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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
[ X] Annual Report Pursuant to Section l3 or l5(d)
of the Securities Exchange Act of l934
For the fiscal year ended December 31, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 0-11083
ONE LIBERTY PROPERTIES, INC.
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(Exact name of registrant as specified in its charter)
MARYLAND 13-3147497
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
60 Cutter Mill Road, Great Neck, New York 11021
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (5l6)466-3l00
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Securities registered pursuant to Section l2(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $1.00 American Stock Exchange
$16.50 Cumulative Convertible
Preferred Stock, par value $1.00 American Stock Exchange
Securities registered pursuant to Section l2(g) of the Act:
NONE
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during
the preceding l2 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
As of March 2, 1999 the aggregate market value of all voting stock (Common Stock
and Preferred Stock) held by non-affiliates of the Registrant was approximately
$27,818,000.
As of March 2, 1999, the Registrant had 2,946,806 shares of Common Stock and
806,376 shares of $16.50 Cumulative Convertible Preferred Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The proxy statement for the Registrant's Annual Meeting of Stockholders,
scheduled for June 9, 1999, will be filed with the Securities and Exchange
Commission within 120 days after the end of the Registrant's fiscal year covered
by this Form 10-K. The information required by Part III (Item 10-Directors and
Executive Officers of the Registrant, Item 11 -Executive Compensation, Item 12 -
Security Ownership of Certain Beneficial Owners and Management, and Item 13 -
Certain Relationships and Related Transactions) will be incorporated by
reference from the definitive proxy statement to be filed by the Registrant
pursuant to Regulation 14A under the Securities Exchange Act of 1934.
PART I
Item 1. Business
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General
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One Liberty Properties, Inc. (the "Company") is a self
administered and self managed real estate investment trust ("REIT") incorporated
under the laws of Maryland on December 20, 1982. The primary business of the
Company is to acquire, own and manage improved, free standing, commercial real
estate operated by the lessee under a long-term net lease. Its focus is the
acquisition, ownership and management of improved real property leased to retail
businesses under long-term commercial net leases. The Company, from time to
time, will acquire and own improved commercial real estate net leased to a
corporation or government agency and improved commercial real property (such as
a multi-family apartment building, office building or industrial building)
leased under a long-term lease to an occupant or operator. Under the typical net
lease and long-term lease, rental and other payments to be made by the lessee
are payable without diminution. The lessee, in addition to its rent obligation,
is generally responsible for payment of all charges attributable to the
property, such as real estate taxes, assessments, water and sewer rents and
charges, governmental charges and all utility and other charges incurred in the
operation of the property. The lessee, is also generally responsible for
maintaining the property, including ordinary maintenance and repair and
restoration following a casualty or partial condemnation, but it is not unusual
for the lessor to be responsible for structural items, foundation and slab, and
roof repair and/or replacement. Tenant is also generally responsible for
casualty, rent loss and liability insurance. The rental provisions in a net
lease transaction may include, but may not be limited to, rent payable on a
stepped basis (rentals increase at specified intervals), an indexed basis
(rentals increase pursuant to a formula such as the consumer price index), a
percentage basis (minimum rental payments plus additional rentals in the form of
participation in the sales derived from the business conducted at the property),
or a combination of the foregoing.
At December 31, 1998 the Company owned fee title to 39 properties
and a "sandwich" lease position with respect to one property. The 40 properties
are located in 14 states. Since December 31, 1998 and through March 22, 1999,
the Company has acquired fee title to four additional properties. Twenty-five of
the 44 properties are net-leased to various retail operators. Thirteen of the
properties are operated as service stations, containing gasoline pumping
islands, a service area and a convenience store. All thirteen "service station"
properties are net-leased to a subsidiary of a major oil company. Three of the
properties are improved with industrial buildings, two of which are operated as
frozen food warehouses. Two properties currently owned by the Company are a
residential apartment building leased to an operator and an
industrial/office/training site leased to a local government agency on a net
basis. One property owned by the Company is currently vacant.
Investment Policy
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The Company's business strategy is focused on acquiring improved,
commercial property subject to a long-term net lease which has scheduled rent
increases, with primary emphasis on properties improved with a free standing
building and net-leased on a long term basis to retail operation. The Company's
investment policies, as articulated in its by-laws, as amended, are as follows:
Types of Investments - The Company is permitted to invest in any type
of real property, mortgage loans (and in both cases in interests therein) and
other investments of any nature, without limitation, provided such investment
does not adversely affect the Company's ability to qualify as a REIT under the
Internal Revenue Code. No limitation is set on the number of properties or
mortgage loans in which the Company may invest, the amount or percentage of the
Company's assets which may be invested in any specific property or on the
concentration of investments in any geographic area in the United States. The
Company may consider investments in any type of real property and in mortgage
loans secured by real property; however as stated above, the current investment
policy of the Company is (and has been for approximately five years) to invest
in improved, commercial real estate under long-term net lease. In prior years,
the Company acquired mortgages receivable for investment. In 1998 the Company
received a payoff in full of a mortgage receivable previously acquired at a
discount. The payoff resulted in the receipt by the Company of $7,582,163,
including amortization of discount of $2,080,918 and $5,501,402 of principal.
The Company has no present plans to invest in mortgage loans secured by real
estate. The Company does not intend to make construction loans or loans secured
by mortgages on undeveloped land. Although it has not done so in the past, the
Company may issue securities in exchange for properties which fit its investment
criteria. The Company pursues a national operating strategy, but does not intend
to purchase properties located outside of the United States.
After termination of any lease relating to any of the Company's
properties (either at lease expiration or early termination), the Company will
seek to relet or sell such property in a manner which will maximize the return
to the Company, considering the income and residual potential of such property.
Although the Company acquires properties for long-term investment and does not
engage in the turnover of investments, the Company may consider the sale or
other disposition of any of the properties prior to termination of the relevant
leases if such sale or other disposition appears advantageous. The Company may
take a purchase money mortgage as part payment in lieu of cash in connection
with any sale and may take into account local custom and prevailing market
conditions in negotiating the terms of repayment. It will be the Company's
policy to use any cash realized from the sale or other disposition of
properties, net of required distributions to shareholders to maintain its REIT
status, to pay down amounts due under loan agreements (excluding real estate
mortgage loans), if any, and in the acquisition of additional properties.
Incurrence of Debt - The directors of the Company, in the
exercise of their business judgment, are permitted to determine the level of
debt and the terms and conditions of any financing or refinancing. There is no
limitation on the level of debt which the Company may incur. The Company has in
the past and intends in the future to borrow money, on a secured and unsecured
basis. The proceeds of any borrowings are used for property acquisitions and for
working capital purposes.
The investment objectives of the Company are (i) to protect the
Company's capital, (ii) to provide current income; and (iii) to provide the
opportunity for increases in income and capital appreciation. In evaluating
potential net lease investments, the Company considers, among other factors (i)
the intrinsic value of the property, given its location and use, (ii) local
demographics (population, occupancy levels, rental trends), (iii) the lessee's
adequacy from a financial point of view to meet operational needs and lease
obligations, (iv) the return on equity to the Company, and (v) potential for
income and capital appreciation. The intrinsic value of the property,
essentially its location and the local demographics, are given greater weight in
the acquisition process than the tenant's credit worthiness, although the
tenant's financial condition is a factor given significant consideration in the
acquisition process.
From time to time, the Company invests in shares of other REIT's. The
Company may invest in the shares of an entity not involved in real estate
investments, provided that any such investment does not adversely affect the
Company's ability to qualify as a REIT under the Internal Revenue Code.
Investments by the Company in shares of another entity are made in such a way so
that the Company will not be treated as an investment company under the
Investment Company Act of 1940. The Company has not in the past invested in the
securities of another entity for the purpose of exercising control, and it has
no present plans to invest in the securities of another entity for such purpose.
However, subject to Board of Director approval, the Company, in the future, may
acquire shares of another entity with a view to gaining control. The Company
does not intend to underwrite the securities of other issuers.
Credit Agreement
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On March 1, 1996 the Company entered into a revolving credit
agreement ("Credit Agreement") with Bank Leumi Trust Company of New York ("Bank
Leumi"). Borrowings under the Credit Agreement were used to provide the Company
with funds to acquire properties. The Credit Agreement matured February 28, 1999
with a right on the part of the Company to extend the Credit Agreement until
February 29, 2000. Because of the Company's strong cash position, it did not
exercise its right to extend the Credit Agreement and therefore the Credit
Agreement terminated on February 28, 1999. The Company is currently in
negotiations to obtain a new credit line, but there can be no assurance that it
will successfully obtain a new line or if obtained, that the availability
thereunder or the terms thereof will be favorable.
Total availability under the Credit Agreement was $9,000,000. The
Company paid interest under the Credit Agreement at the rate of prime plus 1/2%
on funds borrowed on an interest only basis plus a 1/4% servicing fee on the
outstanding balance.
Executive Officers of the Company
The following sets forth information with respect to the executive
officers of the Company:
NAME AGE POSITION WITH THE COMPANY
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Fredric H. Gould 63 Chairman of the Board
Matthew Gould 39 President and Chief Executive Officer
Simeon Brinberg 65 Vice President
David W. Kalish 52 Vice President and Chief Financial Officer
Israel Rosenzweig 51 Senior Vice President
Jeffrey Gould 34 Vice President
Mark H. Lundy 37 Secretary
Seth D. Kobay 44 Vice President and Treasurer
Karen Dunleavy 40 Vice President, Financial
Each of the above listed executive officers will hold office until the next
annual meeting of the Board of Directors, scheduled for June 9, 1999, or until
their respective successors are elected and shall qualify. The information below
sets forth the business experience of the officers of the Company for at least
the past five years.
Fredric H. Gould. Mr. Gould has been Chairman of the Board of the Company
since 1989. Mr. Gould has served as Chairman of the Board of Trustees of BRT
Realty Trust, a real estate investment trust, since 1984 and Chief Executive
Officer of BRT Realty Trust since 1996. Since 1985 Mr. Gould has been a
principal executive officer of the managing general partner of Gould Investors
L.P., a limited partnership engaged in the ownership and operation of real
properties and he also serves as a general partner of Gould Investors L.P. He is
President of the advisor to BRT Realty Trust and a director of Sunstone Hotel
Investors, Inc. and of East Group Properties, Inc.
Matthew Gould. Mr. Gould has been President and Chief Executive Officer of
the Company since 1989. He has been a Vice President of BRT Realty Trust since
1986, a Vice President of the managing general partner of Gould Investors L.P.
from 1986 to 1996 and President since 1996. He also serves as a Vice President
of the advisor to BRT Realty Trust.
Simeon Brinberg. Mr. Brinberg has served as Vice President of the Company
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. He is a director of Witco
Corporation.
David W. Kalish. Mr. Kalish has served as Vice President and Chief
Financial Officer of the Company since June 1990. Mr. Kalish is also Senior Vice
President, Finance of BRT Realty Trust and Vice President and Chief Financial
Officer of the managing general partner of Gould Investors L.P. since June 1990.
For more than five years prior to June 1990, Mr. Kalish, a certified public
accountant, was a partner of Buchbinder Tunick & Company, certified public
accountants.
Israel Rosenzweig. Mr. Rosenzweig has been President of BRT Funding Corp.,
a wholly owned subsidiary of BRT Realty Trust since April, 1998 and a Vice
President of BRT Realty Trust since March 1998. From May 1987 to March 1998 he
was employed as a Vice President of the managing general partner of Gould
Investors L.P. and from November 1994 to April 1997 he was a Senior Vice
President and Chief Lending Officer of Bankers Federal Savings and Loan
Association. For more than five years prior to March 1995, he served as
President of BRT Realty Trust. He continues to serve as a Vice President of the
managing general partner of Gould Investors L.P. Mr. Rosenzweig is a director of
NAUTICA Enterprises, Inc.
Jeffrey Gould. Mr. Gould has been a Vice President of the Company since
1989. Mr. Gould was a Vice President of BRT Realty Trust from January 1988 to
March 1993, Executive Vice President and Chief Operating Officer of BRT from
March 1993 to March 1996, and President and Chief Operating Officer since March
1996. Mr. Gould has served as a Trustee of BRT Realty Trust since March 1997.
Mark H. Lundy. In addition to being Secretary of the Company since June
1993, Mr. Lundy has been a Vice President of BRT since April 1993 and a Vice
President of the managing general partner of Gould Investors L.P. since July
1990. Prior to July 1990 he was an associate with the law firm of Dickstein,
Shapiro and Moran, Washington, D.C.
Seth D. Kobay. Mr. Kobay has been Vice President and Treasurer of the
Company since August 1994. He has been Vice President and Treasurer of BRT
Realty Trust since March 1994 and Vice President of Operations of the managing
general partner of Gould Investors L.P. since 1986.
Karen Dunleavy. Ms. Dunleavy has been Vice President, Financial of the
Company since August 1994. She has served as Treasurer of the managing general
partner of Gould Investors L.P. since 1986.
Matthew Gould and Jeffrey Gould are Fredric H. Gould's sons.
Item 2. Properties
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General
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The Company, at December 31, 1998, owned fee title to 39 properties and a
"sandwich" lease position with respect to one property. Since December 31, 1998,
through March 22, 1999, the Company has acquired fee title to four additional
properties. The 44 properties are located in 14 states. The 44 properties
referred to are herein collectively called the "Properties" and individually a
"Property".
Twenty-five of the forty-four properties owned by the Company are
net-leased to various retail operators under long term leases. Each location has
adequate parking for the building constructed on the site. Most of the retail
tenants operate on a national basis and include, among others, The Kroger
Company, Barnes & Noble Superstores, Inc., Just For Feet, Inc., Hollywood
Entertainment, Inc., Payless Store Source, Inc., Office Max, Inc. and Petco
Animal Supplies, Inc. Thirteen of the properties are service stations leased to
Total Petroleum Inc. Each service station contains gasoline pumping islands, a
service area and a convenience store. Three of the properties are industrial
buildings, two of which are used as frozen food warehouses. One of the
properties is a residential apartment building containing 126 rental units and
six retail stores, and one property is an industrial/office/training building
leased to a local government agency. One building was vacated by the tenant at
the expiration of its lease and is currently vacant. Occupancy rate for the
properties has been in excess of 95% for fiscal years 1998, 1997, 1996, 1995 and
1994. The current occupancy rate is approximately 99%.
It is the policy of the Company to obtain mortgages on substantially
all properties acquired by it. The mortgage financing is consummated at the time
of acquisition of a property or committed for prior to or soon after
acquisition. By obtaining mortgage commitments at or about the time a property
is acquired, the Company can determine at or about the time of acquisition the
return which will be realized by the Company from ownership of the property
during the term (or a significant portion of the term) of the lease. On
occasion, the Company acquires a property subject to a mortgage or elects not to
obtain mortgage financing on a specific property.
At December 31, 1998, the Company had placed mortgages on 12 of the 40
properties it owned as of that date. At December 31, 1998, the Company had
$29,422,491 principal amount of mortgages outstanding, bearing interest at rates
ranging from 6.9% to 9.1%. All mortgages contain prepayment penalties. The
following table sets forth scheduled principal mortgage payments due for the
properties owned as of December 31, 1998 (assuming no payment is made on
principal on any outstanding mortgage in advance of its due date):
PRINCIPAL PAYMENTS DUE
YEAR IN YEAR INDICATED
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1999 $ 410,795
2000 1,353,590
2001 483,351
2002 1,809,043
2003 9,177,799
2004 and thereafter 16,187,913
Significant Properties
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As of December 31, 1998, none of the Properties owned by the
Company either had a book value equal to or greater than 10% of the total assets
of the Company or revenues which accounted for more than 10% of the Company's
aggregate gross revenues. If the Properties leased by Total Petroleum, Inc.
(thirteen separate properties) are considered as one Property then Total
Petroleum accounted for more than 10% of the Company's aggregate revenues in
1998. The following sets forth the information concerning the Total Petroleum
leases.
Description of Total Petroleum Properties
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The Total Petroleum Properties are all service stations and include
gasoline pumping islands, a service area and a retail building used as a
convenience store.
Description of Total Petroleum Leases
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Lease Term The Total Petroleum Properties have 13 separate but
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identical leases dated as of May 15, 1991 (Total Petroleum Leases). The primary
lease term for the Total Petroleum Properties is 20 years ending on May 31,
2011. Total Petroleum has the right to extend the leases for two 10 year renewal
terms, but the renewal options can only be exercised on an all or none basis.
The Total Petroleum Leases contain cross default provisions which provide that
on a monetary default resulting in the termination of a lease, the Landlord has
a right to terminate any or all of the other leases.
Amounts Payable under the Total Petroleum Leases The combined
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annual rent for all 13 properties is $939,830 through May 14, 1999, increasing
by 3% each May 15th throughout the term of the lease. The leases are net leases,
which requires Total Petroleum to pay all real estate taxes, assessments, and
all utility charges.
Maintenance and Modifications Total Petroleum is required, at its
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expense, to maintain the Total Petroleum Properties in good repair and is
responsible to keep each property in reasonably clean condition. The Tenant at
its sole expense may make any non-structural alterations, additions,
replacements or improvements to the property without the Landlord's consent. The
Tenant is required to obtain the Landlord's prior written consent for structural
alterations, additions, replacements or improvements which consent will not be
unreasonably withheld.
Insurance Total Petroleum is required to maintain insurance at its
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expense providing for fire with standard extended risk coverage to the extent of
the full replacement cost. So long as the Tenant's net worth exceeds
$100,000,000 the deductible may be that which is provided in Total Petroleum's
master corporate insurance policy, and if its net worth falls below $100,000,000
then the deductible shall not exceed $250,000 without Landlord's consent. In
Management's opinion the Total Petroleum Properties are adequately covered by
insurance.
Damage to or Condemnation of Property If any of the Total Petroleum
-------------------------------------
Properties is damaged or destroyed by fire or other casualty there is to be no
rent abatement and Total Petroleum is required to repair and restore the
premises in a reasonable diligent manner. If, however, the premises are rendered
untenantable, Total Petroleum may terminate the lease in which event it shall
pay to the Company an amount sufficient to restore the premises to the condition
existing as of the date the lease was executed, reasonable wear and tear
excepted.
If all or any part of any of the properties is taken by
condemnation so as to render the remaining portion of the property unsuitable
for Tenant's business, then the rent due under the lease shall be equitably
adjusted until such time as the Tenant provides Landlord with written notice
that it elects to terminate the lease. If however, the Tenant does not vacate
the property within ninety days of such taking then it is conclusively presumed
that such taking is not extensive enough to render the premises unsuitable for
Total Petroleum's business. In the event of a taking, damages awarded are
payable as follows: (i) Total Petroleum is entitled to a portion of the award
attributable to the value of its leasehold and (ii) Landlord is entitled to the
value of its reversion. In allocating between the value of the leasehold and the
reversion, the value of improvements and betterments made by the Tenant is to be
equitably divided between leasehold and reversion. Each party is entitled to
file a claim in any condemnation proceeding.
Option to Purchase Total Petroleum has been granted an option to
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purchase each location at fair market value, excluding the value of the
improvements made by it. This option may be exercised during the last six months
of the term of the lease. Fair market value is to be determined by an appraisal
process.
Right of First Refusal Total Petroleum has been granted a right of
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first refusal to purchase a Total Petroleum Property from the Company for the
same purchase price and on the same terms and conditions as a bona fide offer to
purchase received by the Company from an unrelated party which is engaged in, or
plans to engage in the business of selling petroleum products, which offer the
Company intends to accept.
Right of First Offer Total Petroleum has been granted a right of
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first offer to purchase each location, which may be exercised if, at any time
during the term of the lease, the Company (or its successor) desires to sell the
Property to an unrelated party other than an unrelated party which is engaged
in, or plans to engage in, the business of selling petroleum products. Such
purchase would be on the same term and conditions as those offered by the
Company.
Mortgage The Total Petroleum Properties are owned free and clear of
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mortgages.
Leases
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The Company's policy is to enter into long-term leases with its
tenants, and the leases generally afford the tenant one or more renewal options.
All leases are net leases, under which the lessee, in addition to its rental
obligation, is responsible for all charges attributable to the property, such as
real estate taxes, assessments, water and sewer rents and charges. The lessee is
also generally responsible for maintaining the property, including maintenance
and repair and for restoration following a casualty or partial condemnation. It
is not unusual for the Company to be responsible for structural repairs,
including foundation and slab, and for roof repair or replacement.
The following table sets forth scheduled lease expirations for all
leases for the Properties as of December 31, 1998.
Current
Net Rentable Annual % of Rents
Square Feet Rents Under Represented
Year of Lease Number of Leases Subject to Expiring By Expiring
Expiration (1) Expiring Expiring Leases Leases (2) Leases
- -------------- -------- --------------- ---------- ------
1999 2 6,125 $ 46,677 0.65%
2000 1 38,448 149,947 2.10%
2001 4 12,363 197,309 2.76%
2002 2 69,060 871,600 12.20%
2003 1 3,062 61,240 0.86%
2004 1 55,370 42,000 0.59%
2005 0 - - -
2006 1 72,897 359,640 5.04%
2007 1 12,000 204,000 2.86%
2008 0 - - -
2009 and thereafter 26 938,155 5,209,223 72.94%
-- ------- --------- ------
39 (3) 1,207,480 $7,141,636 100%
== ========= ========== ===
(1) Lease expirations assume tenants do not exercise existing
renewal options.
(2) Reflects monthly base rent provided for under terms of each
expiring lease as in effect on December 31, 1998 multiplied by 12 and does not
take into account any contractual rent escalations.
(3) The Company's one vacant property is not included in the above
table.
Competition
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The Company faces competition for the acquisition of net leased
properties from other REITs, investment companies, insurance companies, pension
funds and private individuals, some of whom have greater resources than the
Company. The Company also faces indirect competition from institutions that
provide or arrange for other types of commercial financing, such as traditional
mortgage financing and traditional bank financing. The Company believes that its
management's experience in real estate, mortgage lending, credit underwriting
and transaction structuring allows it to compete effectively for properties.
Environmental Matters
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Under various federal, state and local environmental laws, regulations
and ordinances, current or former owners of real estate, may be required to
investigate and clean up hazardous or toxic chemicals, substances or waste or
petroleum products or waste (collectively, "Hazardous Materials") released on,
under, in or from such property, and may be held liable to governmental entities
or to third parties for certain damage and for investigation and clean-up costs
incurred by such parties in connection with the release or threatened release of
Hazardous Materials. Such laws typically impose responsibility and liability
without regard to whether the owner knew of or was responsible for the presence
of Hazardous Materials, and the liability under such laws has been interpreted
to be joint and several under such circumstances. The Company's leases generally
provide that the tenant is responsible for all environmental liability and for
compliance with environmental regulations relating to the tenant's operations.
Such a contractual arrangement does not eliminate the Company's statutory
liability or preclude claims against the Company by governmental authorities or
persons who are not a party to such an arrangement. Contractual arrangements in
the Company's leases may provide a basis for the Company to recover from the
tenant damages or costs for which the Company has been found liable.
The cost of investigation and clean-up of Hazardous Materials on, under,
in or from property can be substantial, and the fact that the property has had a
release of Hazardous Materials, even if remediated, may adversely affect the
value of the property and the owner's ability to sell or lease the property or
to borrow using the property as collateral. In addition, some environmental laws
create a lien on a property in favor of the government for damages and costs it
incurs in connection with the release or threatened release of Hazardous
Materials, and certain state environmental laws provide that such a lien has
priority over all other encumbrances on the property or that a lien can be
imposed on other property owned by the responsible party. Finally, the presence
of Hazardous Materials on a property could result in a claim by a private party
for personal injury or a claim by a neighboring property owner for property
damage.
Other federal, state and local laws and regulations govern the removal
or encapsulation of asbestos-containing material when such material is in poor
condition or in the event of building remodeling, renovation or demolition.
Still other federal, state and local statutes, regulations and ordinances may
require the removal or upgrading of underground storage tanks that are out of
service or out of compliance. In addition, federal, state and local laws,
regulations and ordinances may impose prohibitions, limitations and operational
standards on, or require permits, approvals and notifications in connection with
the discharge of wastewater and other water pollutants, the emission of air
pollutants and operation of air polluting equipment, the generation and
management of Hazardous Materials, and workplace health and safety.
Non-compliance with environmental or health and safety requirements may also
result in the need to cease or alter operations at a property, which could
affect the financial health of a tenant and its ability to make lease payments.
Furthermore, if there is a violation of such requirement in connection with a
tenant's operations, it is possible that the Company, as the owner of the
property, could be held accountable by governmental authorities for such
violation and could be required to correct the violation.
The Company typically undertakes an investigation of potential
environmental risks when evaluating an acquisition. Where warranted, Phase I
and/or Phase II assessments are performed by independent environmental
consulting and engineering firms. Phase I assessments do not involve subsurface
testing, whereas Phase II assessments involve some degree of soil and/or
groundwater testing. The Company may acquire a property which is known to have
had a release of Hazardous Materials in the past, subject to a determination of
the level of risk and potential cost of remediation. The Company normally
requires property sellers to indemnify it against any environmental problem
existing as of the date of purchase. Additionally, the Company normally
structures its leases to require the tenant to assume all responsibility for
environmental compliance or environmental remediation relating to the tenants
operations at the Property.
Except for the environmental remediation undertaken by the Company at
the Total Petroleum Properties, the Company has not been notified by any
governmental authority of or become aware of non-compliance, liability or other
claim in connection with any of the Properties.
In 1991, when the Company entered into lease agreements relating to 13
Total Petroleum Properties, the Company deposited $2,000,000 with an independent
escrow agent, to cover remediation costs relating to environmental problems
discovered at certain of the Total Petroleum Properties. The agreement between
the Company and Total Petroleum limits the Company's maximum cost to $350,000
per location, with any excess cost being the responsibility of Total Petroleum.
There are currently two locations which require additional remediation efforts.
These two locations have a total of $20,000 remaining to be expended towards the
$350,000 maximum. Accordingly, the approximate $793,000 still held by the escrow
agent is adequate to cover the additional environmental costs and a significant
portion is expected to be returned to the Company.
Regulations and Insurance
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Americans With Disabilities Act and Similar Laws. Under the Americans
with Disabilities Act of 1990 (the "ADA"), all places of public accommodation
are required to meet certain Federal requirements related to access and use by
disabled persons. These requirements became effective in 1992. Although
management of the Company believes that the Properties are substantially in
compliance with present requirements of the ADA, the Company has not conducted
and does not presently intend to conduct an audit or investigation to determine
its compliance. There can be no assurance that the Company will not incur
additional costs in complying with the ADA.
Additional legislation may place further burdens or restrictions on
owners with respect to access by disabled persons. The ultimate amount of the
cost of compliance with the ADA or such legislation is not currently
ascertainable, but are not expected to have a material effect on the Company.
Insurance. Under substantially all leases, the Company's tenants are
---------
responsible for maintaining and paying for adequate insurance on the Properties
leased by them, including all risk insurance for the full replacement cost and
liability insurance. The Company monitors compliance by its tenants with the
obligation to insure the Properties. The Company believes the Properties are
covered by adequate fire, flood, property, and liability insurance.
Item 3. Legal Proceedings
-----------------
Neither the Company nor the Properties are presently subject to any
material litigation nor, to the Company's knowledge, is any material litigation
threatened against the Company or the Properties, other than routine litigation
arising in the ordinary course of business, which collectively are not expected
to have a material adverse effect on the business, financial condition or
results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this Form 10-K.
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
-----------------------------------------------------------------
Matters
-------
The following table sets forth the high and low prices for the Common
Stock and the $16.50 Cumulative Convertible Preferred Stock of the Company as
reported by the American Stock Exchange and the per share cash distributions
paid by the Company on the Common Stock and Preferred Stock during each quarter
of the years ended December 31, 1997 and 1998.
COMMON STOCK PREFERRED STOCK
------------ ---------------
DISTRIBUTIONS DISTRIBUTIONS
1997 HIGH LOW PER SHARE HIGH LOW PER SHARE
- ---- ---- --- --------- ---- --- ---------
First Quarter 13-3/4 12-3/4 $.30 17-5/8 16-1/2 $.40
Second Quarter 13-3/4 13-1/4 $.30 17-1/8 16-5/16 $.40
Third Quarter 14 13-1/8 $.30 17-7/8 16-1/2 $.40
Fourth Quarter 14-5/8 13-5/8 $.30* 17-7/8 16-7/8 $.40*
1998
- ----
First Quarter 14-3/4 13-5/8 $.30 17-3/4 16-5/8 $.40
Second Quarter 14-5/8 12-3/4 $.30 17-3/4 16-7/16 $.40
Third Quarter 14 11-7/8 $.30 17-1/8 16-5/16 $.40
Fourth Quarter 13-1/8 12-1/4 $.30* 17 16-3/8 $.40*
*A cash distribution of $.30 and $.40 was paid on the Common Stock and Preferred
Stock, respectively, on January 5 ,1998 and January 5, 1999. These distributions
are reported as being paid in the fourth quarter of the prior year.
The Common Stock and Preferred Stock of the Company trade on the
American Stock Exchange, under the symbols OLP and OLP Pr, respectively. As of
March 2, 1999 there were 483 common and 172 preferred stockholders of record and
the Company estimates that at such date there were approximately 1,800 and 1,500
beneficial owners of the Company's Common and Preferred Stock, respectively.
Item 6. Selected Financial Data
-----------------------
The following are highlights of the Company's operations which are
derived from the audited financial statements of the Company for the years ended
December 31, 1998, 1997, 1996, 1995 and 1994.
YEAR ENDED DECEMBER 31,
-----------------------
INCOME STATEMENT DATA 1998 1997 1996 1995 1994
- --------------------- ---- ---- ---- ---- ----
- -Revenues $10,132,694 $6,284,809 $5,511,556 $4,890,962 $4,041,378
- -Gain on Sale
of Real Estate 1,132,479 599,251 -- -- --
- -Provision for
Valuation
Adjustment (156,832) -- (659,000) -- --
- -Net Income 6,418,398 2,984,192 2,173,952 3,096,302 2,861,137
Calculation of
Net Income
Applicable to
Common
Stockholders:
- -Net Income 6,418,398 2,984,192 2,173,952 3,096,302 2,861,137
- -Less: Dividends
and Accretion
on Preferred
Stock 1,452,102 1,450,220 1,448,359 1,446,519 1,444,703
- -Net Income
Applicable
to Common
Stockholders $4,966,296 $1,533,972 $725,593 $1,649,783 $1,416,434
- -Weighted Average
Number of Common
Shares
Outstanding
- Basic 2,297,268 1,522,967 1,447,413 1,409,371 1,356,989
- Diluted 2,297,978 1,529,203 1,459,198 1,423,361 1,365,143
- -Net Income Per
Common Share: (Note a)
-Basic $2.16 $1.01 $.50 $1.17 $1.04
-Diluted $2.16 $1.00 $.50 $1.16 $1.04
- -Cash Distributions
Per Share of:
-Common Stock $1.20 $1.20 $1.20 $1.03 $ .86
-Preferred Stock $1.60 $1.60 $1.60 $1.60 $1.60
(a) The earnings per share amounts prior to 1997 have been restated as
required to comply with Statement of Financial Accounting Standards No.
128, Earnings Per Share. For further discussion of earnings per share
and the impact of Statement No. 128, see Note 2 to the Consolidated
Financial Statements.
DECEMBER 31,
------------
STATEMENT DATA 1998 1997 1996 1995 1994
- -------------- ---- ---- ---- ---- ----
Balance Sheet Data
- ------------------
- -Total Real
Estate
Investments, Net $59,830,936 $48,316,984 $42,889,213 $24,253,765 $10,996,534
- -Investments in
US Government
Obligations and
Securities -- -- -- 1,274,747 3,972,256
- -Mortgages and
Note Receivables 228,383 5,943,450 6,049,033 7,564,716 16,096,224
- -Total Assets 82,677,900 57,647,555 52,522,988 38,040,246 37,652,773
- -Total Liabilities 30,960,273 26,336,680 21,987,633 7,532,267 7,680,937
- -Redeemable
Convertible
Preferred Stock 13,225,418 13,106,970 12,950,792 12,796,475 12,643,998
- -Total Stock-
holders' Equity 38,494,586 18,203,905 17,442,841 17,711,504 17,327,838
Item 7. Management's Discussion And Analysis Of Financial Condition And Results
----------------------------------------------------------------------
Of Operations
-------------
Liquidity and Capital Resources
- -------------------------------
The Company's primary sources of liquidity are cash and cash
equivalents ($19,089,625 at December 31, 1998), cash generated from operating
activities, and funds obtainable from mortgages to be secured by real estate
investments. In February 1999, a revolving credit facility entered into by the
Company, which provided for a facility of $9,000,000, matured and was not
renewed by the Company. The Company is currently engaged in negotiations for a
new credit facility but there can be no assurance that a new facility will be
obtained or if obtained that the amount of availability or the terms will be
favorable.
On June 22, 1998, the Company sold 1,331,733 shares of Common Stock
at $13.25 per share in a rights offering to its shareholders. The net proceeds
of approximately $17,470,000 (after expenses) was used to repay the $6,985,000
outstanding under the revolving credit facility and the balance is being used
for the acquisition of additional properties.
The terms of the Preferred Stock of the Company affords each
preferred holder the right to "put" the Preferred Stock to the Company at $16.50
per share for the period commencing July 1, 1999 and ending on September 28,
1999. The Company will fund any cash required in connection with the exercise of
the put option from funds from operations, cash generated from mortgage
financing and cash on hand; and if necessary, the Company will borrow funds on a
secured or unsecured basis for such purpose. Although no commitments for
financing has been obtained, management believes that such financing will be
available on competitive terms, if required, including the likelihood that a new
credit facility will be completed by that date.
The Company is currently in discussions concerning the acquisition
of additional net leased properties. Cash provided from operations and the
Company's cash position will provide funds for cash distributions to
shareholders and operating expenses. These sources of funds, as well as funds
obtainable from mortgage financing, will provide funds for future property
acquisitions. It will continue to be the Company's policy to make sufficient
cash distributions to shareholders in order for the Company to maintain its real
estate investment trust status under the Internal Revenue Code.
In connection with the lease agreements with Total Petroleum, Inc.
("Total Petroleum") consummated in 1991, the Company agreed to expend certain
funds to remediate environmental problems at certain locations net leased to
Total Petroleum. It was agreed that the net cost to the Company would not exceed
$350,000 per location, with any excess being the responsibility of Total
Petroleum. At that time the Company deposited $2,000,000 with an independent
escrow agent to insure compliance by the Company with its obligations with
respect to the environmental clean up. At December 31, 1998, there are two
locations which require additional remediation efforts. These two locations have
a total of approximately $20,000 remaining to be expended towards the $350,000
maximum. Accordingly, the approximate $793,000 still held by the escrow agent is
adequate to cover the additional environmental costs and a significant portion
is expected to be returned to the Company.
Management believes there will be no effect on the Company's
liquidity relating to the year 2000 issue because during 1997 the Company
acquired computer hardware and software to handle the Company's accounting and
real estate management. The computer software is capable of handling all issues
relating to the year 2000. In addition, the Company's business will not be
adversely affected in any material way if its suppliers or lessees encounter
year 2000 problems.
Results of Operations
- ---------------------
Comparison of Years Ended December 31, 1998 and 1997
- ----------------------------------------------------
Rental income increased by $1,744,947 to $7,086,438 for the year ended December
31, 1998 as compared to the year ended December 31, 1997, resulting primarily
from the acquisition of four properties in 1998 and two properties in 1997,
offset in part by the sale of a property during 1997.
On September 16, 1998, the Company received a payoff in full of a mortgage
receivable, which had previously been acquired at a discount. Included in
interest from related party for the year ended December 31, 1998 is $2,080,918,
which represents the unamortized balance on the discount.
Interest and other income increased by $275,203 to $385,942, due to an increase
in cash and cash equivalents available for investment. Such investments were
made primarily from the investment of the net proceeds realized by the Company
from the sale of common shares through a rights offering (which was consummated
in June, 1998) and from the approximate $7,600,000 the Company received from the
payoff of a mortgage receivable in September 1998.
An increase in depreciation and amortization expense of $354,530 to $1,377,875
results primarily from depreciation on six properties acquired during 1998 and
1997, offset in part by the sale of one property during 1997.
The increase in interest-mortgages payable to $2,074,760 in 1998 from $1,517,126
in 1997 is due to mortgages placed on four of the properties acquired during
1998 and 1997, offset in part by the sale of one property during 1997.
Interest-bank note payable amounted to $257,913 for the year ended December 31,
1998, as compared to $210,305 for the year ended December 31, 1997, resulting
from borrowings under the Credit Agreement. Borrowings were made to facilitate
property acquisitions. The $6,985,000 outstanding note balance was repaid June
22, 1998 with a portion of the proceeds realized by the Company from the sale of
common shares through the rights offering.
General and administrative expenses increased by $49,119 to $678,539 for the
year ended December 31, 1998. These increases were due to a combination of
factors as the Company's level of activities increased.
At December 31, 1998 the Company owns three properties which had been leased to
a retail chain of stores. Since the expiration of the initial term of these
leases on December 31, 1996, two of these stores have been relet and one remains
vacant. The Company has determined that the estimated fair value of these
properties are lower than their carrying amounts and thus, the Company has taken
a provision for the differences. The total provision taken on these three
properties amounts to $156,832. There was no comparable provision in the year
ended December 31, 1997.
The 1998 gain on sale of real estate results primarily from the sale on
October 30, 1998 of a property located in the State of Washington. The
Company realized a gain of $1,102,142.
On August 5, 1997, the property owned by a limited liability company in which
the Company was a majority member was sold and a gain of $599,251 was realized
on the sale. The Company's share of the gain is $383,915 (after deducting the
minority interest share of the gain of $215,336).
Comparison of Years Ended December 31, 1997 and 1996
- ----------------------------------------------------
As a result of the acquisition of five properties in 1996 and two properties in
1997 rental income increased by $1,163,203 to $5,341,491 for the year ended
December 31, 1997 as compared to the year ended December 31, 1996.
The decrease in interest income from related parties of $299,571 from $1,132,150
for the year ended December 31, 1996 to $832,579 for the year ended December 31,
1997 is substantially due to the payoff in full of a senior note receivable
during August 1996.
Interest and other income decreased to $110,739 in 1997 from $201,118 in 1996
primarily due to a decrease in interest earned on U.S. Government securities
resulting from the sale of such securities, the proceeds of which were used to
purchase properties.
A $310,754 increase in depreciation and amortization expense to $1,023,345
results primarily from depreciation on properties acquired during 1996. Also
contributing to the increase was the amortization of capitalized costs incurred
in connection with the Company's credit facility and placing mortgages on its
properties.
The increase in interest-mortgages payable from $891,953 in 1996 to $1,517,126
in 1997 is due to interest paid on mortgages placed on properties acquired
during 1996 and 1997. Interest - bank note payable amounted to $210,305 and
$110,185 for the years ended December 31, 1997 and 1996, respectively, resulting
from borrowings under the Credit Agreement. Borrowings under the Credit
Agreement were made to facilitate property acquisitions.
General and administrative costs decreased by $33,781 from $663,201 for the year
ended December 31, 1996 to $629,420 for the year ended December 31, 1997 due to
a combination of factors including a decrease in professional fees. In addition,
the year ended December 31, 1996 included various fees and costs incurred with
the implementation of the Company's distribution reinvestment plan.
At December 31, 1996, the Company owned five properties which had been leased to
a retail chain of stores. The initial term with respect to the leases expired on
December 31, 1996. Two of these properties were under contract of sale on
December 31, 1996 (both sales closed during 1997), and three were vacant (two of
which are still vacant and one has since been re-leased). The Company is
actively seeking a buyer or tenant for the two vacant properties. At December
31, 1996 the Company recorded a provision for valuation adjustment on the two
properties which were under contract of sale based on the sales prices. In
addition, the Company had determined that the estimated fair value of the three
vacant properties were lower than their carrying amounts and thus, the Company
had recorded a provision for the differences. The total provision taken on these
five properties amounted to $659,000. There was no comparable provision taken in
1997.
On August 5, 1997, the property owned by a limited liability company in which
the Company was a majority member was sold and a gain of $599,251 was realized
on the sale. The Company's share of the gain is $383,915 (after deducting the
minority interest share of the gain of $215,336).
Item 7a. Qualitative and Quantitative Disclosures About Market Risk
----------------------------------------------------------
The Company has considered the effects of derivatives and exposures
to market risk relating to interest rate, foreign currency exchange rate,
commodity price and equity price risk. The Company has assessed the market risk
for its variable rate debt and mortgages receivables and believes that a 1%
change in interest rates would not have a material effect on income before
taxes.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The financial statements and supplementary data listed in Items
14(a)(1) and 14(a)(2) hereof are included herein.
Item 9. Changes in and Disagreements with Accountants on
------------------------------------------------
Accounting and Financial Disclosure
-----------------------------------
None
PART III
Information required by Part III (Item 10 - "Directors and Executive
Officers of the Registrant", Item 11 - "Executive Compensation", Item 12
- -"Security Ownership of Certain Beneficial Owners and Management" and Item 13
- -"Certain Relationships and Related Transactions") will be contained in the
definitive proxy statement to be filed within 120 days of the end of the
Company's fiscal year.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
(a) Documents filed as part of this Report:
1. The following financial statements of the Company are included in
this Report on Form 10-K:
Page
- Report of Independent Auditors F-1
- Statements:
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-3
Consolidated Statements of
Stockholders' Equity F-4
Consolidated Statements
of Cash Flows F-5
Notes to Consolidated
Financial Statements F-6-F-17
2. Financial Statement Schedules:
- Schedule III-Real Estate
and Accumulated Depreciation F-18-F-19
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or the
notes thereto.
3. Exhibits
--------
3.1 Articles of Incorporation, as amended, of the Company, filed as Exhibit
3.1 to the Company's Form 10-Q for the quarter ended September 30,1985,
which Exhibit is incorporated herein by reference.
3.2 Amendment to Articles of Incorporation, filed as Exhibit to the
Company's Form 10-Q for the quarter ended June 30, 1989, which Exhibit
is incorporated herein by reference.
3.3 Amendment to Articles of Incorporation, filed as an Exhibit to the
Company's Form 10-Q for the quarter ended June 30, 1990, which Exhibit
is incorporated herein by reference.
3.4 By-Laws of the Company, as amended, filed as an Exhibit to the
Company's Form 10-Q for the quarter ended June 30, 1989, which Exhibit
is incorporated herein by reference.
3.5 Amendment to By-Laws filed as an Exhibit to the Company's Form 10-Q for
the quarter ended June 30, 1990, which Exhibit is incorporated herein
by reference.
21.1 Subsidiaries of registrant (filed herewith)
(b) No reports on Form 8-K were filed by the Registrant during the last
quarter of the period covered by this report.
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 25, 1999 By:s/Matthew Gould
Matthew Gould, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant in the capacities indicated on the dates indicated.
Signature Title Date
s/Fredric H. Gould
Fredric H. Gould Chairman of the March 25, 1999
Board of Directors
s/Matthew Gould
Matthew Gould President and
Chief Executive
Officer March 25, 1999
s/Marshall Rose
Marshall Rose Director March 25, 1999
s/Joseph A. Amato
Joseph A. Amato Director March 25, 1999
S/Charles Biederman
Charles Biederman Director March 25, 1999
s/Arthur Hurand
Arthur Hurand Director March 25, 1999
s/David W. Kalish
David W. Kalish Vice President
and Chief Financial
Officer March 25, 1999
Exhibit 21.1
Subsidiaries of the Company
Company State of Incorporation
OLP Action, Inc. Michigan
OLP Arby's II South Carolina
OLP Iowa, Inc. Delaware
OLP Texas, Inc. Texas
OLP-TSA Georgia, Inc. Georgia
OLP Dixie Drive Houston, Inc. Texas
OLP Greenwood Village,
Colorado, Inc. Colorado
OLP Ft. Myers, Inc. Florida
OLP Rabro Drive Corp. New York
OLP Chattanooga, Inc. Tennessee
OLP Columbus, Inc. Ohio
OLP Mesquite, Inc. Texas
OLP South Highway Houston, Inc. Texas
OLP Selden, Inc. New York
OLP Palm Beach Inc. Florida
ONE LIBERTY PROPERTIES, INC.
and SUBSIDIARIES
Consolidated Financial Statements
December 31, 1998
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
One Liberty Properties, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of One Liberty
Properties, Inc. and Subsidiaries (the "Company") as of December 31, 1998 and
1997, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1998. Our audits also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of One
Liberty Properties, Inc. and Subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with 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, present fairly, in all material respects, the
information set forth therein.
New York, New York
February 28, 1999
s/ Ernst & Young, LLP
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
December 31,
------------
1998 1997
---- ----
Real estate investments, at cost (Notes 3, 4, and 6)
Land $ 14,466,202 $ 12,210,147
Buildings 49,083,387 38,641,419
---------- ----------
63,549,589 50,851,566
Less accumulated depreciation 3,718,653 2,534,582
---------- ----------
59,830,936 48,316,984
Mortgages receivable - less unamortized discount in 1997 -
(substantially all from related party in 1997) (Notes 5 and 6) 228,383 5,943,450
Cash and cash equivalents 19,089,625 1,606,364
Unbilled rent receivable 1,165,244 665,052
Rent, interest, deposits and other receivables 707,959 300,584
Investment in BRT Realty Trust - (related party) (Note 2) 184,044 240,384
Deferred financing costs 661,185 510,123
Other (including available-for-sale securities of $729,661) (Note 2) 810,524 64,614
-------------- ---------------
$ 82,677,900 $ 57,647,555
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable (Note 6) $ 29,422,491 $ 20,545,247
Note payable - bank (Note 6) - 4,605,029
Accrued expenses and other liabilities 332,211 394,459
Dividends payable 1,205,571 791,945
----------- ----------
30,960,273 26,336,680
---------- -----------
Commitments and contingencies (Notes 3 and 7) - -
Minority interest in subsidiary (Note 3) (2,377) -
----------- -----------
Redeemable Convertible Preferred Stock,
$1 par value; $1.60 cumulative annual dividend;
2,300,000 shares authorized; 806,376 and 808,776
shares issued; liquidation and redemption
values of $16.50 (Note 7) 13,225,418 13,106,970
---------- ----------
Stockholders' equity (Notes 6,9,10 and 11):
Common Stock, $1 par value; 25,000,000 shares authorized;
2,940,201 and 1,561,450 shares issued and outstanding 2,940,201 1,561,450
Paid-in capital 30,965,164 14,419,609
Accumulated other comprehensive income -
net unrealized gain on available-for-sale securities (Note 2) 99,512 146,706
Accumulated undistributed net income 4,489,709 2,076,140
---------- ----------
38,494,586 18,203,905
---------- ----------
$ 82,677,900 $ 57,647,555
============ ============
See accompanying notes.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
Revenues:
Rental income (Note 3) $ 7,086,438 $ 5,341,491 $ 4,178,288
Interest from related parties (Note 5) 2,660,314 832,579 1,132,150
Interest and other income 385,942 110,739 201,118
----------- ---------- ----------
10,132,694 6,284,809 5,511,556
---------- --------- ---------
Expenses:
Depreciation and amortization 1,377,875 1,023,345 712,591
Interest - mortgages payable 2,074,760 1,517,126 891,953
Interest - bank 257,913 210,305 110,185
Leasehold rent 288,833 288,833 288,833
General and administrative (Note 8) 678,539 629,420 663,201
Provision for valuation adjustment of real estate
(Note 4) 156,832 - 659,000
---------- -------------- ---------
4,834,752 3,669,029 3,325,763
--------- --------- ---------
Income before gain on sale of real estate
and minority interest 5,297,942 2,615,780 2,185,793
Gain on sale of real estate including minority
interest share of $215,336 in 1997 (Note 3) 1,132,479 599,251 -
--------- ---------- ---------------
Income before minority interest 6,430,421 3,215,031 2,185,793
Minority interest (12,023) (230,839) (11,841)
------------ ----------- ------------
Net income $ 6,418,398 $ 2,984,192 $ 2,173,952
=========== =========== ===========
Calculation of net income applicable to common stockholders:
Net income $ 6,418,398 $ 2,984,192 $ 2,173,952
Less dividends and accretion on preferred stock 1,452,102 1,450,220 1,448,359
--------- --------- ---------
Net income applicable to common stockholders $ 4,966,296 $ 1,533,972 $ 725,593
=========== =========== ===========
Weighted average number of common shares outstanding:
Basic 2,297,268 1,522,967 1,447,413
========= ========= =========
Diluted 2,297,978 1,529,203 1,459,198
========= ========= =========
Net income per common share (Notes 2 and 11):
Basic $ 2.16 $ 1.01 $ .50
=========== ========== ==========
Diluted $ 2.16 $ 1.00 $ .50
=========== ========== ==========
Cash distributions per share:
Common Stock $ 1.20 $ 1.20 $ 1.20
=========== ========== ==========
Preferred Stock $ 1.60 $ 1.60 $ 1.60
=========== ========== ==========
See accompanying notes.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the three years ended December 31, 1998
Accumulated
Other Accumulated
Common Paid-in Comprehensive Undistributed
Stock Capital Income Net Income Total
----- ------- ------ ---------- -----
Balances, December 31, 1995 $ 1,416,119 $13,218,757 $ (6,758) $ 3,083,386 $17,711,504
Distributions - Common Stock
($1.20 per share) - - - (1,742,507) (1,742,507)
Distributions - Preferred Stock
($1.60 per share) - - - (1,294,042) (1,294,042)
Accretion on Preferred Stock - (154,317) - - (154,317)
Exercise of options 23,500 190,937 - - 214,437
Shares issued through dividend
reinvestment plan 34,023 395,360 - - 429,383
Net income - - - 2,173,952 2,173,952
Other comprehensive income -
net unrealized gain on available-
for-sale securities (Note 2) - - 104,431 - 104,431
---------
Comprehensive income - - - - 2,278,383
-------------- ---------------- -------------- -------------- ---------
Balances, December 31, 1996 1,473,642 13,650,737 97,673 2,220,789 17,442,841
Distributions - Common Stock
($1.20 per share) - - - (1,834,799) (1,834,799)
Distributions - Preferred Stock
($1.60 per share) - - - (1,294,042) (1,294,042)
Accretion on Preferred Stock - (156,178) - - (156,178)
Exercise of options 29,000 235,625 - - 264,625
Shares issued through dividend
reinvestment plan 58,808 689,425 - - 748,233
Net income - - - 2,984,192 2,984,192
Other comprehensive income -
net unrealized gain on available-
for-sale securities (Note 2) - - 49,033 - 49,033
---------
Comprehensive income - - - - 3,033,225
--------------- ---------------- -------------- --------------- ---------
3,033,225
Balances, December 31, 1997 1,561,450 14,419,609 146,706 2,076,140 18,203,905
Distributions - Common Stock
($1.20 per share) - - - (2,710,787) (2,710,787)
Distributions - Preferred Stock
($1.60 per share) - - - (1,294,042) (1,294,042)
Accretion on Preferred Stock - (158,061) - - (158,061)
Shares issued through rights offering 1,331,733 16,139,254 - - 17,470,987
Shares issued through dividend
reinvestment plan 47,018 564,362 - - 611,380
Net income - - - 6,418,398 6,418,398
Other comprehensive income -
net unrealized loss on available-
for-sale securities (Note 2) - - (47,194) - (47,194)
-----------
Comprehensive income - - - - 6,371,204
----------- ----------- ----------- ----------- -----------
Balances, December 31, 1998 $ 2,940,201 $30,965,164 $ 99,512 $ 4,489,709 $38,494,586
=========== =========== =========== =========== ===========
See accompanying notes.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
Cash flows from operating activities:
Net income $ 6,418,398 $ 2,984,192 $ 2,173,952
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of real estate (1,132,479) (599,251) -
Increase in rental income from straight-lining of rent (500,192) (360,224) (218,061)
Provision for valuation adjustment 156,832 - 659,000
Depreciation and amortization 1,377,875 1,023,345 712,591
Minority interest in earnings of subsidiary 12,023 230,839 11,841
Changes in assets and liabilities:
(Increase) decrease in rent, interest, deposits and
other receivables (460,796) (221,508) 611,739
Increase (decrease) in accrued expenses
and other liabilities (62,248) (80,650) 281,342
----------- ----------- ----------
Net cash provided by operating activities 5,809,413 2,976,743 4,232,404
--------- --------- ---------
Cash flows from investing activities:
Additions to real estate (13,171,879) (10,058,389) (19,940,571)
Net proceeds from sale of real estate 1,419,166 4,347,429 -
Net proceeds from sale of available-for-sale securities 282,207 - -
Collection of mortgages receivable - (including
$5,653,413, $79,032 and $961,789 from related
parties in 1998, 1997 and 1996) 5,715,067 105,583 987,108
Purchase of available-for-sale securities (935,213) - -
Collection of senior secured note receivable - BRT Realty
Trust - related party - - 528,575
Sale of U.S.Government obligations and securities, net - - 1,310,553
Investment by minority interest in subsidiary - - 167,980
Payments to minority interest by subsidiary (14,400) (396,333) (38,099)
Other - 42,249 (2,248)
----------- ---------- ------------
Net cash used in investing activities (6,705,052) (5,959,461) (16,986,702)
----------- ---------- ------------
Cash flows from financing activities:
(Repayments) proceeds from bank borrowings (4,605,029) 705,029 3,900,000
Proceeds from mortgages payable 9,236,178 5,925,000 10,375,000
Payment of financing costs (344,866) (203,212) (392,826)
Repayment of mortgages payable (358,934) (2,226,674) (118,233)
Exercise of stock options - 264,625 214,437
Cash distributions - Common Stock (2,297,161) (1,808,457) (1,725,250)
Cash distributions - Preferred Stock (1,294,042) (1,294,042) (1,294,042)
Proceeds from issuance of shares through rights offering 17,470,987 - -
Repurchase of preferred stock, which was cancelled (39,613) - -
Issuance of shares through dividend reinvestment plan 611,380 748,233 429,383
------- ------- --------
Net cash provided by financing activities 18,378,900 2,110,502 11,388,469
---------- --------- ----------
Net increase (decrease) in cash and cash equivalents 17,483,261 (872,216) (1,365,829)
Cash and cash equivalents at beginning of year 1,606,364 2,478,580 3,844,409
--------- --------- ---------
Cash and cash equivalents at end of year $19,089,625 $ 1,606,364 $ 2,478,580
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest expense $2,438,445 $1,727,603 $ 914,506
Cash paid during the year for income taxes 20,499 17,058 58,437
See accompanying notes.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
NOTE 1 - ORGANIZATION AND BACKGROUND
One Liberty Properties, Inc. (the "Company") was incorporated in
1982 in the state of Maryland. The Company is a self-managed Real
Estate Investment Trust ("REIT") which currently participates in
net leasing transactions and has engaged in other real property
transactions and invested in real property mortgages.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of One
Liberty Properties, Inc., its wholly-owned subsidiaries and a
majority-owned limited liability company. Material intercompany
items and transactions have been eliminated. One Liberty
Properties, Inc., its subsidiaries and the limited liability
company are hereinafter referred to as the Company.
Reclassification of Financial Statements
Certain amounts reported in previous consolidated financial
statements have been reclassified in the accompanying consolidated
financial statements to conform to the current year's
presentation.
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results
could differ from those estimates.
Income Recognition
Rental income includes the base rent that each tenant is required
to pay in accordance with the terms of their respective leases
reported on a straight-line basis over the initial term of the
lease. Mortgage receivable discount is amortized over the
remaining life, utilizing the interest method, based on the
Company's evaluation of the collectibility of the carrying amount
of the mortgage.
Depreciation
Depreciation of buildings is computed on the straight-line method
over an estimated useful life of 40 years for commercial
properties and 27 and one half years for residential properties.
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.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Federal Income Taxes
The Company has qualified as a real estate investment trust under
the applicable provisions of the Internal Revenue Code. Under
these provisions, the Company will not be subject to federal
income taxes on amounts distributed to stockholders providing it
distributes substantially all of its taxable income and meets
certain other conditions.
Distributions made during 1998 and 1997 included approximately 74%
and 3%, respectively, attributable to capital gains, with the
balance to ordinary income.
Investments in Debt and Equity Securities
In accordance with Statement of Financial Accounting Standards
#115, Accounting for Certain Investments in Debt and Equity
Securities, the Company accounts for its investment in common
shares of BRT Realty Trust ("BRT"), a related party of the
Company, and other equity securities at fair value as
"available-for-sale" securities.
The Company's investment in 30,048 common shares of BRT
(accounting for less than 1% of the total voting power of BRT),
purchased at a cost of $97,656 has a fair market value at December
31, 1998 of $184,044 resulting in an unrealized holding gain of
$86,388. In addition, the Company has invested $716,537 in equity
securities which have a fair market value of $729,661 at December
31, 1998. The aggregate net unrealized holding gain of $13,124 is
excluded from earnings and reported as a separate component of
stockholders' equity.
Realized gains and losses are determined using the average cost
method. The Company sold securities classified as
available-for-sale during 1998. Sales proceeds and gross realized
gains on these securities amounted to $282,207 and $30,337,
respectively.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments:
Mortgages receivable: At December 31, 1998 the Company had one
mortgage loan outstanding with a balance of $228,383 carrying an
interest rate which approximates market and thus the outstanding
balance approximates its fair value. The mortgage receivable
balance at December 31, 1997 includes a mortgage loan that was
purchased by the Company at a discount, which was being amortized
by the Company over the life of the mortgage. The Company had
estimated the fair value of the loan to approximate its face
amount of $7,974,030 at December 31, 1997. The loan was carried on
the balance sheet at $5,653,412, the difference representing the
remaining unamortized discount of $2,320,618. The mortgage was
paid off in full in September, 1998.
Cash and short term investments: The carrying amounts reported in
the balance sheet for these instruments approximate their fair
values.
Investment in BRT Realty Trust: Since this investment is
considered "available-for-sale", it is reported in the balance
sheet based upon quoted market price.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Note and mortgages payable: The Company determined the estimated
fair value of its debt by discounting future cash payments at
their effective rates of interest, which approximate current
market rates of interest for similar loans. Accordingly, there is
no material difference between their carrying amount and fair
value.
Redeemable convertible preferred stock: Based on the December 31,
1998 quoted market price per share of $16.8125, the fair value of
the Company's redeemable convertible preferred stock is
$13,557,197.
Accretion on Preferred Stock
The Company has Preferred Stock outstanding which is both
redeemable and convertible. The stock was initially recorded in
the financial statements at its fair value based upon the initial
average trades on the American Stock Exchange. The amount by which
the redemption value exceeds the carrying value is being accreted
using the interest method over the life of the redemption period.
Earnings Per Common Share
In 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share. Statement 128 replaced the
calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods
have been presented, and where appropriate, restated to conform to
the Statement 128 requirements.
For the years ended December 31, 1998, 1997 and 1996, basic
earnings per share was determined by dividing net income
applicable to common stockholders for the year by the weighted
average number of shares of Common Stock outstanding during each
year.
Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue Common Stock
were exercised or converted into Common Stock or resulted in the
issuance of Common Stock that then shared in the earnings of the
Company. For the years ended December 31, 1998, 1997 and 1996
diluted earnings per share was determined by dividing net income
applicable to common stockholders for the 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 (710,
6,236 and 11,785 shares for the years ended 1998, 1997 and 1996,
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 is antidilutive.
In addition, options to purchase 80,500 shares of Common Stock at
$14.50 and $13.50 per share (which were granted during March 1998
and 1997) were not included in the computation of diluted earnings
per share because the exercise price of these options is greater
than the average market price of the common shares and, therefore,
the effect would be antidilutive.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with
maturities of three months or less when purchased.
Valuation Allowance on Real Estate Owned
During the year ended December 31, 1996, the Company adopted
Statement of Financial Accounting Standards Board No. 121 ("FASB
121"), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which requires the Company to
make a review of each real estate asset held for use for which
indicators of impairment are present, to determine whether the
carrying amount of the asset will be recovered. Recognition of
impairment is required if the undiscounted cash flows estimated to
be generated by those assets are less than the assets' carrying
amount. Measurement is based upon the fair market value of the
asset. FASB 121 also requires that long-lived assets that are
expected to be disposed of be reported at the lower of carrying
amount or fair value less costs to sell.
Comprehensive Income
In June 1997, the Financial Accounting Standard Board issued
Statement No. 130, Reporting Comprehensive Income, which is
effective for fiscal years beginning after December 15, 1997.
Statement No. 130 establishes standards for reporting
comprehensive income and its components in a full set of
general-purpose financial statements and requires that all
components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements. The Company adopted Statement No. 130 as of
January 1, 1998. At December 31, 1998, accumulated other
comprehensive income, which is solely comprised of the net
unrealized gain on available-for-sale securities was $99,512.
Segment Reporting
In June, 1997 the Financial Accounting Standards Board issued
Statement No. 131, Disclosure About Segments of an Enterprise and
Related Information, which is effective for financial statements
issued for periods beginning after December 15, 1997. Statement
No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements and requires that those enterprises report
selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major
customers. The Company adopted Statement No. 131 as of January 1,
1998. As the Company operates predominantly in one industry
segment, management believes it is in compliance with the
standards established by Statement No. 131.
NOTE 3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS
The rental properties owned at December 31, 1998 are leased under
noncancellable operating leases to corporate tenants with current
expirations ranging from 1999 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
on the operating leases in effect at December 31, 1998 are as
follows:
Year Ending
December 31,
------------
1999 $7,210,088
2000 7,198,177
2001 7,232,744
2002 6,953,193
2003 6,359,953
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 $288,833 through April 2010 and has a
right to extend the lease for up to three 15 year and one 14 year
renewal options.
At December 31, 1998, the Company has recorded an unbilled rent
receivable aggregating $1,165,244, 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
nineteen years. The minimum future rentals presented above include
amounts applicable to the repayment of these unbilled rent
receivables.
For the year ended December 31, 1998, the following assets
generated revenues for the Company in amounts exceeding 10% of the
Company's total revenues:
For the Year Ended December 31, 1998
------------------------------------
Description Revenue % of Total Revenues
----------- ------- -------------------
Mortgage receivable - related party (a) $ 2,660,314 26.25%
Total Petroleum properties (b) 1,092,604 10.78%
(a) See note 5 - Mortgages Receivable (i) for other information.
(b) Total Petroleum, an operator of combination gas station and
retail convenience stores, is a tenant in thirteen of the
Company's properties, all located in the State of Michigan.
NOTE 3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued)
In connection with the Total Petroleum lease agreement in 1991,
the Company deposited $2,000,000 with an independent escrow
agent, which represented the estimated maximum amount to
remediate environmental problems discovered at certain locations.
The agreement limits the maximum payment to approximately
$350,000 per location. At December 31, 1998, there are two
locations which require additional remediation efforts. These two
locations have a total of approximately $20,000 remaining to be
expended towards the $350,000 maximum. Accordingly, the
approximate $793,000 still held by the escrow agent is adequate
to cover the additional environmental costs and a significant
portion is expected to be returned to the Company.
Sale of Real Estate
On October 30, 1998, the Company sold a property located in the
State of Washington for a sales price of $1,500,000 and
recognized a gain of approximately $1,100,000. In addition, a
second mortgage receivable the Company held on the property was
paid off as part of the sale. The outstanding balance of this
mortgage receivable was approximately $36,000 at the time of the
sale.
On August 5, 1997, the property owned by a limited liability
company in which the Company was a majority member was sold. A
gain of approximately $599,000 was realized on the sale. The
Company's share of the gain was approximately $384,000 after
deducting the minority interest portion.
NOTE 4 - PROVISION FOR VALUATION ADJUSTMENT
At December 1998, the Company owns a portfolio of nine retail
properties which had been leased to a retail chain of stores.
During 1996 the Company recorded a provision for valuation
adjustment on two of these properties which were under contract of
sale based on the sales prices. (In 1997, both properties were
sold). In addition, during 1996, the Company had determined that
the estimated fair value of three vacant properties (one is still
vacant at December 31, 1998) was lower than their carrying amounts
and thus, the Company had taken a provision for the differences.
The total provision taken on these five properties during the year
ended December 31, 1996 amounted to $659,000.
During the year ended December 31, 1998, the Company again
determined that the estimated fair value of three of these retail
properties was lower than their carrying amounts and thus, the
Company took additional provisions. The provision taken on these
three properties during the year ended December 31, 1998 amounted
to $156,832. The provisions taken in 1998 and in 1996 have been
presented as a reduction to real estate investments on the balance
sheet.
NOTE 5 - MORTGAGES RECEIVABLE AND PRINCIPAL RELATED PARTY TRANSACTION
Mortgages receivable at December 31, 1998 and 1997 consist of the
following:
1998 1997
---- ----
Affiliate
---------
Entity substantially owned by
Gould Investors L.P. (net of
unamortized discount of
$2,320,618) (i) $ - $ 5,653,412
Non-affiliate
-------------
Other 228,383 290,038
------- -------
$ 228,383 $ 5,943,450
========== ===========
(i) On July 30, 1993, as a result of a public auction, the Federal
Deposit Insurance Corporation sold to an entity related to the
Company, for a consideration of $19,000,300, a $23,000,000 first
mortgage, providing for an interest rate of 8% per annum, secured
by a single tenant office building located in Manhattan, New York.
The office building which secures this mortgage is owned by a
partnership in which Gould Investors L.P. ("Gould") is General
Partner and in which Gould owns substantially all of the
partnership interests. Simultaneously with the purchase,
$13,181,000 was advanced by an unrelated party, $6,080,000 (which
includes closing costs) was advanced by the Company, and the
mortgage was severed into a first mortgage of $13,181,000 paying
interest at 9 1/2% per annum held by the unrelated party and a
subordinate wrap mortgage of $9,819,000 held by the Company. Both
the first mortgage and the wrap mortgage were to mature in 2005.
On September 16, 1998, the Company received a payoff in full of
this mortgage in the amount of $7,582,163. The original discount
of $3,738,400 was being amortized by the Company over the life of
the mortgage and at September 16, 1998, the unamortized balance of
the discount (which the Company realized as interest income) was
$2,080,918. Interest income, including amortization of the
discount of $2,320,618, $334,200 and $327,600 amounted to
$2,660,314, $832,579 and $848,200 for the years ended 1998, 1997
and 1996, respectively.
At December 31, 1998 and 1997 Gould owned 958,705 and 384,462
shares of the common stock of the Company or 32.6% and 24.6% of
the equity interest and 28.7% and 19.6% of the voting rights,
respectively.
NOTE 6 - DEBT OBLIGATIONS
Mortgages Payable
At December 31, 1998 there are twelve outstanding mortgages
payable, all of which are secured by individual real estate
investments with an aggregate carrying value of $45,430,514 before
accumulated depreciation. The mortgages bear interest at rates
ranging from 6.9% to 9.1%, and mature between 2000 and 2017.
NOTE 6 - DEBT OBLIGATIONS (Continued)
Scheduled principal repayments during the next five years and
thereafter are as follows:
Year Ending
December 31,
------------
1999 $ 410,795
2000 1,353,590
2001 483,351
2002 1,809,043
2003 9,177,799
2004 and thereafter 16,187,913
----------
Total $ 29,422,491
============
Note Payable - Bank
On March 1, 1996 the Company entered into a $5 million revolving
credit agreement ("Credit Agreement") with Bank Leumi Trust
Company of New York ("Bank Leumi"). Under the terms of the Credit
Agreement the Company can add additional lenders to provide a
maximum total facility of $15,000,000. In June 1997, the Company
closed on a $4,000,000 participation interest with Commercial Bank
of New York (formerly First Bank of the Americas), increasing the
total facility to $9,000,000. Borrowings under the Credit
Agreement are being used to provide the Company with funds, when
needed, to acquire additional properties. The Credit Agreement
matured February 28, 1999. The Company paid interest under the
Credit Agreement at the rate of prime plus 1/2% on funds borrowed
on an interest only basis, plus a 1/4% servicing fee on the
outstanding balance to Bank Leumi. Net proceeds of certain events
(e.g. sale of property, financing of properties) must be applied
to reduce the loan.
As collateral for any advances taken by the Company under the
Credit Agreement, the Company had pledged the stock of each of its
subsidiaries and certain mortgages receivable. In addition, the
Company's subsidiaries had guaranteed all loans under the Credit
Agreement. The Credit Agreement contained certain affirmative and
negative covenants as well as specified guarantees.
At December 31, 1998, there was no outstanding balance under the
Credit Agreement.
NOTE 7 - REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Preferred Stock has the following rights, qualifications and
conditions: (i) a cumulative dividend preference of $1.60 per
share per annum; (ii) a liquidation preference of $16.50 per
share; (iii) a right to convert each share of Preferred Stock at
any time into .825 of a share of Common Stock; (iv) redeemable by
the Company after July 1, 1997 at $16.70 per share and at premiums
declining to $16.50 on July 1, 1998 and thereafter; (v) an option
by each preferred holder to put the Preferred Stock to the Company
at $16.50 per share for the period commencing July 1, 1999 and
ending on September 28, 1999; and (vi) one-half vote per share.
NOTE 8 - OTHER RELATED PARTY TRANSACTIONS
Gould charged the Company $202,088, $179,260 and $175,969 during
the years ended December 31, 1998, 1997 and 1996, respectively,
for allocated general and administrative expenses and payroll
based on time incurred by various employees.
A company controlled by the Chairman of the Board of Directors and
certain officers of the Company was paid a brokerage fee of
$45,000 relating to the sale of real estate during the year ended
December 31, 1998. See Note 3.
See Note 5 for other related party transaction information.
NOTE 9 - STOCK OPTIONS
On November 17, 1989, the directors of the Company adopted the
1989 Stock Option Plan. Stock options under the 1989 Stock Option
Plan are granted at per share amounts at least equal to their fair
market value at the date of grant. A maximum of 225,000 common
shares were reserved for issuance under the 1989 Stock Option
Plan, of which 14,500 are available for grant at December 31,
1998.
On March 23, 1998, the Directors of the Company granted, under the
1989 Stock Option Plan, options to purchase a total of 40,000
shares of common stock at $14.50 per share to a number of the
Company's officers and employees. The options are cumulatively
exercisable at a rate of 25% per annum, commencing after six
months, and expire five years after the date of grant. At December
31, 1998 options to purchase 10,000 shares are exercisable, none
of which have been exercised.
On March 21, 1997, the Directors of the Company granted, under the
1989 Stock Option Plan, options to purchase a total of 40,500
shares of common stock at $13.50 per share to a number of the
Company's officers and employees. The options are cumulatively
exercisable at a rate of 25% per annum, commencing after six
months, and expire five years after the date of grant. At December
31, 1998 options to purchase 20,250 shares are exercisable, none
of which have been exercised.
On December 6, 1996, the directors of the Company adopted the 1996
Stock Option Plan (Incentive/Nonstatutory Stock Option Plan),
whereby a maximum of 125,000 shares of common stock of the Company
are reserved for issuance to employees, officers, directors,
consultants and advisors to the Company. 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. The options will expire no later than ten
years after the date on which the option was granted.
The Company elected Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), and related
interpretations in accounting for its employee stock options.
Under APB 25, no compensation expense is recognized because the
exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant. The
alternative fair value accounting provided for under FASB No. 123,
Accounting for Stock-Based Compensation, is not applicable because
it requires use of option valuation models that were not developed
for use in valuing employee stock options.
NOTE 9 - STOCK OPTIONS (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 1998 and
1997, respectively: risk free interest rate of 5.64% and 6.49%,
dividend yield of 8.95% and 8.50%, volatility factor of the
expected market price of the Company's Common Stock based on
historical results of .123 and .117; and an expected life of 5 and
4 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 because the impact on the reported net
income and earnings per share is immaterial.
Changes in the number of common shares under all option
arrangements are summarized as follows:
Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
Outstanding at beginning of period 40,500 29,000 57,500
Granted 40,000 40,500 -
Option prices $13.50-$14.50 $13.50-$9.125 -
Exercisable at end of period 30,250 10,125 29,000
Exercised - 29,000 23,500
Expired - - 5,000
Outstanding at end of period 80,500 40,500 29,000
Option price per share outstanding $13.50-$14.50 $13.50 $9.125
As of December 31, 1998 the outstanding options had a weighted
average remaining contractual life of approximately 3.72 years and
a weighted average exercise price of $14.00.
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, 1998 and 1997, the Company issued
47,018 and 58,808 common shares, respectively, under the Plan.
NOTE 11 - RIGHTS OFFERING
On June 22, 1998, the Company sold 1,331,733 shares of Common
Stock at $13.25 per share in a rights offering to its
stockholders. Pursuant to a Registration Statement filed with the
Securities and Exchange Commission on February 10, 1998 and
declared effective on March 31, 1998 the Company issued to each
common and preferred stockholder of record as of March 24, 1998,
one nontransferable right for each common and/or preferred share
owned of record entitling the holder to purchase one share of
Common Stock for a price of $13.25 per share. In addition, each
common and preferred stockholder was afforded the opportunity to
over-subscribe to the extent of two additional shares, however, in
order for the over-subscription privilege to come into effect a
stockholder must have fully exercised the basic subscription
privilege. The offer expired on June 15, 1998.
NOTE 12 - SUBSEQUENT EVENTS
During February 1999, the Company acquired two additional real
properties. Both properties were acquired for a total cash
consideration of approximately $5,390,000. The basic term of the
net leases expire in 2007 and 2013, respectively and provide the
tenants with lease renewal options through 2017 and 2033,
respectively.
NOTE 13 - QUARTERLY FINANCIAL DATA (UNAUDITED):
Quarter Ended
-------------
Total
March 31 June 30 September 30 December 31 For Year
-------- ------- ------------ ----------- --------
(In thousands, except per share data)
1998
- ----
Revenues $1,745 $1,982 $4,277(b) $2,129 $10,133
Net income (a) 686 727 2,947(b) 2,058 6,418
Net income applicable to
common stockholders 324 364 2,583(b) 1,695 4,966
Net income per common share:
Basic .21 .21 .88 .58 2.16(c)
Diluted .21 .21 .82 .57 2.16(c)
(a) Net income reflects a provision for valuation adjustment of real estate
amounting to $156,832 for the quarter ending September 30, 1998.
(b) Includes $2,080,918, (or $.71 and $.58 per common share, basic and
diluted, respectively) from the early payoff in September 1998 of a
mortgage receivable acquired by the Company at a discount, representing
the unamortized balance of the discount. See Note 5.
(c) Calculated on weighted average shares outstanding for the year.
Quarter Ended
-------------
Total
March 31 June 30 September 30 December 31 For Year
-------- ------- ------------ ----------- --------
(In thousands, except per share data)
1997
- ----
Revenues $1,566 $1,567 $1,493 $1,659 $6,285
Net income 639 641 1,005 (a) 699 2,984
Net income applicable to
common stockholders 277 279 642 336 1,534
Net income per common share (b):
Basic .19 .18 .42 .22 1.01(c)
Diluted .18 .18 .42 .22 1.00(c)
(a) Net income includes gain on sale of real estate of $599,251 and is after
minority interest of $230,839 (substantially attributable to such gain).
See Note 3.
(b) The earnings per share amounts for the quarter ended March 31, 1997 have
been restated to comply with Statement of Financial Accounting Standards
No. 128, Earnings Per Share.
(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, 1998
Initial Cost Gross Amount at Which Carried At Life on Which
to Company December 31, 1998 Depreciation in
Latest Income
Statement Is
Accumulated Date Of Date Computed
Encumbrances Land Buildings Land Buildings Total Depreciation Construction Acquired (Years)
------------ ---- --------- ---- ----------- ------- ------------ ------------ -------- -------
Free Standing
Retail Locations:
Columbus, OH $4,288,263 $1,445,232 $5,780,926 $1,445,232 $5,780,926 $7,226,158 $162,588 1996 November 19, 1997 40
Ft. Myers, FL 3,166,123 1,013,463 4,053,848 1,013,463 4,053,848 5,067,311 215,364 1996 November 7, 1996 40
Miscellaneous 12,512,176 9,103,254 28,005,804 8,937,657 27,714,569 36,652,226 2,399,154 Various Various 40
Office Building:
New York, NY 4,487,647 1,343,792 5,375,166 1,343,792 5,375,166 6,718,958 106,103 1973 March 31, 1998 40
Miscellaneous - 181,021 724,086 181,021 724,086 905,107 3,771 1978 October 2, 1998 40
Apartment Building:
New York, NY 4,968,282 1,109,836 4,439,346 1,109,836 4,439,346 5,549,182 733,166 1910 June 14, 1994 27.5
Land Under
Improvements:
Miscellaneous - 435,201 - 435,201 - 435,201 - - January 19, 1995 -
Industrial:
Miami, FL - - 995,446 - 995,446 995,446 98,507 1967 January 19, 1995 40
----------- ----------- ----------- ----------- ----------- ----------- ----------
$29,422,491 $14,631,799 $49,374,622 $14,466,202 $49,083,387 $63,549,589 $3,718,653
=========== =========== =========== =========== =========== =========== ==========
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes To Schedule III
Consolidated Real Estate And Accumulated Depreciation
(a) Reconciliation of "Real Estate and Accumulated Depreciation"
Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
Investment in real estate:
Balance, beginning of year $50,851,566 $44,735,907 $25,454,336
Addition: Land and buildings 13,171,879 10,058,389 19,940,571
Deductions:
Cost of properties sold (317,024) (3,942,730) -
Valuation allowance (c) (156,832) - (659,000)
--------- -------------- -----------
Balance, end of year $ 63,549,589 $ 50,851,566 $ 44,735,907
============ ============ ============
Accumulated depreciation:
Balance, beginning of year $ 2,534,582 $ 1,846,694 $ 1,200,571
Addition: depreciation 1,184,071 893,123 646,123
Deduction: accumulated
depreciation related to
properties sold - (205,235) -
--------------- --------- -------------
Balance, end of year $ 3,718,653 $ 2,534,582 $ 1,846,694
============ ============ ============
(b) The aggregate cost of the properties is the same for federal income tax
purposes.
(c) During the years ended December 31, 1998 and 1996, the Company took
provisions for valuation adjustment of real estate totaling $156,832
and $659,000, respectively. See Note 4 to the consolidated financial
statements for other information.