One Liberty Properties, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Comparative figures are for Q1 2023 unless otherwise noted. Dollar amounts are in millions except per-share data.
Business context
One Liberty Properties is a self-managed REIT focused primarily on industrial properties, with a smaller retail portfolio. At quarter-end it owned 110 properties in 31 states, including joint-venture properties, and reported occupancy of approximately 98.4% by square footage.
Key financial results
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $22.696 | $22.952 | Down 1.1% |
| Operating income | $10.003 | $10.110 | Down 1.1% |
| Net income attributable to One Liberty | $5.155 | $5.386 | Down 4.3% |
| Diluted EPS | $0.23 | $0.25 | Down $0.02 |
| FFO per diluted share | $0.45 | $0.47 | Down $0.02 |
| AFFO per diluted share | $0.48 | $0.50 | Down $0.02 |
| Cash from operating activities | $8.907 | $14.712 | Down $5.805 |
Rental income fell 2.2% to $22.446 million. Same-store rental income was down 0.3%, mainly reflecting lease amendments at two Regal Cinemas properties and a Bed Bath & Beyond bankruptcy, partly offset by tenant reimbursements and lease amendments. Real estate expenses rose 8.4% to $4.470 million, while interest expense increased 2.5% to $4.717 million. Reported operating income includes a $1.784 million gain on a property sale; Q1 2023 included a $1.534 million gain. The reported operating margin, including those gains, was approximately 44.1% in both periods.
Net cash provided by operating activities was $8.907 million. Investing activities provided $1.826 million, principally from property-sale proceeds, while financing activities used $10.104 million, including $9.466 million of common-stock distributions. Cash, cash equivalents and restricted cash ended the quarter at $30.221 million, including $2.848 million of restricted cash.
Balance sheet, debt and liquidity
- Total assets were $755.669 million and total equity was $306.050 million at March 31, 2024.
- Mortgage debt was $420.992 million gross and $416.539 million net of specified financing costs and mortgage intangibles. The company had no balance outstanding on its $100 million revolving credit facility.
- Mortgage debt had a weighted-average interest rate of 4.41% after swaps and a weighted-average remaining term of 6.3 years. The company reported compliance with credit-facility covenants.
- Scheduled mortgage principal payments and maturities total $34.263 million for the remainder of 2024, $40.065 million in 2025, $30.044 million in 2026 and $48.322 million in 2027. Management expects to refinance a substantial portion of 2024–2025 maturities, but cautioned that refinancing may be unavailable or on less favorable terms.
- At May 1, 2024, reported available liquidity was $115.1 million: $15.1 million of cash and cash equivalents, including the facility’s required average deposit balance, plus $100 million available under the credit facility. The facility’s interest rate was 7.06% on that date.
Material changes, outlook and risks
The company sold a restaurant parcel in Lakewood, Colorado, through a 90%-owned joint venture for $2.670 million net of closing costs, recording a $1.784 million gain and a $0.250 million lease-termination fee. After quarter-end, it acquired a single-tenant industrial property in Albuquerque for $6.450 million. The filing also describes contracts or sales involving four properties expected to generate approximately $18.927 million in gross sale proceeds and estimated gains totaling about $6.4 million; these estimates are subject to completion and accounting recognition.
Management reported 2024 contractual base rent of approximately $70.2 million. This includes $1.3 million tied to a negotiated but unsigned lease amendment and $325,000 from a lease terminable on 90 days’ notice. It excludes, among other items, estimated variable rent from The Vue Apartments and rent associated with properties sold or expected to be sold. The filing provides no formal earnings or FFO guidance. Management expects to fund operating needs, debt service and dividends primarily through operating cash flow, available cash and, as needed, financing and property transactions; it estimates approximately $2.8 million of capital expenditures.
Management said there had been no material change in the status of challenged tenants or properties, including The Vue Apartments, LA Fitness and Regal Cinemas. The Vue ground lease produced no rental income in Q1; the company’s land position, carried at approximately $17.3 million, is subordinate to the tenant/operator’s $63.2 million mortgage. The company may, at its discretion, fund specified operating shortfalls and capital expenditures. Other stated risks include tenant defaults or bankruptcies, lease renewals and re-leasing, real-estate conditions, interest rates, capital availability, debt maturities and covenant compliance. The quarterly dividend was $0.45 per share, unchanged from Q1 2023.
Management stated that disclosure controls and procedures were effective and that there were no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress and final terms for refinancing the scheduled 2024–2025 mortgage maturities, given higher current borrowing costs.
- Completion, proceeds and recognized gains for the post-quarter property sales, and the planned repayment of the Kennesaw vacant-property mortgage.
- Whether the unsigned Brooklyn lease amendment is executed and whether the terminable Dick’s Sporting Goods lease continues.
- Rent collection, operating performance and any additional funding needs at The Vue, as well as developments at Regal Cinemas and LA Fitness.
- Coverage of the $0.45 quarterly dividend by recurring cash generation; Q1 AFFO was $0.48 per diluted share, but FFO, AFFO and GAAP cash flow are not interchangeable measures.