One Liberty Properties Inc. Reports Operating Results (10-Q)
ONE LIBERTY PROPERTIES INC. is a real estate investment trust which invests primarily in improved commercial real estate under long-term net lease. One Liberty Properties Inc. has a market cap of $91.1 million; its shares were traded at around $8.35 with a P/E ratio of 4.4 and P/S ratio of 2.3. The dividend yield of One Liberty Properties Inc. stocks is 2.6%. One Liberty Properties Inc. had an annual average earning growth of 1.5% over the past 5 years. Highlight of Business Operations:Rental income increased by $3.2 million, or 12.3%, to $29.2 million for the nine months ended September 30, 2009 from $26 million for the nine months ended September 30, 2008. For the three months ended September 30, 2009, rental income increased by $845,000, or 9.7%, to $9.6 million from $8.7 million for the three months ended September 30, 2008. The increase in rental income is primarily due to rental revenues during the nine and three months ended September 30, 2009 of $3.4 million and $1 million, respectively, earned on twelve properties acquired during 2008. The increase in rental income was offset by a decrease in rent received from two tenants adversely affected by the current recession and by the termination in June 2009 of a property lease, for which we received the lease termination fee referred to below.
Depreciation and amortization expense increased by $702,000, or 12.4%, and $197,000, or 10.3%, to $6.4 million and $2.1 million, respectively, for the nine and three months ended September 30, 2009. The increase was primarily due to depreciation and amortization increases of $659,000 and $193,000 for the nine and three months ended September 30, 2009, respectively, taken on twelve properties acquired during 2008.
Interest and other income decreased by $195,000, or 40%, and $72,000, or 45.9%, to $292,000 and $85,000 for the nine and three months ended September 30, 2009, respectively. We had less cash available for investment in short-term cash equivalents in both periods, as we applied available cash to the purchase of nine properties in September 2008. In addition, interest rates earned on short term cash equivalents have 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 the nine months ended September 30, 2009.
Amortization of deferred financing costs increased by $147,000, or 33.6%, and $37,000, or 25.3%, to $585,000 and $183,000 for the nine and three months ended September 30, 2009, respectively. The increase in the nine month period results primarily from $118,000 of accelerated amortization of deferred financing costs relating to a mortgage loan that was refinanced during the quarter ended March 31, 2009. In addition, the nine and three months ended September 30, 2009 includes $37,000 of accelerated amortization of deferred financing costs relating to a mortgage loan that was repaid in full during the three months ended September 30, 2009.
Income from operations included in discontinued operations decreased by $693,000, or 40.6%, and $353,000, or 51.8%, to $1,012,000 and $328,000 for the nine and three months ended September 30, 2009, respectively. Included are the operations of five properties that were formerly leased to Circuit City Stores, Inc., which filed for protection under the federal bankruptcy laws in November 2008 and rejected leases for two of the properties in December 2008 and the remaining three properties in March 2009. As a result, the Circuit City properties generated net income in the nine and three months ended September 30, 2008, but produced losses in the current nine and three month periods. In addition, the nine months ended September 30, 2009 includes 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. As discussed below, these properties were conveyed to the mortgagee in July 2009.
As of September 30, 2009, we had two interest rate swaps outstanding which had an aggregate notional value of $20.4 million, one of which was designated as a cash flow hedge and the other as un-designated. Our designated interest rate swap agreement is perfectly effective with no ineffectiveness. Changes in the fair value of the effective portion of our designated interest rate swap is recorded in other comprehensive income and is subsequently reclassified to interest expense as we make payments on our variable debt. Changes in the fair value of the ineffective portion of our undesignated interest rate swap (attributable to the late designation of one of the Company s interest rate swap agreements) are recognized directly in earnings. As of September 30, 2009, we recorded a $111,000 gain on hedge ineffectiveness and a $63,000 gain due to accelerated reclassifications of amounts in other comprehensive income to earnings as a result of the termination in October 2009, of a loan agreement associated with our undesignated interest rate swap. The fair value of our interest rate swap agreements are dependent upon existing market interest rates and swap spreads, which change over time. If there had been a 100 basis point increase in forward interest rates, we would have recorded income of approximately $359,000 and if there had been a 100 basis point decrease in forward interest rates, we would have recorded an expense of approximately $374,000.
Read the The complete ReportOLP is in the portfolios of Michael Price of MFP Investors LLC.