Attached files
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8-K - ONE LIBERTY PROPERTIES INC | v206409_8k.htm |
EX-23.1 - ONE LIBERTY PROPERTIES INC | v206409_ex23-1.htm |
Exhibit
99.1
Item 6.
Selected Financial
Data.
The following table sets forth the
selected consolidated statement of operations data for each of the periods
indicated, all of which are derived from our audited consolidated financial
statements and related notes. The selected financial data for each of the three
years in the period ended December 31, 2009 should be read together with our
consolidated financial statements and related notes appearing elsewhere herein
and in “Management’s Discussion and Analysis of Financial Condition and Results
of Operations,” below, where this data is discussed in more
detail.
1
As of and for the Year Ended
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December 31,
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2009
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2008
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2007
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2006
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2005
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(Amounts
in Thousands, Except Per Share Data)
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OPERATING
DATA (Note a)
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Rental
revenues
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$ | 38,454 | $ | 35,450 | $ | 32,894 | $ | 28,064 | $ | 21,954 | ||||||||||
Equity
in earnings (loss) of unconsolidated joint ventures
(Note
b)
|
559 | 622 | 648 | (3,276 | ) | 2,102 | ||||||||||||||
Gain
on dispositions of real estate of unconsolidated joint
ventures
|
- | 297 | 583 | 26,908 | - | |||||||||||||||
Net
gain on sale of unimproved land, air rights and other
gains
|
- | 1,830 | - | 413 | 10,248 | |||||||||||||||
Income
from continuing operations
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12,054 | 9,633 | 7,443 | 29,157 | 16,552 | |||||||||||||||
Income
(loss) from discontinued operations
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7,587 | (4,741 | ) | 3,147 | 7,268 | 4,728 | ||||||||||||||
Net
income
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19,641 | 4,892 | 10,590 | 36,425 | 21,280 | |||||||||||||||
Weighted
average number of common shares outstanding:
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Basic
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10,651 | 10,183 | 10,069 | 9,931 | 9,838 | |||||||||||||||
Diluted
|
10,812 | 10,183 | 10,069 | 9,934 | 9,843 | |||||||||||||||
Net
income per common share – basic
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Income
from continuing operations
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$ | 1.13 | $ | .95 | $ | .74 | $ | 2.94 | $ | 1.68 | ||||||||||
Income
(loss) from discontinued operations
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.71 | (.47 | ) | .31 | .73 | .48 | ||||||||||||||
Net
income
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$ | 1.84 | $ | .48 | $ | 1.05 | $ | 3.67 | $ | 2.16 | ||||||||||
Net
income per common share – diluted
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Income
from continuing operations
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$ | 1.12 | $ | .95 | $ | .74 | $ | 2.94 | $ | 1.68 | ||||||||||
Income
(loss) from discontinued operations
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.70 | (.47 | ) | .31 | .73 | .48 | ||||||||||||||
Net
income
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$ | 1.82 | $ | .48 | $ | 1.05 | $ | 3.67 | $ | 2.16 | ||||||||||
Cash
distributions per share of common stock (Note c)
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$ | .08 | $ | 1.30 | $ | 2.11 | $ | 1.35 | $ | 1.32 | ||||||||||
Stock
distributions per share of common stock
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$ | .80 | - | - | - | - | ||||||||||||||
BALANCE
SHEET DATA
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Real
estate investments, net
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$ | 341,885 | $ | 349,206 | $ | 298,697 | $ | 305,573 | $ | 198,850 | ||||||||||
Properties
held for sale
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3,808 | 38,250 | 45,345 | 46,268 | 59,272 | |||||||||||||||
Investment
in unconsolidated joint ventures
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5,839 | 5,857 | 6,570 | 7,014 | 27,335 | |||||||||||||||
Cash
and cash equivalents
|
28,036 | 10,947 | 25,737 | 34,013 | 26,749 | |||||||||||||||
Available-for-sale
securities
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6,762 | 297 | 1,024 | 1,372 | 163 | |||||||||||||||
Total
assets
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408,686 | 429,105 | 406,634 | 422,037 | 330,583 | |||||||||||||||
Mortgages
and loan payable
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190,518 | 225,514 | 222,035 | 227,923 | 167,472 | |||||||||||||||
Line
of credit
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27,000 | 27,000 | - | - | - | |||||||||||||||
Total
liabilities
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228,558 | 265,130 | 235,395 | 241,912 | 175,064 | |||||||||||||||
Total
stockholders' equity
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180,128 | 163,975 | 171,239 | 180,125 | 155,519 |
2
As of and for the Year Ended
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December 31,
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2009
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2008
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2007
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2006
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2005
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(Amounts in Thousands, Except Per Share Data)
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OTHER
DATA (Note d)
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Funds
from operations
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$ | 23,272 | $ | 13,952 | $ | 18,645 | $ | 13,707 | $ | 26,658 | ||||||||||
Funds
from operations per common share:
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Basic
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$ | 2.19 | $ | 1.37 | $ | 1.85 | $ | 1.38 | $ | 2.71 | ||||||||||
Diluted
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$ | 2.15 | $ | 1.37 | $ | 1.85 | $ | 1.38 | $ | 2.71 | ||||||||||
Adjusted
funds from operations
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$ | 22,064 | $ | 12,458 | $ | 16,621 | $ | 11,594 | $ | 25,093 | ||||||||||
Adjusted
funds from operations per common share:
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Basic
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$ | 2.07 | $ | 1.22 | $ | 1.65 | $ | 1.17 | $ | 2.55 | ||||||||||
Diluted
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$ | 2.04 | $ | 1.22 | $ | 1.65 | $ | 1.17 | $ | 2.55 |
Note
a: Certain amounts reported in prior periods have been reclassified
to conform to the current year’s presentation, primarily the restatement of
prior periods for discontinued operations.
Note
b: For the year ended December 31, 2006, “Equity in earnings (loss)
of unconsolidated joint ventures” is after giving effect to $5.3 million, our
share of the mortgage prepayment premium expense incurred in connection with
dispositions of real estate of unconsolidated joint ventures. This
expense is reflected as interest expense on the books of the joint ventures and
is not netted against the $26.9 million gain on dispositions.
Note
c: 2007 includes a special cash distribution of $.67 per
share.
Note
d: We consider funds from operations (FFO) and adjusted funds from
operations (AFFO) to be relevant and meaningful supplemental measures of the
operating performance of an equity REIT, and they should not be deemed to be a
measure of liquidity. FFO and AFFO do not represent cash generated
from operations as defined by generally accepted accounting principles (GAAP)
and is not indicative of cash available to fund all cash needs, including
distributions. They should not be considered as an alternative to net
income for the purpose of evaluating our performance or to cash flows as a
measure of liquidity.
We
compute FFO in accordance with the “White Paper on Funds From Operations” issued
in April 2002 by the National Association of Real Estate Investment Trusts
(NAREIT). FFO is defined in the White Paper as “net income (computed
in accordance with generally accepting accounting principles), excluding gains
(or losses) from sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint
ventures will be calculated to reflect funds from operations on the same basis.”
In computing FFO, we do not add back to net income the amortization of costs in
connection with our financing activities or depreciation of non-real estate
assets. Since the NAREIT White Paper only provides guidelines for
computing FFO, the computation of FFO may vary from one REIT to another. We
compute AFFO by deducting from FFO our straightline rent accruals and
amortization of lease intangibles (including our share of our unconsolidated
joint ventures).
3
We
believe that FFO and AFFO are useful and standard supplemental measures of the
operating performance for equity REITs and are used frequently by securities
analysts, investors and other interested parties in evaluating equity REITs,
many of which present FFO and AFFO when reporting their operating
results. FFO and AFFO are intended to exclude GAAP historical cost
depreciation and amortization of real estate assets, which assures that the
value of real estate assets diminish predictability over time. In
fact, real estate values have historically risen and fallen with market
conditions. As a result, we believe that FFO and AFFO provide a
performance measure that when compared year over year, should reflect the impact
to operations from trends in occupancy rates, rental rates, operating costs,
interest costs and other matters without the inclusion of depreciation and
amortization, providing a perspective that may not be necessarily apparent from
net income. We also consider FFO and AFFO to be useful to us in
evaluating potential property acquisitions.
FFO and
AFFO do not represent net income or cash flows from operations as defined by
GAAP. FFO and AFFO should not be considered to be an alternative to
net income as a reliable measure of our operating performance; nor should FFO
and AFFO be considered an alternative to cash flows from operating, investing or
financing activities (as defined by GAAP) as measures of liquidity.
FFO and
AFFO do not measure whether cash flow is sufficient to fund all of our cash
needs, including principal amortization, capital improvements and distributions
to stockholders. FFO and AFFO do not represent cash flows from
operating, investing or financing activities as defined by GAAP.
Management
recognizes that there are limitations in the use of FFO and AFFO. In
evaluating the performance of our company, management is careful to examine GAAP
measures such as net income and cash flows from operating, investing and
financing activities. Management also reviews the reconciliation of
net income to FFO and AFFO.
The table
below provides a reconciliation of net income in accordance with GAAP to FFO and
AFFO, as calculated under the current NAREIT definition of FFO, for each of the
years in the five year period ended December 31, 2009 (amounts in
thousands):
2009
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2008
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2007
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2006
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2005
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Net
income (Note 1)
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$ | 19,641 | $ | 4,892 | $ | 10,590 | $ | 36,425 | $ | 21,280 | ||||||||||
Add:
depreciation of properties
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9,001 | 8,971 | 8,248 | 7,091 | 5,905 | |||||||||||||||
Add:
our share of depreciation in unconsolidated joint ventures
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323 | 322 | 329 | 716 | 1,277 | |||||||||||||||
Add:
amortization of deferred leasing costs
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64 | 64 | 61 | 43 | 101 | |||||||||||||||
Deduct:
gain on sales of real estate
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(5,757 | ) | - | - | (3,660 | ) | (1,905 | ) | ||||||||||||
Deduct:
gain on dispositions of real estate of unconsolidated joint
ventures
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- | (297 | ) | (583 | ) | (26,908 | ) | - | ||||||||||||
Funds
from operations (Note 1)
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23,272 | 13,952 | 18,645 | 13,707 | 26,658 | |||||||||||||||
Deduct:
straight line rent accruals and amortization of lease
intangibles
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(1,151 | ) | (1,394 | ) | (1,924 | ) | (1,950 | ) | (1,282 | ) | ||||||||||
Deduct:
our share of straight line rent accruals and amortization of lease
intangibles of unconsolidated joint ventures
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(57 | ) | (100 | ) | (100 | ) | (163 | ) | (283 | ) | ||||||||||
Adjusted
funds from operations (Note 1)
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$ | 22,064 | $ | 12,458 | $ | 16,621 | $ | 11,594 | $ | 25,093 |
Note
1: For the year ended December 31, 2008, net income, FFO and AFFO are
after $6 million of impairment charges. For the year ended December
31, 2006, net income, FFO and AFFO are after giving effect to $5.3 million, our
share of the mortgage prepayment premium expense incurred in connection with the
dispositions of real estate of unconsolidated joint ventures. This
expense is reflected as interest expense on the books of the joint ventures and
not netted against gain on dispositions. For the year ended December 31, 2005,
net income, FFO and AFFO include $10.2 million from the gain on sale of air
rights.
4
The table
below provides a reconciliation of net income per common share (on a diluted
basis) in accordance with GAAP to FFO and AFFO.
2009
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2008
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2007
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2006
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2005
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Net
income (Note 2)
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$ | 1.82 | $ | .48 | $ | 1.05 | $ | 3.67 | $ | 2.16 | ||||||||||
Add:
depreciation of properties
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.83 | .88 | .82 | .71 | .60 | |||||||||||||||
Add:
our share of depreciation in unconsolidated joint ventures
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.03 | .03 | .03 | .07 | .13 | |||||||||||||||
Add:
amortization of deferred leasing costs
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- | .01 | .01 | .01 | .01 | |||||||||||||||
Deduct:
gain on sales of real estate
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(.53 | ) | - | - | (.37 | ) | (.19 | ) | ||||||||||||
Deduct:
gain on dispositions of real estate of unconsolidated joint
ventures
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- | (.03 | ) | (.06 | ) | (2.71 | ) | - | ||||||||||||
Funds
from operations (Note 2)
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2.15 | 1.37 | 1.85 | 1.38 | 2.71 | |||||||||||||||
Deduct: straight
line rent accruals and amortization of lease intangibles
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(.11 | ) | (.14 | ) | (.19 | ) | (.20 | ) | (.13 | ) | ||||||||||
Deduct:
our share of straight line rent accruals and amortization of lease
intangibles of unconsolidated joint ventures
|
- | (.01 | ) | (.01 | ) | (.01 | ) | (.03 | ) | |||||||||||
Adjusted
funds from operations (Note 2)
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$ | 2.04 | $ | 1.22 | $ | 1.65 | $ | 1.17 | $ | 2.55 |
Note
2: For the year ended December 31, 2008, net income, FFO and AFFO is
after $.59 of impairment charges. For the year ended December 31,
2006, net income, FFO and AFFO is after $.53, our share of the mortgage
prepayment premium expense. For the year ended December 31, 2005, net
income, FFO and AFFO include $1.04 from the gain on sale of air
rights. See Note 1 above.
5
Item
7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
Comparison
of Years Ended December 31, 2009 and December 31, 2008
Rental
Revenues
Rental income. Rental income
increased by $3 million, or 8.5%, to $38.5 million for the year ended December
31, 2009, from $35.5 million for the year ended December 31,
2008. The increase in rental revenues is primarily due to rental
revenues of $3.4 million earned during the year ended December 31, 2009 on
twelve properties acquired by us during 2008. The increase in rental
income was offset by a decrease in rent payments from two tenants adversely
affected by the recession and by a lease termination in June 2009, for which we
received the lease termination fee referred to below.
Lease termination fee. The
lease termination fee income received in 2009 resulted from a $1,905,000 lease
termination payment from a retail tenant that had been paying its rent on a
current basis, but had vacated the property in March 2009, offset by the write
off of the entire balance of the unbilled rent receivable and intangible lease
asset related to this property, aggregating $121,000. There was no
comparable fee income in 2008. This property was released effective
November 9, 2009.
Operating
Expenses
Depreciation and amortization
expense. Depreciation and amortization expense increased by $688,000, or
8.9%, to $8.4 million for the year ended December 31, 2009, from $7.7 million
for the year ended December 31, 2008. The increase was primarily due
to depreciation and amortization increases of $660,000 on twelve properties
acquired during 2008, as well as from an increase in depreciation expense of
building improvements.
Real estate expenses.
Real estate expenses increased by $312,000, or 88.1%, to $666,000 for the
year ended December 31, 2009, from $354,000 for the year ended December 31,
2008, resulting primarily from real estate taxes and utilities related to our
vacant property. In addition, the year ended December 31, 2009
includes real estate taxes for another property which became subject to a lease
with a new tenant under which we are responsible for the real estate taxes, and
an increase in repairs, maintenance and other operating expenses at several
properties.
Other
Income and Expenses
Gain on dispositions of real estate
of unconsolidated joint ventures. In the year ended December 31, 2008, we
recognized a net gain of $297,000 on the sale by a joint venture of a vacant
property. There was no comparable gain in the year ended December 31,
2009.
Interest and other income.
Interest and other income decreased by $175,000, or 32.8%, to $358,000
for the year ended December 31, 2009, from $533,000 for the year ended December
31, 2008. The decrease resulted primarily because we had less cash
available for investment as we applied available cash to purchase nine
properties in September 2008. In addition, interest rates earned on
short-term cash equivalents declined significantly. Offsetting the
decrease in interest income was $110,000 of consulting fee income and $37,000
received for granting an easement at one of our properties, both recorded in
2009.
6
Interest expense. Interest
expense decreased by $225,000, or 1.7%, to $13.4 million for the year ended
December 31, 2009, from $13.6 million for the year ended December 31, 2008. This
decrease resulted from the payoff in full of two mortgage loans during the year,
as well as from the monthly principal amortization of other
mortgages. These decreases were offset by interest expense on fixed
rate mortgages placed on three properties between September 2008 and March
2009. In addition, at the end of September 2008, we borrowed $34
million under our line of credit which was applied to the purchase of eight
properties, of which $7 million was repaid in November 2008 with a portion of
the proceeds from a mortgage financing of one of our
properties. Accordingly, interest expense relating to our line of
credit increased by $297,000 during the year ended December 31,
2009.
Amortization of deferred financing
costs. Amortization of deferred financing costs increased by
$146,000, or 25.3%, to $724,000 for the year ended December 31, 2009, from
$578,000 for the year ended December 31, 2008. The increase results
primarily from accelerated amortization of deferred financing costs of $118,000
relating to a mortgage loan that was refinanced during 2009 and from $37,000
relating to a mortgage loan that was repaid in full during
2009.
Income from settlement with former
president. In November 2009, civil litigations commenced by us
as plaintiff, against our former president and chief executive officer, arising
out of his inappropriate financial dealings, were settled, and we received
$900,000 in cash and 5,641 shares of our common stock valued at $51,000 (based
on the November 23, 2009 closing price). We were also assigned an
interest in a real estate consulting venture, the value of which was fully
reserved against.
Gain on sale of excess unimproved
land. During the year ended December 31, 2008, we sold five
acres of excess unimproved land that we acquired as part of the purchase of a
flex building in 2000 and recognized a gain of $1.8 million. There
was no such gain in the year ended December 31, 2009.
Discontinued
Operations
Income
from discontinued operations increased by $12.3 million, or 260%, to $7.6
million for the year ended December 31, 2009 from a loss of $4.7 million for the
year ended December 31, 2008 and includes the operations of ten of our
properties, five of which were conveyed to the mortgagee, three of which were
sold during the year ended December 31, 2009 and two of which were sold
subsequent to 2009.
In July
2009, non-recourse mortgages, secured and cross collateralized by five of our
properties that had formerly been leased to Circuit City Stores Inc., had an
outstanding balance of $8,706,000. Circuit City Stores, Inc. filed
for protection under the federal bankruptcy laws in November 2008 and rejected
leases for two of our properties in December 2008 and rejected leases for the
remaining three properties in March 2009. No payments were made on these
mortgages from December 1, 2008 and a letter of default was received on March
16, 2009. In July 2009, these properties were conveyed to the mortgagee by
deeds-in-lieu of foreclosure and we and our five wholly-owned subsidiaries which
owned the Circuit City properties were released from all obligations, including
principal, interest and real estate taxes due. We had accrued mortgage interest
expense totaling $297,000 for the period December 2008 through July 7, 2009 and
accrued real estate tax expense totaling $246,000 on these five properties. The
carrying value of the portfolio of the properties transferred of $8,075,000, net
of the $5,231,000 of impairment charges taken at December 31, 2008, approximated
their fair value at the time of transfer. During the year ended December 31,
2009, we recognized an $897,000 gain based on the excess of the carrying amount
of the payables (mortgage, real estate taxes and mortgage interest) over the
fair value of the portfolio of properties transferred. The gain also reflects
the write off of deferred costs and escrows relating to these mortgages totaling
$277,000.
7
In
addition to the $5,231,000 impairment charge taken during the year ended
December 31, 2008 against the Circuit City properties discussed above, an
impairment charge of $752,000 was taken against another property in 2008, where
a retail tenant that had been paying its rent on a current basis had vacated the
property in 2006. In March 2009, we sold this property and recorded an
impairment charge of $229,000 to recognize the loss.
In
October 2009, in unrelated transactions, we sold two properties and recognized
gains for accounting purposes totaling $5,757,000. There were no
comparable gains in the year ended December 31, 2008.
Comparison
of Years Ended December 31, 2008 and December 31, 2007
Rental
Revenues
Rental revenues. Rental
revenues increased by $2.6 million, or 7.8%, to $35.5 million for the year ended
December 31, 2008, from $32.9 million for the year ended December 31,
2007. The increase in rental revenues is substantially due to rental
revenues of $1.7 million earned during the year ended December 31, 2008 on
twelve properties acquired by us during 2008. The increase in 2008
rental income as compared to 2007 also resulted from a $253,000 write off of the
intangible lease liability related to a property where we directly assumed in
December 2008 the sublease for a property leased by us to Circuit City and
subleased by Circuit City to a furniture retailer. Additionally, in
2008 and 2007, we wrote off the entire balance of unbilled rent receivable
relating to several properties.
Operating
Expenses
Depreciation and amortization
expense. Depreciation and amortization expense increased by $403,000, or
5.5%, to $7.7 million for the year ended December 31, 2008, from $7.3 million
for the year ended December 31, 2007. The increase was primarily due
to depreciation and amortization of $370,000 on twelve properties acquired
between January and September 2008.
General and administrative expenses.
General and administrative expenses decreased by $13,000, or .2%, to
$6.508 million for the year ended December 31, 2008, from $6.521 million for the
year ended December 31, 2007. The decrease is due to a number of
factors, including: (a) a $100,000 decrease paid under the Compensation and
Services Agreement; (b) a $91,000 decrease in Federal excise tax expense; and
(c) a $64,000 decrease in state tax expense. These decreases were
offset by several factors, including: (i) a $133,000 increase in payroll and
payroll related expenses for full-time employees;and (ii) a $105,000 increase in
professional fees incurred in connection with civil litigations commenced by us
as plaintiff, arising out of the activities of our former president and chief
executive officer.
Real estate expenses.
Real estate expenses increased by $165,000, or 87.3%, to $354,000 for the
year ended December 31, 2008, from $189,000 for the year ended December 31,
2007, resulting primarily from real estate taxes for three of our properties,
including one vacant property and a property which became subject to a lease
with a new tenant under which we are responsible for the real estate
taxes.
8
Other
Income and Expenses
Gain on dispositions of real estate
of unconsolidated joint ventures. In the years ended December 31, 2008
and 2007, two of our joint ventures each sold a vacant property and we
recognized gains on sale of $297,000 and $583,000, respectively.
Interest and other income.
Interest and other income decreased by $1.2 million, or 70%, to $533,000
for the year ended December 31, 2008, from $1.8 million for the year ended
December 31, 2007. Due to the credit crisis, interest rates steadily
declined over the past several quarters resulting in a decrease in the income we
earn on our investment in short-term cash equivalents. In addition,
we had less cash available for investment after we paid a special distribution
of $6.7 million to our stockholders in October 2007 and purchased nine
properties in September 2008. Also contributing to the decrease in
interest and other income was the inclusion of a $118,000 gain on the sale of
available-for-sale securities in the year ended December 31, 2007. We
did not have a similar sale of securities in 2008.
Interest expense. Interest
expense increased by $100,000, or .7%, to $13.6 million for the year ended
December 31, 2008, from $13.5 million for the year ended December 31, 2007. At
the end of September 2008, we borrowed $34 million under our credit facility
which was applied to the purchase of eight Office Depot properties, of which $7
million was repaid in November 2008 with a portion of the proceeds from a
mortgage financing of one of our properties. Accordingly, interest
expense relating to our credit facility increased by $360,000 during the year
ended December 31, 2008. The increase was also due to interest
expense on fixed rate mortgages placed on three properties between August 2007
and September 2008, and the assumption of two fixed rate mortgages in connection
with the purchase of two properties in January and February
2008. These increases were offset from the payoff in full of two
mortgage loans, as well as from the monthly principal amortization of other
mortgages.
Gain on sale of excess unimproved
land. During the year ended December 31, 2008, we sold five
acres of excess land that we acquired as part of the purchase of a flex building
in 2000 and recognized a gain of $1.8 million. There was no such gain
in the year ended December 31, 2007.
Discontinued
Operations
Income
from discontinued operations decreased by $7.9 million, or 251%, to a loss of
$4.7 million for the year ended December 31, 2008 from income of $3.1 million
for the year ended December 31, 2007 and includes the operations of ten of our
properties, five of which were conveyed to the mortgagee (Circuit City
properties) during the year ended December 31, 2009, three of which were sold
during the year ended December 31, 2009 and two of which were sold subsequent to
2009. The decrease in discontinued operations results substantially
from $6 million of impairment charges we recorded during the year ended December
31, 2008 relating to four of these properties. An impairment charge
of $5.2 million was recorded relating to three of our Circuit City properties
and $752,000 was related to a retail furniture property. Circuit City rejected
leases for two of the properties in December 2008 and rejected the lease for the
third property in March 2009.Our analysis determined that the other two
properties leased to Circuit City which were rejected in March 2009, did not
require an impairment charge. Although the retail furniture property
has been vacant, the tenant is current in its rent payments. There was no
impairment charge recorded in the year ended December 31, 2007.
9
Liquidity
and Capital Resources
Our
capital sources include income from our operating activities, cash and cash
equivalents, available-for-sale securities, borrowings under a revolving credit
facility, refinancing existing mortgage loans and obtaining mortgage loans
secured by our unencumbered properties. Our available liquidity at
December 31, 2009 was approximately $34.8 million, including $28 million of cash
and cash equivalents and $6.8 million of marketable securities. Our
available liquidity as of March 8, 2010 (giving effect to the acquisition by us
of a community shopping center on February 24, 2010) was approximately $30
million, including cash and available-for-sale securities.
Liquidity
and Financing
We expect
to meet all of our capital needs with cash flow generated by our operating
activities, primarily, rental income. To the extent that cash
provided by our operations is not adequate to cover all of our capital needs
(which we do not anticipate), we will be required to use our available cash and
cash equivalents and/or sell our marketable securities to pay our capital
needs.
Mortgage
loans aggregating $18.6 million in principal amount mature in 2010, of which a
$2.4 million mortgage loan was repaid in January 2010, a $4.5 million mortgage
loan matured on March 1, 2010 and a $9 million mortgage loan is due on April 1,
2010. Additionally, one mortgage loan, with an outstanding principal
amount of $1.7 million, has been, since October, 2009, callable on ninety days
notice by the mortgagee. We are seeking to refinance or extend the
mortgage loans which have or will become due in 2010,as well as the mortgage
loan due upon demand, and we intend to repay the amount not refinanced or
extended from our existing cash position, including our marketable
securities. In addition, at December 31, 2009, we owned unencumbered
income producing real estate with an aggregate carrying value, before
accumulated depreciation, of $74.3 million, which we may seek to finance if we
determine we need additional liquidity.
We
continually seek to refinance existing mortgage loans on terms we deem
acceptable, in order to generate additional liquidity. Additionally,
in the normal course of our business, we sell properties when we determine that
it is in our best interests, which also generates additional liquidity. Further,
since each of our encumbered properties is subject to a non-recourse mortgage
(with standard carve outs), if our in-house evaluation of the market value of
such property is substantially less than the principal balance outstanding on
the mortgage loan, we may determine to convey such property to the mortgagee in
order to terminate our mortgage obligations, including payment of interest,
principal and real estate taxes, with respect to such property.
Our
credit facility expires on March 31, 2010. Currently, there is
$27million outstanding under our credit facility. We have negotiated
a modification and extension of our credit facility with our lending syndicate
and have reached an understanding on all material terms, including among other
items, a two year extension. For a discussion of all of the material
terms of the proposed modification and extension of the credit facility, see
"Credit Facility"
below. We are confident the modification and extension of the credit facility
will be consummated, and that our lending syndicate will continue our current
credit facility until the modification and extension is consummated. In the
event that we do not consummate the modification and extension, our lending
syndicate may demand prompt re-payment of the $27 million outstanding under the
credit facility. If that occurs and we are unable to fully repay the
$27 million outstanding as we have been unable to(i) obtain a new credit
facility, (ii) secure adequate funds by refinancing existing mortgages and/or
mortgaging unencumbered properties, or(iii) unable to raise funds by other means
(whether by equity or debt offerings or securing short term financing, etc.), we
will be required to sell certain of our properties at prices we may deem
inadequate in order to secure funds to repay all amounts outstanding under our
credit facility.
10
Typically,
we utilize funds from a credit facility to acquire a property and, thereafter
secure long term, fixed rate mortgage debt on such property. We apply the
proceeds from the mortgage loan to repay borrowings under the credit facility,
thus providing us with the ability to re-borrow under the credit facility for
the acquisition of additional properties. As a result, in order to grow our
business, it is important to have a credit facility in place in order for us to
pursue an active acquisition program. If we are unable to consummate
the modification and extension of our credit facility or obtain a new credit
facility, then unless we can raise additional equity or long term debt, of which
there is no assurance, we will be significantly constrained in our ability to
acquire properties. In addition, in the current credit environment,
borrowers are limited in their ability to obtain mortgage
financing. If we continue to be limited in obtaining mortgage
financing (either for acquisitions or with respect to our properties), it will
also adversely affect our ability to acquire additional properties. Accordingly,
our long term liquidity is dependent (i) upon our ability to document the
modification and extension of our credit facility or obtain a new credit
facility,(ii) the increased availability of long term, institutional mortgage
financing, or (iii) our ability to raise additional equity or long term
debt.
Credit
Facility
We are a
party to a credit agreement, as amended, with VNB New York Corp., Bank Leumi,
USA, Manufacturers and Traders Trust Company and Israel Discount Bank of New
York, which provides for a $62.5 million revolving credit
facility. The credit facility is available to pay off existing
mortgages, to fund the acquisition of additional properties or to invest in
joint ventures. The facility matures on March 31,
2010. Borrowings under the facility bear interest at the lower of
LIBOR plus 2.15% or the bank’s prime rate and there is an unused facility fee of
¼% per annum. Net proceeds received from the sale or refinancing of
properties are required to be used to repay amounts outstanding under the
facility if proceeds from the facility were used to purchase or refinance the
property. The facility is guaranteed by our subsidiaries that own
unencumbered properties and is secured by the outstanding stock of subsidiary
entities. As of December 31, 2009 and March 10, 2010, there was $27
million outstanding under the facility.
We have
negotiated a modification and extension of our credit facility with our lending
syndicate and have agreed on all of the material terms. The proposed
modification and extension will reduce the availability under the facility from
$62.5 million to $40 million, extend the expiration date from March 31, 2010 to
March 31, 2012, increase the interest rate from the lower of LIBOR plus 2.15% or
the banks prime rate to 90 day LIBOR plus 3%, with a minimum interest rate of 6%
per annum. Until we have executed the modification and extension, our lending
syndicate has advised us that our current credit facility will remain in place,
but we will not be permitted to draw down any additional funds under our credit
facility. Although, we are confident that the modification and extension will be
documented substantially in accordance with the agreed upon terms, there can be
no assurance that it will be consummated. In the event, that the modification
and extension is not consummated, we expect to have sufficient liquidity
available to us to fully repay the $27 million outstanding under our credit
facility. As a result, we will be required to seek liquidity from other sources,
including refinancing mortgages, financing unencumbered properties, selling
assets, raising equity or obtaining short or long term debt.
Contractual
Obligations
The
following sets forth our contractual cash obligations as of December 31, 2009,
which relate to interest and amortization payments and balances due at maturity
under outstanding mortgages secured by our properties for the periods indicated.
It also includes the amount due at maturity under our credit facility and does
not include the $17.7 million mortgage we assumed in connection with the
purchase of a community shopping center we acquired on February 24, 2010
(amounts in thousands):
11
Payment due by period
|
||||||||||||||||||||
Contractual Obligations
|
Total
|
Less than
1 Year
|
1-3
Years
|
4-5
Years
|
More than
5 Years
|
|||||||||||||||
Mortgages
payable – interest and amortization
|
$ | 92,011 | $ | 16,220 | $ | 32,158 | $ | 29,871 | $ | 13,762 | ||||||||||
Mortgages
payable – balances due at maturity
|
154,335 | 18,591 | 35,287 | 11,040 | 89,417 | |||||||||||||||
Credit
facility
|
27,000 | 27,000 | - | - | - | |||||||||||||||
Total
|
$ | 273,346 | $ | 61,811 | $ | 67,445 | $ | 40,911 | $ | 103,179 |
As of
December 31, 2009, we had outstanding approximately $190.5 million in mortgage
indebtedness (excluding mortgage indebtedness of our unconsolidated joint
ventures), all of which is non-recourse (subject to standard
carve-outs). We expect that debt service payments of approximately
$48.4 million due in the next three years will be paid primarily from cash
generated from our operations. We anticipate that loan maturities of
approximately $80.9 million, including $27 million due under our credit
facility, due in the next three years will be paid primarily from cash and cash
equivalents and mortgage financings and refinancings. If we are not
successful in refinancing our existing indebtedness or financing our
unencumbered properties, our cash flow, funds available under our credit
facility and available cash, if any, may not be sufficient to repay all maturing
debt when payments become due, and we may be forced to sell additional equity,
obtain long or short term debt, or dispose of properties on disadvantageous
terms.
In
addition, we, as ground lessee, are obligated to pay rent under a ground lease
for a property owned in fee by an unrelated third party. The annual
fixed leasehold rent expense is as follows (amounts in thousands):
Total
|
2010
|
2011
|
2012
|
2013
|
2014
|
More than
5 years
|
||||||||||||||||||||
$ | 3,487 | $ | 297 | $ | 297 | $ | 297 | $ | 297 | $ | 328 | $ | 1,971 |
We had no
outstanding contingent commitments, such as guarantees of indebtedness, or any
other contractual cash obligations at December 31, 2009.
Cash
Distribution Policy
We have
elected to be taxed as a REIT under the Internal Revenue Code of 1986, as
amended. To qualify as a REIT, we must meet a number of
organizational and operational requirements, including a requirement that we
distribute currently at least 90% of our ordinary taxable income to our
stockholders (pursuant to Internal Revenue Procedures). It
is our current intention to comply with these requirements and maintain our REIT
status. As a REIT, we generally will not be subject to corporate
federal, state or local income taxes on taxable income we distribute currently
(in accordance with the Internal Revenue Code and applicable regulations) to our
stockholders. If we fail to qualify as a REIT in any taxable year, we
will be subject to federal, state and local income taxes at regular corporate
rates and may not be able to qualify as a REIT for four subsequent tax
years. Even if we qualify for federal taxation as a REIT, we may be
subject to certain state and local taxes on our income and to federal income
taxes on our undistributed taxable income (i.e., taxable income not distributed
in the amounts and in the time frames prescribed by the Internal Revenue Code
and applicable regulations there under) and are subject to federal excise taxes
on our undistributed taxable income.
12
It is our
intention to pay to our stockholders within the time periods prescribed by the
Internal Revenue Code no less than 90%, and, if possible, 100% of our annual
taxable income, including taxable gains from the sale of real estate and
recognized gains on the sale of securities. It will continue to be
our policy to make sufficient distributions to stockholders in order for us to
maintain our REIT status under the Internal Revenue Code.
In 2008,
our board determined that, in view of the economic environment, we should
conserve our capital. As a result, all of our dividends declared in 2009
consisted of 90% stock and 10% cash, pursuant to Revenue Procedures issued by
the Internal Revenue Service. On March 9, 2010, our board of
directors declared a quarterly dividend of $.30 per share payable in cash on
April 6, 2010 to record holders on March 26, 2010. Our board of
directors reviews the dividend policy at each regularly scheduled quarterly
board meeting to determine if any changes to our dividend should be made and
whether the distribution should consist of all cash or a combination of cash and
stock.
Off-Balance Sheet
Arrangements
None.
Critical
Accounting Policies
Our
significant accounting policies are more fully described in Note 2 to our
Consolidated Financial Statements, provided in this annual report on Form
10-K. Certain of our accounting policies are particularly important
to an understanding of our financial position and results of operations and
require the application of significant judgment by our management; as a result
they are subject to a degree of uncertainty. These critical accounting policies
include the following, discussed below.
Purchase
Accounting for Acquisition of Real Estate
The fair
value of real estate acquired is allocated to acquired tangible assets,
consisting of land and building, and identified intangible assets and
liabilities, consisting of the value of above-market and below-market leases and
other value of in-place leases based in each case on their fair
values. The fair value of the tangible assets of an acquired property
(which includes land and building) is determined by valuing the property as if
it were vacant, and the “as-if-vacant” value is then allocated to land and
building based on management’s determination of relative fair values of these
assets. We assess fair value of the lease intangibles based on
estimated cash flow projections that utilize appropriate discount rates and
available market information. The allocation made by management may
have a positive or negative effect on net income and may have an effect on the
assets and liabilities on the balance sheet.
13
Revenues
Our
revenues, which are substantially derived from rental income, include rental
income that our tenants pay in accordance with the terms of their respective
leases reported on a straight line basis over the term of each
lease. It is our policy not to record straight-line rent beyond the
expected useful life of a building. Since many of our leases provide
for rental increases at specified intervals, straight line basis accounting
requires us to record as an asset and include in revenues, unbilled rent
receivables which we will only receive if the tenant makes all rent payments
required through the expiration of the term of the
lease. Accordingly, our management must determine, in its judgment,
that the unbilled rent receivable applicable to each specific tenant is
collectible. We review unbilled rent receivables on a quarterly basis
and take into consideration the tenant’s payment history and the financial
condition of the tenant. In the event that the collectability of an
unbilled rent receivable is in doubt, we are required to take a reserve against
the receivable or a direct write off of the receivable, which has an adverse
affect on net income for the year in which the reserve or direct write off is
taken, and will decrease total assets and stockholders’ equity.
Value
of Real Estate Portfolio
We review
our real estate portfolio on a quarterly basis to ascertain if there are any
indicators of impairment to the value of any of our real estate assets,
including deferred costs and intangibles, in order to determine if there is any
need for an impairment charge. In reviewing the portfolio, we examine
the type of asset, the current financial statements or other available financial
information of the tenant, the economic situation in the area in which the asset
is located, the economic situation in the industry in which the tenant is
involved and the timeliness of the payments made by the tenant under its lease,
as well as any current correspondence that may have been had with the tenant,
including property inspection reports. For each real estate asset
owned for which indicators of impairment exist, if the undiscounted cash flow
analysis yields an amount which is less than the asset’s carrying amount, an
impairment loss is recorded to the extent that the estimated fair value is less
than the asset’s carrying amount. The estimated fair value is
determined using a discounted cash flow model of the expected future cash flows
through the useful life of the property. Real estate assets that are
expected to be disposed of are valued at the lower of carrying amount or fair
value less costs to sell on an individual asset basis. We generally do not
obtain any independent appraisals in determining value but rely on our own
analysis and valuations. Any impairment charge taken with respect to any part of
our real estate portfolio will reduce our net income and reduce assets and
stockholders’ equity to the extent of the amount of any impairment charge, but
it will not affect our cash flow or our distributions until such time as we
dispose of the property.
Item 8.
Financial Statements
and Supplementary Data.
The
following financial statements and financial statement schedule of the Company
are included in this report:
- Report
of Independent Registered
|
||
Public
Accounting Firm
|
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
through F-6
|
|
Notes
to Consolidated Financial Statements
|
F-7
through F-31
|
|
- Schedule
III-Real Estate and Accumulated Depreciation
|
F-32
through
F-34
|
14
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of
One
Liberty Properties, Inc. and Subsidiaries
We have
audited the accompanying consolidated balance sheets of One Liberty Properties,
Inc. and Subsidiaries (the "Company") as of December 31, 2009 and 2008, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31,
2009. Our audits also included the financial statement schedule
listed in the Index under Item 8. These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of One Liberty
Properties, Inc. and Subsidiaries at December 31, 2009 and 2008, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2009, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), One Liberty Properties, Inc. and Subsidiaries’
internal control over financial reporting as of December 31, 2009, based on
criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report
dated March 12, 2010 (not provided herein) expressed an unqualified opinion
thereon.
/s/
Ernst & Young LLP
|
New York,
New York
March 12,
2010
except
for Note 4, as to which the date is December 28, 2010
F-1
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated
Balance Sheets
(Amounts
in Thousands, Except Per Share Data)
December 31,
|
||||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Real
estate investments, at cost
|
||||||||
Land
|
$ | 87,071 | $ | 87,071 | ||||
Buildings
and improvements
|
301,100 | 300,524 | ||||||
388,171 | 387,595 | |||||||
Less
accumulated depreciation
|
46,286 | 38,389 | ||||||
341,885 | 349,206 | |||||||
Properties
held for sale
|
3,808 | 38,250 | ||||||
Assets
related to properties held for sale
|
146 | 2,297 | ||||||
Investment
in unconsolidated joint ventures
|
5,839 | 5,857 | ||||||
Cash
and cash equivalents
|
28,036 | 10,947 | ||||||
Available-for-sale
securities (including treasury bills of $3,999 in 2009)
|
6,762 | 297 | ||||||
Unbilled
rent receivable
|
10,560 | 9,455 | ||||||
Unamortized
intangible lease assets
|
7,157 | 8,018 | ||||||
Escrow,
deposits and other assets and receivables
|
2,471 | 2,055 | ||||||
Investment
in BRT Realty Trust at market (related party)
|
189 | 111 | ||||||
Unamortized
deferred financing costs
|
1,833 | 2,612 | ||||||
$ | 408,686 | $ | 429,105 | |||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Liabilities:
|
||||||||
Mortgages
payable
|
$ | 190,518 | $ | 207,553 | ||||
Mortgages
payable – properties held for sale
|
- | 17,961 | ||||||
Line
of credit
|
27,000 | 27,000 | ||||||
Dividends
payable
|
2,456 | 2,239 | ||||||
Accrued
expenses and other liabilities
|
3,757 | 5,143 | ||||||
Unamortized
intangible lease liabilities
|
4,827 | 5,234 | ||||||
Total
liabilities
|
228,558 | 265,130 | ||||||
Commitments
and contingencies
|
- | - | ||||||
Stockholders'
equity:
|
||||||||
Preferred
stock, $1 par value; 12,500 shares authorized; none issued
|
- | - | ||||||
Common
stock, $1 par value; 25,000 shares authorized;
10,879
and 9,962 shares issued and outstanding
|
10,879 | 9,962 | ||||||
Paid-in
capital
|
143,272 | 138,688 | ||||||
Accumulated
other comprehensive income (loss)
|
191 | (239 | ) | |||||
Accumulated
undistributed net income
|
25,786 | 15,564 | ||||||
Total
stockholders' equity
|
180,128 | 163,975 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 408,686 | $ | 429,105 |
See
accompanying notes.
F-2
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated
Statements of Income
(Amounts
in Thousands, Except Per Share Data)
Year Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Revenues:
|
||||||||||||
Rental
income
|
$ | 38,454 | $ | 35,450 | $ | 32,894 | ||||||
Lease
termination fee
|
1,784 | - | - | |||||||||
Total
revenues
|
40,238 | 35,450 | 32,894 | |||||||||
Operating
expenses:
|
||||||||||||
Depreciation
and amortization
|
8,429 | 7,741 | 7,338 | |||||||||
General
and administrative (including $2,188, $2,188 and $2,290, respectively, to
related party)
|
6,540 | 6,508 | 6,521 | |||||||||
Real
estate expenses
|
666 | 354 | 189 | |||||||||
Leasehold
rent
|
308 | 308 | 308 | |||||||||
Total
operating expenses
|
15,943 | 14,911 | 14,356 | |||||||||
Operating
income
|
24,295 | 20,539 | 18,538 | |||||||||
Other
income and expenses:
|
||||||||||||
Equity
in earnings of unconsolidated joint ventures
|
559 | 622 | 648 | |||||||||
Gain
on dispositions of real estate – unconsolidated joint
ventures
|
- | 297 | 583 | |||||||||
Interest
and other income
|
358 | 533 | 1,776 | |||||||||
Interest:
|
||||||||||||
Expense
|
(13,385 | ) | (13,610 | ) | (13,510 | ) | ||||||
Amortization
of deferred financing costs
|
(724 | ) | (578 | ) | (592 | ) | ||||||
Income
from settlement with former president
|
951 | - | - | |||||||||
Gain
on sale of excess unimproved land
|
- | 1,830 | - | |||||||||
Income
from continuing operations
|
12,054 | 9,633 | 7,443 | |||||||||
Discontinued
operations:
|
||||||||||||
Income
from operations
|
1,162 | 1,242 | 3,147 | |||||||||
Impairment
charges
|
(229 | ) | (5,983 | ) | - | |||||||
Gain
on troubled mortgage restructuring, as a result of conveyance to
mortgagee
|
897 | - | - | |||||||||
Net
gain on sales
|
5,757 | - | - | |||||||||
Income
(loss) from discontinued operations
|
7,587 | (4,741 | ) | 3,147 | ||||||||
Net
income
|
$ | 19,641 | $ | 4,892 | $ | 10,590 | ||||||
Weighted
average number of common shares outstanding:
|
||||||||||||
Basic
|
10,651 | 10,183 | 10,069 | |||||||||
Diluted
|
10,812 | 10,183 | 10,069 | |||||||||
Net
income per common share – basic:
|
||||||||||||
Income
from continuing operations
|
$ | 1.13 | $ | .95 | $ | .74 | ||||||
Income
(loss) from discontinued operations
|
.71 | (.47 | ) | .31 | ||||||||
Net
income per common share
|
$ | 1.84 | $ | .48 | $ | 1.05 | ||||||
Net
income per common share – diluted:
|
||||||||||||
Income
from continuing operations
|
$ | 1.12 | $ | .95 | $ | .74 | ||||||
Income
(loss) from discontinued operations
|
.70 | (.47 | ) | .31 | ||||||||
Net
income per common share
|
$ | 1.82 | $ | .48 | $ | 1.05 | ||||||
Cash
distributions per share of common stock
|
$ | .08 | $ | 1.30 | $ | 2.11 | ||||||
Stock
distributions per share of common stock
|
$ | .80 | $ | - | $ | - |
See
accompanying notes.
F-3
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated
Statements of Stockholders' Equity
For the
Three Years Ended December 31, 2009
(Amounts
in Thousands, Except Per Share Data)
Common
Stock
|
Paid-in
Capital
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Accumulated
Undistributed
Net Income
|
Total
|
||||||||||||||||
Balances,
December 31, 2006
|
$ | 9,823 | $ | 134,826 | $ | 935 | $ | 34,541 | $ | 180,125 | ||||||||||
Cash
distributions – common stock ($2.11 per share)
|
- | - | - | (21,218 | ) | (21,218 | ) | |||||||||||||
Repurchase
of common stock
|
(159 | ) | (3,053 | ) | - | - | (3,212 | ) | ||||||||||||
Shares
issued through dividend reinvestment plan
|
237 | 4,482 | - | - | 4,719 | |||||||||||||||
Restricted
stock vesting
|
5 | (5 | ) | - | - | - | ||||||||||||||
Compensation
expense – restricted stock
|
- | 826 | - | - | 826 | |||||||||||||||
Net
income
|
- | - | - | 10,590 | 10,590 | |||||||||||||||
Other
comprehensive income-
|
||||||||||||||||||||
Net
unrealized loss on available-for-sale securities
|
- | - | (591 | ) | - |
(591
|
) | |||||||||||||
Comprehensive
income
|
- | - | - |
-
|
9,999
|
|||||||||||||||
Balances,
December 31, 2007
|
9,906 | 137,076 | 344 | 23,913 | 171,239 | |||||||||||||||
Cash
distributions – common stock ($1.30 per share)
|
- | - | - | (13,241 | ) | (13,241 | ) | |||||||||||||
Repurchase
of common stock
|
(125 | ) | (1,702 | ) | - | - | (1,827 | ) | ||||||||||||
Shares
issued through dividend reinvestment plan
|
158 | 2,449 | - | - | 2,607 | |||||||||||||||
Restricted
stock vesting
|
23 | (23 | ) | - | - | - | ||||||||||||||
Compensation
expense – restricted stock
|
- | 888 | - | - | 888 | |||||||||||||||
Net
income
|
- | - | - | 4,892 | 4,892 | |||||||||||||||
Other
comprehensive income-
|
||||||||||||||||||||
Net
unrealized loss on available-for-sale securities
|
- | - | (583 | ) | - | (583 | ) | |||||||||||||
Comprehensive
income
|
- | - | - | - | 4,309 | |||||||||||||||
Balances,
December 31, 2008
|
9,962 | 138,688 | (239 | ) | 15,564 | 163,975 | ||||||||||||||
Distributions
– common stock
|
||||||||||||||||||||
cash
- $.08 per share
|
- | - | - | (948 | ) | (948 | ) | |||||||||||||
stock
- $.80 per share
|
1,160 | 4,955 | - | (8,471 | ) | (2,356 | ) | |||||||||||||
Repurchase
of common stock
|
(268 | ) | (1,148 | ) | - | - | (1,416 | ) | ||||||||||||
Retirement
of common stock
|
(6 | ) | (45 | ) | - | - | (51 | ) | ||||||||||||
Restricted
stock vesting
|
31 | (31 | ) | - | - | - | ||||||||||||||
Compensation
expense – restricted stock
|
- | 853 | - | - | 853 | |||||||||||||||
Net
income
|
- | - | - | 19,641 | 19,641 | |||||||||||||||
Other
comprehensive income -
|
||||||||||||||||||||
Net
unrealized gain on available-for-sale securities
|
- | - | 319 | - | 319 | |||||||||||||||
Net
unrealized gain on derivative instruments
|
- | - | 111 | - | 111 | |||||||||||||||
Comprehensive
income
|
- | - | - | - | 20,071 | |||||||||||||||
Balances,
December 31, 2009
|
$ | 10,879 | $ | 143,272 | $ | 191 | $ | 25,786 | $ | 180,128 |
See
accompanying notes.
F-4
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated
Statements of Cash Flows
(Amounts
in Thousands)
Year Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income
|
$ | 19,641 | $ | 4,892 | $ | 10,590 | ||||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||
Gain
on sale of excess unimproved land, real estate and other
|
(5,757 | ) | (1,830 | ) | (122 | ) | ||||||
Gain
on troubled mortgage restructuring, as a result of conveyance to
mortgagee
|
(897 | ) | - | - | ||||||||
Increase
in rental income from straight-lining of rent
|
(1,336 | ) | (1,201 | ) | (1,996 | ) | ||||||
Decrease
in rental income resulting from bad debt expense
|
619 | 356 | 322 | |||||||||
Decrease
(increase) in rental income from amortization of intangibles relating to
leases
|
23 | (371 | ) | (250 | ) | |||||||
Impairment
charges
|
229 | 5,983 | - | |||||||||
Amortization
of restricted stock expense
|
853 | 888 | 826 | |||||||||
Retirement
of common stock
|
(51 | ) | - | - | ||||||||
Change
in fair value of non-qualifying interest rate swap
|
- | 650 | - | |||||||||
Gain
on dispositions of real estate related to unconsolidated joint
ventures
|
- | (297 | ) | (583 | ) | |||||||
Equity
in earnings of unconsolidated joint ventures
|
(559 | ) | (622 | ) | (648 | ) | ||||||
Distributions
of earnings from unconsolidated joint ventures
|
507 | 535 | 1,089 | |||||||||
Depreciation
and amortization
|
9,066 | 9,035 | 8,309 | |||||||||
Amortization
of financing costs
|
1,012 | 631 | 638 | |||||||||
Changes
in assets and liabilities:
|
||||||||||||
(Increase)
decrease in escrow, deposits, other assets and receivables
|
(976 | ) | 695 | (153 | ) | |||||||
(Decrease)
increase in accrued expenses and other liabilities
|
(682 | ) | 93 | (138 | ) | |||||||
Net
cash provided by operating activities
|
21,692 | 19,437 | 17,884 | |||||||||
Cash
flows from investing activities:
|
||||||||||||
Purchase
of real estate and improvements
|
(576 | ) | (60,009 | ) | (423 | ) | ||||||
Net
proceeds from sale of real estate and excess unimproved
land
|
24,014 | 2,976 | 4 | |||||||||
Investment
in unconsolidated joint ventures
|
(7 | ) | (379 | ) | (8 | ) | ||||||
Distributions
of return of capital from unconsolidated joint ventures
|
86 | 1,435 | 551 | |||||||||
Net
proceeds from sale of available-for-sale securities
|
4,495 | 525 | 843 | |||||||||
Purchase
of available-for-sale securities
|
(10,683 | ) | - | (551 | ) | |||||||
Net
cash provided by (used in) investing activities
|
17,329 | (55,452 | ) | 416 | ||||||||
Cash
flows from financing activities:
|
||||||||||||
Borrowing
on bank line of credit, net
|
- | 27,000 | - | |||||||||
Proceeds
from mortgage financings
|
2,559 | 14,185 | 2,700 | |||||||||
Payment
of financing costs
|
(208 | ) | (366 | ) | (695 | ) | ||||||
Repayment
of mortgages and loan payable
|
(19,780 | ) | (13,476 | ) | (8,588 | ) | ||||||
Change
in restricted cash
|
- | 7,742 | (333 | ) | ||||||||
Cash
distributions - common stock
|
(2,939 | ) | (14,640 | ) | (21,167 | ) | ||||||
Repurchase
of common stock
|
(1,416 | ) | (1,827 | ) | (3,212 | ) | ||||||
Expenses
associated with stock issuance
|
(148 | ) | - | - | ||||||||
Issuance
of shares through dividend reinvestment plan
|
- | 2,607 | 4,719 | |||||||||
Net
cash (used in) provided by financing activities
|
(21,932 | ) | 21,225 | (26,576 | ) | |||||||
Net
increase (decrease) in cash and cash equivalents
|
17,089 | (14,790 | ) | (8,276 | ) | |||||||
Cash
and cash equivalents at beginning of year
|
10,947 | 25,737 | 34,013 | |||||||||
Cash
and cash equivalents at end of year
|
$ | 28,036 | $ | 10,947 | $ | 25,737 |
Continued
on next page
F-5
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated
Statements of Cash Flows (Continued)
(Amounts
in Thousands)
Year Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Supplemental
disclosures of cash flow information:
|
||||||||||||
Cash
paid during the year for interest expense
|
$ | 15,287 | $ | 14,908 | $ | 14,812 | ||||||
Cash
paid during the year for income taxes
|
67 | 81 | 35 | |||||||||
Supplemental
schedule of non-cash investing and financing activities:
|
||||||||||||
Mortgage
debt extinguished upon conveyance of properties to mortgagee by
deeds-in-lieu of foreclosure
|
$ | 8,706 | $ | - | $ | - | ||||||
Properties
conveyed to mortgagee
|
8,075 | - | - | |||||||||
Liabilities
extinguished upon transfer to mortgagee
|
543 | - | - | |||||||||
Common
stock dividend – portion paid in shares of Company’s common
stock
|
6,263 | - | - | |||||||||
Assumption
of mortgages payable in connection with (sale) purchase of real
estate
|
(9,069 | ) | 2,771 | - | ||||||||
Purchase
accounting allocations – intangible lease assets
|
- | 4,362 | - | |||||||||
Purchase
accounting allocations – intangible lease liabilities
|
- | (451 | ) | - | ||||||||
Purchase
accounting allocations – mortgage payable discount
|
- | (40 | ) | - |
See
accompanying notes.
F-6
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes to
Consolidated Financial Statements
December
31, 2009
NOTE
1 - ORGANIZATION
AND BACKGROUND
One
Liberty Properties, Inc. (“OLP”) was incorporated in 1982 in the state of
Maryland. OLP is a self-administered and self-managed real estate investment
trust ("REIT"). OLP acquires, owns and manages a geographically
diversified portfolio of retail (including furniture and office supply stores),
industrial, office, flex, health and fitness and other properties, a substantial
portion of which are under long-term net leases. As of December 31, 2009, OLP
owned 71 properties, one of which is vacant, and one of which is a 50% tenancy
in common interest. OLP’s joint ventures owned a total of five properties. The
76 properties are located in 27 states.
NOTE
2 - SIGNIFICANT
ACCOUNTING POLICIES
On July
1, 2009, OLP adopted the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) as the exclusive source of
authoritative U.S. generally accepted accounting principles (“GAAP”), to be
applied by non-government entities, except for Securities and Exchange
Commission (“SEC”) rules and interpretive releases, which are also authoritative
GAAP for U.S. registrants. Upon adoption, the FASB ASC superseded all
then existing non-SEC accounting and reporting standards. All other
non-grandfathered, non-SEC accounting literature not included in the FASB ASC
became non-authoritative. The FASB ASC does not change U.S. GAAP, but
is intended to simplify user access to all authoritative U.S. GAAP by providing
all the authoritative literature related to a particular topic in one
place. The Company’s conversion to FASB ASC, which was effective for
financial statements issued for interim and annual periods ending after
September 15, 2009, did not have any effect on the Company’s consolidated
financial position, results of operations, or cash flows.
Principles
of Consolidation
The
consolidated financial statements include the accounts and operations of OLP and
its wholly owned subsidiaries. OLP and its subsidiaries are
hereinafter referred to as the Company. Material intercompany items
and transactions have been eliminated.
Investment
in Unconsolidated Joint Ventures
The
Company accounts for its investments in unconsolidated joint ventures under the
equity method of accounting. Although the Company is the managing
member, it does not exercise substantial operating control over these entities,
and such entities are not variable-interest entities. These
investments are recorded initially at cost, as investments in unconsolidated
joint ventures, and subsequently adjusted for its share of equity in earnings,
cash contributions and distributions. None of the joint venture debt
is recourse to the Company.
The
Company has elected to follow the cumulative earnings approach when assessing,
for the statement of cash flows, whether the distribution from the investee is a
return of the investor’s investment as compared to a return on its investment.
The source of the cash generated by the investee to fund the distribution is not
a factor in the analysis (that is, it does not matter whether the cash was
generated through investee refinancing, sale of assets or operating results).
Consequently, the investor only considers the relationship between the cash
received from the investee to its equity in the undistributed earnings of the
investee, on a cumulative basis, in assessing whether the distribution from the
investee is a return on or return of its investment. Cash received from
the unconsolidated entity is presumed to be a return on the investment
to the extent that, on accumulative basis, distributions received by the
investor are less than its share of the equity in the undistributed earnings of
the entity.
F-7
NOTE 2 - SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
Management
believes that the estimates and assumptions that are most important to the
portrayal of the Company’s financial condition and results of operations, in
that they require management’s most difficult, subjective or complex judgments,
form the basis of the accounting policies deemed to be most significant to the
Company. These significant accounting policies relate to revenues and
the value of the Company’s real estate portfolio. Management believes
its estimates and assumptions related to these significant accounting policies
are appropriate under the circumstances; however, should future events or
occurrences result in unanticipated consequences, there could be a material
impact on the Company’s future financial condition or results of
operations.
Revenue
Recognition
Rental
income includes the base rent that each tenant is required to pay in accordance
with the terms of their respective leases reported on a straight-line basis over
the term of the lease. It is the Company’s policy not to record straight-line
rent beyond the expected useful life of a building. In order for management to
determine, in its judgment, that the unbilled rent receivable applicable to each
specific property is collectible, management reviews unbilled rent receivables
on a quarterly basis and takes into consideration the tenant’s payment history
and the financial condition of the tenant. Some of the leases provide for
additional contingent rental revenue in the form of percentage rents and
increases based on the consumer price index. The percentage rents are
based upon the level of sales achieved by the lessee and are recorded once the
required sales levels are reached.
Gains or
losses on disposition of properties are recorded when the criteria for
recognizing such gains or losses under generally accepted accounting principles
have been met.
Purchase
Accounting for Acquisition of Real Estate
The
Company allocates the purchase price of real estate to land and building and
intangibles, such as the value of above, below and at-market leases and
origination costs associated with in-place leases. The Company depreciates the
amount allocated to building and intangible assets or liabilities over their
estimated useful lives, which generally range from two to forty
years. The values of the above and below market leases are amortized
and recorded as either an increase (in the case of below market leases) or a
decrease (in the case of above market leases) to rental income over the
remaining minimum term of the associated lease. The origination costs
are amortized as an expense over the remaining minimum term of the
lease. The Company assesses fair value of the lease intangibles based
on estimated cash flow projections that utilize appropriate discount rates and
available market information.
F-8
NOTE 2 - SIGNIFICANT ACCOUNTING
POLICIES (Continued)
As a
result of the acquisitions made during the year ending December 31, 2008, the
Company recorded additional deferred intangible lease assets of $4,362,000,
representing the value of the acquired
above market leases and assumed lease origination costs. The Company
also recorded during the year ending December 31, 2008 additional deferred
intangible lease liabilities of $451,000, representing the value of the acquired
below market leases. The Company did not acquire any properties
during the year ended December 31, 2009. The Company recognized a net
(decrease) increase in rental revenue of ($23,000), $371,000 and $250,000 for
the amortization of the above/below market leases for the years ended 2009, 2008
and 2007, respectively. For the years ended 2009, 2008 and 2007, the Company
recognized amortization expense of $534,000, $499,000 and $290,000,
respectively, relating to the amortization of the assumed lease origination
costs. The years ended 2009 and 2008 include a decline in rental revenue of
$170,000 and $180,000, respectively, and additional amortization expense of
$323,000 and $161,000, respectively, resulting from the accelerated expiration
of certain leases. In 2007, there was no decline in revenue or
additional amortization expense resulting from the accelerated expiration of
rents and leases. At December 31, 2009 and 2008, accumulated amortization of
intangible lease assets was $2,188,000 and $1,813,000, respectively and
accumulated amortization of intangible lease liabilities was $1,562,000 and
$1,155,000, respectively.
The
unamortized balance of intangible lease assets as a result of acquired above
market leases at December 31, 2009 will be deducted from rental income through
2025 as follows:
2010
|
$ | 375,000 | ||
2011
|
375,000 | |||
2012
|
375,000 | |||
2013
|
376,000 | |||
2014
|
369,000 | |||
Thereafter
|
1,320,000 | |||
$ | 3,190,000 |
The
unamortized balance of intangible lease liabilities as a result of acquired
below market leases at December 31, 2009 will be added to rental income through
2022 as follows:
2010
|
$ | 407,000 | ||
2011
|
407,000 | |||
2012
|
407,000 | |||
2013
|
407,000 | |||
2014
|
407,000 | |||
Thereafter
|
2,792,000 | |||
$ | 4,827,000 |
Accounting
for Long-Lived Assets and Impairment
of Real Estate Owned
The
Company reviews its real estate portfolio on a quarterly basis to ascertain if
there are any indicators of impairment to the value of any of its real estate
assets, including deferred costs and intangibles, in order to determine if there
is any need for an impairment charge. In reviewing the portfolio, the
Company examines the type of asset, the current financial statements or other
available financial information of the tenant, the economic situation in the
area in which the asset is located, the economic situation in the industry in
which the tenant is involved and the timeliness of the payments made by the
tenant under its lease, as well as any current correspondence that may have been
had with the tenant, including property inspection reports. For each
real estate asset owned for which indicators of impairment exist, if the
undiscounted cash flow
analysis yields an amount which is less than the asset’s carrying amount, an
impairment loss is recorded to the extent that the estimated fair value is less
than the asset’s carrying amount. The estimated fair value is determined using a
discounted cash flow model of the expected future cash flows through the useful
life of the property. Real estate assets that are classified as held
for sale are valued at the lower of carrying amount or fair value less costs to
sell on an individual asset basis.
F-9
NOTE 2 - SIGNIFICANT ACCOUNTING
POLICIES (Continued)
A
conditional asset retirement obligation (“CARO”) is a legal obligation to
perform an asset retirement activity in which the timing and/or method of
settlement is conditional on a future event that may or may not be within the
control of the Company. The Company would record a liability for a
CARO if the fair value of the obligation can be reasonably
estimated. There were no CARO’s recorded by the Company during the
three years ended December 31, 2009.
Cash
and Cash Equivalents
All
highly liquid investments with original maturities of three months or less when
purchased are considered to be cash equivalents. The Company places
its cash and cash equivalents in high quality financial
institutions.
Escrow,
Deposits and Other Assets and Receivables
Escrow,
deposits and other assets and receivables include $738,000 and $866,000 at
December 31, 2009 and 2008, respectively, of restricted cash relating to real
estate taxes, insurance and other escrows.
Allowance
for Doubtful Accounts
The
Company maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of our tenants to make required rent
payments. If the financial condition of a specific tenant were to
deteriorate, resulting in an impairment of its ability to make payments,
additional allowances may be required. At December 31, 2009 and 2008,
the balance in allowance for doubtful accounts was $472,000 and $160,000,
respectively, recorded as a reduction to accounts receivable. The Company
records bad debt expense as a reduction of rental income. For the years ended
December 31, 2009, 2008 and 2007, the Company recorded bad debt expense of
$619,000, $356,000 and $322,000, respectively. Of these amounts, $75,000 and
$277,000 were recorded in discontinued operations for the years ended December
31, 2009 and 2008. For 2007, discontinued operations did not include any bad
debt expense.
Depreciation
and Amortization
Depreciation
of buildings and improvements is computed on the straight-line method over an
estimated useful life of 40 years for commercial properties and 27 1/2 years for
the Company’s residential property. Depreciation ceases when a
property is deemed “held for sale”. If a property which was deemed
“held for sale” is reclassified to a “held and used” property, “catch-up”
depreciation is recorded. Leasehold interest and the related ground lease
payments are amortized over the initial lease term of the leasehold
position. Depreciation expense, including amortization of a leasehold
position, lease origination costs, and capitalized lease commissions amounted to
$8,429,000, $7,741,000 and $7,338,000 for the three years ended December 31,
2009, 2008 and 2007, respectively.
F-10
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred
Financing Costs
Mortgage
and credit line costs are deferred and amortized on a straight-line basis over
the terms of the respective debt obligations, which approximates the effective
interest method. At December 31, 2009 and 2008, accumulated
amortization of such costs was $2,943,000 and $3,069,000,
respectively.
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 at least 90% of its taxable income and
meets certain other conditions.
All
distributions made during 2009 were attributable to ordinary
income. Distributions made during 2008 included 3% treated as capital
gain distributions, with the balance treated as ordinary income.
The
Company follows a two step approach for evaluating uncertain tax
positions. Recognition (step one) occurs when an enterprise concludes
that a tax position, based solely on its technical merits, is
more-likely-than-not to be sustained upon examination. Measurement
(step two) determines the amount of benefit that more-likely-than-not will be
realized upon settlement. Derecognition of a tax position that was
previously recognized would occur when a company subsequently determines that a
tax position no longer meets the more-likely-than-not threshold of being
sustained. The use of a valuation allowance as a substitute for
derecognition of tax positions is prohibited. The Company has not
identified any uncertain tax positions requiring accrual.
Investment
in Available-For-Sale Securities
The
Company determines the appropriate classification of equity and debt securities
at the time of purchase and reassesses the appropriateness of the classification
at each reporting date. At December 31, 2009, all marketable
securities have been classified as available-for-sale and recorded at fair
value. The fair value of the Company’s equity and debt investment in
publicly-traded companies is determined based upon the closing trading price of
the equity and debt securities as of the balance sheet date and unrealized gains
and losses on these securities are recorded as a separate component of
stockholders' equity.
The
Company's investment in 37,081 common shares of BRT Realty Trust ("BRT"), a
related party of the Company, (accounting for less than 1% of the total voting
power of BRT), was purchased at a cost of $132,000 and has a fair market value
at December 31, 2009 of $189,000. At December 31, 2009, the total cumulative
unrealized gain of $80,000 on all investments in equity and debt securities is
reported as accumulated other comprehensive income (loss) in the stockholders'
equity section.
Realized
gains and losses are determined using the average cost method and is included in
“Interest and other income” on the income statement. During 2009,
2008 and 2007, sales proceeds and gross realized gains and losses on securities
classified as available-for-sale were (amounts in thousands):
F-11
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
2009
|
2008
|
2007
|
||||||||||
Sales
proceeds
|
$ | 4,495 | $ | 525 | $ | 843 | ||||||
Gross
realized losses
|
$ | - | $ | 4 | $ | - | ||||||
Gross
realized gains
|
$ | - | $ | 4 | $ | 118 |
Concentration
of Credit Risk
The
Company maintains accounts at various financial institutions. While
the Company attempts to limit any financial exposure, its deposit balances
exceed federally insured limits. The Company has not experienced any
losses on such accounts.
The
Company’s properties are located in 27 states. For the years
ended December 31, 2009, 2008 and 2007, excluding properties held for sale,
14.2%, 15.7% and 15.7% of rental revenues were attributable to properties
located in Texas and 15.6%, 16.6% and 17.4% of rental revenues were attributable
to properties located in New York. No other state contributed over
10% to the Company’s rental revenues.
The
Company owns eleven retail furniture stores that are located in six states and
are net leased to Haverty Furniture Companies, Inc. pursuant to a master
lease. The basic term of the net lease expires August 2022, with
several renewal options. These properties, which represented 15.1% of
the depreciated book value of real estate investments at December 31, 2009,
generated rental revenues of approximately $4,844,000 in each year, or 12.0%,
13.7%and 14.7%, of the Company’s total revenues for the years ended December 31,
2009, 2008 and 2007, respectively.
In
September 2008, the Company acquired eight retail office supply stores, located
in seven states, net leased to Office Depot, Inc. pursuant to eight separate
leases which contain cross default provisions. The basic term of the
net leases expire September 2018, with several renewal options. These
eight properties plus two other Office Depot properties the Company already
owned represented 14.1% of the depreciated book value of real estate investments
at December 31, 2009 and generated rental revenues of $4,433,000 and $1,551,000,
or 11.0% and 4.4%, of the Company’s total revenues for the years ended December
31, 2009 and 2008, respectively.
Earnings
Per Common Share
Basic
earnings per share was determined by dividing net income for each year by the
weighted average number of shares of common stock outstanding, which includes
unvested restricted stock during each year.
Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts exercisable for, or convertible into, common stock
were exercised or converted or resulted in the issuance of common stock that
shared in the earnings of the Company. The weighted average number of
common shares outstanding used for the diluted earnings per share calculations
includes the impact of common stock issued in connection with the dividends paid
in April, July and October 2009 and January 2010, as of the dividend declaration
date, as the shares were contingently issuable as of that date. Such
stock dividends were included in basic EPS as of the issuance
date. There was zero impact on the income per common share used in
the diluted earnings per share calculations. There were no options to
purchase shares of common stock or other contracts exercisable for, or
convertible into, common stock in the years ended December 31, 2009, 2008 and
2007.
F-12
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Segment
Reporting
Virtually
all of the Company's real estate assets are comprised of real estate owned that
is net leased to tenants on a long-term basis. Therefore, the Company
operates predominantly in one industry segment.
Derivatives
and Hedging Activities
The
Company’s primary objective in using derivatives is to add stability to interest
expense and to manage its exposure to interest rate movements. To accomplish
this objective, the Company primarily uses interest rate swaps as part of its
interest rate risk management strategy. At December 31, 2009, the Company had
one interest rate swap outstanding, involving the receipt of variable rate
amounts from a counterparty in exchange for the Company making fixed-rate
payments over the life of the agreement without exchange of the underlying
principal amount. Derivatives were used to hedge the variable cash flows
associated with variable rate debt regarding two properties, including one
outstanding at December 31, 2009 and one outstanding at December 31,
2008. The Company did not have any derivatives during the year ended
December 31, 2007. The Company does not use derivatives for trading
or speculative purposes.
The
Company records all derivatives on the consolidated balance sheets at fair
value. In determining the fair value of its derivatives, the Company considers
the credit risk of its counterparties and the Company
and widely accepted valuation techniques, including discounted cash flow
analysis on the expected cash flows of the derivative. These
counterparties are generally larger financial institutions engaged in providing
a variety of financial services. These institutions generally face similar risks
regarding adverse changes in market and economic conditions, including, but not
limited to, fluctuations in interest rates, exchange rates, equity and commodity
prices and credit spreads.
The
accounting for changes in the fair value of derivatives depends on the intended
use of the derivative, whether the Company has elected to designate a derivative
in a hedging relationship and apply hedge accounting and whether the hedging
relationship has satisfied the criteria necessary to apply hedge
accounting. For derivatives designated as cash flow hedges, the
effective portion of changes in the fair value of the derivative is initially
reported in accumulated other comprehensive income (outside of earnings) and
subsequently reclassified to earnings in the period in which the hedged
transaction affects earnings. The ineffective portion of changes in
the fair value of the derivative is recognized directly in
earnings. For derivatives not designated as cash flow hedges, changes
in the fair value of the derivative are recognized directly in earnings in the
period in which the change occurs.
Stock
Based Compensation
The fair
value of restricted stock grants, determined as of the date of grant, is
amortized into general and administrative expense over the respective vesting
period.
F-13
NOTE 2 - SIGNIFICANT ACCOUNTING
POLICIES (Continued)
New
Accounting Pronouncements
On
January 1, 2009, the Company adopted the updated accounting guidance related to
business combinations and is applying such provisions prospectively to business
combinations that have an acquisition date on or after January 1, 2009. The
updated guidance (i) establishes the
acquisition-date fair value as the measurement objective for all assets
acquired, liabilities assumed and any contingent consideration, (ii) requires
expensing of most transaction costs that were previously capitalized upon
acquisition and (iii) requires the acquirer to disclose to investors and other
users of the information needed to evaluate and understand the nature and
financial effect of the business combination. The principal impact of the
adoption on the Company’s consolidated financial statements is the requirement
that the Company expense most of its transaction costs relating to its
acquisition activities. There were no acquisitions which occurred
during the twelve months ended December 31, 2009.
On
January 1, 2009, the Company adopted the updated accounting guidance related to
disclosures about derivative instruments and hedging activities. The
updated guidance expands the disclosure requirements with the intent to provide
users of financial statements with an enhanced understanding of (i) how and why
an entity uses derivative instruments, (ii) how derivative instruments and
related hedged items are accounted for, and (iii) how derivative instruments and
related hedged items affect an entity’s financial position, financial
performance, and cash flows. In addition, it requires qualitative disclosures
about objectives and strategies for using derivatives, quantitative disclosures
about the fair value of and gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in derivative
instruments. As a result of the adoption, the Company has added significant
disclosures to its financial statements. Refer to Note 7 for the Company’s added
disclosures.
On
January 1, 2009, the Company adopted the updated accounting guidance related to
determining whether instruments granted in share-based payment transactions are
participating securities. The updated guidance states that unvested
share-based payment awards that contain non forfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and
shall be included in the computation of earnings per share. The adoption had no
impact on the Company as the unvested restricted stock awards were previously
included in the per share amounts for both basic and diluted earnings per
share.
On April
1, 2009, the Company adopted the updated accounting guidance related to debt and
equity securities. The updated guidance changes existing accounting
requirements for other-than-temporary impairment for debt
securities. The updated guidance also extends new disclosure
requirements for debt and equity securities to interim reporting periods as well
as provides new disclosure requirements. The adoption did not have a
material effect on the Company’s consolidated financial condition, results of
operations, or cash flows. Refer to Note 8 for the Company’s added
disclosures.
On April
1, 2009, the Company adopted the updated accounting guidance related to fair
value measurements and disclosures. The updated guidance clarifies
the guidance for fair value measurements when the volume and level of activity
for the asset or liability have significantly decreased and includes guidance on
identifying circumstances that indicate a transaction is not
orderly. The updated guidance must be applied prospectively. The
adoption did not have a material effect on the Company’s consolidated financial
condition, results of operations, or cash flows.
F-14
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
(Continued)
In
January 2010, the FASB issued Accounting Standards Update No. 2010-1, Accounting for Distributions to
Shareholders with Components of Stock and Cash, (“ASU
2010-1). The updated guidance clarifies that the stock portion of a
distribution to shareholders that allows them to elect to receive cash or stock
with a potential limitation on the total amount of cash that all shareholders
can elect to receive in the aggregate is considered a share issuance that is
reflected in earnings per share prospectively and is not a stock dividend for
the purpose of the calculation. ASU 2010-1 is effective for interim
and annual periods ending on or after December 15, 2009 and is to be applied
retrospectively. As a result of the adoption of this updated
guidance, the Company has restated its weighted average shares outstanding and
its earnings per share for the 2009 interim quarters as presented in Note
18.
On April
1, 2009, the Company adopted the updated accounting guidance related to
subsequent events. The updated guidance establishes general standards
of accounting for and disclosure of subsequent events. It renames the
two types of subsequent events as recognized subsequent events or non-recognized
subsequent events and modifies the definition of the evaluation period for
subsequent events as events or transactions that occur after the balance sheet
date, but before the issuance of the financial statements. The
adoption did not have a material effect on the Company’s consolidated financial
condition, results of operations, or cash flows. In
February2010, the FASB further amended the subsequent events guidance with the
issuance of Accounting Standards Update No. 2010-9, Amendments to Certain Recognition
and Disclosure Requirements,(“ASU 2010-9”). As a result of the adoption
of ASU 2010-9, the Company is no longer required to disclose the date through
which management evaluated subsequent events in the financial statements, either
in originally issued financial statements or reissued financial
statements.
The FASB
has issued updated consolidation accounting guidance for determining whether an
entity is a variable interest entity, or VIE, and requires the performance of a
qualitative rather than a quantitative analysis to determine the primary
beneficiary of a VIE. The updated guidance requires an entity to consolidate a
VIE if it has (i) the power to direct the activities that most significantly
impact the entity’s economic performance and (ii) the obligation to absorb
losses of the VIE or the right to receive benefits from the VIE that could be
significant to the VIE. The updated guidance is effective for the first annual
reporting period that begins after November 15, 2009, with early adoption
prohibited. While the Company is currently evaluating the effect of
adoption of this guidance, it currently believes that its adoption will not have
a material impact on its consolidated financial statements.
NOTE
3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS
During
the year ended December 31, 2008, the Company purchased twelve single tenant
properties, including a portfolio of eight properties which are leased to the
same tenant, located in eight states for a total consideration of
$62,085,000. There were no property acquisitions during the year
ended December 31, 2009.
With the
exception of one vacant property, the rental properties owned at December 31,
2009 are leased under non cancellable operating leases with current expirations
ranging from 2010 to 2038, with certain tenant renewal
rights. Substantially all of the lease agreements are net lease
arrangements which require the tenant to pay not only rent but all the expenses
of the leased property including maintenance, taxes, utilities and
insurance. Certain lease agreements provide for periodic rental
increases and others provide for increases based on the consumer price
index.
F-15
NOTE
3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued)
The
minimum future rentals to be received over the next five years and thereafter on
the operating leases in effect at December 31, 2009 are as follows:
Year
Ending
December 31,
|
(In Thousands)
|
|||
2010
|
$ | 38,207 | ||
2011
|
37,882 | |||
2012
|
37,090 | |||
2013
|
36,899 | |||
2014
|
34,605 | |||
Thereafter
|
207,725 | |||
Total
|
$ | 392,408 |
Included
in the minimum future rentals are rentals from a property not owned in fee, but
ground leased from an unrelated third party. The Company paid annual fixed
leasehold rent of $237,500 through July 2009 at which time the annual amount
increased to $296,875. There are 25% increases every five years
through March 3, 2020 and the Company has a right to extend the lease for up to
five 5-year and one seven month renewal options.
At
December 31, 2009 and 2008, the Company has recorded an unbilled rent receivable
aggregating $10,706,000 and $10,916,000, respectively, including $146,000 and
$1,461,000 classified as assets related to properties held for sale at December
31, 2009 and 2008, respectively, representing rent reported on a straight-line
basis in excess of rental payments required under the term of the respective
leases. This amount is to be billed and received pursuant to the lease terms
during the next eighteen years.
During
the year ended December 31, 2009, the Company wrote-off or recorded accelerated
amortization of $1,545,000 of unbilled “straight-line” rent receivable, which
includes $1,384,000 relating to two properties sold during 2009. During the year
ended December 31, 2008, the Company wrote-off or recorded accelerated
amortization of $332,000 of unbilled "straight-line" rent receivable for six
retail properties, including five properties formerly leased to Circuit City
Stores, Inc.
Lease
Termination Fee Income
In June
2009, the Company received a $1,905,000 lease termination fee from a retail
tenant that had been paying its rent on a current basis, but had vacated the
property in March 2009. Offsetting this amount is the write off of
the entire balance of the unbilled rent receivable and the intangible lease
asset related to this property, aggregating $121,000. The net amount
of $1,784,000 is recorded on the income statement as “Lease termination fee”
income in the year ended December 31, 2009. The Company has re-leased
this property effective November 2009.
Sale
of Excess Unimproved Land
In May
2008, the Company sold a five acre parcel of excess, unimproved land to an
unrelated third party for a sales price of $3,150,000 and realized a gain of
$1,830,000. This land, adjacent to a flex property owned by the
Company, had been acquired by the Company as part of the purchase of the flex
property in 2000.
F-16
NOTE
4 – PROPERTIES HELD FOR SALE AND DISCONTINUED OPERATIONS
Reclassification
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, primarily to reclassify three real estate
investments sold in 2009 and two real estate investments sold in 2010 from real
estate investments to properties held for sale at December 31, 2008 and 2009 and
to reclassify the property operating income and expenses to discontinued
operations in all periods presented. In addition, five real estate
investments, formerly leased to Circuit City Stores, Inc. and conveyed in July
2009 to the mortgagee by deeds-in-lieu of foreclosure, were reclassified from
real estate investments to properties held for sale at December 31, 2008 and the
related property operating income and expenses were reclassified to discontinued
operations in all periods presented.
Properties
are classified as held for sale when management has determined that it has met
the criteria established under GAAP. Properties which are held for
sale are not depreciated and their operations are included in a separate
component of income on the consolidated statements of income under the caption
Discontinued Operations.
Properties
Conveyed to Mortgagee
Circuit
City Stores, Inc., a retail tenant which previously leased five properties from
five of OLP’s wholly-owned subsidiaries, filed for protection under the Federal
bankruptcy laws in November 2008, rejected leases for two of the properties in
December 2008 and rejected leases for the remaining three properties in March
2009. These five properties were secured by non-recourse
cross-collateralized mortgages with an outstanding balance of $8,706,000. No
payments were made on these mortgages from December 1, 2008 and a letter of
default was received on March 16, 2009. On July 7, 2009, these
properties were conveyed to the mortgagee by deeds-in-lieu of foreclosure and
OLP and the five wholly-owned subsidiaries which owned the Circuit City
properties were released from all obligations, including principal, interest and
real estate taxes due.
The
$8,075,000 carrying value of the portfolio of the properties transferred, net of
the $5,231,000 of impairment charges taken at December 31, 2008, approximated
their fair value at the time of transfer.
The
conveyance of these properties was accounted for as a troubled debt
restructuring. The Company had accrued interest expense on these mortgages and
real estate tax expense totaling $297,000 and $246,000, respectively, for the
period December 2008 through July 7, 2009. In connection with this
conveyance, the Company wrote off deferred costs and escrows relating to these
mortgages totaling $277,000. The Company recognized a “Gain on troubled mortgage
restructuring, as a result of conveyance to mortgagee” based on the excess of
the carrying amount of the payables over the fair value of the portfolio of
properties transferred in the amount of $897,000 ($.08 per diluted and basic
common share).
F-17
NOTE 4 – PROPERTIES HELD FOR SALE AND
DISCONTINUED OPERATIONS (Continued)
Sales
of Properties
In
February 2009, the Company entered into a lease termination agreement with a
retail tenant of a Texas property that had been paying its rent on a current
basis, but had vacated the property in 2006. Pursuant to the agreement, the
tenant paid the Company $400,000 as consideration for the lease termination. On
March 5, 2009, the Company sold this property for $1,900,000
and recorded an impairment charge of $229,000 to recognize the loss. This is in
addition to an impairment charge of $752,000 taken in the prior year. The
related property income and expenses, including the impairment charges and the
lease termination fee are included in discontinued operations for the current
and prior years. The net book value of this property was $2,072,000
and is included in properties held for sale at December 31, 2008 on the
accompanying consolidated balance sheet.
During
the three months ended September 30, 2010, the Company sold to unrelated
parties, two properties in separate transactions, for an aggregate of
approximately $4,100,000, net of closing costs, and realized an aggregate gain
of $235,000 in the three and nine months ended September 30, 2010. One of the
properties was vacant as of July 1, 2010. The net book value of the two
properties was $3,808,000 and $3,907,000 at December 31, 2009 and 2008,
respectively, and is included in properties held for sale on the accompanying
balance sheet.
In
October 2009, in unrelated transactions, the Company sold two properties for a
total sales price of $31,788,000, resulting in gains totaling $5,757,000, which
is included in net gain on sales in discontinued operations in the results of
operations for the year ended December 31, 2009. In connection with the
closings, one mortgage, in the amount of $9,069,000, was assumed by the buyer
and is included in mortgages payable-properties held for sale on the
accompanying balance sheet at December 31, 2008. The other mortgage, in the
amount of $10,477,000, was paid off and the related interest rate swap agreement
was terminated. The Company incurred a $492,000 fee for terminating the swap
which is included in interest expense in discontinued operations. The net book
value of the two properties was $24,104,000 at December 31, 2008 and is included
in properties held for sale on the accompanying consolidated balance
sheet.
At
December 31, 2009, assets related to properties held for sale consists of
unbilled rent receivable for one of the properties sold in 2010. At
December 31, 2008, assets related to the three properties that were sold and the
five properties that were transferred to the mortgagee during 2009 and the two
properties that were sold in 2010 aggregated approximately $2,297,000,
consisting of unbilled rent receivable, unamortized intangible lease assets,
unamortized deferred financing costs and escrow, deposits and other
receivables.
F-18
NOTE
4 – PROPERTIES HELD FOR SALE AND DISCONTINUED OPERATIONS
(Continued)
The
following details the components of income from discontinued operations,
primarily the ten properties discussed above. Rental income for the
year ended December 31, 2007 includes settlements of $405,000 relating to
properties sold in a prior year (amounts in thousands):
Year Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Rental
income
|
$ | 3,642 | $ | 4,891 | $ | 5,661 | ||||||
Depreciation
and amortization
|
637 | 1,293 | 971 | |||||||||
Real
estate expenses
|
288 | 268 | 74 | |||||||||
Interest
expense
|
1,555 | 2,088 | 1,469 | |||||||||
Total
expenses
|
2,480 | 3,649 | 2,514 | |||||||||
Income
from operations
|
1,162 | 1,242 | 3,147 | |||||||||
Impairment
charges
|
(229 | ) | (5,983 | ) | - | |||||||
Gain
on troubled mortgage restructuring, as a result of conveyance to
mortgagee
|
897 | - | - | |||||||||
Net
gain on sales
|
5,757 | - | - | |||||||||
Income
(loss) from discontinued operations
|
$ | 7,587 | $ | (4,741 | ) | $ | 3,147 |
NOTE
5 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The
Company’s five unconsolidated joint ventures each own and operate one
property. At December 31, 2009 and 2008, the Company’s equity
investment in unconsolidated joint ventures totaled $5,839,000 and $5,857,000,
respectively. These balances are net of distributions, including
distributions of $593,000 and $1,970,000 received in 2009 and 2008,
respectively. In addition to the gain on sale of properties of $297,000 and
$583,000 for the years ended December 31, 2008 and 2007, respectively, the
unconsolidated joint ventures contributed $559,000, $622,000 and $648,000 in
equity earnings for the years ending December 31, 2009, 2008 and 2007,
respectively. See Note 9 for related party fees paid by one of the
unconsolidated joint ventures.
In 2008
and 2007, two of the Company’s unconsolidated joint ventures sold their only
properties, which were vacant, resulting in gains to the Company of $297,000 and
$583,000, respectively.
NOTE
6– DEBT OBLIGATIONS
Mortgages
Payable
At
December 31, 2009, there were 35 outstanding mortgages payable, all of which are
secured by first liens on individual real estate investments with an aggregate
carrying value before accumulated depreciationof $318,767,000. The
mortgage payments bear interest at fixed rates ranging from 5.44% to 8.8%, and
mature between 2010 and 2037. The weighted average interest rate was
6.18% and 6.33% for the years ended December 31, 2009 and 2008,
respectively.
F-19
NOTE
6– DEBT OBLIGATIONS (Continued)
Scheduled
principal repayments during the next five years and thereafter are as
follows:
Year Ending
December 31,
|
(In Thousands)
|
|||
2010
|
$ | 23,259 | (a) | |
2011
|
8,061 | |||
2012
|
36,994 | |||
2013
|
8,999 | |||
2014
|
19,356 | |||
Thereafter
|
93,849 | |||
Total
|
$ | 190,518 |
(a)
Includes a $4,500,000 mortgage loan which matured on March 1, 2010 which the
Company has not paid off and is currently in discussions with representatives of
the mortgagee. In addition, three other mortgages mature during 2010
which require balloon payments aggregating approximately $12,400,000 at
maturity, including a $2,400,000 mortgage loan the Company paid off in January
2010. Also included is a $1,700,000 mortgage loan which the lender can call on
90 days notice and the scheduled amortization of principal balances in the
amount of $4,659,000.
Line
of Credit
The
Company has a $62,500,000 revolving credit facility (“Facility”) with VNB New
York Corp., Bank Leumi USA, Israel Discount Bank of New York and Manufacturers
and Traders Trust Company. The Facility matures March 31, 2010 and provides that
the Company pays interest at the lower of LIBOR plus 2.15% or the respective
bank’s prime rate on funds borrowed and has an unused facility fee of
1/4%. At December 31, 2009, there was $27,000,000 outstanding under
the Facility. The Company was in compliance with all debt covenants at December
31, 2009.
The
Facility is guaranteed by all of the Company’s subsidiaries which own
unencumbered properties and is secured by the outstanding stock of all
subsidiaries of the Company. The Facility is available to pay off existing
mortgages, to fund the acquisition of additional properties, or to invest in
joint ventures. Net proceeds received from the sale or refinancing of
properties are required to be used to repay amounts outstanding under the
Facility if proceeds from the Facility were used to purchase or refinance the
property.
The
Company has negotiated a modification and extension of its credit facility and
has come to agreement on all material terms. The proposed
modification and extension will extend the maturity date from March 31, 2010 to
March 31, 2012 and reduce permitted borrowings from $62,500,000 to $40,000,000.
Interest will be charged at the 90 day LIBOR rate plus 3%, with a minimum
interest rate of 6% per annum and there is an unused facility fee of 1/4%. In
connection with the amendment, the Company will pay a commitment fee of
$400,000. Although the Company is confident that the modification and
extension will be finalized, there can be no assurance that it will be
consummated.
F-20
NOTE
7 - DERIVATIVE FINANCIAL INSTRUMENTS
The
following is a summary of the terminated and designated derivative financial
instruments as of December 31, 2009 and 2008 (amounts in
thousands):
Notional
|
Fair Value
|
||||||||||||||||||
December 31,
|
December 31,
|
||||||||||||||||||
Balance Sheet
|
|||||||||||||||||||
Designation
|
Derivative
|
2009
|
2008
|
Location
|
2009
|
2008
|
|||||||||||||
Non-Qualifying
|
Terminated
Interest Rate Swap
|
$ | - | $ | 10,675 |
Other
Liabilities
|
$ | - | $ | 650 | |||||||||
Qualifying
|
Active
Cash Flow Interest Rate Swap
|
$ | 9,832 | $ | - |
Other
Assets
|
$ | 111 | $ | - |
At
December 31, 2009, the Company had one qualifying interest rate swap, which was
entered into in March 2009. At December 31, 2008, the Company had one
non-qualifying interest rate swap which was subsequently designated as a
qualifying cash flow hedge at April 1, 2009. The Company terminated
the loan agreement on this interest rate swap in October 2009 due to the sale of
the mortgaged property.
The
following table presents the effect of the Company’s derivative financial
instrument that was not designated as a cash flow hedge on the consolidated
statement of income for the year ended December 31, 2009 (amounts in
thousands):
Derivative Not Designated as
|
Location of Gain Recognized in
|
Gain Recognized
on Derivative
|
||||
Hedging Instruments
|
Income on Derivative
|
2009
|
||||
Interest
Rate Swap
|
Interest
Expense
|
$ | 201 |
The
following table presents the effect of the Company’s derivative financial
instruments that were designated as cash flow hedges on the consolidated
statement of income for the year ended December 31, 2009 (amounts in
thousands):
Derivative in
Cash Flow
Hedging
Relationships
|
(Loss)
Recognized
in OCI on
Derivatives
(Effective
Portion)
|
Location of Loss
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
|
(Loss)
Reclassified from
Accumulated
OCI into Income
(Effective
Portion)
|
Location of Gain
Recognized in
Income on
Derivative
(Ineffective Portion
and Amount
Excluded from
Effectiveness
Testing)
|
Gain
Recognized in
Income on
Derivative
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)
|
||||||||||
Interest
Rate Swap
|
$ | (24 | ) |
Interest
Expense
|
$ | (135 | ) |
Interest
Expense
|
$ | 111 |
During
the twelve months ended December 31, 2009, the Company recorded a $111,000 gain
on hedge ineffectiveness attributable to the late designation of one of the
Company’s interest rate swaps which was recorded as a reduction of interest
expense. In addition, the Company accelerated the reclassification of
amounts in other comprehensive income to earnings as a result of the Company’s
termination of the loan agreement on this interest rate swap due to the
sale of
the mortgaged property in October 2009. The accelerated amount was a
gain of $63,000 reclassified out of other comprehensive income into earnings as
a reduction to interest expense due to the termination of the loan
agreement.
F-21
NOTE
7 - DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
At
December 31, 2009, the Company had one qualifying interest rate swap designated
as a cash flow hedge. During the next 12 months, the Company
estimates an additional $188,000 will be reclassified from other comprehensive
income to interest expense.
The
derivative agreement in existence at December 31, 2009 provides that if the
wholly owned subsidiary of the Company which is a party to the agreement
defaults or is capable of being declared in default on any of its indebtedness,
then a default can be declared on such subsidiary’s derivative obligation. In
addition, the Company (but not any of its subsidiaries) is a credit support
provider and a party to the derivative agreement and if there is a default by
the Company on any of its indebtedness, a default can be declared on the
derivative obligation under the agreement to which the Company is a party. The
default under the Circuit City mortgage obligations referred to in Note 4 was
not a default under the derivative agreement outstanding at December 31, 2009 or
the derivative agreement terminated in October 2009.
NOTE
8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial
Instruments Not Measured at Fair Value
The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments for which adjustments to measure at fair value
are not reported:
Cash and
cash equivalents: The carrying amounts reported in the balance sheet
for these instruments approximate their fair values.
Mortgages
payable: At December 31, 2009, the $184,443,000 estimated fair value
of the Company's mortgages payable is less than their carrying value by
approximately $6,075,000, assuming a market interest rate of 7%.
Line of
credit: At December 31, 2009, the $26,681,000 estimated fair value of
the Company’s line of credit is less than its carrying value by approximately
$319,000, assuming a market interest rate of 6%.
The fair
value of the Company’s mortgages and line of credit was estimated using other
observable inputs such as available market information and discounted cash flow
analysis based on borrowing rates the Company believes it could obtain with
similar terms and maturities.
Considerable
judgment is necessary to interpret market data and develop estimated fair
value. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value
amounts.
F-22
NOTE 8 - FAIR VALUE OF
FINANCIAL INSTRUMENTS (Continued)
Financial
Instruments Measured at Fair Value
The
Company accounts for fair value measurements based on the assumptions that
market participants
would use in pricing the asset or liability. As a basis for
considering market participant assumptions in fair value measurements, a fair
value hierarchy distinguishes between market participant assumptions based on
market data obtained from sources independent of the reporting entity and the
reporting entity’s own assumptions about market participant
assumptions. In accordance with the fair value hierarchy, Level 1
assets/liabilities are valued based on quoted prices for identical instruments
in active markets, Level 2 assets/liabilities are valued based on quoted prices
in active markets for similar instruments, on quoted prices in less active or
inactive markets, or on other “observable” market inputs and Level 3
assets/liabilities are valued based significantly on “unobservable” market
inputs. The Company does not currently own any financial instruments
that are classified as Level 3.
The
Company’s financial assets and liabilities, other than mortgages payable and
line of credit, are generally short-term in nature, and consist of cash and cash
equivalents, rents and other receivables, other assets, and accounts payable and
accrued expenses. The carrying amounts of these assets and liabilities are not
measured at fair value on a recurring basis, but are considered to be recorded
at amounts that approximate fair value due to their short-term
nature.
The fair
value of the Company’s available-for-sale securities and derivative financial
instrument was determined using the following inputs as of December 31, 2009
(amount in thousands):
Fair Value
Measurements
Using
|
||||||||||||||||
Carrying and
|
Fair Value Hierarchy
|
|||||||||||||||
Fair Value
|
Maturity Date
|
Level 1
|
Level 2
|
|||||||||||||
Financial
assets:
|
||||||||||||||||
Available-for-sale
securities:
|
||||||||||||||||
Corporate
debt security
|
$ | 1,405 |
January
15, 2012
|
$ | - | $ | 1,405 | |||||||||
Corporate
debt security
|
981 |
February
15, 2037
|
- | 981 | ||||||||||||
Equity
securities
|
566 |
-
|
566 | - | ||||||||||||
Treasury
bill
|
2,000 |
March
11, 2010
|
2,000 | - | ||||||||||||
Treasury
bill
|
1,999 | May 6, 2010 | 1,999 | - | ||||||||||||
Derivative
financial instrument
|
111 | - | - | 111 |
Available-for-sale
securities
The
Company’s available-for-sale securities have a total amortized cost of
$6,839,000. At December 31, 2009, unrealized gains on such securities
were $257,000 and unrealized losses were $145,000. The aggregate net
unrealized gain of $112,000 is included in accumulated other comprehensive
income on the balance sheet. Fair values are approximated on current
market quotes from financial sources that track such securities. All of the
available-for-sale securities in an unrealized loss position are equity
securities and amounts are not considered to be other than temporary impairment
because the Company expects the value of these securities to recover and plans
on holding them until at least such recovery.
F-23
NOTE
8 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Derivative
financial instrument
Fair
values are approximated using widely accepted valuation techniques including
discounted cash flow analysis on the expected cash flows of the derivative. This
analysis reflects the contractual terms of the derivative, including the period
to maturity, and uses observable market-based inputs, including interest rate
curves, foreign exchange rates, and implied volatilities. At December
31, 2009, this derivative is included in other assets on the consolidated
balance sheet.
Although
the Company has determined that the majority of the inputs used to value its
derivative fall within Level 2 of the fair value hierarchy, the credit valuation
adjustments associated with it utilize Level 3 inputs, such as estimates of
current credit spreads to evaluate the likelihood of default by itself and its
counterparty. However, as of December 31, 2009, the Company has
assessed the significance of the impact of the credit valuation adjustments on
the overall valuation of its derivative position and has determined that the
credit valuation adjustments are not significant to the overall valuation of its
derivative. As a result, the Company has determined that its
derivative valuation is classified in Level 2 of the fair value
hierarchy.
NOTE
9– RELATED PARTY TRANSACTIONS
At
December 31, 2009 and 2008, Gould Investors L.P. (“Gould”), a related party,
owned 1,268,221 and 991,707 shares of the common stock of the Company or
approximately 11.4% and 9.7%, respectively. During 2009, Gould purchased 139,970
shares of the Company’s stock in the open market and received 136,544 shares of
the Company in connection with the stock dividends paid in April, July and
October 2009. There were no stock dividends in the years ended
December 31, 2008 and 2007. During 2008, Gould purchased 78,466 shares of the
Company through the Company’s dividend reinvestment plan. The Company
suspended the dividend reinvestment plan on December 9, 2008 as described in
Note 13.
Effective
as of January 1, 2007, the Company entered into a compensation and services
agreement with Majestic Property Management Corp. (“Majestic”), a company
wholly-owned by our Chairman and in which certain of the Company’s executive
officers are officers and from which they receive compensation. Under the terms
of the agreement, Majestic took over the Company’s obligations to make payments
to Gould (and other affiliated entities) under a shared services agreement and
agreed to provide to the Company the services of all affiliated executive,
administrative, legal, accounting and clerical personnel that the Company had
there to fore utilized on an as needed, part time basis and for which the
Company had paid, as a reimbursement, an allocated portion of the payroll
expenses of such personnel in accordance with the shared services agreement.
Accordingly, the Company, no longer incurs any allocated payroll
expenses. Under the terms of the agreement, Majestic (or its
affiliates) continues to provide to the Company certain property management
services (including construction supervisory services), property acquisition,
sales and leasing services and mortgage brokerage services that it has provided
to the Company in the past, some of which were capitalized, deferred or reduced
net sales proceeds in prior years. The Company does not incur any fees or
expenses for such services except for the annual fees described
below. As consideration for providing to the Company the services
described above, the Company paid Majestic an annual fee of $2,025,000,
$2,025,000 and $2,125,000 in 2009, 2008 and 2007, respectively, in equal monthly
installments. Majestic credits against the fee payments due to it
under the agreement any management or other fees received by it from any joint
venture in which the Company is a joint venture partner (exclusive of fees paid
by the tenant in common on
a property located in Los Angeles, California). The agreement also
provides for an additional payment to Majestic of $175,000 in 2009, 2008 and
2007 for the Company’s share of all direct office expenses, such as rent,
telephone, postage, computer services, internet usage, etc., previously
allocated to the Company under the shared services agreement. The
annual payments the Company makes to Majestic is negotiated each year by the
Company and Majestic, and is approved by the Company’s Audit Committee and the
Company’s independent directors. The Company also agreed to pay compensation to
the Company’s Chairman of $250,000 per annum effective January
2007.
F-24
NOTE
10 - STOCK BASED COMPENSATION
The
Company’s 2009 Stock Incentive Plan (the “2009 Incentive Plan”), approved by the
Company’s stockholders in June 2009, permits the Company to grant stock options,
restricted stock and/or performance-based awards to its employees, officers,
directors and consultants. The maximum number of shares of the
Company’s common stock that may be issued pursuant to the 2009 Incentive Plan is
600,000.
The
Company’s 2003 Stock Incentive Plan (the “2003 Incentive Plan”), approved by the
Company’s stockholders in June 2003, permitted the Company to grant stock
options and restricted stock to its employees, officers, directors and
consultants. The maximum number of shares of the Company’s common
stock that was allowed to be issued pursuant to the 2003 Incentive Plan was
275,000.
The
restricted stock grants are recorded based on the market value of the common
stock on the date of the grant and substantially all restricted stock awards
made to date provide for vesting upon the fifth anniversary of the date of grant
and under certain circumstances may vest earlier. For accounting purposes, the
restricted stock is not included in the outstanding shares shown on the balance
sheet until they vest, however dividends are paid on the unvested
shares. The value of such grants is initially deferred, and
amortization of amounts deferred is being charged to general and administrative
expense over the respective vesting periods.
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Restricted
share grants
|
175,025 | 50,550 | 51,225 | |||||||||
Average
per share grant price
|
$ | 7.00 | $ | 17.50 | $ | 24.50 | ||||||
Recorded
as deferred compensation
|
$ | 1,225,000 | $ | 885,000 | $ | 1,255,000 | ||||||
Total
charge to general and administrative expenses, all outstanding restricted
grants
|
$ | 853,000 | $ | 888,000 | $ | 826,000 | ||||||
Non-vested
shares:
|
||||||||||||
Non-vested
beginning of period
|
213,625 | 186,300 | 140,175 | |||||||||
Grants
|
175,025 | 50,550 | 51,225 | |||||||||
Vested
during period
|
(30,675 | ) | (22,650 | ) | (5,050 | ) | ||||||
Forfeitures
|
(50 | ) | (575 | ) | (50 | ) | ||||||
Non-vested
end of period
|
357,925 | 213,625 | 186,300 |
F-25
NOTE 10 - STOCK BASED COMPENSATION
(Continued)
Through December 31, 2009, a total
of 274,950 and 143,100 shares were issued pursuant to the Company’s 2003 and
2009 Stock Incentive Plans, respectively, of which 456,900 shares remain
available for grant under the 2009 Plan. Approximately $2,548,000 remains as
deferred compensation and will be charged to expense over the remaining
respective vesting periods. The weighted average vesting period is approximately
3.14 years.
As of
December 31, 2009, 2008 and 2007 there were no options outstanding under the
2009 and 2003 Incentive Plans.
NOTE
11 - COMMON STOCK DIVIDEND DISTRIBUTIONS
The
following table details the distributions paid in cash and common stock of the
Company with respect to the 2009 fiscal year.
Payment Date
|
Total
Dividend
|
Cash
|
# Common
Shares
|
Per Share Value of
Common Stock
|
||||||||||||
January
25, 2010
|
$ | 2,456,000 | $ | 246,000 | 216,000 | $ | 10.20 | |||||||||
October
30, 2009
|
$ | 2,401,000 | $ | 240,000 | 255,000 | $ | 8.45 | |||||||||
July
21, 2009
|
$ | 2,333,000 | $ | 234,000 | 376,000 | $ | 5.58 | |||||||||
April
27, 2009
|
$ | 2,229,000 | $ | 223,000 | 529,000 | $ | 3.79 |
The
number of common shares issued and outstanding as presented on the balance sheet
at December 31, 2009 would have been 11,095,000, taking into account the 216,000
shares issued on January 25, 2010.
NOTE
12 – STOCK REPURCHASE PROGRAMS
In
November 2008, the Company announced that its Board of Directors had authorized
a twelve month common stock repurchase program of up to 500,000 shares of the
Company’s common stock in open market transactions. From November
2008 through October 2009, the Company repurchased 300,000 shares of common
stock for an aggregate consideration of $1,679,000.
In August
2007, the Company announced that its Board of Directors had authorized a twelve
month common stock repurchase program of up to 500,000 shares of the Company’s
common stock in open market transactions. From August 2007 through
July 2008, the Company repurchased 252,000 shares of common stock for an
aggregate consideration of $4,776,000.
NOTE
13 - DISTRIBUTION REINVESTMENT PLAN
On
December 9, 2008, the Company suspended its Dividend Reinvestment Plan (the
“Plan”). The Plan had provided owners of record the opportunity to reinvest cash
dividends paid on the Company’s common stock in additional shares of its common
stock, at a discount of 0% to 5% from the market price. The discount
was determined at the Company’s sole discretion and had been offered at a 5%
discount from market. Under the Plan, the Company issued 158,242 and
236,645 common shares during the years ended December 31, 2008 and 2007,
respectively.
F-26
NOTE
14 – INCOME FROM SETTLEMENT WITH FORMER PRESIDENT
On
November 23, 2009, the Company settled its civil suit against the Company’s
former president and chief executive officer (who resigned in July 2005
following the discovery of inappropriate financial dealings). The terms of the
settlement included his payment to us of $900,000, 5,641 shares of the Company,
valued at $51,000, based on the November 23, 2009 stock closing price and the
assignment of his interest in a real estate consulting venture, which value has
been fully reserved against. The income from this settlement, which aggregated
$951,000, was recorded in the year ended December 31, 2009.
NOTE
15 – COMMITMENTS AND CONTINGENCIES
The
Company maintains a non-contributory defined contribution pension plan covering
eligible employees. Contributions by the Company are made through a
money purchase plan, based upon a percent of qualified employees’ total salary
as defined. Pension expense approximated$114,000, $107,000 and
$100,000 for the years ended December 31, 2009, 2008 and 2007,
respectively.
In the
ordinary course of business the Company is party to various legal actions which
management believes are routine in nature and incidental to the operation of the
Company’s business. Management believes that the outcome of the
proceedings will not have a material adverse effect upon the Company’s
consolidated statements taken as a whole.
NOTE
16 – INCOME TAXES
The
Company elected to be taxed as a real estate investment trust (REIT) under the
Internal Revenue Code, commencing with its taxable year ended December 31,
1983. To qualify as a REIT, the Company must meet a number of
organizational and operational requirements, including a requirement that it
currently distribute at least 90% of its adjusted taxable income to its
stockholders. It is management’s current intention to adhere to these
requirements and maintain the Company’s REIT status. As a REIT, the Company
generally will not be subject to corporate level federal, state and local income
tax on taxable income it distributes currently to its stockholders. If the
Company fails to qualify as a REIT in any taxable year, it will be subject to
federal, state and local income taxes at regular corporate rates (including any
applicable alternative minimum tax) and may not be able to qualify as a REIT for
four subsequent taxable years. Even though the Company qualifies for
taxation as a REIT, the Company is subject to certain state and local taxes on
its income and property, and to federal income and excise taxes on its
undistributed taxable income.
The
Company recorded $91,000 of federal excise tax (included in general and
administrative expense) which is based on taxable income generated but not yet
distributed for the year ended December 31, 2007. There was no
federal excise tax for the years ended December 31, 2009 and
2008. Included in general and administrative expenses for the years
ended December 31, 2009, 2008 and 2007 are state tax expense of $178,000,
$162,000 and $226,000, respectively.
F-27
NOTE
16 – INCOME TAXES (Continued)
Reconciliation
between Financial Statement Net Income and Federal Taxable Income:
The
following unaudited table reconciles financial statement net income to federal
taxable income for the years ended December 31, 2009, 2008 and 2007 (amounts in
thousands):
2009
Estimate
|
2008
Actual
|
2007
Actual
|
||||||||||
Net
income
|
$ | 19,641 | $ | 4,892 | $ | 10,590 | ||||||
Straight
line rent adjustments
|
(1,174 | ) | (1,023 | ) | (1,600 | ) | ||||||
Excess
of capital losses over capital gains
|
- | - | 868 | |||||||||
Financial statement gain on sale
in excess of tax gain (A)
|
(10,619 | ) | (1,685 | ) | (1,581 | ) | ||||||
Rent
received in advance, net
|
299 | (82 | ) | 95 | ||||||||
Financial
statement impairment charge
|
229 | 5,983 | - | |||||||||
Federal
excise tax, non-deductible
|
- | - | 91 | |||||||||
Financial
statement adjustment for above/below market leases
|
23 | (371 | ) | (285 | ) | |||||||
Non-deductible
portion of restricted stock expense
|
741 | 507 | 710 | |||||||||
Financial
statement adjustment of fair value of derivative
|
(694 | ) | 650 | - | ||||||||
Financial
statement depreciation in excess of tax depreciation
|
1,002 | 1,158 | 702 | |||||||||
Other
adjustments
|
389 | 64 | 2 | |||||||||
Federal
taxable income
|
$ | 9,837 | $ | 10,093 | $ | 9,592 |
F-28
NOTE
16 – INCOME TAXES (Continued)
(A)
|
For
the year ended December 31, 2009, amount includes $4,951 GAAP gain on sale
of real estate which was deferred for federal tax purposes in accordance
with Section 1031 of the Internal Revenue Code of 1986, as amended. Also
includes financial statement impairment charges of $5,983, which were
recorded during the year ended December 31, 2008 relating to four
properties that were disposed of in the year ended December 31,
2009.
|
Reconciliation
between Cash Dividends Paid and Dividends Paid Deduction:
The
following unaudited table reconciles cash dividends paid with the dividends paid
deduction for the years ended December 31, 2009, 2008 and 2007 (amounts in
thousands):
2009
Estimate
|
2008
Actual
|
2007
Actual
|
||||||||||
Dividends
paid (A)
|
$ | 9,419 | $ | 13,241 | $ | 21,218 | ||||||
Dividend
reinvestment plan (B)
|
- | 96 | 268 | |||||||||
9,419 | 13,337 | 21,486 | ||||||||||
Less:
Spillover dividends designated to previous year (C)
|
(2,667 | ) | (5,861 | ) | (17,705 | ) | ||||||
Plus:
Dividends designated from following year (C)
|
3,135 | 2,667 | 5,861 | |||||||||
Dividends
paid deduction (D)
|
$ | 9,887 | $ | 10,143 | $ | 9,642 |
(A)
|
In
2009, the quarterly dividends on the Company’s common stock of $.22 per
share were paid in cash and/or shares of the Company’s common
stock.
|
(B)
|
Amount
reflects the 5% discount on the Company's common shares purchased through
the dividend reinvestment plan, which was terminated in December
2008.
|
(C)
|
Includes
a special dividend paid on October 2, 2007 of $.67 per share or $6,731,
which represents the remaining undistributed portion of the taxable income
recognized by the Company in 2006 primarily from gains on sale by two of
its 50% owned joint ventures of their portfolio of movie theater
properties.
|
(D)
|
Dividends
paid deduction is slightly higher than federal taxable income in 2009,
2008 and 2007so as to account for adjustments made to federal taxable
income as a result of the impact of the alternative minimum
tax.
|
NOTE
17– SUBSEQUENT EVENTS
On
February 24, 2010, the Company acquired a community shopping center located in
Pennsylvania, for a purchase price of $23,500,000. The center is 99% occupied
and leased to ten separate tenants. In connection with the purchase, the Company
assumed an existing first mortgage encumbering the property of approximately
$17,700,000 and the balance was paid in cash.
On March
9, 2010, the Board of Directors declared a quarterly cash distribution of $.30
per share totaling $3,436,000, on the Company's common stock, payable on April
6, 2010 to stockholders of record on March 26, 2010.
F-29
NOTE
18- QUARTERLY FINANCIAL DATA (Unaudited):
(In Thousands, Except Per Share Data)
Quarter Ended
|
||||||||||||||||||||
2009
|
March 31
|
June 30
|
Sept. 30
|
Dec. 31
|
Total
For Year
|
|||||||||||||||
Rental
revenues as previously reported
|
$ | 10,679 | $ | 12,324 | $ | 9,591 | $ | 9,838 | $ | 42,432 | ||||||||||
Revenues
from discontinued operations (A)
|
(982 | ) | (938 | ) | (137 | ) | (137 | ) | (2,194 | ) | ||||||||||
Revenues
|
$ | 9,697 | $ | 11,386 | $ | 9,454 | $ | 9,701 | $ | 40,238 | ||||||||||
Income
from continuing operations (B)
|
$ | 2,263 | $ | 4,231 | $ | 2,147 | $ | 3,413 | $ | 12,054 | ||||||||||
Income
from discontinued operations (B)
|
390 | 212 | 1,293 | 5,692 | 7,587 | |||||||||||||||
Net
income
|
$ | 2,653 | $ | 4,443 | $ | 3,440 | $ | 9,105 | $ | 19,641 | ||||||||||
Weighted
average number of common shares outstanding (C):
|
||||||||||||||||||||
Basic:
|
10,165 | 10,488 | 10,837 | 11,104 | 10,651 | |||||||||||||||
Diluted:
|
10,276 | 10,751 | 10,974 | 11,234 | 10,812 | |||||||||||||||
Net
income per common share:
|
||||||||||||||||||||
Basic:
|
||||||||||||||||||||
Income
from continuing operations (B)
|
$ | .22 | $ | .40 | $ | .20 | $ | .31 | $ | 1.13 | (D) | |||||||||
Income
from discontinued operations (B)
|
.04 | .02 | .12 | .51 | .71 | (D) | ||||||||||||||
Net
income (C)
|
$ | .26 | $ | .42 | $ | .32 | $ | .82 | $ | 1.84 | (D) | |||||||||
Diluted:
|
||||||||||||||||||||
Income
from continuing operations (B)
|
$ | .22 | $ | .39 | $ | .20 | $ | .30 | $ | 1.12 | (D) | |||||||||
Income
from discontinued operations (B)
|
.04 | .02 | .11 | .51 | .70 | (D) | ||||||||||||||
Net
income (C)
|
$ | .26 | $ | .41 | $ | .31 | $ | .81 | $ | 1.82 | (D) |
(A)
|
Represents
revenues from discontinued operations which were previously included in
rental revenues as previously
reported.
|
(B)
|
Amounts
have been adjusted to give effect to the Company’s discontinued
operations.
|
(C)
|
Amounts
have been restated to give effect to a new accounting pronouncement as
discussed in Note 2.
|
(D)
|
Calculated
on weighted average shares outstanding for the
year.
|
F-30
NOTE
18- QUARTERLY FINANCIAL DATA (Continued)
Quarter
Ended
|
||||||||||||||||||||
2008
|
March
31
|
June
30
|
Sept.
30
|
Dec.
31
|
Total
For
Year
|
|||||||||||||||
Rental
revenues as previously reported
|
$ | 9,751 | $ | 9,686 | $ | 9,950 | $ | 10,954 | $ | 40,341 | ||||||||||
Reclassification of
revenues (E)
|
(1,339 | ) | (1,160 | ) | (1,354 | ) | (1,038 | ) | (4,891 | ) | ||||||||||
Revenues
|
$ | 8,412 | $ | 8,526 | $ | 8,596 | $ | 9,916 | $ | 35,450 | ||||||||||
Income from
continuing operations(F)
|
$ | 2,015 | $ | 3,594 | $ | 1,695 | $ | 2,329 | $ | 9,633 | ||||||||||
Income (loss) from
discontinued operations (F)
|
764 | (348 | ) | 773 | (5,930 | ) | (4,741 | ) | ||||||||||||
Net
income (loss)
|
$ | 2,779 | $ | 3,246 | $ | 2,468 | $ | (3,601 | ) | $ | 4,892 | |||||||||
Weighted
average number of common shares outstanding - basic and
diluted
|
10,152 | 10,219 | 10,169 | 10,192 | 10,183 | |||||||||||||||
Net
income per common share – basic and diluted:
|
||||||||||||||||||||
Income
from continuing operations
|
$ | .20 | $ | .35 | $ | .16 | $ | .23 | $ | .95 | (G) | |||||||||
Income
(loss) from discontinued operations
|
.07 | (.03 | ) | .08 | (.58 | ) |
(.47
|
)(G) | ||||||||||||
Net
income (loss)
|
$ | .27 | $ | .32 | $ | .24 | $ | (.35 | ) | $ | .48 | (G) |
(E)
|
Represents
revenues from discontinued operations which were previously included in
rental revenues as previously
reported.
|
(F)
|
Amounts
have been adjusted to give effect to the Company’s discontinued
operations.
|
(G)
|
Calculated
on weighted average shares outstanding for the
year.
|
F-31
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Schedule
III - Consolidated Real Estate and Accumulated Depreciation
December
31, 2009
(Amounts
in Thousands)
Initial Cost To
Company
|
Cost
Capitalized
Subsequent
to Acquisition
|
Gross Amount at Which Carried at
December 31, 2009
|
Accumulated
Depreciation
|
Date of
Construction
|
Date
Acquired
|
Life on
Which
Depreciation
in Latest
Income
Statement is
Computed
(Years)
|
|||||||||||||||||||||||||||||||||
Encumbrances
|
Land
|
Buildings
|
Improvements
|
Land
|
Buildings and
Improvements
|
Total
|
|||||||||||||||||||||||||||||||||
Free Standing Retail
Locations:
|
|||||||||||||||||||||||||||||||||||||||
10
Properties – Note 1
|
$ | 2,782 | $ | 19,929 | $ | 29,720 | $ | - | $ | 19,929 | $ | 29,720 | $ | 49,649 | $ | 1,491 |
Various
|
Various
|
40 | ||||||||||||||||||||
11
Properties – Note 2
|
24,750 | 10,286 | 45,414 | - | 10,286 | 45,414 | 55,700 | 4,210 |
Various
|
04/07/06
|
40 | ||||||||||||||||||||||||||||
Miscellaneous
|
65,228 | 29,677 | 100,509 | 1,010 | 29,677 | 101,519 | 131,196 | 18,868 |
Various
|
Various
|
40 | ||||||||||||||||||||||||||||
Flex
Buildings:
|
|||||||||||||||||||||||||||||||||||||||
Miscellaneous
|
12,976 | 2,993 | 15,125 | 1,032 | 2,993 | 16,157 | 19,150 | 3,489 |
Various
|
Various
|
40 | ||||||||||||||||||||||||||||
Office
Buildings:
|
|||||||||||||||||||||||||||||||||||||||
Parsippany,
NJ
|
15,604 | 6,055 | 23,300 | - | 6,055 | 23,300 | 29,355 | 2,500 |
1997
|
09/16/05
|
40 | ||||||||||||||||||||||||||||
Miscellaneous
|
15,596 | 3,537 | 13,688 | 2,574 | 3,537 | 16,262 | 19,799 | 3,307 |
Various
|
Various
|
40 | ||||||||||||||||||||||||||||
Apartment
Building:
|
|||||||||||||||||||||||||||||||||||||||
Miscellaneous
|
4,142 | 1,110 | 4,439 | - | 1,110 | 4,439 | 5,549 | 2,509 |
1910
|
06/14/94
|
27.5 | ||||||||||||||||||||||||||||
Industrial:
|
|||||||||||||||||||||||||||||||||||||||
Baltimore,
MD - Note 3
|
22,725 | 6,474 | 25,282 | - | 6,474 | 25,282 | 31,756 | 1,923 |
1960
|
12/20/06
|
40 | ||||||||||||||||||||||||||||
Miscellaneous
|
11,591 | 4,777 | 18,263 | 956 | 4,777 | 19,219 | 23,996 | 2,794 |
Various
|
Various
|
40 | ||||||||||||||||||||||||||||
Theater:
|
|||||||||||||||||||||||||||||||||||||||
Miscellaneous
|
5,903 | - | 8,328 | - | - | 8,328 | 8,328 | 2,895 |
2000
|
08/10/04
|
15.6 | ||||||||||||||||||||||||||||
Health
Clubs:
|
|||||||||||||||||||||||||||||||||||||||
Miscellaneous
|
9,221 | 2,233 | 8,729 | 2,731 | 2,233 | 11,460 | 13,693 | 2,300 |
Various
|
Various
|
40 | ||||||||||||||||||||||||||||
Totals
|
$ | 190,518 | $ | 87,071 | $ | 292,797 | $ | 8,303 | $ | 87,071 | $ | 301,100 | $ | 388,171 | $ | 46,286 |
F-32
Note 1 –
These ten properties are retail office supply stores net leased to the same
tenant, pursuant to separate leases. Eight of these leases contain
cross default provisions. They are located in eight states (Florida, Illinois,
Louisiana, North Carolina, Texas, California, Georgia and Oregon) and no
individual property is greater than 5% of the Company’s total
assets.
Note 2 –
These 11 properties are retail furniture stores covered by one master lease and
one loan that is secured by crossed mortgages. They are located in
six states (Georgia, Kansas, Kentucky, South Carolina, Texas and Virginia) and
no individual property is greater than 5% of the Company’s total
assets.
Note 3 –
Upon purchase of the property in December 2006, a $416,000 rental income reserve
was posted by the seller for the Company’s benefit, since the property was not
producing sufficient rent at the time of acquisition. The Company
recorded the receipt of this rental reserve as a reduction to land and
building.
F-33
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes to
Schedule III
Consolidated
Real Estate and Accumulated Depreciation
(a)
|
Reconciliation
of "Real Estate and Accumulated Depreciation"
|
(Amounts In Thousands)
|
Year Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Investment
in real estate:
|
||||||||||||
Balance,
beginning of year
|
$ | 387,595 | $ | 329,728 | $ | 380,111 | ||||||
Addition:
Land, buildings and improvements
|
576 | 59,015 | 576 | |||||||||
Deductions:
|
||||||||||||
Cost
of properties sold
|
- | (1,148 | ) | (1 | ) | |||||||
Reclassification
to “properties held for sale”
|
- | - | (50,542 | ) | ||||||||
Rental
reserve received (see Note 3 above)
|
- | - | (416 | ) | ||||||||
Balance,
end of year
|
$ | 388,171 | $ | 387,595 | $ | 329,728 | ||||||
(b)
|
||||||||||||
Accumulated
depreciation:
|
||||||||||||
Balance,
beginning of year
|
$ | 38,389 | $ | 31,031 | $ | 28,270 | ||||||
Addition:
Depreciation
|
8,467 | 8,470 | 7,958 | |||||||||
Deduction:
|
||||||||||||
Accumulated
depreciation related to “properties held for sale”
|
(570 | ) | (1,112 | ) | (5,197 | ) | ||||||
Balance,
end of year
|
$ | 46,286 | $ | 38,389 | $ | 31,031 |
(b)
|
The
aggregate cost of the properties is approximately $16,323 lower for
federal income tax purposes at December 31,
2009.
|
F-34