One Liberty Properties, Inc. — FY2020 Form 10-K
Reporting period: Year ended December 31, 2020. One Liberty Properties (NYSE: OLP) is a self-managed REIT focused on leased commercial properties. At year-end, it owned or participated in 123 properties across 31 states, with approximately 10.7 million square feet; wholly owned properties were 98.4% occupied.
Key financial metrics
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $81.9 million | $84.7 million |
| Rental income, net | $81.9 million | $83.8 million |
| Net income attributable to OLP | $27.4 million; $1.33 diluted EPS | $18.0 million; $0.88 diluted EPS |
| NAREIT FFO | $33.9 million; $1.66 per share | $36.6 million; $1.84 per share |
| AFFO | $38.8 million; $1.90 per share | $39.4 million; $1.98 per share |
| Cash from operating activities | $35.1 million | $36.2 million |
| Year-end total assets / stockholders’ equity | $776.1 million / $290.8 million | $774.6 million / $290.8 million |
Net income rose primarily because net gains on property sales were $17.3 million, versus $4.3 million in 2019. FFO and AFFO declined. The filing does not provide a single comparable operating-margin measure.
- Debt: $433.5 million gross mortgage debt and $13.0 million gross credit-facility borrowings at December 31, 2020. Mortgage debt had a 4.19% weighted-average interest rate and 7.1-year weighted-average remaining term; substantially all mortgage interest was fixed or hedged. Total debt to total market capitalization was reported at 51.9%.
- Liquidity: Cash and cash equivalents were $12.7 million at year-end. As of March 4, 2021, management reported approximately $75.1 million of available liquidity, including $8.7 million cash and $66.4 million available under the facility, subject to borrowing-base requirements.
- Rent collections: OLP collected 91.7% of 2020 base rent due before deferrals and abatements, and 98.4% after giving effect to them, including deferral repayments.
- Portfolio and rent: 2021 contractual rental income was $68.7 million, a management-defined operating metric rather than GAAP revenue. Industrial properties represented 55.5% and retail 32.4% of that amount. Five tenants represented approximately 25.2%.
Changes versus 2019
- Rental income, net decreased 2.3%, reflecting pandemic-related abatements, rent collection concerns and a $1.1 million write-off of Regal Cinemas unbilled rent. Same-store rental income decreased 3.2%; acquisition contributions partly offset dispositions and same-store declines.
- Operating cash flow decreased 3.0%. Interest expense declined 2.6%, while operating expenses increased 4.3%, including higher general and administrative costs.
- OLP acquired two industrial properties for $28.3 million and sold four retail properties. Sale gains increased to $17.3 million; mortgage prepayment costs of $1.1 million were recorded separately.
- FFO declined 7.4% and AFFO declined 1.6%. GAAP net income increased, but was substantially affected by property-sale gains.
Outlook, risks and unusual items
- Management provided no formal earnings guidance. It reported $68.7 million of 2021 contractual rental income, subject to the metric’s exclusions and assumptions. Lease expirations represented 21.0% of that amount in 2022 and 12.6% in 2023.
- COVID-19 remains the primary uncertainty. OLP deferred $3.5 million of base rent and abated $1.4 million during 2020. At year-end, approximately $3.0 million of deferred rent remained outstanding; collection is not assured.
- Regal Cinemas had closed theaters at OLP properties for an unspecified period and had not paid certain rent. February 2021 amendments deferred and rescheduled rent and extended leases; continued payment and reopening remain uncertain.
- The Vue ground-lease property faces operating, occupancy and litigation challenges. OLP’s land is subordinate to the tenant’s approximately $67.2 million mortgage; OLP agreed, at its discretion, to fund 78% of specified future operating shortfalls and capital expenditures and had funded $409,000 through March 4, 2021.
- The Manahawkin joint-venture redevelopment remains uncertain, with OLP estimating its share of required capital expenditures at $12–15 million. Joint-venture property occupancy was 59.1% at year-end.
- Approximately $205.0 million of mortgage debt matures from 2021 through 2025, including $63.0 million in 2024. The credit facility matures December 31, 2022; covenants, refinancing access and tenant performance are material considerations. A March 2021 amendment temporarily increased the operating-expense borrowing limit to $20 million through June 30, 2022.
- OLP paid $6.8 million of 2020 dividends in stock to conserve cash. It declared $36.6 million of dividends for the year; the board determines future dividend amounts and form. Stock dividends may dilute shareholders and can create tax obligations exceeding cash received.
- Other notable items include a $430,000 hurricane-related impairment at a Louisiana property, with additional insurance proceeds anticipated, and pending Round Rock guaranty litigation. The company’s claimed damages exceed $14 million; the defendant disputes liability and OLP cautions that recovery is uncertain.
Important facts for investors to verify
- Subsequent rent receipts, repayment of deferred rent, and the status of Regal Cinemas and other financially challenged tenants.
- Renewal or re-leasing outcomes for major 2022–2023 expirations, particularly Haverty Furniture, and any related concessions or capital spending.
- Liquidity, covenant headroom, credit-facility availability and refinancing plans for near-term mortgage maturities.
- Funding requirements and progress for the Manahawkin redevelopment and The Vue, including any additional OLP support.
- Whether the dividend can be maintained in cash without further borrowing or stock issuance, and how reported FFO/AFFO compare with cash available after debt amortization and capital needs.