ONE LIBERTY PROPERTIES INC

Previous wording

As more fully described in our Annual Report, and in particular, the sections thereof entitled “Risk Factors” and*“Management’s Discussion and Analysis of Financial Condition and Results of Operations”*, we face challenges due to the volatile economic environment, and certain of our properties and tenants (including The Vue Apartments, LA Fitness and Regal Cinemas) face various challenges. Our cash flow and profitability will be adversely impacted if the issues with respect to the challenged tenants/properties identified in the Annual Report are not resolved in a satisfactory manner. There have been no material changes to the status of such tenants/properties.

Current wording

As more fully described in our Annual Report, and in particular, the sections thereof entitled “Risk Factors” and*“Management’s Discussion and Analysis of Financial Condition and Results of Operations”, we face challenges due to the volatile economic environment, and certain of our properties and tenants face various challenges. Our cash flow and profitability will be adversely impacted if the issues with respect to the challenged tenants/properties identified in the Annual Report are not resolved in a satisfactory manner. There have been no material changes to the status of such tenants/ properties other than with respect to our Hamilton, Ohio property formerly tenanted by LA Fitness– see “–Sales Contract and Impairment Loss*” below.

Previous wording

We acquire, own and manage a geographically diversified portfolio consisting primarily of industrial and, to a lesser extent, retail properties, many of which are subject to long-term net leases. As of March 31, 2024, we own 110 properties (including three properties owned by consolidated joint ventures and two properties owned by unconsolidated joint ventures) located in 31 states. Based on square footage, our occupancy rate at March 31, 2024 is approximately 98.4%.

Current wording

We acquire, own and manage a geographically diversified portfolio consisting primarily of industrial and, to a lesser extent, retail properties, many of which are subject to long-term net leases. As of June 30, 2024, we own 106 properties (including two properties owned by consolidated joint ventures and two properties owned by unconsolidated joint ventures) located in 31 states. Based on square footage, our occupancy rate at June 30, 2024 is approximately 98.2%.

Previous wording

We monitor the risk of tenant non-payments through a variety of approaches tailored to the applicable situation. Generally, based on our assessment of the credit risk posed by our tenants, we monitor a tenant’s financial condition through one or more of the following actions: reviewing tenant financial statements or other financial information, obtaining other tenant related information, changes in tenant payment patterns, regular contact with tenant’s representatives, tenant credit checks and regular management reviews of our tenants. We may sell a property if the tenant’s financial condition is unsatisfactory.

Current wording

We monitor the risk of tenant non-payments through a variety of approaches tailored to the applicable situation. Generally, based on our assessment of the credit risk posed by our tenants, we monitor a tenant’s financial condition through one or more of the following actions: reviewing tenant financial statements or other financial information, obtaining other tenant related information, changes in tenant payment patterns, regular contact with tenant’s representatives, tenant credit checks and regular management reviews of our tenants. We have in the past, and we may in the future, sell a property if the tenant’s financial condition is unsatisfactory.

Previous wording

In acquiring and disposing of properties, among other things, we evaluate the terms of the leases, the credit of the existing tenants, the terms and conditions of the related financing arrangement (including any contemplated financing) and engage in a fundamental analysis of the real estate to be bought or sold. This fundamental analysis takes into account, among other things, the estimated value of the property, local demographics and the ability to re-rent or dispose of the property on favorable terms upon lease expiration or early termination. In addition, in evaluating property sales, we take into account, among other things, the property type (*i.e.,*industrial, retail or other), our perception of the property’s long-term prospects (including the likelihood for, and the extent of, any further appreciation or diminution in value), the term remaining on the related lease and mortgage debt, the price and other terms and conditions for the sale of such property and the returns anticipated to be generated from the reinvestment ofthe net proceeds to us from such property sale.

Current wording

In acquiring and disposing of properties, among other things, we evaluate the terms of the leases, the credit of the existing tenants, the terms and conditions of the related financing arrangement (including any contemplated financing) and engage in a fundamental analysis of the real estate to be bought or sold. This fundamental analysis takes into account, among other things, the estimated value of the property, local competition and demographics, and the ability to re-rent or dispose of the property on favorable terms upon lease expiration or early termination. In addition, in evaluating property sales, we take into account, among other things, the property type (*i.e.,*industrial, retail or other), our perception of the property’s long-term

Previous wording

Our 2024 contractual base rent is approximately $70.2 million and represents, after giving effect to any abatements, concessions, deferrals or adjustments, the base rent payable to us during the year ending December 31, 2024 under leases in effect at March 31, 2024.

Current wording

Our 2024 contractual base rent is approximately $70.9 million and represents, after giving effect to any abatements, concessions, deferrals or adjustments, the base rent payable to us during the twelve months ending June 30, 2025 under leases in effect at June 30, 2024.

Previous wording

Excluded from such contractual rental income is an aggregate of $2.5 million comprised of:

Current wording

Excluded from contractual rental income is an aggregate of $1.5 million comprised of:

Previous wording

The decrease in same store rental income during the three ended March 31, 2024 is due primarily to decreases of:

Current wording

The changes in same store rental income during the three and six months ended June 30, 2024 are due primarily to decreases of:

Previous wording

The decrease was offset during the three months ended March 31, 2024 by increases in rental income of:

Current wording

The decreases were offset during the three and six months ended June 30, 2024 by increases in rental income of:

Previous wording

Depreciation and amortization. The decrease in the three months ended March 31, 2024 is due primarily to (i) decreases of $356,000, related to tenant origination costs at several properties that prior to March 31, 2024 were fully amortized, and (ii) the inclusion in the corresponding 2023 period of $160,000 of such expense from the properties sold since January 1, 2023.

Current wording

Depreciation and amortization. The decreases in the three and six months ended June 30, 2024 are due primarily to (i) decreases of $367,000 and $723,000, respectively, related to tenant origination costs at several properties that prior to June 30, 2024 were fully amortized, and (ii) the inclusion in the corresponding 2023 periods of $253,000 and $412,000, respectively, of such expense from the properties sold since January 1, 2023.

Previous wording

The decrease was offset by (i) $220,000 of such expense from a property acquired in 2023, and (ii) $132,000 of depreciation from improvements at several properties.

Current wording

The decreases were offset by (i) $291,000 and $511,000, respectively, of such expense from three properties acquired since January 1, 2023, and (ii) $118,000 and $247,000, respectively, of depreciation from improvements at several properties.

Previous wording

Real estate expenses. The increase in the three months ended March 31, 2024 is due primarily to:

Current wording

Real estate expenses. The increase in the six months ended June 30, 2024 is due primarily to $229,000 from a property acquired in 2023.

Previous wording

Other Income. The increase in the three months ended March 31, 2024 is due primarily to a $192,000 increase in interest income from investments in short-term U.S. treasury bills.

Current wording

Other Income. The increases in the three and six months ended June 30, 2024 are due to increases of $113,000 and $305,000, respectively, in interest income from investments in short-term U.S. treasury bills. The balance of the increase is due to various factors, none of which was individually significant.

Previous wording

The increase in mortgage interest in the three months ended March 31, 2024 is due primarily to the increase in the average principal amount of mortgage debt outstanding as a result of financings and refinancings, offset by mortgage payoffs (generally in connection with scheduled maturities) and scheduled amortization payments.

Current wording

The increases in mortgage interest in the three and six months ended June 30, 2024 are due primarily to increases in the average principal amount of mortgage debt outstanding as a result of financings and refinancings, offset by mortgage payoffs (generally in connection with scheduled maturities) and scheduled amortization payments.

Previous wording

The decrease is due to the elimination of the principal balance outstanding on the credit facility. The $63,000 of interest expense constitutes the unused facility fee.

Current wording

The decreases in credit line interest in the three and six months ended June 30, 2024 are due to the payoff of the principal balance outstanding on the credit facility. The interest expense of $63,000 and $126,000 for the three and six months ended June 30, 2024, respectively, constitutes the unused facility fee.

Previous wording

As of March 31, 2023, the weighted average interest rate was 6.23% and the weighted average principal amount outstanding was $20.2 million.

Current wording

The weighted average interest rate was 6.69% and 6.44% for the three and six months ended June 30, 2023, respectively, and the weighted average principal amount outstanding was $16.6 million and $18.4 million for the three and six months ended June 30, 2023, respectively.

Previous wording

Our sources of liquidity and capital include cash flow from operations, cash and cash equivalents, borrowings under our credit facility, refinancing existing mortgage loans, obtaining mortgage loans secured by our unencumbered properties, issuance of our equity securities and property sales. Our available liquidity at May 1, 2024, was $115.1 million, including $15.1 million of cash and cash equivalents (including the credit facility’s required minimum $3.0 million average deposit maintenance balance) and up to $100.0 million available under our credit facility. At May 1, 2024, the facility is available for the acquisition of commercial real estate, repayment of mortgage debt, and up to $40.0 million for renovation and operating expense purposes.

Current wording

Our sources of liquidity and capital include cash flow from operations, cash and cash equivalents, borrowings under our credit facility, refinancing existing mortgage loans, obtaining mortgage loans secured by our unencumbered properties, issuance of our equity securities and property sales. Our available liquidity at August 1, 2024, was $134.1 million, including $34.1 million of cash and cash equivalents (including the credit facility’s required minimum $3.0 million average deposit maintenance balance) and up to $100.0 million available under our credit facility. At August 1, 2024, the facility is available for the acquisition of commercial real estate, repayment of mortgage debt, and up to $40.0 million for renovation and operating expense purposes.

Previous wording

We expect to meet our short-term (i.e., one year or less) and long-term (i) operating cash requirements, including debt service, anticipated dividend payments and repurchases of our common stock, principally from cash flow from operations, our available cash and cash equivalents, proceeds from and, to the extent permitted and needed, our credit facility and (ii) investing and financing cash requirements (including an estimated aggregate of $2.8 million of capital expenditures) from the foregoing, as well as property financings and refinancings, property sales and sales of our common stock.

Current wording

We expect to meet our short-term (i.e., one year or less) and long-term:

Previous wording

At March 31, 2024, we had 67 outstanding mortgages payable secured by 68 properties in the aggregate principal amount of $421.0 million (before netting unamortized deferred financing costs of $3.7 million and mortgage intangibles of $770,000). These mortgages represent first liens on individual real estate investments with an aggregate carrying value of $668.0 million, before accumulated depreciation of $130.4 million. After giving effect to interest rate swap agreements, the mortgage payments bear interest at fixed rates ranging from 3.05% to 8.32% (a 4.41% weighted average interest rate) and mature between 2024 and 2047 (a 6.3 year weighted average remaining term to maturity).

Current wording

At June 30, 2024, we had 68 outstanding mortgages payable secured by 69 properties in the aggregate principal amount of $419.8 million (before netting unamortized deferred financing costs of $3.6 million and mortgage intangibles of $736,000). These mortgages represent first liens on individual real estate investments with an aggregate carrying value of $672.6 million, before accumulated depreciation of $131.3 million. After giving effect to interest rate swap agreements, the mortgage payments bear interest at fixed rates ranging from 3.05% to 8.33% (a 4.41% weighted average interest rate) and mature between 2024 and 2047 (a 6.0 year weighted average remaining term to maturity).

Previous wording

The following table sets forth, as of March 31, 2024, information with respect to our mortgage debt that is payable during the nine months ending December 31, 2024 and for each of the subsequent twelve months through December 31, 2027:

Current wording

The following table sets forth, as of June 30, 2024, information with respect to our mortgage debt that is payable during the six months ending December 31, 2024 and for each of the subsequent twelve months through December 31, 2027:

Previous wording

We intend to make debt amortization payments from operating cash flow and, though no assurance can be given that we will be successful in this regard, generally intend to refinance, extend or pay off the mortgage loans which mature in 2024 through 2027. In particular, we anticipate refinancing a substantial portion of the debt maturing in 2024 and 2025 although given the significant increase in interest rates over the past year, we can provide no assurance that we will be able to do so on terms as favorable as those currently in effect or at all. We generally intend to repay the amounts not refinanced or extended from our existing funds and sources of funds, including our available cash, proceeds from the sale of our common stock and our credit facility (to the extent available).

Current wording

We anticipate refinancing a substantial portion of the remaining debt maturing in 2024 and 2025, although given the significant increase in interest rates over the past year, we can provide no assurance that we will be able to do so on terms as favorable as those currently in effect or at all. We generally intend to repay the amounts not refinanced or extended from our existing funds and sources of funds, including our available cash, proceeds from property sales and, if any, the sale of our common stock, and our credit facility (to the extent available).

Previous wording

Typically, we utilize funds from our 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.

Current wording

Typically, we use funds from our 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.

Previous wording

Our credit facility provides that subject to borrowing base requirements, we can borrow up to $100.0 million for the acquisition of commercial real estate, repayment of mortgage debt, and renovation and operating expense purposes; provided, that if used for renovation and operating expense purposes, the amount outstanding for such purposes will not exceed the lesser of $40.0 million and 40% of the borrowing base. The facility matures December 31, 2026 and bears interest equal to 30-day SOFR plus the applicable margin. The applicable margin ranges from 175 basis points if our ratio of total debt to total value (as calculated pursuant to the facility) is equal to or less than 50%, increasing to a maximum of 275 basis points if such ratio is greater than 60%. The applicable margin was 175 basis points for each of the three months ended March 31, 2024 and 2023. There is an unused facility fee of 0.25% per annum on the difference between the outstanding loan balance and $100.0 million. The credit facility requires the maintenance of $3.0 million in average deposit balances. The interest rate on the facility was 7.08% and 7.06% at March 31, 2024 and May 1, 2024, respectively.

Current wording

Our credit facility provides that subject to borrowing base requirements, we can borrow up to $100.0 million for the acquisition of commercial real estate, repayment of mortgage debt, and renovation and operating expense purposes; provided, that if used for renovation and operating expense purposes, the amount outstanding for such purposes will not exceed the lesser of $40.0 million and 40% of the borrowing base. The facility matures December 31, 2026 and bears interest equal to 30-day SOFR plus the applicable margin. The applicable margin ranges from 175 basis points if our ratio of total debt to total value (as calculated pursuant to the facility) is equal to or less than 50%, increasing to a maximum of 275 basis points if such ratio is greater than 60%. The applicable margin was 175 basis points for each of the six months ended June 30, 2024 and 2023. There is an unused facility fee of 0.25% per annum on the difference between the outstanding loan balance and $100.0 million. The credit facility requires the maintenance of $3.0 million in average deposit balances. The interest rate on the facility was 7.09% at each of June 30, 2024 and August 1, 2024.

Previous wording

We own a land parcel located in Beachwood, Ohio which is improved by a multi-family complex (i.e., The Vue Apartments) that we ground lease to the owner/operator of such complex. This ground lease did not generate any rental income during the three months ended March 31, 2024 and 2023. At March 31, 2024, the carrying value of the land on our balance sheet was approximately $17.3 million; our leasehold position is subordinate to $63.2 million of mortgage debt incurred by our tenant, the owner/operator of the multi-family complex. In addition, we have agreed, in our discretion, to fund certain capital expenditures and operating cash flow shortfalls at this property. We do not believe that this type of off-balance sheet arrangement has been or will be material to our liquidity and capital resource positions, except to the extent we determine to continue to fund the capital expenditures required by, and the operating cash flow shortfalls at, this property. See Note 5 to our consolidated financial statements for additional information regarding this arrangement.

Current wording

We own a land parcel located in Beachwood, Ohio which is improved by a multi-family complex (i.e., The Vue Apartments) that we ground lease to the owner/operator of such complex. This ground lease did not generate any rental income during the six months ended June 30, 2024 and 2023. At June 30, 2024, the carrying value of the land on our balance sheet was approximately $17.3 million; our leasehold position is subordinate to $62.9 million of mortgage debt incurred by our tenant, the owner/operator of the multi-family complex. In addition, we have agreed, in our discretion, to fund certain capital expenditures and operating cash flow shortfalls at this property. We do not believe that this type of off-balance sheet arrangement has been or will be material to our liquidity and capital resource positions, except to the extent we determine to continue to fund the capital expenditures required by, and the operating cash flow shortfalls at, this property. See Note 6 to our consolidated financial statements for additional information regarding this arrangement.

Previous wording

The $554,000, or 5.5%, decrease in FFO for the three months ended March 31, 2024 from the corresponding 2023 period is due primarily to:

Current wording

The $324,000, or 3.4%, decrease in FFO for the three months ended June 30, 2024 from the corresponding 2023 period is due primarily to:

Previous wording

The $593,000, or 5.5%, decrease in AFFO for the three months ended March 31, 2024 from the corresponding 2023 period is due to the factors impacting FFO as described immediately above, excluding the (i) $250,000 lease termination fee income and (ii) a $232,000 increase in rental income, net, due to the exclusion of the amortization of straight line rent and lease-related intangibles.

Current wording

The $1.1 million, or 5.2%, decrease in AFFO for the six months ended June 30, 2024 from the corresponding 2023 period is due to the factors impacting FFO as described immediately above, excluding the (i) $453,000 decrease in general and administrative expenses related to the amortization of restricted stock and RSU compensation, (ii) a $351,000 increase in rental income, net, due to the exclusion of the amortization of straight line rent and lease-related intangibles, and (iii) $250,000 lease termination fee income.