One Liberty Properties, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. One Liberty is a self-managed REIT owning 122 properties in 30 states, primarily industrial, retail, restaurant, health and fitness, and theater properties. Portfolio occupancy was approximately 98.2% by square footage.
Financial performance
Amounts below are in millions except per-share data; comparisons are with 2020.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $20.4 | $21.1 | $61.7 | $63.2 |
| Net income attributable to OLP | $6.1 | $13.7 | $32.4 | $23.8 |
| Diluted EPS | $0.28 | $0.67 | $1.55 | $1.17 |
| NAREIT FFO per share | $0.47 | $0.47 | $1.25 | $1.34 |
| AFFO per share | $0.48 | $0.49 | $1.44 | $1.46 |
- Q3 rental income declined 3.4% to $20.3 million; same-store rental income fell 0.6%. Nine-month rental income declined 2.9% to $61.3 million.
- Q3 net income was lower mainly because gains on real estate sales declined to $1.3 million from $10.3 million. Nine-month net income rose, with property-sale gains of $22.8 million versus $14.6 million in 2020.
- Nine-month operating cash flow was $36.6 million, versus $25.7 million. Investing activities provided $27.0 million, principally from property-sale proceeds; financing activities used $62.7 million, including $27.9 million of cash distributions to stockholders.
- At September 30, cash and cash equivalents were $13.7 million; total assets were $752.0 million, total liabilities $446.9 million, and equity $305.1 million.
- Mortgage debt was $406.9 million gross, and line-of-credit borrowings were $3.2 million gross. Mortgages had a 4.18% weighted-average rate after swaps and a 6.6-year weighted-average remaining term. Interest expense declined 6.9% for the nine-month period to $13.6 million.
- As of November 1, available liquidity was reported at $105.2 million, including $11.9 million of cash and $93.3 million available under the credit facility. The $100 million facility matures December 31, 2022; the company reported covenant compliance at September 30.
Material changes, transactions and outlook
- During the first nine months, OLP sold a Whole Foods property in West Hartford for $40.5 million and a vacant Philadelphia retail property for $8.3 million; it acquired industrial properties in North Carolina and Florida for a combined purchase price of approximately $16.4 million.
- Management said it expected to close an $8.0 million purchase of a Home Depot-leased warehouse distribution center in Omaha in November 2021. The filing provides no formal earnings or FFO guidance.
- Management reported approximately $68.0 million of contractual base rent for the 12 months ending September 30, 2022, subject to specified exclusions and assumptions. The company was shifting its portfolio toward industrial properties: industrial accounted for 56.6% of 2021 contractual base rent.
- Management expects to fund operating needs, debt service and current dividend payments primarily from operating cash flow, cash and, as needed, financing sources. It estimated its share of Manahawkin redevelopment capital spending at $13 million to $15 million, targeting completion in 2024.
- Cash distributions were $0.45 per share in each 2021 quarter reported; nine-month cash distributions totaled $1.35 per share. Management cautioned that lower-yielding industrial investments replacing some higher-yielding retail properties could pressure cash flows and the ability to sustain current dividends.
Risks, contingencies and unusual items
- COVID-19 and tenant exposure: The filing identifies pandemic-related effects and tenant defaults, vacancies, lease renewals, and sector disruption—particularly retail, theaters, and health and fitness—as significant risks. Regal Cinemas had complied through October 2021 with amended lease payments; deferred rent repayment was scheduled to begin January 2022. OLP did not accrue certain Regal deferrals because collection was considered less than probable.
- The Vue, Beachwood, Ohio: The ground lease generated no rental income in the first nine months of 2021. The owner/operator had not paid rent since October 2020. OLP’s $15.4 million land position is subordinate to the tenant’s $66.3 million mortgage, and OLP has funded operating shortfalls and capital expenditures and anticipates further funding.
- Insurance and litigation: Hurricane-related insurance recoveries contributed $695,000 of other income in the first nine months; management anticipated approximately $850,000 of additional proceeds by Q4 2021. Management also anticipated increased litigation expense in early 2022 relating to the Round Rock property.
- Debt maturities and interest rates: Mortgage principal and amortization scheduled for 2022–2024 totaled $140.5 million. The revolving credit facility matures in December 2022. Most mortgage exposure was fixed-rate or swapped, but the facility is variable-rate and the filing notes refinancing and liquidity risks.
- Net income includes sizable property-sale gains and other nonrecurring items; FFO and AFFO are non-GAAP supplemental measures and do not represent cash available for all obligations or distributions.
Investor verification priorities
- Track rent collection and repayment of deferred rent, especially Regal Cinemas, and confirm whether scheduled repayments are received.
- Monitor The Vue’s rent status, ongoing funding needs, and the value and subordination risk of OLP’s land collateral.
- Assess refinancing plans for 2022–2024 maturities and the credit facility’s December 2022 expiration, including covenant headroom and available liquidity.
- Compare recurring rental performance and FFO/AFFO with GAAP earnings, separating property-sale gains, insurance recoveries, and other unusual items.
- Verify the Omaha acquisition closing, Manahawkin redevelopment funding, and whether portfolio repositioning supports cash flow and the dividend.