UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2021 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 001-09279 ONE LIBERTY PROPERTIES, INC. (Exact name of registrant as specified in its charter) MARYLAND 13-3147497 (State or other jurisdiction of (I.R.S. employer incorporation or ...

PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business.) OLP is a self-managed REIT with a diversified property portfolio, strategically shifting to industrial assets while managing pandemic impacts - As of December 31, 2020, OLP owns **123 properties** in **31 states**, totaling approximately **10.7 million square feet**, with a portfolio occupancy rate of **98.4%**[17](index=17&type=chunk) Key Metrics as of December 31, 2020 | Metric | Value | | :--- | :--- | | 2021 Contractual Rental Income | $68.7 million | | Occupancy Rate (by sq. ft.) | 98.4% | | Weighted Avg. Mortgage Debt Term | 7.1 years | | Weighted Avg. Mortgage Interest Rate | 4.19% | | Weighted Avg. Lease Term | 5.6 years | - In response to the COVID-19 pandemic in 2020, the company collected **91.7% of base rent** before adjustments, granting **$3.5 million in rent deferrals** to **37 tenants** and **$1.4 million in rent abatements** to **12 tenants**[23](index=23&type=chunk) - The company has strategically shifted its portfolio towards industrial properties, which accounted for **55.4% of net rental income in 2020**, up from **35.1% in 2017**, while retail properties' contribution decreased from **43.7% to 32.9%** over the same period[26](index=26&type=chunk) Tenant Diversification by Industry (as of Dec 31, 2020) | Type of Property | Number of Tenants | Number of Properties | % of 2021 Contractual Rental Income | | :--- | :--- | :--- | :--- | | Industrial | 50 | 46 | 55.5% | | Retail—General | 51 | 28 | 16.4% | | Retail—Furniture | 3 | 14 | 9.0% | | Restaurant | 9 | 16 | 5.0% | | Health & Fitness | 1 | 3 | 4.7% | | Other | 10 | 13 | 9.4% | - The company employs **nine full-time employees** and utilizes a compensation and services agreement with Majestic Property Management Corp., paying Majestic approximately **$3.0 million** for services and **$275,000** for office expenses in 2020[50](index=50&type=chunk)[51](index=51&type=chunk) [Item 1A. Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors.) Key risks include COVID-19 impacts, tenant concentration, e-commerce challenges, and significant mortgage debt refinancing obligations - The COVID-19 pandemic is the most significant risk, having led to rent deferrals of **$3.5 million** and abatements of **$1.4 million** in 2020, which contributed to a **2.3% decrease in net rental income**[69](index=69&type=chunk)[70](index=70&type=chunk) - A significant portion of rental income is concentrated among a few tenants, with five tenants accounting for approximately **25.2% of the 2021 contractual rental income**[78](index=78&type=chunk) - The portfolio has notable exposure to the traditional retail sector, which faces increasing competition from e-commerce, with retail tenants generating **32.4% of 2021 contractual rental income**[77](index=77&type=chunk) - The company faces significant refinancing risk, with approximately **$205.0 million** of its **$433.5 million in mortgage debt** maturing between 2021 and 2025[88](index=88&type=chunk)[89](index=89&type=chunk) - The planned phase-out of LIBOR after June 2023 creates uncertainty for **$97.7 million** of the company's variable rate debt, including **$68.7 million** of mortgage debt and related swaps that mature after this date[98](index=98&type=chunk) - Potential conflicts of interest exist due to transactions with affiliated entities, notably the compensation and services agreement with Majestic Property, which is wholly-owned by the company's vice chairman[111](index=111&type=chunk) [Item 1B. Unresolved Staff Comments](index=27&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) The company reports no unresolved staff comments from the Securities and Exchange Commission - None[132](index=132&type=chunk) [Item 2. Properties](index=27&type=section&id=Item%202.%20Properties.) As of December 31, 2020, OLP owns 120 properties with a net book value of $691.9 million and a 98.4% occupancy rate, alongside interests in three joint venture properties, with $433.5 million in mortgage debt - As of December 31, 2020, the company owns **120 properties** with an aggregate net book value of **$691.9 million** and an occupancy rate of **98.4%**, also participating in joint ventures that own three properties[133](index=133&type=chunk)[134](index=134&type=chunk) Geographic Concentration of Owned Properties (Top 5 States) | State | Number of Properties | % of 2021 Contractual Rental Income | | :--- | :--- | :--- | | New York | 8 | 9.3% | | South Carolina | 7 | 9.2% | | Pennsylvania | 12 | 8.1% | | Texas | 7 | 7.6% | | Georgia | 10 | 6.1% | - The company has **$433.5 million of mortgage debt** outstanding across **91 of its 120 properties**, with a weighted average interest rate of **4.19%** and a weighted average remaining term of **7.1 years**[148](index=148&type=chunk) Scheduled Principal Mortgage Payments (in thousands) | Year | Principal Payments Due | | :--- | :--- | | 2021 | $22,575 | | 2022 | $46,126 | | 2023 | $30,278 | | 2024 | $63,016 | | 2025 | $43,048 | | Thereafter | $228,506 | | **Total** | **$433,549** | [Item 3. Legal Proceedings](index=32&type=section&id=Item%203.%20Legal%20Proceedings.) This item is not applicable - Not applicable[146](index=146&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable - Not applicable[147](index=147&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=33&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) The company's common stock is listed on the NYSE under "OLP", with approximately 270 holders of record, and no shares were repurchased in 2020 under its $7.5 million program - The company's common stock trades on the NYSE under the symbol **"OLP"**[150](index=150&type=chunk) - The company did not repurchase any of its common stock in 2020, despite having an authorization to repurchase up to **$7.5 million** in shares[152](index=152&type=chunk) [Item 6. Selected Financial Data](index=33&type=section&id=Item%206.%20Selected%20Financial%20Data.) This item is not applicable as the company qualifies as a smaller reporting company - Not applicable as the company is a smaller reporting company[153](index=153&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses the significant COVID-19 impact on 2020 financial results, outlining company responses, the strategic shift to industrial properties, and liquidity management, with FFO and AFFO declines [Challenges and Uncertainties Related to the COVID-19 Pandemic](index=34&type=section&id=Challenges%20and%20Uncertainties%20Related%20to%20the%20COVID-19%20Pandemic) The pandemic significantly impacted tenants, leading to $3.5 million in rent deferrals and $1.4 million in abatements, while OLP conserved cash by paying $6.8 million of dividends in stock and amending its credit facility - The company deferred payment of approximately **$3.5 million**, or **4.8%**, of the annual base rent for 2020, with **79.6%** scheduled for repayment in 2021[160](index=160&type=chunk) - Rent abatements totaled **$1.4 million** in 2020, but linking abatements to lease extensions for eight tenants increased aggregate future base rent over modified lease terms by **$16.3 million**[161](index=161&type=chunk)[163](index=163&type=chunk) Base Rent Collection Rate (Before Deferrals & Abatements) | Period | Base Rent Due (thousands) | Base Rent Collected (thousands) | Percentage Collected | | :--- | :--- | :--- | :--- | | Year Ended Dec 31, 2020 | $72,505 | $66,481 | 91.7% | | Q4 2020 | $18,105 | $17,169 | 94.8% | - To conserve cash, the company paid **$6.8 million** of its 2020 dividends in stock and amended its credit facility to increase the working capital borrowing capacity to **$20 million** until June 30, 2022[165](index=165&type=chunk) [Challenges and Uncertainties Facing Certain Tenants and Properties](index=38&type=section&id=Challenges%20and%20Uncertainties%20Facing%20Certain%20Tenants%20and%20Properties) This section details specific issues with key tenants, including Regal Cinemas' closures leading to $1.1 million in unbilled rent write-offs, LA Fitness's $500,000 in rent abatements, and the Beachwood, Ohio tenant's non-payment since October 2020 - Regal Cinemas, a tenant at three properties, closed its theaters in October 2020, leading to a **$1.1 million write-off of unbilled rent**, **$928,000 in uncollected rent**, and **$676,000 in rent abatements** for the two consolidated properties in 2020[179](index=179&type=chunk) - LA Fitness, a tenant at three properties, received **$290,000 in rent deferrals** and **$500,000 in rent abatements** during 2020[181](index=181&type=chunk) - The tenant of a ground lease in Beachwood, Ohio (The Vue), has not paid rent from October 2020 through March 2021, and the company does not expect rent payments for several months, potentially requiring it to fund operating and capital shortfalls[182](index=182&type=chunk) [Comparison of Years Ended December 31, 2020 and 2019](index=41&type=section&id=Comparison%20of%20Years%20Ended%20December%2031%2C%202020%20and%202019) Total revenues decreased by 3.3% to $81.9 million in 2020, primarily due to a 2.3% decline in net rental income, while operating expenses rose 4.3%, offset by a significant increase in gain on sale of real estate to $17.3 million Revenue Comparison (in thousands) | | 2020 | 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Rental income, net | $81,888 | $83,786 | $(1,898) | (2.3)% | | Lease termination fees | $15 | $950 | $(935) | (98.4)% | | **Total revenues** | **$81,903** | **$84,736** | **$(2,833)** | **(3.3)%** | - The **$2.5 million decrease in same-store rental income** was primarily due to **$1.3 million in COVID-19 rent abatements**, a **$1.1 million non-cash write-off of unbilled rent** for Regal Cinemas, and **$928,000 of uncollected rent** from Regal Cinemas[189](index=189&type=chunk)[191](index=191&type=chunk) Operating Expense Comparison (in thousands) | | 2020 | 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Depreciation and amortization | $22,964 | $22,026 | $938 | 4.3% | | General and administrative | $13,671 | $12,442 | $1,229 | 9.9% | | Real estate expenses | $13,634 | $14,074 | $(440) | (3.1)% | | **Total operating expenses** | **$51,009** | **$48,890** | **$2,119** | **4.3%** | - Gain on sale of real estate increased to **$17.3 million** in 2020 from **$4.3 million** in 2019[201](index=201&type=chunk) [Funds from Operations and Adjusted Funds from Operations](index=44&type=section&id=Funds%20from%20Operations%20and%20Adjusted%20Funds%20from%20Operations) For 2020, Funds from Operations (FFO) decreased by 7.4% to $33.9 million, or $1.66 per share, while Adjusted Funds from Operations (AFFO) saw a smaller 1.6% decrease to $38.8 million, or $1.90 per share FFO and AFFO Reconciliation (in thousands) | | 2020 | 2019 | | :--- | :--- | :--- | | GAAP net income attributable to OLP | $27,407 | $18,011 | | **NAREIT FFO applicable to common stock** | **$33,876** | **$36,579** | | **AFFO applicable to common stock** | **$38,755** | **$39,377** | FFO and AFFO Per Share | | 2020 | 2019 | | :--- | :--- | :--- | | **NAREIT FFO per share** | **$1.66** | **$1.84** | | **AFFO per share** | **$1.90** | **$1.98** | - The **7.4% decrease in FFO** was primarily due to a **$1.9 million decrease in rental income**, a **$935,000 decrease in lease termination fees**, and a **$1.2 million increase in G&A expenses**[215](index=215&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 4, 2021, the company had approximately $75.1 million in available liquidity, consisting of $8.7 million in cash and $66.4 million available under its credit facility, with significant upcoming obligations including $99.0 million in mortgage payments through 2023 - As of March 4, 2021, available liquidity was approximately **$75.1 million**, including **$8.7 million in cash** and **$66.4 million available** under the credit facility[218](index=218&type=chunk) - The company has a **$100 million credit facility** that matures on December 31, 2022, with an interest rate of LIBOR plus 200 basis points for 2020[225](index=225&type=chunk) Contractual Obligations Summary (as of Dec 31, 2020, in thousands) | Obligation | Less than 1 Year | 1 - 3 Years | 4 - 5 Years | More than 5 Years | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Mortgages payable (interest & principal) | $40,892 | $108,173 | $128,753 | $262,610 | $540,428 | | Credit facility | — | $12,950 | — | — | $12,950 | | Purchase obligations | $3,902 | $7,796 | $7,487 | $307 | $19,492 | | **Total** | **$44,794** | **$128,919** | **$136,240** | **$262,917** | **$572,870** | [Critical Accounting Estimates](index=50&type=section&id=Critical%20Accounting%20Estimates) Management identifies three critical accounting estimates: Rental Income, Purchase Accounting for Real Estate Acquisitions, and the Carrying Value of the Real Estate Portfolio, all requiring significant judgment - Rental Income: Management must judge the collectability of unbilled rent receivables, which are recorded on a straight-line basis, requiring a write-off if collection becomes unlikely[237](index=237&type=chunk) - Purchase Accounting: The allocation of a property's purchase price to land, building, and intangible assets/liabilities is based on management's fair value estimates[238](index=238&type=chunk) - Carrying Value of Real Estate: The company reviews its portfolio quarterly for impairment indicators, recording a charge if estimated undiscounted future cash flows are less than the asset's carrying amount[239](index=239&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) The company's primary market risk is interest rate changes affecting its variable-rate credit facility and interest rate swaps, with a 100 basis point increase in rates raising annual interest costs by approximately $130,000 - The primary market risk exposure is from interest rate changes on its variable rate credit facility and interest rate swaps[241](index=241&type=chunk) - A **100 basis point increase** in the interest rate on the credit facility would increase annual interest costs by approximately **$130,000**[245](index=245&type=chunk) - The company uses **23 interest rate swap agreements** to hedge its variable rate mortgages, converting them to fixed-rate debt, with an early termination liability for these swaps of **$5.3 million** at year-end[242](index=242&type=chunk)[243](index=243&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=52&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data.) This section presents the company's audited consolidated financial statements for 2020, including an unqualified auditor's report from Ernst & Young LLP, which identifies real estate impairment as a critical audit matter, detailing financial position, performance, and key accounting policies [Report of Independent Registered Public Accounting Firm](index=59&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP issued an unqualified audit opinion on the company's 2020 consolidated financial statements, identifying "Impairment of Real Estate Investments" as a Critical Audit Matter due to subjective judgments - The auditor, Ernst & Young LLP, issued an **unqualified (clean) opinion** on the consolidated financial statements[276](index=276&type=chunk) - The audit identified **"Impairment of Real Estate Investments"** as a Critical Audit Matter due to the high degree of subjectivity and complex judgment involved in management's impairment assessment[280](index=280&type=chunk)[281](index=281&type=chunk) [Consolidated Financial Statements](index=61&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of $776.1 million and net income attributable to OLP of $27.4 million for 2020, a significant increase from 2019, primarily driven by higher gain on sale of real estate Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Real estate investments, net | $691,922 | $700,535 | | Total assets | $776,137 | $774,629 | | Mortgages payable, net | $429,704 | $435,840 | | Total liabilities | $484,177 | $482,645 | | Total OLP stockholders' equity | $290,767 | $290,763 | Consolidated Statement of Income Highlights (in thousands) | | 2020 | 2019 | | :--- | :--- | :--- | | Total revenues | $81,903 | $84,736 | | Gain on sale of real estate, net | $17,280 | $4,327 | | Net income attributable to OLP | $27,407 | $18,011 | | Diluted EPS | $1.33 | $0.88 | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=52&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure.) This item is not applicable - Not applicable[248](index=248&type=chunk) [Item 9A. Controls and Procedures](index=52&type=section&id=Item%209A.%20Controls%20and%20Procedures.) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2020, with no material changes reported for Q4 2020 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[249](index=249&type=chunk) - Based on an assessment using the COSO framework, management concluded that internal control over financial reporting was effective as of December 31, 2020[251](index=251&type=chunk)[252](index=252&type=chunk) [Item 9B. Other Information](index=53&type=section&id=Item%209B.%20Other%20Information.) This section provides a tax disclosure update related to the Tax Cuts and Jobs Act and notes a March 2021 amendment to the company's credit facility, extending the period for using up to $20.0 million for operating expenses until June 30, 2022 - The company provides an update to its tax disclosures regarding limitations on interest deductibility under the Tax Cuts and Jobs Act[254](index=254&type=chunk) - In March 2021, the company amended its credit facility to extend its ability to use up to **$20.0 million** for operating expenses until June 30, 2022[255](index=255&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=53&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance.) Information required by this item, except for executive officer details provided in Part I, will be incorporated by reference from the company's proxy statement for its 2021 annual meeting of stockholders - Information is incorporated by reference from the 2021 proxy statement[257](index=257&type=chunk) [Item 11. Executive Compensation](index=53&type=section&id=Item%2011.%20Executive%20Compensation.) Information required by this item will be incorporated by reference from the company's proxy statement for its 2021 annual meeting of stockholders - Information is incorporated by reference from the 2021 proxy statement[258](index=258&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=54&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters.) This section provides information on the company's equity compensation plans as of December 31, 2020, with 150,052 securities issuable as RSUs and 450,398 remaining available, while other required information will be incorporated by reference from the 2021 proxy statement Equity Compensation Plan Information (as of Dec 31, 2020) | Plan Category | Securities to be issued upon exercise (a) | Weighted-average exercise price (b) | Securities remaining available for future issuance (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 150,052 | — | 450,398 | | **Total** | **150,052** | **—** | **450,398** | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=54&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence.) Information required by this item will be incorporated by reference from the company's proxy statement for its 2021 annual meeting of stockholders - Information is incorporated by reference from the 2021 proxy statement[262](index=262&type=chunk) [Item 14. Principal Accountant Fees and Services](index=54&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services.) Information required by this item will be incorporated by reference from the company's proxy statement for its 2021 annual meeting of stockholders - Information is incorporated by reference from the 2021 proxy statement[263](index=263&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=55&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules.) This section lists the documents filed as part of the Form 10-K, including the consolidated financial statements, financial statement schedules (specifically Schedule III—Real Estate and Accumulated Depreciation), and a list of 25 exhibits - Lists the financial statements, Schedule III (Real Estate and Accumulated Depreciation), and all exhibits filed with the report[265](index=265&type=chunk)[266](index=266&type=chunk) [Item 16. Form 10-K Summary](index=56&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - Not applicable[269](index=269&type=chunk)