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One Liberty Properties(OLP) - 2023 Q1 - Quarterly Report

Part I — Financial Information Unaudited Consolidated Financial Statements The unaudited consolidated financial statements for Q1 2023 detail assets, income, and cash flows, reporting $771.1 million in assets and $5.4 million net income Consolidated Balance Sheets Total assets decreased to $771.1 million, liabilities to $456.4 million, and equity to $314.7 million as of March 31, 2023 | (In Thousands) | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $771,143 | $783,255 | | Real estate investments, net | $697,451 | $706,453 | | Cash and cash equivalents | $7,016 | $6,718 | | Total Liabilities | $456,442 | $466,318 | | Mortgages payable, net | $406,946 | $405,162 | | Line of credit, net | $10,814 | $21,068 | | Total Equity | $314,701 | $316,937 | Consolidated Statements of Income Net income for Q1 2023 significantly decreased to $5.4 million ($0.25/share) from $9.3 million ($0.44/share) in Q1 2022, due to lower property sale gains and higher expenses | (In Thousands, Except Per Share Data) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total revenues | $22,952 | $21,556 | | Rental income, net | $22,952 | $21,531 | | Operating income | $10,110 | $12,809 | | Gain on sale of real estate, net | $1,534 | $4,649 | | Net income attributable to One Liberty Properties, Inc. | $5,386 | $9,323 | | Per common share (Basic and Diluted) | $0.25 | $0.44 | Consolidated Statements of Cash Flows Net cash from operating activities increased to $14.7 million in Q1 2023, with investing activities providing $2.9 million and financing activities using $17.1 million | (In Thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $14,712 | $8,831 | | Net cash provided by investing activities | $2,904 | $258 | | Net cash used in financing activities | ($17,114) | ($13,936) | | Net increase (decrease) in cash | $502 | ($4,847) | Notes to Consolidated Financial Statements Notes detail accounting policies, lease agreements, property transactions, debt, and equity, including a $1.5 million Q1 2023 property sale gain and a $3.1 million Q2 2023 anticipated gain - As of March 31, 2023, the company owns a geographically diversified portfolio of 119 properties located in 31 states, consisting primarily of industrial and retail properties22 - On February 28, 2023, the company sold a restaurant property in Hauppauge, New York for $4.076 million, recognizing a gain of $1.534 million44 - The company has a contract to sell a retail property in Duluth, Georgia for $6.0 million, which is expected to close in Q2 2023 and result in a gain of approximately $3.1 million46 - A quarterly cash dividend of $0.45 per share was declared on March 13, 202374 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial performance, noting a 6.5% revenue increase, tenant challenges, and liquidity, with FFO at $0.47/share and AFFO at $0.50/share | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $23.0M | $21.6M | +6.5% | | FFO per share | $0.47 | $0.50 | -6.0% | | AFFO per share | $0.50 | $0.50 | 0.0% | - The company faces significant challenges from tenant bankruptcies, including Regal Cinemas and Bed Bath & Beyond, which are expected to adversely impact cash flow and profitability105106107 Challenges and Uncertainties Significant tenant distress from Regal Cinemas and Bed Bath & Beyond bankruptcies is expected to adversely impact future rent collections and cash flow - Regal Cinemas: The company is in discussions for significant lease modifications, including rent reductions and shortened terms, following the parent company's Chapter 11 filing. It is anticipated that collected amounts will be significantly less than the obligated amounts106 - Bed Bath & Beyond (BBBY): BBBY filed for Chapter 11 bankruptcy on April 23, 2023, and is closing its retail locations. This affects a 32,138 sq. ft. property in Kennesaw, Georgia, which has an aggregate of $2.3 million in base rent obligations through January 2027107 Results of Operations Q1 2023 total revenues increased 6.5% to $23.0 million, while operating expenses rose 7.3% to $14.4 million, and property sale gains significantly decreased | (In thousands) | Q1 2023 | Q1 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $22,952 | $21,556 | $1,396 | 6.5% | | Rental income, net | $22,952 | $21,531 | $1,421 | 6.6% | | Total Operating Expenses | $14,376 | $13,396 | $980 | 7.3% | | Depreciation & Amortization | $6,145 | $5,843 | $302 | 5.2% | | General & Administrative | $4,039 | $3,792 | $247 | 6.5% | | Real estate expenses | $4,124 | $3,687 | $437 | 11.9% | - The increase in rental income was driven by $1.1 million from six properties acquired in 2022 and a $832,000 increase from same-store properties, partially offset by a $481,000 decrease from properties sold123125126 - Interest expense increased by 6.8% to $4.6 million, driven by a 195.1% rise in credit line interest due to higher interest rates (6.23% vs 1.89%) and a larger average outstanding balance135137 Liquidity and Capital Resources Available liquidity was $87.9 million as of May 1, 2023, with total mortgage debt at $410.9 million and a weighted average maturity of 6.2 years - Available liquidity as of May 1, 2023 was $87.9 million, including $7.9 million of cash and cash equivalents and $80.0 million available under the credit facility138 - The company has $155.6 million in total mortgage payments (amortization and principal) due between April 1, 2023, and December 31, 2026141 - The $100 million credit facility matures on December 31, 2026. The interest rate was 6.47% at March 31, 2023, based on 30-day SOFR plus a margin of 175 basis points145 Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) Q1 2023 FFO decreased 4.9% to $10.1 million ($0.47/share), while AFFO increased 1.4% to $10.8 million ($0.50/share) | (In thousands, except per share) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | NAREIT FFO | $10,113 | $10,635 | | FFO per share | $0.47 | $0.50 | | AFFO | $10,803 | $10,654 | | AFFO per share | $0.50 | $0.50 | - The decrease in FFO was primarily driven by a $918,000 decrease in other income from an insurance recovery, a $437,000 increase in real estate operating expenses, and a $294,000 increase in interest expense157 Quantitative and Qualitative Disclosures About Market Risk Primary market risk stems from interest rate changes affecting the variable-rate credit facility and interest rate swaps, with a 100 basis point rate change impacting annual interest costs by $115,000 - The company uses interest rate swaps for hedging purposes to limit interest rate risk on variable rate mortgages. At March 31, 2023, 17 swap agreements were outstanding160161 - Based on the $11.5 million outstanding balance on the variable rate credit facility at March 31, 2023, a 100 basis point (1%) change in the interest rate would change annual interest costs by approximately $115,000163 Controls and Procedures CEO and CFO concluded disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - The chief executive officer and chief financial officer concluded that the company's disclosure controls and procedures are effective as of March 31, 2023165 - There were no changes in internal control over financial reporting during Q1 2023 that materially affected, or are reasonably likely to materially affect, these controls166 Part II — Other Information Exhibits Exhibits include CEO and CFO certifications under Sarbanes-Oxley Act and financial statements in Inline XBRL format - The exhibits filed with this report include Sarbanes-Oxley Act certifications from the CEO and CFO, and financial data in Inline XBRL format167