is at
the lower of LIBOR plus 2.5% or at the prime rate.
Considerable judgment is necessary to interpret market data and
develop estimated fair value. The use of different market
assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
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 exercisable for or
convertible into Common Stock were exercised or converted or
resulted in the issuance of Common Stock that then shared in the
earnings of the Company. 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 (16,288, 32,052 and 29,977 shares for the
years ended 2004, 2003 and 2002, respectively) using the treasury
stock method. The Preferred Stock was not considered for the
purpose of computing diluted earnings per share because their
assumed conversion was antidilutive.
Accounting for Long-Lived Assets and Impairment of 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 aggregate future 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 determined by applying the appropriate
capitalization rate in the area in which the property is located,
and applying such capitalization rate to the net operating income
derived from that 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.
During the year ended December 31, 2004, the Company determined
that the estimated fair value of a retail property, where the
tenant filed for bankruptcy protection and vacated the premises,
was lower than its carrying value and thus, the Company recorded a
$366,000 provision for the difference. The $366,000 provision was
recorded as a direct write-down of the investment on the balance
sheet and depreciation was calculated using the new basis.
Segment Reporting
Virtually all of the Company's real estate assets are comprised of
real estate owned that is net leased to tenants on a long-term
basis. Therefore, the Company operates predominantly in one
industry segment.
Consolidation of Variable Interest Entities
In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, "Consolidation of Variable Interest
Entities", which explains how to identify variable interest
entities ("VIE") and how to assess whether to consolidate such
entities. In December 2003, a revision was issued (46R) to clarify
some of the original provisions. Management has reviewed its
unconsolidated joint ventures and determined that none represent
variable interest entities which would require consolidation by
the Company pursuant to the interpretation.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
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, 2004, the Company purchased
five single tenant properties and one property with two tenants,
in six states, for a total consideration of $57,880,000. The
Company assumed pre-existing first mortgages aggregating
$9,854,000 on two of these properties.
The rental properties owned at December 31, 2004 are leased under
noncancellable operating leases to corporate tenants with current
expirations ranging from 2005 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.
The minimum future rentals to be received over the next five years
and thereafter on the operating leases in effect at December 31,
2004 are as follows:
Year Ending
December 31, (In Thousands)
------------ --------------
2005 $ 26,739
2006 26,466
2007 26,163
2008 25,505
2009 24,462
Thereafter 190,759
--------
Total $320,094
========
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 $237,500 through July 2009 with 25%
increases every five years through March 3, 2020 and has a right
to extend the lease for up to five 5-year and one seven month
renewal options.
At December 31, 2004, the Company has recorded an unbilled rent
receivable aggregating $5,301,000, 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
twenty years. The minimum future rentals presented above include
amounts applicable to the repayment of these unbilled rent
receivables.
For the year ended December 31, 2004 and 2003, GE Medical Systems
Technologies, Inc. ("GE") generated revenues of $2,191,000 and
$2,020,000 or 8.3% and 10.2% of the Company's total revenues. The
Company entered into a new lease with GE effective July 1, 2004,
pursuant to which GE leased 111,100 square feet of space in the
189,146 square foot facility, formerly occupied entirely by GE.
Sales of Real Estate
In July 2004, the Company sold a retail property, which had been
vacant since February 2003, for a sales price of $1,340,000 and
realized a gain of $13,000. The net operating income (loss) for
the property was ($74,000), ($134,000) and $108,000 for the years
ended December 31, 2004, 2003 and 2002, respectively. In August
2004, the Company realized a gain of $60,000 resulting from its
granting of an underground easement to a power company at one of
its properties.
NOTE 3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued)
In May 2003, the Company sold one property for a sales price of
$170,000 and recognized a gain of $14,000. The net operating
income (loss) for the property was ($8,000) and $20,000 for the
years ended December 31, 2003 and 2002, respectively.
During the fourth quarter of 2002, the Company sold three
properties for a total sales price of $580,000 and recognized a
net loss of $29,000. The aggregate net operating loss for the
three properties sold was $16,000 for the year ended December 31,
2002.
Unaudited Pro Forma Information
The following table summarizes, on an unaudited pro forma basis,
the combined results of operations of the Company for the years
ended December 31, 2004 and 2003 as though the acquisitions of
five properties during 2004 were completed on January 1, 2003. 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, 2003. (Amounts in
thousands, except per share data.)
2004 2003
---- ----
Pro forma revenues $28,320 $23,201
Pro forma net income 11,752 10,374
Pro forma common shares - basic 9,728 6,340
Pro forma common share and common
share equivalents - diluted 9,744 6,372
Pro forma earnings per common share:
Basic $1.21 $1.47
Diluted $1.21 $1.47
NOTE 4 - INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The Company is a member in six unconsolidated joint ventures which
own and operate fourteen properties. Summaries of the two most
significant joint ventures in which the Company was designated the
managing member are below.
At December 31, 2004, the Company owns a 50% equity interest in
two joint ventures, with MTC Investors LLC ("MTC"), an unrelated
entity. These ventures were organized at various times for the
purpose of acquiring and owning megaplex movie theaters. The first
joint venture (Joint Venture #1) owns five megaplex stadium-style
movie theaters and the second joint venture (Joint Venture #2)
owns one partial stadium-style movie theater, three megaplex
stadium-style movie theaters and one stadium-style movie theater
which was under construction. The construction has been suspended
while the joint venture seeks another operator since the lease
with the former operator was terminated by mutual agreement.
On October 3, 2003, the Company acquired one half of the 50%
interest in Joint Venture #1 held by an unrelated co-venturer,
resulting in the Company's 50% ownership interest in this joint
venture. MTC purchased the remaining interest of this unrelated
venturer. The aggregate purchase price for the entire 50% interest
was approximately $13,783,000 (approximately $2 million in excess
of book value). Approval of both members of both joint ventures
are needed for all material decisions including property
acquisitions, financing and transfer of interest.
NOTE 4 - INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)
The following tables present condensed financial statements for
the two movie theater joint ventures at December 31, 2004 and for
the year then ended (amounts in thousands):
Condensed Balance Sheets Joint Venture #1 Joint Venture #2
------------------------ ---------------- ----------------
Cash and cash equivalents $ 720 $ 413
Real estate investments, net 54,533 42,012
Deferred financing costs 527 450
Unbilled rent receivable 1,105 839 (A)
Other assets 3 18
--------- ---------
Total assets $ 56,888 $ 43,732
========= =========
Mortgage loans payable $ 32,600 $ 25,606
Other liabilities 687 610
Equity 23,601 17,516
--------- ---------
Total liabilities and equity $ 56,888 $ 43,732
========= =========
Company's equity investment $ 12,752 $ 8,652
========= =========
Condensed Statements of Operations Joint Venture #1 Joint Venture #2
Revenues, primarily rental income $ 7,334 $ 3,969 (A)
--------- ---------
Depreciation and amortization 1,154 809
Mortgage interest 2,651 2,066
Operating expenses (B) 291 79
--------- ---------
Total expenses 4,096 2,954
--------- ---------
Net income attributable to members $ 3,238 $ 1,015
========= =========
Company's share of net income $ 1,599 $ 507
========= =========
Distributions received by the Company:
From operations $ 1,612 $ 601
========= =========
From mortgage proceeds $ - $ -
========= =========
(A) The $839 is net of a $724 direct write off against the entire
balance of unbilled rent receivable related to a movie theater
which had been paying its rent in compliance with a stipulation.
During February 2005, the operator of this movie theater sold its
business to an independent third party which accelerated
arrearages of rent and other miscellaneous charges of
approximately $670,000 that was due in August 2005. In exchange
for the venture's agreement to consent to the lease assignment and
lease amendment and to waive the requirement for a security
deposit under the amended lease, the venture received 40,000
restricted shares of Class A common stock of the tenant's parent
company, which trades on the American Stock Exchange.
(B) Includes management fees of $67 and $40, respectively, paid to
a company controlled by the Chairman of the Board of Directors and
certain officers of the Company. The management fee is equal to 1%
of rent paid by the tenants.
NOTE 4 - INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)
The following tables present condensed financial statements for
the two movie theater joint ventures at December 31, 2003 and for
the year then ended (amounts in thousands):
Condensed Balance Sheets Joint Venture #1 Joint Venture #2
------------------------ ---------------- ----------------
Cash and cash equivalents $ 695 $ 799
Real estate investments, net 55,684 41,532
Deferred financing costs (A) 597 478
Unbilled rent receivable 712 830 (B)
Other assets 9 21
---------- ---------
Total assets $ 57,697 $ 43,660
========== =========
Mortgage loans payable $ 33,414 $ 26,171
Other liabilities 696 686
Equity 23,587 16,803
---------- ---------
Total liabilities and equity $ 57,697 $ 43,660
========== =========
Company's equity investment $ 12,765 $ 8,296
========== =========
Condensed Statements of Operations Joint Venture #1 Joint Venture #2
---------------------------------- ---------------- ----------------
Revenues, primarily rental income $ 7,336 $ 4,942
---------- ---------
Depreciation and amortization 1,152 807
Mortgage interest 2,588 1,872 (C)
Operating expenses (D) 320 109
---------- ---------
Total expenses 4,060 2,788
---------- ---------
Net income attributable to members $ 3,276 $ 2,154
========== =========
Company's share of net income $ 1,009 $ 1,077
========== =========
Distributions received by the Company:
From operations $ 1,058 $ 945
========== =========
From mortgage proceeds $ 1,345 $ 5,514
========== =========
(A) Includes .8% mortgage brokerage fees of $43 and $143 paid
during 2003 to a company controlled by the Chairman of the Board
of Directors and certain officers of the Company.
(B) The $830 is net of a $374 reserve taken against the total
unbilled rent receivable related to two movie theaters leased to
operators under common control.
(C) Includes $194 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 the outstanding balance, in full totaling $6,719, due
to the Company.
(D) Includes management fees of $67 and $41, respectively, paid to
a company controlled by the Chairman of the Board of Directors and
certain officers of the Company. The management fee is equal to 1%
of rent paid by the tenants.
At December 31, 2004, Joint Venture #1 has one consolidated
outstanding mortgage payable, which is secured by first mortgage
liens on the five megaplex stadium-style movie theaters it owns.
The mortgage loan, which matures July 1, 2012, bears interest
rates of 8.06% (four movie theaters) and 6.6% (one movie theater)
per annum (on outstanding principal balances of $27,405,000 and
$5,195,000), respectively. Total monthly payments of principal and
interest of $283,000 are required with approximately $24,000,000
due at maturity.
NOTE 4 - INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)
At December 31, 2004, there are two outstanding mortgage loans in
Joint Venture #2. One mortgage loan with an outstanding principal
balance of $16,620,000 at December 31, 2004 is secured by first
mortgage liens on three of the movie theater properties, matures
May 1, 2018 and bears interest at 6.94%. Monthly payments of
principal and interest of $138,000 are required with approximately
$7,200,000 due at maturity. The other mortgage loan has an
outstanding balance of $8,986,000 at December 31, 2004, is secured
by a first mortgage lien on one movie theater property and bears
interest at 8.94% through June 2017 and thereafter, the greater of
10.94% or the Treasury Rate plus two percentage points through the
maturity date of March 1, 2022. Monthly payments of principal and
interest of $77,994 are required through March 1, 2007 increasing
every five years through maturity.
Scheduled principal repayments during the next five years and
thereafter are as follows (in thousands):
Year Ending
December 31, Joint Venture #1 Joint Venture #2
------------ ---------------- ----------------
2005 $ 880 $ 599
2006 951 647
2007 1,029 696
2008 1,112 750
2009 1,202 807
Thereafter 27,426 22,107
-------- --------
Total $ 32,600 $ 25,606
======== ========
The movie theater properties are net leased under noncancellable
operating leases to experienced theater operators with current
expirations ranging from 2015 to 2022, with certain tenant renewal
rights. The minimum future rentals to be received over the next
five years and thereafter on the operating leases in effect at
December 31, 2004 are as follows (in thousands):
Year Ending
December 31, Joint Venture #1 Joint Venture #2
------------ ---------------- ----------------
2005 $ 6,845 $ 4,616
2006 6,911 4,664
2007 6,935 4,756
2008 7,015 4,785
2009 7,040 4,851
Thereafter 66,786 59,795
-------- --------
Total $101,532 $ 83,467
======== ========
The remaining four unconsolidated joint ventures, each of which
own one property, include two recently organized joint ventures.
In August 2004, the Company invested approximately $6,000,000 for
a 50% interest in a joint venture which purchased a manufacturing/
warehouse/office property located in Wisconsin. In November 2004,
the Company invested $6,600,000 for a 50% interest in a joint
venture which purchased a retail property located in Nebraska. At
December 31, 2004 and 2003, the Company's equity investment in
these four joint ventures totaled $15,619,000 and $3,380,000,
respectively, and they contributed $763,000 and $325,000 in equity
earnings for the years ended December 31, 2004 and 2003,
respectively.
NOTE 5 - DEBT OBLIGATIONS
Mortgages Payable
At December 31, 2004, there are thirty-one outstanding mortgages
payable, all of which are secured by first liens on individual
real estate investments with an aggregate carrying value, as
adjusted for intangibles, of $190,300,000. The mortgages bear
interest at rates ranging from
NOTE 5 - DEBT OBLIGATIONS (Continued)
5.13% to 8.8%, and mature between 2005 and 2023. The weighted
average interest rate was 7.1% and 7.4% for the years ended
December 31, 2004 and 2003, respectively.
Scheduled principal repayments during the next five years and
thereafter are as follows:
Year Ending
December 31, (In Thousands)
------------ --------------
2005 $ 10,796
2006 5,046
2007 6,788
2008 7,227
2009 7,713
Thereafter 86,449
--------
Total $124,019
========
Line of Credit
On June 4, 2004, the Company amended its existing $30,000,000
revolving credit facility to add two new lenders, to increase the
total amount of the facility to $62,500,000 ("Facility") and to
extend its maturity from March 21, 2005 to March 3, 2007. The two
original lenders were Valley National Bank, Merchants Bank
Division and Bank Leumi USA and the two new lenders are Israel
Discount Bank of New York and Manufacturers and Traders Trust
Company. The Facility provides that the Company pay interest at
the lower of LIBOR plus 2.5% or at the bank's prime rate on funds
borrowed and an unused facility fee of 1/4%. The Company paid
$636,000 in fees and closing costs relating to the Facility
increase which are being amortized over the term of the Facility.
The Facility is guaranteed by all of the Company's subsidiaries
which own unencumbered properties and the shares of stock of all
other subsidiaries are pledged as collateral. The Company has
agreed that it and its affiliates (including entities that are
participants in a Shared Services Agreement - see Note 8) will
maintain on deposit with the banks at least 10% of the average
outstanding annual principal balance under the Facility. If
minimum balances are not maintained by the Company and its
affiliates, a deficiency fee will be charged to the Company.
The Facility is available to finance the acquisition or financing
of interests in 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.
NOTE 6 - REDEEMABLE CONVERTIBLE PREFERRED STOCK
On December 30, 2003, the Company completed the redemption of all
of its outstanding $16.50 convertible preferred stock. Of the
648,058 shares of preferred stock outstanding, 509,185 shares were
redeemed for a total consideration of approximately $8,400,000 and
138,873 shares were converted by the owners into 114,539 shares of
common stock. The conversion ratio was .825 of a share of common
for each share of preferred stock converted.
The Preferred Stock had 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.
NOTE 7 - PUBLIC OFFERING
During October and November 2003, the Company sold, pursuant to a
shelf registration statement filed with the U.S. Securities and
Exchange Commission in September 2003, 3,737,500 shares of common
stock (including 487,500 shares sold resulting from the exercise
in full of the over-allotment option held by the underwriters) at
a public offering price of $18.25 per share and received net
proceeds of approximately $64,500,000 (after underwriting
discounts and commissions and expenses of the offering).
The shelf registration statement, which was declared effective by
the U.S. Securities and Exchange Commission on October 2, 2003,
allows the Company to sell common stock from time to time in one
or more public offerings (at prices and terms to be determined at
the time of the offering) up to an aggregate public offering price
of $200,000,000.
On May 30, 2002, the Company sold 2,500,000 shares of common stock
at $15.25 per share in a public offering, resulting in net
proceeds of approximately $35,000,000.
NOTE 8 - RELATED PARTY TRANSACTIONS
At December 31, 2004 and 2003, Gould Investors L.P. ("Gould"), a
related party, owned 818,679 and 765,590 shares of the common
stock of the Company or approximately 8% of the equity interest.
During 2004, Gould purchased 53,089 shares of the Company through
the Company's dividend reinvestment plan. During 2003, Gould
purchased 98,193 shares of the Company, of which 40,193 shares
were purchased through the Company's dividend reinvestment plan,
8,000 shares were purchased at the market price from the Company's
president and 50,000 were purchased at a cost of $867,000 ($17.34
per share) during October 2003 in connection with the public
offering described in Note 7. Gould's per share price in the
October 2003 public offering was net of any underwriters'
discounts and commissions.
Gould charged the Company $980,000, $901,000 and $717,000 during
the years ended December 31, 2004, 2003 and 2002, respectively,
for allocated general and administrative expenses and payroll
based on time incurred by various employees pursuant to a Shared
Services Agreement. Such amounts included $69,000 and $125,000 in
2003 and 2002, respectively, attributable to time spent on the
public offerings. At December 31, 2004 and 2003, $228,000 and
$221,000 remain unpaid and is reflected in accrued expenses on the
balance sheet.
The Company paid the following fees to companies controlled by the
Chairman of the Board of Directors and certain officers of the
Company:
Years Ended December 31,
2004 2003 2002
---- ---- ----
Mortgage brokerage fees (A) $122,000 $291,000 $ 34,000
Sales commissions 47,000 - -
Lease commissions - 309,000 16,000
Management fees 58,000 15,000 15,000
Supervisory fees (B) 26,000 172,000 -
-------- -------- --------
Total fees $253,000 $787,000 $ 65,000
======== ======== ========
(A) Relating to mortgages placed on three, six and one of the
Company's properties for the years ended December 31, 2004, 2003
and 2002, respectively. These fees were deferred and are being
amortized over the life of the respective mortgages.
(B) For supervision of improvements to properties.
See Note 4 for other related party transactions involving the
Company's unconsolidated joint ventures.
NOTE 9 - STOCK OPTIONS AND RESTRICTED STOCK
Stock Options
On November 17, 1989, the directors of the Company adopted the
1989 Stock Option Plan, which was approved by the Company's
stockholders on June 4, 1990. 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,
2004.
On December 6, 1996, the directors of the Company adopted the 1996
Stock Option Plan (Incentive/Nonstatutory Stock Option Plan),
which was approved by the Company's stockholders on June 6, 1997.
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 225,000 shares of common stock of
the Company (which includes 100,000 additional shares which were
approved by the Company's stockholders as an amendment to the Plan
at the 2001 annual meeting of stockholders) are reserved for
issuance to employees, officers, directors, consultants and
advisors to the Company, of which none are available for grant at
December 31, 2004.
Changes in the number of common shares under all option
arrangements are summarized as follows:
Year Ended December 31,
---------------------------------------
2004 2003 2002
---- ---- ----
Outstanding at beginning of period 68,688 142,302 202,600
Granted - - -
Option prices - - -
Exercisable at end of period 19,500 54,938 101,175
Exercised (49,188) (66,864) (47,798)
Expired - (6,750) (12,500)
Outstanding at end of period 19,500 68,688 142,302
Option price per share outstanding $11.125-$12.19 $11.125-$12.375 $11.125-$14.50
As of December 31, 2004, the outstanding options had a weighted
average remaining contractual life of approximately ten months and
a weighted average exercise price of $11.75.
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.
NOTE 9 - STOCK OPTIONS AND RESTRICTED STOCK (Continued)
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 options
granted in 2001 and 2000, respectively: risk free interest rate of
4.06% and 5.22%, dividend yield of 10.07% and 11.03%, volatility
factor of the expected market price of the Company's Common Stock
based on historical results of .141 and .135; 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. The Company has elected not to present
pro forma information for 2004, 2003 and 2002 because the impact
on the reported net income and earnings per share is immaterial.
Restricted Stock
During the years ended December 31, 2004 and 2003, the Company
awarded 35,700 and 26,350 shares of restricted stock under its
2003 Incentive Plan which was approved by the Company's
stockholders 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 under
APB 25 over the vesting period, measuring the compensation cost
based on the market value of the shares on the date of grant. For
the years ended December 31, 2004 and 2003 the total value of
restricted stock grants was $699,000 and $488,000. Compensation
expense of $220,000 and $41,000 was recognized in 2004 and 2003,
respectively and at December 31, 2004, $926,000 has been deferred
as unearned compensation and will be charged to expense over the
vesting period. Included in the 2004 compensation expense is
$28,000 related to the accelerated vesting of 1,750 shares of
restricted stock that had been awarded to a retired board member.
Changes in the number of shares under the 2003 One Liberty
Incentive Plan is shown below:
Years Ended December 31,
2004 2003
---- ----
Outstanding at beginning of period 26,350 -
Issued 35,700 26,350
Accelerated vesting (1,750) -
------ ------
Outstanding at the end of period 60,300 26,350
====== ======
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, 2004 and 2003, the Company issued
72,214 and 60,612 common shares, respectively, under the Plan.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
In the ordinary course of business the Company is party to various
legal actions which management believes are routine in nature and
incidental to the operation of the Company's business. Management
believes that the outcome of the proceedings will not have a
material adverse effect upon the Company's consolidated statements
taken as a whole.
NOTE 12 - SUBSEQUENT EVENTS
On February 18, 2005, the Company acquired a manufacturing
facility and an office building leased to a single operator. The
property was acquired for an all cash purchase price of
approximately $9,700,000. The basic term of the net lease expires
February 28, 2025, with two options to renew, each for a ten year
period.
On January 20, 2005, the Company acquired five retail stores,
located in four states, leased to a single operator. The
properties were acquired for an all cash purchase price of
approximately $15,000,000. The basic term of the net leases expire
December 31, 2014, with two options to renew, each for a five year
period.
NOTE 13 - INCOME TAXES
The Company elected to be taxed as a real estate investment trust
(REIT) under the Internal Revenue Code, commencing with its
taxable year ended December 31, 1983. To qualify as a REIT, the
Company must meet a number of organizational and operational
requirements, including a requirement that it currently distribute
at least 90% of its adjusted taxable income to its stockholders.
It is management's current intention to adhere to these
requirements and maintain the Company's REIT status. As a REIT,
the Company generally will not be subject to corporate level
federal, state and local income tax on taxable income it
distributes currently to its stockholders. If the Company fails to
qualify as a REIT in any taxable year, it will be subject to
federal, state and local income taxes at regular corporate rates
(including any applicable alternative minimum tax) and may not be
able to qualify as a REIT for four subsequent taxable years. Even
though the Company qualifies for taxation as a REIT, the Company
is subject to certain state and local taxes on its income and
property, and to federal income and excise taxes on its
undistributed taxable income.
NOTE 13 - INCOME TAXES (Continued)
Reconciliation Between Financial Statement Net Income and
Federal Taxable Income:
The following unaudited table reconciles financial statement net
income to federal taxable income for the years ended December 31,
2004, 2003 and 2002 (amounts in thousands):
2004 2003 2002
Estimate Actual Actual
-------- ------ ------
Net income $ 10,974 $ 8,525 $ 5,880
Straight line rent adjustments (1,205) (1,576) (900)
Financial statement gain on sale
in excess of tax gain - (48) (162)
Rent received in advance, net 275 748 292
Financial statement provision for
valuation adjustment 366 - -
Fee income subject to tax,
not recorded for books 134 5 157
Financial statement adjustment for
above/below market leases 188 153 -
Compensation expense, not tax deductible 189 41 -
Financial statement depreciation
in excess of tax 62 70 92
Other adjustments (2) 4 6
-------- -------- --------
Federal taxable income $ 10,981 $ 7,922 $ 5,365
======== ======== ========
Reconciliation Between Cash Dividends Paid and Dividends Paid
Deduction:
The following unaudited table reconciles cash dividends paid with
the dividends paid deduction for the years ended December 31,
2004, 2003 and 2002 (amounts in thousands):
2004 2003 2002
Estimate Actual Actual
-------- ------ ------
Cash dividends paid $12,854 $ 9,817 $ 7,607
Dividend reinvestment plan (1) 57 66 15
------- ------- -------
12,911 9,883 7,622
Less: Dividends designated to prior years - - (1,009)
Less: Spillover dividends designated to
following year (2) (3,235) (2,646) (1,238)
Less: Return of capital (1,291) - -
Plus: Dividends designated from following year - - -
Plus: Spillover dividends designated from
prior year 2,646 1,238 -
------- ------- -------
Dividends paid deduction (3) $11,031 $ 8,475 $ 5,375
======= ======= =======
(1) Amount reflects the 5% discount on the Company's common shares
purchased through the dividend reinvestment plan.
(2) The entire dividend paid in January 2005 and a portion of the
dividend paid in January 2004 will be considered 2005 and 2004
dividends, respectively, as it was in excess of the Company's
accumulated earnings and profits through 2004 and 2003,
respectively.
(3) Dividends paid deduction is higher than federal taxable income
in 2004, 2003 and 2002 so as to account for adjustments made to
federal taxable income as a result of the impact of the
alternative minimum tax.
NOTE 14 - QUARTERLY FINANCIAL DATA (Unaudited):
(In Thousands, Except Per Share Data)
Quarter Ended
-------------
Total
March 31 June 30 September 30 December 31 For Year
-------- ------- ------------ ----------- --------
2004
- ----
Revenues $5,650 $6,198 $6,347 $8,332(A) $26,527
Net income 2,245 2,221 2,499 4,009 10,974
Net income applicable to
common stockholders 2,245 2,221 2,499 4,009 10,974
Weighted average number of
common shares outstanding:
Basic 9,662 9,721 9,749 9,780 9,728
Diluted 9,688 9,736 9,762 9,790 9,744
Net income per common share:
Basic .23 .23 .26 .41 1.13(B)
Diluted .23 .23 .26 .41 1.13(B)
(A) The quarter ended December 31, 2004 includes the receipt of $767,000 from
the sale by the Company of a claim in connection with the bankruptcy
proceeding involving a retail tenant which disaffirmed its lease and
vacated the property. In addition, the quarter includes $350,000 received
from the settlement of a claim made by the Company regarding the purchase
of one of the Company's properties.
(B) Calculated on weighted average shares outstanding for the year.
Quarter Ended
-------------
Total
March 31 June 30 September 30 December 31 For Year
-------- ------- ------------ ----------- --------
2003
- ----
Revenues $4,644 $4,583 $5,055 $5,514 $19,796
Net income 2,199 2,008 2,153 2,165 8,525
Net income applicable to
common stockholders 1,939 1,749 1,894 1,906 7,488
Weighted average number of common
shares outstanding:
Basic 5,636 5,683 5,726 8,294 6,340
Diluted 5,667 5,715 5,760 8,325 6,372
Net income per common share:
Basic .34 .31 .33 .23 1.18(C)
Diluted .34 .31 .33 .23 1.18(C)
(C) 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, 2004
(Amounts in Thousands)
Initial Cost Gross Amount at Which Carried At Life on Which
to Company December 31, 2004 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:
- -----------------
El Paso, TX $ 9,608 $ 2,821 $11,403 $2,821 $11,403 $14,224 $1,363 1974 March 29, 2000 40
Miscellaneous 58,888 20,824 81,218 20,897 81,511 102,408 9,038 Various Various 40
Flex Buildings:
- ---------------
Jupiter, FL - 3,208 12,644 3,208 12,644 15,852 643 1990 December 24, 2003 40
Miscellaneous 12,882 3,780 15,279 3,780 15,279 19,059 1,538 Various Various 40
Office Buildings:
- -----------------
Miscellaneous 15,339 3,537 16,202 3,537 16,202 19,739 1,280 Various Various 40
Apartment Building:
- -------------------
Miscellaneous 4,499 1,110 4,439 1,110 4,439 5,549 1,702 1910 June 14, 1994 27.5
Industrial:
- -----------
St. Cloud, MN - 3,407 13,151 3,407 13,151 16,558 68 2001 October 18, 2004 40
Miscellaneous 11,343 4,123 16,041 4,123 16,041 20,164 1,741 Various Various 40
Theater:
- --------
Miscellaneous 6,900 2,331 17,606 2,331 17,606 19,937 406 Various Various Various
Health Clubs:
- -------------
Miscellaneous 4,560 2,233 11,460 2,233 11,460 13,693 868 Various Various 40
----- ----- ------ ----- ------ ------ ---
$124,019 $47,374 $199,443 $47,447 $199,736 $247,183 $18,647
======== ======= ======== ======= ======== ======== =======
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes To Schedule III
Consolidated Real Estate And Accumulated Depreciation
(a) Reconciliation of "Real Estate and Accumulated Depreciation"
(Amounts In Thousands)
Year Ended December 31,
-----------------------
2004 2003 2002
---- ---- ----
Investment in real estate:
Balance, beginning of year $191,471 $151,294 $127,227
Addition: Land, buildings and
improvements 57,427 40,431 25,880
Deductions:
Cost of properties sold (1,349) (222) (818)
Contribution of real property to
unconsolidated joint venture - - (995)
Valuation allowance (c) (366) - -
Other - (32) -
-------- -------- --------
Balance, end of year $247,183 $191,471 $151,294
======== ======== ========
Accumulated depreciation:
Balance, beginning of year $ 14,155 $ 10,857 $ 8,663
Addition: depreciation 4,614 3,375 2,617
Deductions:
Accumulated depreciation
related to properties sold (122) (77) (247)
Contribution of real property to
unconsolidated joint venture - - (176)
--------- --------- ---------
Balance, end of year $ 18,647 $ 14,155 $ 10,857
========= ========= =========
(b) The aggregate cost of the properties is approximately $4,028 lower for
federal income tax purposes.
(c) During the year ended December 31, 2004, the Company recorded a
provision for valuation adjustment of real estate totaling $366. See
Note 2 to the consolidated financial statements for further
information.
EXHIBIT 3.4
One Liberty Properties,
Inc.
B Y - L A W S
as amended through
August 28, 1998
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the
----------------
Corporation shall be in the City of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal executive
--------------------------
office of the Corporation shall be in the City of New York, State of New York.
Section 3. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Maryland as
the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders shall be held at
------------------
such place within the United States as shall be determined from time to time by
the Board of Directors and stated in the notice of meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual Meeting. The annual meeting of stockholders of the
---------------
Corporation shall be held, on the last Thursday in June or such other date as
shall be designated annually by the Board of Directors and stated in the notice
of the meeting, at which meeting the stockholders shall elect the class of
directors whose terms shall expire for the year in question, and transact such
other business as may properly be brought before the meeting.
Section 3. Special Meetings. At any time in the interval between annual
-----------------
meetings, special meetings of the stockholders may be called by a majority of
the Board of Directors, the President, the Chairman of the Board of Directors
or, to the extent required by the Maryland General Corporation Law as amended
from time to time, the stockholders of the Corporation. If a special meeting is
called at the request of stockholders, such request shall state the purpose or
purposes of such meeting and the matters proposed to be acted on. Business of
the Corporation transacted at any special meeting of stockholders by whomever
called shall be limited to the purposes stated in the notice.
Section 4. Notice of Meetings; Waiver of Notice. Not less than ten nor more
-------------------------------------
than ninety days before the date of every stockholders' meeting, the Secretary
shall give to each stockholder entitled to vote at such meeting, and to each
stockholder not entitled to vote who is entitled by statute to notice, written
or printed notice stating the time and place of the meeting and, in the case of
a special meeting, the purpose or purposes for which the meeting is called,
either by mail or by presenting it personally to the stockholder or by leaving
it at his residence or usual place of business. If mailed with postage thereon
prepaid, such notice shall be deemed to be given when deposited in the United
States mail, addressed to the stockholder at his post office address as it
appears on the records of the Corporation.
In the case of a special meeting of stockholders convened at the request
of stockholders, as provided for in Section 3 above, the notice herein provided
for shall be given by the Secretary, in the manner provided herein and in
compliance with the Maryland General Corporation Law, as amended from time to
time.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. If a meeting is adjourned to a time or
place announced at the adjourned meeting, further notice of the meeting need not
be given unless the Board of Directors after the adjournment fixes a new record
date for the meeting or the meeting, is adjourned from time to time to a date
more than 120 days after the original record date.
Section 5. Quorum. At any meeting of stockholders the presence in person
------
or by proxy of stockholders entitled to cast a majority of the shares of stock
entitled to vote at the meeting shall constitute a quorum, unless otherwise
provided by any statute or by the Articles of Incorporation. In the absence of a
quorum no business may be transacted, except that the holders of a majority of
the shares of stock present in person or by proxy and entitled to vote may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, except as required by Section 4 above, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting, as originally notified.
Section 6. Voting. A majority of the votes cast at a meeting of
-------
stockholders, duly called and at which a quorum is present, shall be sufficient
to take or authorize action upon any matter which may properly come before the
meeting, unless more than a majority of the votes cast is required by statute or
by the Articles of Incorporation. If a vote shall be taken on any question other
than the election of directors, which shall be by written ballot, then unless
required by statute or these By-Laws, or determined by the chairman of the
meeting to be advisable, or demanded by stockholders, present in person or by
proxy, entitled to cast ten percent (10%) in number of votes entitled to be cast
at such meeting, any such vote need not be by ballot. On a vote by ballot, each
ballot shall be signed by the stockholder voting or by his proxy, and shall
state the number of shares voted.
Unless a statute or the Articles of Incorporation provide otherwise, each
holder of record of outstanding shares of stock of the Corporation having voting
power shall be entitled to one vote for every share of such stock on each matter
submitted to a vote at a meeting of stockholders, and any fractional share of
stock shall have proportionately the voting right of a whole share; but no share
shall be entitled to vote if any installment payable thereon is overdue and
unpaid. A stockholder may vote only the shares owned by him as shown on the
record of stockholders of the Corporation as of the record date determined
pursuant to Section 7 below or pursuant to applicable law and may cast his
shares in person or by proxy executed in writing by the stockholder or by his
duly authorized attorney-in-fact, but no proxy shall be valid after eleven
months from its date, unless otherwise provided in the proxy. At all meetings of
stockholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting.
Section 7. Fixing of Record Date. The Board of Directors may fix, in
----------------------
advance, a record date not more than ninety nor less than ten days before the
date then fixed for the holding of any meeting of the stockholders. All persons
who were holders of record of shares at such time, and no others, shall be
entitled to vote at such meeting and any adjournment thereof.
Section 8. Organization and Order of Business. At each meeting of the
----------------------------------
stockholders, the Chairman of the Board of Directors, or in his absence or
inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, the Vice President, shall act as
chairman of the meeting. The Secretary, or in his absence or inability to act,
any person appointed by the chairman of the meeting, shall act as secretary of
the meeting and keep the minutes thereof. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting.
Section 9. Inspectors. The Board of Directors may, in advance of any
----------
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fall to appear or act, the chairman of the meeting may, and on
the request of any stockholder entitled to vote thereat shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them. No
director or candidate for the office of director shall act as inspector of an
election of directors. Inspectors need not be stockholders.
Section 10. Consent of Stockholders in Lieu of Meeting. Except as otherwise
------------------------------------------
provided by statute or the Articles of Incorporation, any action required to be
taken at any annual or special meeting of stockholders, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if the following are
filed with the records of stockholders meetings: (i) a unanimous written consent
which sets forth the action and is signed by each stockholder entitled to vote
on the matter and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting, but not entitled to vote thereat.
Section 11. Certain Share Acquisitions. The tender offer commenced by Gould
--------------------------
Investors L.P. ("Gould") on December 27, 1988, as such tender offer was amended
on January 17, 1989, and as such tender offer may be further amended from time
to time and any other acquisition by Gould of equity securities of the
Corporation following the adoption of this Section 11 shall be exempt from any
and all provisions of proposed Subtitle 7 of Title 3 of the Maryland General
Corporation Law entitled "Corporations and Associations -- Special Voting
Requirements and Control Share Acquisitions" (as such act or any act of similar
import is now proposed or as it may be later introduced in, adopted, or later
amended by the Maryland General Assembly) as, if and when such act becomes
effective. Notwithstanding any other provision of these By-Laws, this Section 11
may not be amended, altered or repealed without either the written consent of
Gould or the approval of the holders of at least two-thirds of the outstanding
shares of capital stock.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Number of Directors. The number of directors of the
--------------------
Corporation shall be three (3). By vote of a majority of the entire Board of
Directors, the number of directors fixed by the Articles of Incorporation or by
these By-Laws may be increased or decreased by resolution from time to time, but
may not exceed ten (10) nor be less than three (3). The tenure of office of a
director shall not be affected by any decrease in the number of directors so
made by the Board.
Section 2. General Powers. The business and affairs of the
---------------
Corporation shall be managed by its Board of Directors, which may exercise all
of the powers of the Corporation, except such as are by law or by the Articles
of Incorporation or by these By-Laws conferred upon or reserved to the
stockholders.
Section 3. Affiliations of Board Members. A majority of the
------------------------------
members of the Board of Directors shall at all times be persons who are not
Affiliates of an individual or corporate management company to whom the Board
has delegated management duties as permitted in Section 18 of this Article and
Article VI paragraph (7) of the Articles of Incorporation (a "Management
Company"),(such directors being herein referred to as "Independent Directors").
As used in these By-Laws, the term "Affiliate" of another
person means any person directly or indirectly owning, controlling, or holding
with power to vote, five percent or more of the outstanding voting securities of
such other person; any person five percent or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held with power to
vote by such other person; any person directly or indirectly controlling,
controlled by or under common control with, such other person, corporation,
partnership, trust, company or other entity.
Section 4. Election and Term. The directors of the Corporation
-----------------
shall be classified with respect to the time for which they shall severally hold
office by dividing them into three classes, each class to be as nearly equal in
number as possible, which classes shall be designated as Class 1, Class 2 and
Class 3. Subject to the provisions hereof, the number of directors in each class
shall from time to time be designated by the Board of Directors of the
Corporation pursuant to these by-laws. At each annual meeting, the successors to
the class of directors whose terms shall expire that year shall be elected to
hold office for a term of three years so that each term of office of one class
of directors shall expire in each year.
Section 5. Vacancies. Any vacancy occurring in the Board of
---------
Directors for any cause other than by reason of an increase in the number of
directors may be filled by a majority of the remaining members of the Board of
Directors, although such majority is less than a quorum. Any vacancy occurring
by reason of an increase in the number of directors may be filled by action of a
majority of the entire Board of Directors. Directors who are not Affiliated with
respect to the persons or entitles referred to in Section 3 of this Article
shall be entitled to nominate another such non-affiliated person to fill a
vacancy occurring amongst such directors. A director elected by the Board of
Directors to fill a vacancy shall be elected to hold office until the next
annual meeting of stockholders or until his successor is elected and qualifies.
Section 6. Removal of Directors. Only the stockholders may, at
--------------------
any meeting of stockholders duly called and at which a quorum is present, by the
affirmative vote or consent of the holders of a majority of all of the
outstanding shares entitled to vote, remove any director or directors from
office, and only for cause, and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of removed directors.
Section 7. Place of Meetings. Meetings of the Board of
-----------------
Directors, regular or special, may be held in or out of the State of Maryland at
such place as the Board of Directors may from time to time determine or as shall
be specified in the notice of such meeting.
Section 8. Annual Meeting. The first meeting of each newly
--------------
elected Board of Directors shall be held as soon as practicable after the annual
meeting of the stockholders at which the directors were elected. The meeting,
may be held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors, or as shall
be specified in a written waiver signed by all of the directors, except that no
notice shall be necessary if such meeting is held immediately after the
adjournment, and at the site, of the meeting of stockholders.
Section 9. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board of Directors.
Section 10. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by two or more directors of the Corporation or by the
Chairman of the Board or the President.
Section 11. Notice of Special Meetings. Notice of each special
--------------------------
meeting of the Board shall be given by the Secretary as hereinafter provided, in
which notice shall be stated the time and place of the meeting each such
meeting. Notice of each such meeting shall be delivered to each director, either
personally or by telephone, telegraph, cable or wireless, at least twenty-four
hours before the time at which such meeting is to be held, or by first-class
mail, postage prepaid, addressed to him at his post-office address as it appears
on the records of the Corporation, at least four days before the day on which
such meeting is to be held. If mailed with postage prepaid, such notice shall be
deemed to be given when deposited in the United States mail, addressed to the
director at his address as it appears in the records of the Secretary.
Section 12. Quorum and Voting. At all meetings of the Board of
-----------------
Directors, a majority of the entire Board of Directors shall constitute a quorum
for the transaction of business, and the action of a majority of the directors
present at any meeting, at which a quorum is present shall be the action of the
Board of Directors unless the concurrence of a greater proportion is required
for such act by statute, the Articles of Incorporation or these By-Laws.
Notwithstanding the first paragraph of this Section 12, any
action pertaining to a transaction involving the Corporation and any director or
officer of the Corporation or any Affiliate of any of the foregoing persons has
an interest shall be approved by a majority of the members of the Board of
Directors who are not Affiliates of such interested parties, even if the
disinterested directors constitute less than a quorum. In approving any such
transaction, the non-interested directors must determine that:
(a) the transaction is fair and reasonable to the Corporation and its
shareholders;
(b) the terms of such transaction are at least as favorable as the terms of any
comparable transactions made on an arm's length basis which are known to the
directors; and
(c) if an acquisition of property is involved, the total consideration is not in
excess of the appraised value of such property being acquired.
If a quorum shall not be present at any meeting of directors, the directors
present at the meeting may, by a majority vote adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 13. Organization. The Chairman of the Board shall preside at each
meeting of the Board. In the absence or inability of the Chairman of the Board
to preside at a meeting, the President, or, in his absence or inability to act,
another director chosen by a majority of the Directors present, shall act as
chairman of the meeting and preside thereat. The Secretary (or, in his absence
or inability to act, any person appointed by the Chairman shall act as secretary
of the meeting and keep the minutes thereof.
Section 14. Meeting by Conference Telephone. Members of the Board of
-------------------------------
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
constitutes presence in person at a meeting.
Section 15. Consent in Lieu of Meeting. Any action required or permitted
--------------------------
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if a written consent to such action is signed by
all members of the Board or of such committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the Board or
committee.
Section 16. Compensation. Directors may receive compensation for services
------------
to the Corporation in their capacities as directors in such manner and in such
amounts as may be fixed from time to time by the Board, and expenses of
attendance at each regular or special meeting of the Board of Directors, or of
any committee thereof.
Section 17. Investment Policies and Restrictions.
------------------------------------
(a) It shall be the duty of the Board of Directors to ensure
that the purchase, sale, retention and disposal of Corporation assets and the
investment policies of the Corporation and the limitations thereon or amendment
thereto are at all times in compliance with the restrictions applicable to real
estate investment trusts pursuant to the Internal Revenue Code of 1986, as
amended and as may be hereafter amended (the "Code").
(b) The Corporation may invest in any type of real property,
mortgage loans (and, in both cases, in interests therein) and in other
investments of any nature whatsoever; provided that the investment does not
adversely affect the Corporation's ability to continue to qualify as a real
estate investment trust under the Code; and provided further that the investment
does not necessitate that the Corporation register as an investment company
under the Investment Company Act of 1940 as amended and as may be hereafter
amended.
Except as provided above, there shall be no limit on the
number of investments in which the Corporation may invest or the percentage of
the Corporation's assets invested in any one investment. The properties may be
situated anywhere in the United States, without limit as to the concentration of
investments in a particular geographic area.
After termination of the lease as to each of its properties
under lease, the Corporation shall seek to relet or sell such property in such a
manner as to maximize the ultimate return to the Corporation, considering the
income and residual value potentials of such property. Any reletting or sale of
such property may be to any company on the open market at the maximum obtainable
price and terms. The Corporation may also consider the sale or other disposition
of any of such properties prior to termination of the relevant lease if such
sale or other disposition appears to be advantageous. The Corporation may take
purchase money obligations as part payment in lieu of cash in connection with
such sales (or any other sales of its properties not under lease), and may take
into account local custom in negotiating the terms of repayment.
(c) The Corporation may finance and refinance its investments
in whatever manner the Directors determine to be in the best interests of the
stockholders. The method of financing and refinancing may include short,
intermediate or long term borrowings, whether secured or unsecured, subject to
the limitations set forth below. Borrowings may be in the form of bank
borrowings, including unsecured borrowings or borrowings secured by a mortgage
on the Corporation's current properties and/or the properties acquired, the
issuance of commercial paper, or the issuance in public or private transactions
of senior or subordinated notes or debentures, including notes or debentures
convertible into shares of the Corporation's Common Stock. The Corporation may
also, in public or private transactions, issue additional shares of its Common
Stock, and may, in the discretion of the Board of Directors, combine any two or
more of such financing methods.
(d) The cash proceeds of a sale or other disposition of the
Corporation's assets may be reinvested in long-term investments, if such
reinvestment can be made without adversely affecting the Corporation's ability
to qualify as a real estate investment trust under the Code.
(e) The Corporation shall not (i) invest in the securities of
other issuers for the purpose of exercising control (except where real property
is the principal asset of a corporation and the acquisition of such property can
best be effected by the acquisition of the stock of the corporation), nor (ii)
underwrite securities of other issuers. The Corporation may purchase or
otherwise reacquire its outstanding shares of Common Stock whenever necessary to
maintain qualification as a real estate investment trust under the Code and also
at any time and for such prices as the Directors deem appropriate without
adversely affecting the ability of the Corporation to qualify as a real estate
investment trust under the Code.
(f) The provisions of this Section 17 of Article III of these
By-Laws are not subject to alteration, modification or repeal by the Board of
Directors and may be altered, modified or repealed only by majority vote of the
stockholders.
Section 18. Management Arrangements. The Board may delegate the duty of
------------------------
management of the assets and the administration of its day-to-day operations to
a Management Company pursuant to a written contract or contracts which have
obtained the requisite approvals, including the requisite approvals of renewals
thereof, of the Board of Directors, including a majority of the Independent
Directors as defined in Section 3 of this Article III, and the stockholders of
the Corporation, as provided in the Articles of Incorporation.
In connection with the consideration and approval of any management
arrangements, including renewals thereof, the Independent Directors shall be
provided with such information as is deemed necessary so that such Directors
will be fully informed in an impartial manner of all relevant factors with
respect to such arrangements including, without limitation, information as to
the available alternatives, the nature and quality of the services to be
provided, and relevant compensation, operating expense and performance data, and
will thereby be in a position to make a reasonable business Judgment with
respect to such arrangements on the basis of arm's length bargaining. The
minutes of meetings with respect to such determinations shall reflect such
considerations.
The provisions of this Section 18 of Article III of these
By-Laws are not subject to alteration, modification or repeal by the Board of
Directors and may be altered, modified or repealed only by majority vote of the
stockholders.
ARTICLE IV
COMMITTEES OF
DIRECTORS
Section 1. Executive and Other Committees. The Board of
------------------------------
Directors may, by resolution adopted by a majority of the Board, appoint from
among its members an Executive Committee or other committees each composed of
two or more directors, provided that at least a majority of the members of any
such committee shall be composed of directors who are Independent Directors, and
may delegate to such committees any of the powers of the Board of Directors
except the power to declare dividends or distributions on stock, recommend to
the stockholders any action which requires stockholder approval, amend the
By-Laws, approve any merger or share exchange which does not require stockholder
approval or issue stock.
Section 2. Minutes and Reports. The committees shall keep
--------------------
minutes of their proceedings and shall report the same to the Board of Directors
at the meeting next succeeding, and any action taken by the committees shall be
subject to revision and alteration by the Board of Directors, provided that no
rights of third persons shall be affected by any such revision or alteration.
Section 3. Notice. Notice of committee meetings shall be given
-------
in the same manner as notice for special meetings of the Board, and a waiver
thereof in writing, signed by the director entitled to such notice and filed
with the records of the meeting, whether before or after the holding thereof, or
actual attendance at the committee meeting in person shall be deemed equivalent
to the giving of such notice to such director.
Section 4. Quorum, Voting and General. One-third, but not less
--------------------------
than two, of the members of any committee shall be present in person at any
meeting of such committee in order to constitute a quorum for the transaction of
business and at such meeting, and the act of a majority present shall be the act
of such committee. The Board may designate a chairman of any committee and such
chairman or any two members of any committee may fix the time and place of its
meetings unless the Board shall otherwise provide. In the absence or
disqualification of any member of any committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. The Board shall have the power at any time to change the membership of
any committee, to fill all vacancies, to designate alternate members to replace
any absent or disqualified member, or to dissolve any such committee.
ARTICLE V
OFFICERS AND AGENTS
Section 1. Number and Qualification. The officers of the
------------------------
Corporation shall be chosen by the Board of Directors and shall be a Chairman of
the Board, a President, a Vice President, a Secretary and a Treasurer. The
Chairman of the Board shall be selected from among the directors. Two or more
offices, except those of President and Vice President, may be held by the same
person, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity, if such instrument is required by law, the Articles of
Incorporation or these By-Laws to be executed, acknowledged or verified by two
or more officers. Such officers shall be elected by the Board of Directors at
its first meeting after each annual meeting of stockholders and shall serve for
one year and until their successors are chosen and qualify. The Board of
Directors may appoint such other officers and agents as it shall deem necessary,
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board.
Section 2. Compensation. The salaries of all officers and
------------
agents of the Corporation shall be fixed by the Board of Directors.
Section 3. Removal and Vacancies. Any officer or agent may be
---------------------
removed by the Board of Directors whenever in its judgment the best interests of
the Corporation will be served thereby, but such removal shall be without
prejudice to the contractual rights, if any, of the person so removed. If the
office of any officer becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors for the unexpired portion of the term of the office
which shall be vacant.
Section 4. The Chairman of the Board. The Chairman of the
-------------------------
Board may be the chief executive officer of the Corporation. The Board as
directs us may designate the Chairman or President as Chief Executive Officer.
He shall direct, coordinate and control the Corporation's business and
activities all in accordance with basic policies established by and subject to
the control of the Board of Directors. He may employ and discharge employees and
agents of the Corporation except such as shall be appointed by the Board, and he
may delegate these powers. He shall have general authority to execute bonds,
deeds and contracts in the name and on behalf of the Corporation. As provided in
Section B of Article II, he shall act as chairman at all meetings of the
stockholders at which he is present, and, as provided in Section 13 of Article
III, he shall preside at all meetings of the Board of Directors at which he is
present. In the absence of the Chairman of the Board, his duties shall be
performed and his authority may be exercised by the President, and, in the
absence of the Chairman of the Board and the President, such duties shall be
performed and such authority may be exercised by the Vice President, or in the
absence of the Vice President, by such officer as may have been designated by
the most senior officer of the Corporation who has made any such designation,
with the right reserved to the Board of Directors to make the designation or
supersede any designation so made.
Section 5. The President. The President may be the chief
-------------
executive officer of the Corporation. The Board of Directors may designate the
Chairman or President as Chief Executive Officer. The President shall be the
chief operating officer of the Corporation. He shall implement the general
directives, plans and policies formulated by the Board of Directors, in general
shall have authority to exercise all powers delegated to him by the Board of
Directors and shall establish operating and administrative plans and policies
and direct and coordinate the Corporation's organizational components, within
the scope of the authority delegated to him by the Board of Directors. He shall
have general authority to execute bonds, deeds and contracts in the name of and
on behalf of the Corporation and responsibility for the employment or
appointment and discharge of such employees, agents and officers, except such as
shall be appointed by the Board, as may be required to carry on the operation of
the business. As provided in Section 4 of this Article V, in the absence of the
Chairman of the Board, the President shall perform all the duties and exercise
the authority of the Chairman of the Board. In the absence of the President, his
duties shall be performed and his authority may be exercised by the Vice
President, and in the absence of both the President and of the vice President by
such officer as may have been designated by the most senior officer of the
Corporation who has made any such designation, with the right reserved to the
Board of Directors to make the designation or supersede any designation so made.
The same individual, or the directors of the Board of Directors, may serve as
Chairman of the Board and President.
Section 6. Vice President. The Vice President shall, in the
---------------
absence or disability of the President, perform the duties and exercise the
powers of the President, and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
Section 7. Secretary. The Secretary shall attend all meetings
---------
of the Board of Directors and all meetings of the stockholders and shall record
all the proceedings of the meetings of the Corporation and of the Board of
Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board of
Directors and shall perform such other duties as may be prescribed by the Board
of Directors, Chairman of the Board or President, under whose supervision he
shall act. He shall keep in safe custody the seal of the Corporation and, when
authorized by the Board of Directors, affix the same to any instrument requiring
it and, when so affixed, it shall be attested by his signature.
Section 8. Treasurer. The Treasurer shall have the custody of
---------
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, he shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 9. Delegation of Duties. In case of the absence of any
--------------------
officer of the Corporation or for any other reason that the Board may deem
sufficient, the Board may confer for the time being the powers or duties, or any
of them, of such officer upon any other officer or upon any director.
Section 10. Indemnification. To the maximum extent permitted
---------------
by Maryland law in effect from time to time, the Corporation shall indemnify,
and shall pay or reimburse reasonable expenses in advance of final disposition
of a proceeding to, (i) any individual who is a present or former director,
officer or employee of the Corporation or (ii) any individual who serves or has
served another corporation, partnership, joint venture, trust, employee benefit
plan or any other enterprise as a director or officer of such corporation or as
a partner or trustee of such partnership, joint venture, trust or employee
benefit plan at the request of the Corporation. The Corporation may, with the
approval of its Board of Directors, provide such indemnification and advancement
of expenses to a person who served a predecessor of the Corporation in any of
the capacities described in (i) or (ii) above and to any employee or agent of
the Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Section nor the
adoption or amendment of any other provision of the By-Laws or charter of the
Corporation inconsistent with this Section shall apply to or affect in any
respect the applicability of the preceding paragraph with respect to any act or
failure to act which occurred prior to such amendment, repeal or adoption.
ARTICLE VI
CERTIFICATES OF
STOCK
Section 1. Form and Number. Each stockholder shall be entitled
---------------
upon request to a certificate or certificates in such form as shall be approved
by the Board which shall represent and certify the number and kind and class of
shares owned by him in the Corporation provided, however, that certificates for
fractional shares shall not be issued. Each certificate shall be signed by the
Chairman of the Board or the President or Vice President and countersigned by
the Secretary or the Treasurer and may be sealed with the corporate seal. The
signatures may be either manual or facsimile signatures and the seal may be
either facsimile or any other form of seal. In case any officer who has signed
any certificate ceases to be an officer of the Corporation before the
certificate is issued, the certificate may nevertheless be issued by the
Corporation with the same effect as if the officer had not ceased to be such
officer as of the date of its issue. Each stock certificate shall include on its
face the name of the Corporation, the name of the stockholder and the class of
stock and number of shares represented by the certificate. A stock certificate
may not be issued by the Corporation until the stock represented by it is fully
paid by the stockholder.
Section 2. Legends. Every stock certificate representing
-------
shares of stock which are restricted as to transferability by the Corporation
shall contain a full statement of the restriction or state that the Corporation
will furnish information about the restriction to the stockholder on request and
without charge.
Section 3. Books of Account and Record of Stockholders. There
-------------------------------------------
shall be kept at the principal executive office of the Corporation correct and
complete books and records of account of all the business and transactions of
the Corporation. There shall be made available upon request of any stockholder,
in accordance with Maryland law, a record containing the number of shares of
stock issued during a specified period not to exceed twelve months and the
consideration received by the Corporation for each such share.
Section 4. Information to Stockholder and Others. Any
-------------------------------------
stockholder of the Corporation or his agent may inspect and copy during usual
business hours the Corporation's By-Laws, minutes of the proceedings of its
stockholders, annual statements of its affairs, and voting trust agreements on
file at its principal office.
Section 5. Transfers of Shares. Transfers of shares of stock
-------------------
of the Corporation shall be made on the stock records of the Corporation only by
the registered holder thereof, or by his attorney thereunto authorized by power
of attorney duly executed and filed with the Secretary or with a transfer agent
or transfer clerk, and on surrender of the certificate or certificates, if
issued, for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Upon surrender to the
Corporation or the transfer agent of the Corporation of the certificate for
shares duly endorsed or accompanied by proper evidence of succession, assignment
or authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 6. Regulations. The Board may make such additional
-----------
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.
Section 7. Lost, Destroyed or Mutilated Certificates. The
-----------------------------------------
holder of any certificates representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, destruction or mutilation of
such certificate and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
stolen, lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such stolen, lost or
destroyed certificate or certificates or his legal representative, to advertise
the same in such manner as it shall require and to give the Corporation a bond,
with sufficient surety, to indemnify it against any loss or claim which may
arise by reason of the issuance of a new certificate.
Section B. Fixing of a Record Date for Dividends and
Distributions. The Board may fix, in advance, a date not more than sixty days
preceding the date fixed for the payment of any dividend or the making of any
distribution or the allotment of rights to subscribe for securities of the
Corporation or for the delivery of evidences of rights or evidences of interests
arising out of any change, conversion or exchange of common stock or other
Securities as the record date for the determination of the stockholders entitled
to receive any such dividend, distribution allotment, rights or interests, and
in such case only the stockholders of record at the time so fixed shall be
entitled to receive such dividend, distribution, allotment, rights or interests.
ARTICLE VII
DIVIDENDS
Dividends upon the capital stock of the Corporation subject to the
provisions of the Articles of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in its own shares, subject to the
provisions of any statute and of the Articles of Incorporation. Before payment
of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Directors from time to time, in
their absolute discretion, think proper as a reserve fund to meet contingencies,
or for equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Directors shall think conducive to
the interests of the Corporation and the Directors may modify or abolish any
such reserve in the manner in which it was created.
ARTICLE VIII
ANNUAL STATEMENT
The Chairman of the Board, the President, the Vice President
or the Treasurer shall prepare or cause to be prepared annually a full and
correct statement of the affairs of the Corporation including a balance sheet
and a financial statement of operations for the preceding fiscal year, which
shall be certified by independent certified public accountants and distributed
to shareholders within 120 days after the close of the Corporation's fiscal year
and a reasonable period of time prior to the annual meeting of shareholders.
Such annual statement shall also be submitted at the annual meeting, and shall
be filed within twenty days thereafter at the principal office of the
Corporation in the State of Maryland.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by
resolution of the Board.
ARTICLE X
DEPOSITORIES AND
CUSTODIANS
Section 1. Depositories. The funds of the Corporation shall be
------------
deposited with such banks or other depositories as the Board of Directors of
the Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments
----------
shall be deposited in the safekeeping of such banks or other companies as the
Board of Directors of the Corporation may from time to time determine.
ARTICLE XI
EXECUTION OF
INSTRUMENTS
Checks, notes, drafts, acceptances, bills of exchange and
other orders or obligations for the payment of money shall be signed by such
officer or officers or person or persons as the Board of Directors by resolution
shall from time to time designate.
ARTICLE XII
INDEPENDENT PUBLIC ACCOUNTANTS
A firm of independent public accountants shall sign or certify
the financial statements of the Corporation which are filed with the Securities
and Exchange Commission and shall be selected annually by the Board of
Directors.
ARTICLE XIII
SEAL
The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Maryland". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.\
ARTICLE XIV
STOCK LEDGER
The Corporation shall maintain at its office in the City and
State of New York, an original stock ledger containing the names and addresses
of all stockholders and the number of shares held by each stockholder. Such
stock ledger may be in written form or any other form capable of being converted
into written form within a reasonable time for visual inspection.
ARTICLE XV
AMENDMENTS
The Board of Directors shall have the power, at any regular
meeting or at any special meeting, if notice thereof be included in the notice
of such special meeting, to alter, modify or repeal any By-Laws of the
Corporation and to make new By-Laws, except that the Board of Directors shall
not alter, modify or repeal Sections 17 or 18 of Article III of these By-Laws or
any By-Laws made by the stockholders.
The stockholders shall have the power, at any annual meeting
or at any special meeting if notice thereof be included in the notice of such
special meeting, to alter, modify or repeal any By-Laws of the Corporation and
to make new By-Laws.
EXHIBIT 14.1
ONE LIBERTY PROPERTIES, INC.
CODE OF BUSINESS CONDUCT AND ETHICS
PURPOSE
This Code of Business Conduct and Ethics contains general guidelines for
conducting the business of the Company consistent with the highest standards of
business ethics, and is intended to be a "code of ethics" within the meaning of
Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated
thereunder ("SOAct"). This Code should be considered to be a minimum standard.
If a law, rule or regulation conflicts with a policy in this Code you must
comply with the law, rule or regulation; however, if a local custom or policy
conflicts with this Code, you must comply with the Code. If this Code requires a
higher standard than is required by local custom or policy or applicable law,
rules and regulations, you are required to adhere to these higher standards.
This Code applies to all of our officers, directors, employees (whether a direct
employee or employed pursuant to a shared services agreement among various
entities, including the Company) and agents, including consultants, whether they
work for the Company on a full or part-time basis. We refer to all persons
covered by this Code as "Associates."
COMPLIANCE WITH LAWS, RULES AND REGULATIONS
Obeying the law, both in letter and in spirit, is the foundation on which our
ethical standards are built. All Associates must respect and obey federal law
and the laws of the cities and states in which we operate. Although not all
Associates are expected to know the details of these laws, it is important to
know enough to determine when to seek advice from executives or other
appropriate personnel.
All Associates must cooperate fully with the people responsible for preparing
reports filed with the Securities and Exchange Commission and all other
materials that are made available to the investing public to make sure the
people responsible for preparing such reports and materials are promptly made
aware of all information that might have to be disclosed in those reports or
other materials or that might affect the way in which information is disclosed
in them.
REPORTING VIOLATIONS OF THE CODE
All Associates have a duty to report any known or suspected violation of this
Code, including any violation of laws, rules, regulations or policies that apply
to the Company. Reporting a known or suspected violation of this Code by others
should not be considered an act of disloyalty, but an action to safeguard the
reputation and integrity of the Company and its Associates.
If you know of or suspect a violation of this Code, immediately report the
conduct to Simeon Brinberg, Senior Vice President (Counsel) of the Company, or
his successor, who will work directly with you to investigate your concern.
It is our policy that any Associate who violates this Code will be subject to
appropriate discipline, including potential termination of employment, as
determined by a committee consisting of the Senior Vice President referred to
above or his successor, the Chief Executive Officer and the Chief Financial
Officer of the Company (the "Committee"), based upon the facts and circumstances
of each particular situation. An Associate accused of violating this Code will
be given an opportunity to present his or her version of the events at issue to
said Committee prior to any determination of appropriate discipline. Any
Associate who fails to report known or suspected violations by another Associate
may also be subject to appropriate discipline. Furthermore, Associates who
violate the law or this Code may expose themselves to substantial civil damages,
criminal fines and prison terms. The Company may also face substantial fines and
penalties in such situations, not to mention damage to the Company's reputation.
In short, your conduct as an Associate of the Company, if it does not comply
with the law or with this Code, can result in serious consequences for both you
and the Company.
CONFIDENTIALITY AND POLICY AGAINST RETALIATION
All questions and reports of known or suspected violations of the law or this
Code will be treated with sensitivity and discretion. The Committee and the
Company will protect your anonimity to the extent possible consistent with law
and the Company's need to investigate your concern. The Company strictly
prohibits retaliation against an Associate who, in good faith, seeks help or
reports known or suspected violations. Anyone who seeks reprisal or retaliates
against an Associate because the Associate, in good faith, sought help or filed
a report will be subject to disciplinary action, including potential termination
of employment.
WAIVERS OF THE CODE
Waivers of this Code will be granted on a case-by-case basis and only in
extraordinary circumstances. Waivers of this Code for Associates may be made
only by the Committee. Any waiver of this Code for our directors, executive
officers or other principal officers may be made only by our Board of Directors
and will be promptly disclosed to the public.
CONFLICTS OF INTEREST
Although Associates are generally free to engage in personal business and
personal financial transactions and other activities outside the Company, this
freedom is not unlimited. As long as you remain an Associate, you must avoid
situations where your loyalties may be divided between the Company's interests
and your own. These divided loyalties are referred to as "conflicts of
interest." You should actively avoid any private interest that may influence
your ability to act in the best interests of the Company or that makes it
difficult to perform your work objectively and effectively. It is difficult to
list all of the ways in which a conflict of interest may arise. The Board of
Directors has determined that it is not a conflict of interest for an Associate
(other than directors who are deemed to be independent directors under SOAct and
the rules of New York Stock Exchange) to work for or otherwise have a business
connection with the entities who are parties to a Shared Services Agreement
among the Company, BRT Realty Trust, Gould Investors L.P. and other entities.
An actual or potential conflict of interest occurs when an Associate is in a
position to influence a decision that may result in a personal gain for that
Associate or for a relative of the Associate as a result of the Company's
business dealings. Personal gain may result not only in cases where an Associate
or relative has a significant financial interest in, or is employed by, a firm
with which the Company does business, but also when an Associate or relative
receives any loan, kickback, bribe, substantial gift or special consideration as
a result of any transaction or business dealings involving the Company.
Associates and their relatives shall exercise caution, prudence and good
judgment before accepting any gift, entertainment, services, or promises of
future benefits from any person, group or agency who might benefit or appear to
benefit from the Associate's connection with the Company. For the purpose of
this Code, a relative is any person who is related by blood or marriage, or
whose relationship with the Associate is similar to that of persons who are
related by blood or marriage.
The Board of Directors is aware of certain transactions between the Company and
entities affiliated with one or more executive officers of the Company. These
transactions with affiliated entities include the sharing of services pursuant
to the terms of the Shared Services Agreement and the provision of services by
such affiliated entities to the Company and to persons who conduct business with
the Company. The Board of Directors has determined that these services are
beneficial to the Company and that the Company may enter into any contract or
transaction with an officer, employee or agent of the Company (other than
directors who are deemed to be independent directors under SOAct and the rules
of the New York Stock Exchange) or any of their affiliates, whether or not any
of them have a financial interest in the transaction, provided that any such
transaction is approved by the Audit Committee of the Board of Directors which
is satisfied that the fees, charges or other payments made to officers,
employees and agents of the Company or their affiliates are at no greater cost
or expense to the Company than would be incurred if the Company were to obtain
substantially the same services from unrelated and unaffiliated persons.
CORPORATE OPPORTUNITIES
As an Associate of the Company, you have an obligation to put the interests of
the Company ahead of your personal interests and to advance the Company's
interests when the opportunity to do so arises. If you discover a business
opportunity through the use of corporate property, information or position that
is in the Company's line of business, you must first present the business
opportunity to the Company before pursuing the opportunity in your individual
capacity. No Associate may use corporate property, information or his or her
position for personal gain, and no Associate may compete with the Company either
directly or indirectly.
You are required to fully disclose to the Chief Executive Officer the terms and
conditions of each business opportunity covered by this Code that you wish to
pursue. The Chief Executive Officer and the appropriate management personnel
will determine whether the Company wishes to pursue the business opportunity. If
the Company waives its right to pursue the business opportunity, which must be
authorized by an executive officer of the Company with the concurrence of the
Chief Executive Officer, you may pursue the business opportunity on the same
terms and conditions offered to the Company and consistent with the other
ethical guidelines set forth in this Code. Business opportunities available to
directors, executive officers and other principal officers may only be waived by
our Board of Directors.
CONFIDENTIAL INFORMATION
Employees must maintain the confidentiality of confidential information
entrusted to them by the Company or its tenants, except when disclosure is
authorized by the Company's counsel or required by laws or regulations.
Confidential information includes all non-public information that might be of
use to competitors, or harmful to the Company or its tenants, if disclosed. It
also includes information that our tenants or other parties with whom we have
investing or business arrangements have entrusted to us. The obligation to
preserve confidential information continues even after employment ends.
COMPETITION AND FAIR DEALING
We seek to outperform our competition fairly and honestly. We seek competitive
advantages through superior performance, never through unethical or illegal
business practices. Stealing proprietary information, possessing trade secret
information that was obtained without the owner's consent, or inducing such
disclosures by past or present employees of other companies is prohibited. Each
employee should endeavor to respect the rights of and deal fairly with the
Company's service providers, competitors and employees. No employee should take
unfair advantage of anyone through manipulation, concealment, abuse of
privileged information, misrepresentation of material facts, or any other
intentional unfair practices. The purpose of business entertainment and gifts in
a commercial setting is to create good will and sound working relationships, not
to gain unfair advantage. No gift or entertainment should ever be offered,
given, provided or accepted by any Associate of the Company, family member of an
employee or agent unless it: (i) is not a cash gift, (ii) is consistent with
customary business practices, (iii) is not excessive in value, (iv) cannot be
construed as a bribe or payoff and (v) does not violate any laws or regulations.
Please discuss with the Chief Executive Officer or Senior Vice President
(Counsel) of the Company any gifts or proposed gifts which you are not certain
are appropriate.
RELATIONSHIPS WITH TENANTS
Our business success depends upon our ability to foster lasting relationships
with our tenants and others with whom we conduct business. The cornerstone of
these relationships is trust. To build trust, the Company is committed to
dealing with tenants and others with whom we conduct business fairly, honestly
and with integrity. Specifically, you should keep the following guidelines in
mind when dealing with tenants and others with whom we conduct business:
o Information we supply should be accurate and complete to the best of
our knowledge. Associates should never deliberately misrepresent information.
o Business entertainment should never exceed reasonable and customary business
practice.
PROTECTION OF COMPANY ASSETS
All Associates should protect the Company's assets and ensure their efficient
use for legitimate business purposes only. Theft, carelessness and waste have a
direct impact on the Company's profitability. To ensure the protection of the
Company's assets, each Associate should:
o Exercise reasonable care to prevent theft, damage or misuse of Company
property.
o Promptly report the actual or suspected theft, damage or misuse of Company
property to the Chief Financial Officer.
o Safeguard all electronic programs, data, communications and written
materials from inadvertent access by others.
PERSONAL USE OF COMPANY RESOURCES
The Company provides a wide variety of assets as resources for its Associates in
conducting company business including computers, communications systems and
other equipment and materials. Although an Associate may, at times, use many of
these resources for incidental personal activities, this personal use should be
kept to a minimum. Excessive personal use of the Company resources can adversely
affect an Associate's performance, increase the Company's costs, and reduce
availability of the resources for the Company's business needs. As an example,
while Associates may sometimes need to use a Company telephone for a short call
to a family matter, it is not appropriate to use Company telephones for
frequent, extended or unusually costly calls that do not relate to company
business.
While you may occasionally use the Company's electronic systems to send personal
messages or to access Internet materials that are not directly business-related,
these personal applications should be minimized in accordance with these
principles, even if your personal activity involves Company systems that are
available for your use at home. In addition, certain messages and materials
simply must not be sent or accessed on Company equipment or through Company
systems; these include solicitations, chain letters, and threatening, sexually
explicit or harassing materials. You must not use Company resources to create,
transmit, store or display messages, images or materials in any of these
categories. The use of the funds or assets of the Company, whether for personal
gain or not, for any unlawful or improper purpose is strictly prohibited. Misuse
of Company assets is misconduct, and may result in termination of your
employment.
Associates should be aware that Company property includes all data and
communications transmitted to or received by, or contained in, the Company's
electronic or telephonic systems or by written media. This includes, among other
things, the computer system, any files in memory and all instant messages,
e-mails and phone records. Associates and other users of this property should
have no expectation of privacy with respect to these communications and data. To
the extent permitted by law, the Company has the ability, and reserves the
right, to monitor all electronic and telephonic communication. These
communications may also be subject to disclosure to law enforcement or
government officials.
COMPANY RECORDS
Accurate and reliable records are crucial to our business. Our records are the
basis of our earnings statements, financial reports and other disclosures to the
public. In addition, our records are the source of essential data that guides
business decision-making and strategic planning. Company records include
payroll, travel and expense reports, emails, accounting and financial data,
measurement and performance records, electronic data files and all other records
maintained in the ordinary course of our business.
All Company records must be complete, accurate and reliable in all material
respects. There is never a reason to make false or misleading entries. In
addition, undisclosed or unrecorded funds, payments or receipts are strictly
prohibited. You are responsible for understanding and complying with our
recordkeeping policy. Ask our Chief Financial Officer if you have any questions.
ACCURACY OF FINANCIAL REPORTS AND OTHER PUBLIC COMMUNICATIONS
We are a public company and are required to report our financial results and a
great deal of financial and other information about our business to the public
and the Securities and Exchange Commission (the "SEC"). We are also subject to
various securities laws and regulations. It is our policy to promptly disclose
accurately and completely material information regarding the Company's business,
financial condition and results of operations. Inaccurate, incomplete or
untimely reporting is not acceptable and can severely damage the Company and
cause legal liability. Associates should be on guard for, and must promptly
report, evidence of improper financial reporting. Examples of suspicious
activities that must be reported include:
o Financial results that seem inconsistent with the performance of underlying
business transactions;
o Inaccurate records, such as overstated expense reports, or erroneous time
sheets or invoices;
o Transactions that do not seem to have a good business purpose; and
o Requests to circumvent ordinary review and approval procedures.
The Company's senior financial officers and other Associates working in the
Accounting Department have a special responsibility to ensure that all of our
financial disclosures are full, fair, accurate, timely and understandable. Such
Associates must understand and strictly comply with generally accepted
accounting principles as adopted by the Company and all standards, laws and
regulations regarding accounting and financial reporting of transactions,
estimates and forecasts. The SEC has adopted rules that prohibit officers or
directors, and persons acting under their direction, from making any materially
false, misleading, or incomplete statement to an accountant in connection with
an audit or any filing with the SEC.
If an Associate believes that the Company has engaged in any type of
questionable accounting or auditing activity, such Associate should report the
allegations to the Chief Financial Officer.
PROFITING FROM INSIDE INFORMATION
If you possess information about the Company that is both material and
non-public, called "material inside information," you are subject to trading
restrictions. You cannot legally trade in Company securities, or make
recommendations to anyone, including your family, friends and colleagues, about
trading in Company securities, until a reasonable time, usually the second
trading day after the Company issues a press release or makes an SEC filing
disclosing the material inside information that you possess.
Information is "material" if it would influence a reasonable person to buy or
sell stock. Examples include undisclosed data reflecting earnings or
profitability, or trends in these figures; major acquisitions, equity
investments or divestitures; and important developments in projects, alliances
or litigation. Information is "non-public" if it hasn't been the subject of a
Company press release or contained in an SEC filing made by the Company. Trading
in Company stock includes buying or selling Company shares in the open market,
selling shares that were purchased under any Company stock option plan or
dividend reinvestment plan. It does not include regular, continuing purchases
through the Company's dividend reinvestment plan or purchases, without sale, of
shares through exercise of a Company stock option.
In order to minimize the risk of insider trading and prevent inadvertent use of
material, inside information, you are required to follow the procedures and
rules set forth below:
1. Before trading in the Company's securities you must consult with our
Senior Vice President (Counsel);
2. If the Senior Vice President (Counsel) has cleared your transaction,
you must execute the transaction within two business days. If more than two
business days have elapsed since you spoke with the Senior Vice President
(Counsel), you must speak with him again before engaging in the trade; and
3. The foregoing procedures are also applicable to proposed
transactions in securities to be made by (i) your spouse, your children, any
other relative who may live with you, and any corporation or other entity that
you may directly or indirectly control; and (ii) any fiduciary account (where
you are trustee, executor, custodian, etc.) with respect to which you make
investment decisions. If you are not certain as to whether the procedures apply
to a particular trade, please consult with the Senior Vice President (Counsel).
If you violate insider trading laws, both you and the Company may be subject to
severe criminal penalties. Insider trading laws apply to all Company employees
at any level, not merely to officers or managers.
PUBLIC COMMUNICATIONS AND REGULATION FD
The Company places a high value on its credibility and reputation in the
community. What is written or said about the Company in the news media and
investment community directly affects our reputation, positively or negatively.
It is our policy to provide timely, accurate and complete information in
response to public requests, consistent with our obligations to maintain the
confidentiality of competitive and proprietary information and to prevent
selective disclosure of market-sensitive data. To ensure compliance with this
policy, all news media or other public requests for information regarding the
Company should be directed to the Investor Relations Director, or person
performing such function. The Investor Relations Director will work with you and
the appropriate personnel to evaluate and coordinate a response to the request.
COMPLIANCE WITH REGULATION FD
In connection with its public communications, the Company is required to comply
with a rule under the federal securities laws referred to as Regulation FD
(which stands for "fair disclosure"). Regulation FD provides that, when we
disclose material, non-public information about the Company to securities market
professionals or stockholders (where it is reasonably foreseeable that the
stockholders will trade on the information), we must also disclose the
information to the public. "Securities market professionals" generally include
analysts, institutional investors and investment advisors.
To ensure compliance with Regulation FD, we have designated the Investor
Relations Director as our only company spokesperson.
Only our company spokesperson is authorized to disclose information about the
Company in response to requests from securities market professionals or
stockholders. If you receive a request for information from any securities
market professionals or stockholders, promptly contact our company spokesperson
to coordinate a response to such request.
Associates who regularly interact with securities market professionals are
specifically covered by Regulation FD and have a special responsibility to
understand and comply with Regulation FD. Contact our Senior Vice President
(Counsel) if you have any questions about the scope or application of Regulation
FD.
COMPLIANCE PROCEDURES
We must all work to ensure prompt and consistent action against violations of
this Code. However, in some situations it is difficult to know right from wrong.
Since we cannot anticipate every situation that will arise, it is important that
we have a way to approach a new question or problem. These are the steps to keep
in mind:
o Make sure you have all the facts.In order to reach the right solutions,
we must be as fully informed as possible.
o Ask yourself: What specifically am I being asked to do? Does it seem
unethical or improper? This will enable you to focus on the specific
question you are faced with, and the alternatives you have. Use your
judgment and common sense; if something seems unethical or improper, it
probably is.
o Clarify your responsibility and role. In most situations, there is
shared responsibility. Are your colleagues informed? It may help to get
others involved and discuss the problem.
o Discuss the problem with an executive officer. This is the basic
guidance for all situations. In many cases, an executive officer will
be more knowledgeable about the question, and will appreciate being
brought into the decision-making process. Remember that it is an
executive officer's responsibility to help solve problems.
o You may report ethical violations in confidence and without fear of
retaliation. If your situation requires that your identity be kept
secret, your anonymity will be protected. The Company does not permit
retaliation of any kind against employees for good faith reports of
ethical violations.
o Always ask first, act later: If you are unsure of what to do in any
situation, seek guidance before you act.
CONCLUSION
This Code of Business Conduct and Ethics contains general guidelines for
conducting the business of the Company consistent with the highest standards of
business ethics. If you have any questions about these guidelines, please
contact Simeon Brinberg, Senior Vice President (Counsel) or a person performing
that function. We expect all Associates, regardless of their level, to adhere to
these standards. Each Associate is separately responsible for his or her
actions. Conduct that violates the law or this Code cannot be justified by
claiming that it was ordered by someone in higher management. If you engage in
conduct prohibited by the law or this Code, you will be deemed to have acted
outside the scope of your employment. Such conduct will subject you to
disciplinary action, including possibly termination of employment.
Note: This Code and the matters contained herein are neither a contract of
employment nor a guarantee of continuing Company policy. We reserve the right to
amend, supplement or discontinue this Code and the matters addressed herein,
without prior notice, at any time.
Exhibit 21.1
SUBSIDIARIES OF THE COMPANY
Company State of Organization
------- ---------------------
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
OLP Theaters, LLC Delaware
OLP Movies, LLC Delaware
OLP Tucker, LLC Georgia
OLP Lake Charles, LLC Louisiana
OLP Lake Worth, LLC Florida
OLP Marcus Drive, LLC New York
OLP Sommerville, LLC Massachusetts
OLP Newark, LLC Delaware
OLP Texas, LLC Delaware
OLP GP Inc. Texas
OLP Texas 1, L.P. Texas
OLP Los Angeles, Inc. California
OLP Chula Vista Corp. California
OLP Knoxville LLC Tennessee
OLP Athens LLC Delaware
OLP NNN Manager LLC Delaware
OLP Greensboro LLC Delaware
OLP South Milwaukee Manager LLC Delaware
OLP Onalaska LLC Delaware
OLP Saint Cloud LLC Minnesota
OLP CC Antioch LLC Tennessee
OLP CC Fairview Heights LLC Illinois
OLP CC Ferguson LLC Missouri
OLP CC St. Louis LLC Missouri
OLP CC Florence LLC Kentucky
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements on
Form S-3 (No. 333-108765) and in the related Prospectus and Form S-8 (No.
333-101681) pertaining to the 1996 Stock Option Plan of One Liberty Properties,
Inc.; and Form S-8 (No. 333-104461) pertaining to the 2003 Incentive Plan of One
Liberty Properties, Inc., of our report dated March 2, 2005, with respect to the
consolidated financial statements and schedule of One Liberty Properties, Inc.,
One Liberty Properties, Inc. management's assessment of the effectiveness of
internal control over financial reporting, and the effectiveness of internal
control over financial reporting of One Liberty Properties, Inc. included in
this Annual Report (Form 10-K) for the year ended December 31, 2004.
New York, New York
March 9, 2005
Exhibit 31.1
CERTIFICATION
I, Jeffrey Fishman, President and Chief Executive Officer of One Liberty
Properties, Inc., certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year
ended December 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
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: March 15, 2005
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 Annual Report on Form 10-K for the fiscal year
ended December 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 controls over financial
reporting, to the registrant's auditors and the audit committee of
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: March 15, 2005
s/David W. Kalish
-----------------
David W. Kalish
Senior Vice President and
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF PRESIDENT AND PRINCIPAL 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 Annual Report on Form 10-K for the year
ended December 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: March 15, 2005 /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 Annual Report on
Form 10-K for the year ended December 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: March 15, 2005 /s/ David W. Kalish
------------------------------------
David W. Kalish
Senior Vice President and Chief
Financial Officer