One Liberty Properties, Inc. — Q1 2021 Form 10-Q
Business context and period. This unaudited report covers the three months ended March 31, 2021, compared with Q1 2020. The REIT owned 123 properties in 31 states, with approximately 97.5% occupancy. Its portfolio was diversified across industrial, retail, restaurant, health and fitness, theater, and other properties; industrial generated approximately 54.8% of contractual base rent.
Key financial results
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $20.8 million | $21.2 million | Down 2.0% |
| Net income attributable to One Liberty | $3.0 million | $7.8 million | Down 62.2% |
| Diluted EPS | $0.13 | $0.39 | Down $0.26 |
| NAREIT FFO | $8.8 million; $0.42/share | $9.2 million; $0.46/share | Down 4.4% in total |
| AFFO | $10.0 million; $0.48/share | $10.2 million; $0.51/share | Down 1.7% in total |
| Cash from operating activities | $11.5 million | $10.1 million | Up $1.4 million |
Operating expenses rose 5.9% to $13.2 million. Reported operating income was $7.7 million versus $13.1 million, but the 2020 period included a $4.3 million property-sale gain. Interest expense decreased 5.1% to $4.6 million. The company paid a $0.45/share dividend in both periods; Q1 2021 AFFO was $0.48/share.
At March 31, total assets were $768.2 million, total liabilities $479.7 million, and equity $288.4 million. Mortgages payable were $428.0 million gross; the line of credit was $15.5 million gross. Cash and cash equivalents were $11.2 million, plus $0.8 million of restricted cash. Cash, cash equivalents and restricted cash declined $1.5 million during the quarter. At May 3, management reported $81.5 million of available liquidity, including $6.8 million of cash and $74.7 million available under the credit facility.
Material changes and unusual items
- Rental income fell 2.6% to $20.7 million. Same-property rental income declined 1.5%, including lower rent from The Vue and Regal Cinemas; the prior-year period also benefited from properties later sold.
- Net income and EPS were materially lower partly because Q1 2020 included the $4.3 million real estate gain and a $0.1 million gain on sale of a joint-venture property. No property sale gain was recorded in Q1 2021.
- General and administrative expense increased 9.2%, primarily from higher non-cash restricted-stock and RSU compensation. Real estate expenses rose 10.3%, including higher snow removal and property tax costs.
- Q1 2021 other income included a $100,000 lease-assignment fee, $46,000 of interest on seller financing, and a $20,000 insurance recovery gain. The seller-financed loan was repaid April 26, 2021.
- Q1 investing cash use was $0.6 million, compared with $21.5 million in Q1 2020, which included property purchases. Financing used $12.4 million in Q1 2021, principally for debt amortization and common dividends.
Outlook, risks and contingencies
- The filing provides no specific earnings or FFO guidance. Management expected to fund operating needs, including debt service and current dividend payments, primarily from operating cash flow, cash and credit availability. It anticipated approximately $3.3 million of capital expenditures and transaction costs over two years for expected lease extensions.
- Management and its joint-venture partner were redeveloping the Manahawkin property, targeting completion in 2022; One Liberty estimated its share of required capital spending at $12 million to $15 million.
- COVID-19 remained a key uncertainty, with tenant credit, rent collection, retail-sector disruption, property leasing, capital availability and dividend sustainability identified as risks. The company had deferred and accrued $3.36 million of tenant rent during 2020; $1.66 million remained and was considered collectible, with expected repayment through 2023.
- In February 2021, Regal Cinemas lease amendments deferred $1.449 million of rent otherwise payable from September 2020 through August 2021; the tenant agreed to pay $441,000 during that period. Deferred Regal rent for September 2020 through March 2021 was not accrued because collection was considered less than probable. Regal was current under the amended terms through April 30, and announced planned theater reopenings by mid-May.
- The Vue ground-lease tenant had not paid rent for several months, and management did not expect near-term payments. The company funded operating shortfalls and capital expenditures, including $430,000 in Q1 and a further $611,000 from April 1 through May 3. The company’s $14.6 million land position is subordinate to the tenant’s $66.9 million mortgage; its maximum exposure to loss was stated as the land’s carrying value.
- Mortgage debt had a 4.19% weighted-average interest rate after swaps and a 6.9-year weighted-average remaining term. Scheduled amortization and maturities totaled $157 million for 2021–2024, including $50.6 million of principal due at maturity in 2024. The $100 million credit facility matures December 31, 2022; the company reported covenant compliance at March 31.
- Twenty-two swaps hedged $81.9 million of mortgage principal. Their March 31 termination liability was approximately $3.7 million. A 100-basis-point increase in the credit-facility rate was estimated to increase the next 12 months’ interest cost by approximately $155,000.
Important facts for investors to verify
- Regal rent collection, theater reopening and repayment of deferred rent under the amended leases.
- The Vue tenant’s ability to resume rent payments and the company’s continuing funding obligations and exposure to the subordinated land position.
- Whether operating cash flow and liquidity can support the $0.45/share dividend, planned property spending and upcoming mortgage maturities.
- Progress, cost and funding plans for the Manahawkin redevelopment, including the estimated $12 million–$15 million company share.
- Tenant rent deferral collections, including the $1.66 million balance management considered collectible, and any changes in collectability assessments.
- Refinancing or repayment plans for near-term mortgage maturities and the credit facility due in December 2022; confirm covenant compliance and available borrowing capacity.
- Interpret FFO and AFFO as supplemental, non-GAAP measures; the filing cautions they are not substitutes for GAAP earnings or operating cash flow.