REGISTRATION NO. 333-45937
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON MARCH 30, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1993
ONE LIBERTY PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED
IN ITS GOVERNING INSTRUMENTS)
60 Cutter Mill Road, Great Neck, NY 11021 - (516) 466-3100
(Address, including Zip Code, and Telephone Number,
including Area Code, of Registrant's Principal
Executive Offices)
Mark H. Lundy
60 Cutter Mill Road, Great Neck, NY 11021 - (516) 466-3100
(Name, Address, including Zip Code and Telephone Number,
including Area Code, of Agent for Service)
COPIES TO:
SIMEON BRINBERG, ESQ.
60 CUTTERMILL ROAD
GREAT NECK, NEW YORK 11021
(516) 773-2750
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| ____________
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. |_| _____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. |_|
CALCULATION OF REGISTRATION FEE
TITLE OF PROPOSED MAXIMUM
SECURITIES AMOUNT MAXIMUM AGGREGATE AMOUNT OF
BEING BEING OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT PRICE FEE
Common Stock
Par Value $1.00 808,776 SHS. $13.81(1) $11,169,197 $3,384.60(2)
Per Share
(1) The proposed maximum offering price per share is estimated solely for
the purposes of calculating the registration fee in accordance with Rule 457.
(2) Additional fee of $3,384.60 has been paid in connection with additional
shares being registered pursuant to Amendment No. 1.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A) MAY DETERMINE.
<PAGE>
ONE LIBERTY PROPERTIES, INC.
Cross Reference Sheet, Showing the Localities
in the Prospectus of the Information Required
by Items 1 through 30, Part I, of Form S-11
Item #
1. Forepart of Registration Facing Page of the Registration
Statement and Outside Front Statement;Front Cover of Pros-
Cover Page of Prospectus pectus
2. Inside Front and Outside Available Information: Table
Back Cover Pages of Prospectus of Contents
3. Summary Information, Risk Prospectus Summary; Investment
Factors and Ratio of Earnings Considerations
to Fixed Charges
4. Determination of Offering Price Cover Page of Prospectus;
The Offer
5. Dilution Not Applicable
6. Selling Security-Holders Not Applicable
7. Plan of Distribution The Offer
8. Use of Proceeds Use of Proceeds
9. Selected Financial Data Selected Financial Data
10. Management's Discussion and Management's Discussion and
Analysis of Financial Condition Analysis of Financial Condition
and Results of Operations and Results of Operations
11. General Information as to Registrant The Company
12. Policy with Respect to Certain Activities The Company
13. Investment Policies of Registrant The Company
14. Description of Real Estate Properties
15. Operating Data Properties
16. Tax Treatment of Registrant Federal Income Tax Considera-
and its Security Holders tions
17. Market Price of and Dividends Price Range of Common Stock
on the Registrant's Common Equity and Distributions
and Related Stockholder Matters
18. Description of Registrant's Securities Description of Capital Stock
19. Legal Proceedings Properties
20. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management
21. Directors and Executive Officers Management
22. Executive Compensation Executive Compensation
23. Certain Relationships and Certain Relationships and
Related Transactions Related Transactions
24. Selection, Management and Custody The Company
of Registrant's Investments
25. Policies with Respect to Investment Consideration
Certain Transactions
26. Limitations of Liability Management
27. Financial Statements and Information Selected Financial Data;
Financial Statements
28. Interest of Named Experts and Counsel Legal Matters
29. Disclosure of Commission Position on Indemnification
Indemnification for Securities
Act Liabilities
30. Quantitative and Qualitative Not Applicable
Disclosures about Market Risk
<PAGE>
Subject to Completion, Dated March 30, 1998
PROSPECTUS
ONE LIBERTY PROPERTIES, INC.
2,383,670 Shares
of
Common Stock Issuable Upon Exercise of Non-Transferable
Rights to Subscribe for Such Shares of Common Stock
American Stock Exchange Symbol: OLP
ONE LIBERTY PROPERTIES, INC. (the "Company") is issuing to its
common stockholders and preferred stockholders of record as of the close of
business on March 24, 1998 (the "Record Date") rights ("Rights") entitling the
holders thereof to subscribe for an aggregate of 2,383,670 shares of the
Company's Common Stock (the "Offer"). Common stockholders and preferred
stockholders of record will receive one Right for each share of Common Stock
and/or Preferred Stock held. Each Right entitles the holder to subscribe for and
purchase one share of Common Stock ("Basic Subscription Privilege") for a price
of $__________ per share (the "Subscription Price") and, subject to proration,
each Right also entitles any holder exercising the Basic Subscription Privilege
in full to subscribe at the Subscription Price for up to two additional shares
of Common Stock for each share of Common Stock purchased by the holder under the
Basic Subscription Privilege (the "Over-Subscription Privilege"). The Rights are
non-transferable and will not be admitted for trading on the American Stock
Exchange or any other exchange. See "The Offer."
Gould Investors L.P., which owns 392,981 shares of Common Stock of
the Company (24.9% of the outstanding shares of Common Stock), will fully
exercise the Rights granted to it to purchase an aggregate of 392,981 shares of
Common Stock and will exercise the Over-Subscription Privilege for 376,250
additional shares of Common Stock.
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON June 15,
1998, UNLESS EXTENDED AS DESCRIBED HEREIN (THE "EXPIRATION DATE").
The Company announced the offer before the commencement of trading
on the American Stock Exchange on February 11, 1998. The last reported sale
price of the Common Stock at the close of business on February 10, 1998 was $14
3/8. The last reported sale price on the American Stock Exchange on __________,
1998 was __________. The Subscription Price is approximately ____% less than the
last reported sale price on the American Stock Exchange on ____________, 1998.
Common and preferred stockholders who subscribe for shares of Common Stock
pursuant to the Offer will not be entitled to receive the cash distribution of
$.30 per share which will be paid to common stockholders on or about July 1,
1998, (subject to declaration by the Board of Directors) with respect to the
shares subscribed for pursuant to the Offer.
<PAGE>
As a result of the terms of the Offer, holders of Common Stock who
do not fully exercise the Basic Subscription Privilege and Over-Subscription
Privilege will, upon the completion of the Offer, own a smaller proportional
interest in the Company than would otherwise be the case. Before making an
investment decision stockholders of the Company should carefully consider the
factors set forth under the caption "Investment Considerations" in addition to
the other information contained in this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Price to Public Underwriting Proceeds to Company
Discounts and
Commissions
Per Share N/A (1)
Total N/A (2)
(1) Before deduction of offering expenses payable by the Company estimated
at $120,000.
(2) Funds received by check prior to the Expiration Date will be deposited
into a segregated interest bearing account (which interest will accrue to the
benefit of the Company) pending proration and distribution of shares. Total
proceeds to the Company assumes that all Common Stock offered are sold, either
pursuant to the exercise of the Basic Subscription Privilege or the
Over-Subscription Privilege.
The date of this Prospectus is __________, 1998.
<PAGE>
TABLE OF CONTENTS
PAGE
Prospectus Summary
The Company
The Offer
Selected Financial Information
Summary Consolidated Financial Data
Investment Considerations
The Company
General
Investment Policy
Credit Agreement
Mortgages Receivable
Properties
Additional Information Concerning Certain of the
Properties
Lease Expirations
Indebtedness
Competition
Environmental Matters
Regulations and Insurance
Legal Proceedings
Use of Proceeds
Price Range of Common Stock and Distributions
Capitalization
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Management
Executive Compensation
Certain Relationships and Related Transactions
Principal Stockholders
Description of Capital Stock
Federal Income Tax Considerations
The Offer
Experts
Legal Matters
Indemnification
Available Information
Index to Financial Statements
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus.
THE COMPANY
One Liberty Properties, Inc. (the "Company" or "One Liberty") is a self
administered and self-managed real estate investment trust ("REIT") incorporated
under the laws of Maryland on December 20, 1982. The primary business of the
Company is to acquire, own and manage improved, free standing commercial real
estate operated by the lessee under a long-term net lease. The Company's focus
is the acquisition, ownership and management of improved real property leased to
retail businesses under long term commercial net leases. The Company, from time
to time, will acquire and own improved commercial real estate, including
multi-family apartment houses, office buildings and industrial buildings, leased
under a long term lease to an occupant or operator.
At December 31, 1997 the Company owned fee title to 36 properties and a
"sandwich" lease position with regard to one property (collectively the
"Properties"), located in 14 states. The Properties contain 1,118,435 square
feet of rentable commercial space. The occupancy rate of the Company's property
portfolio was 99% on January 30, 1998.
The Company's business strategy is focused on acquiring improved
commercial properties subject to long term net leases which have scheduled rent
increases. It pursues a national operating strategy and seeks property locations
which are on main thoroughfares or arteries, in areas where the demographics
(growing population, favorable occupancy levels and trends and increasing rents)
are positive. Both the credit of the existing or proposed tenant and property
values are investigated and are important in the acquisition decision, with
property location and local demographics given greater weight in the decision
making process.
The Company's principal executive officers are located at 60 Cutter Mill
Road, Great Neck, N.Y. 11021 and its telephone number is (516) 466-3100.
<PAGE>
THE OFFER
Securities Offered 2,383,670 shares of Common
Stock, $1.00 par value, by a Rights
offering to Common Stockholders and
Preferred Stockholders.
Subscription Price ____ per Share.
Record Date March 24, 1998
Rights One non-transferable Right is being
issued with respect to each share of
Common Stock and Preferred Stock
held of record as of the Record
Date. Rights must be exercised prior
to the Expiration Date.
Basic Subscription Each Right entitles the holder thereof
Privilege to subscribe at the Subscription
Price for shares of Common Stock at
the rate of one share for each
Right.
Over-Subscription Subject to proration, a holder of Rights
Privilege who has fully exercised the Basic
Subscription Privilege may oversubscribe
at the Subscription Price for up to
two additional shares of Common Stock for
each share of Common Stock purchased
under the Basic Subscription Privilege.
Shares acquired pursuant to the
Over- Subscription Privilege are
subject to proration as more fully
discussed under the caption
"Offer-Over-Subscription Privilege."
Expiration Date The Rights expire at 5:00 p.m., New
York City time, on June 15, 1998. Thereafter
the Rights cannot be exercised.
Rights Agent American Stock Transfer and Trust Company
Use of Proceeds The proceeds from the sale of Common
Stock in the Rights offering will be
used to pay in full the $4,605,000
due under the Credit Agreement and
the balance (estimated at $_______)
to acquire Properties and for
working capital.
Investment A purchase of Common Stock involves a
Considerations degree of investment risk. Purchasers
should carefully consider the information
set forth under "Investment Considerations".
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION
YEAR ENDED DECEMBER 31,
OPERATING DATA 1997 1996 1995 1994 1993
- -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $6,284,809 $5,511,556 $4,890,962 $4,041,378 $3,348,419
Gain On Sales
Of Investments 599,251 168,631
Provision For Valua-
tion Adjustment
and Impairment - (659,000) (258,744)
Net Income 2,984,192 2,173,952 3,096,302 2,861,137 2,435,269
Net Income
Applicable To
Common Stock-
Holders 1,533,972 725,593 1,649,783 1,416,434 992,362
PER SHARE DATA:
Net Income Per
Common Share:
Basic $1.01 $0.50 $1.17 $1.04 $.74
Diluted $1.00 $0.50 $1.16 $1.04 $.73
Cash Distribu-
tions Per Share
Of Common Stock $1.20 $1.20 $1.03 $.86 $.94
Cash Distributions
Per Share Of
Preferred Stock $1.60 $1.60 $1.60 $1.60 $1.60
BALANCE SHEET DATA:
Real Estate
Investments, Net $48,316,984 $42,889,213 $24,253,765 $10,996,534 $5,627,909
Mortgages and Notes
Receivable 5,943,450 6,049,033 7,564,716 16,096,224 17,274,039
Total Assets 57,647,555 52,522,988 38,040,246 37,652,773 32,383,674
Mortgages Payable 20,545,247 16,846,921 6,590,154 6,983,647 2,753,700
Total Liabilities 26,336,680 21,987,633 7,532,267 7,680,937 3,360,236
Redeemable
Convertible
Preferred Stock 13,106,970 12,950,792 12,796,475 12,643,998 2,493,337
Shareholders' Equity 18,203,905 17,442,841 17,711,504 17,327,838 16,530,101
</TABLE>
<PAGE>
ONE LIBERTY PROPERTEIS, INC.
SUMMARY CONSOLDIATED FINANCIAL DATA
The following tables set forth the summary unaudited pro forma consolidated
financial data for One Liberty Properties, Inc. giving effect to the expected
purchase of 300 Gold Street in Brooklyn, New York as if it had occurred on the
dates indicated.
The summary unaudited pro forma consolidated statement of income data are
presented as if the transaction was consummated on January 1, 1997. The summary
unaudited pro forma balance sheet data are presented as if the transaction was
consummated on December 31, 1997.
The summary unaudited pro forma consolidated financial data should be read in
conjunction with, and is qualified in its entirety by the historical
consolidated financial statements and notes thereto.
<PAGE>
<TABLE>
<CAPTION>
ONE LIBERTY PROPERTIES, INC.
SUMMARY CONSOLIDATED FINANCIAL DATA
Pro Forma Historical
Year Ended Year Ended
December 31, 1997 December 31, 1997
----------------- -----------------
(Unaudited)
OPERATING DATA:
<S> <C> <C>
Revenues:
Rental income $ 6,184,656 $ 5,341,491
Interest from related parties 832,579 832,579
Interest and other income 104,739 110,739
------------- -----------
7,121,974 6,284,809
------------ ----------
Expenses:
Depreciation and amortization 1,157,345 1,023,345
Interest - mortgages payable 1,854,626 1,517,126
Interest - bank 389,105 210,305
Leasehold rent 288,833 288,833
General and administrative 629,420 629,420
------------ -----------
4,319,329 3,669,029
----------- ----------
Income before gain on sale of real
estate and minority interest 2,802,645 2,615,780
Gain on sale of real estate 599,251 599,251
------------ -----------
Income before minority interests 3,401,896 3,215,031
Minority interest (250,839) (230,839)
------------- ------------
Net income $ 3,151,057 $ 2,984,192
=========== ===========
Calculation of net income applicable to common stockholders:
Net income $ 3,151,057 $ 2,984,192
Less dividends and accretion on preferred stock 1,450,220 1,450,220
------------ ------------
Net income applicable to common stockholders $ 1,700,837 $ 1,533,972
=========== ===========
Net income per common share:
Basic $ 1.12 $ 1.01
=============== ==============
Diluted $ 1.12 $ 1.00
=============== ==============
BALANCE SHEET DATA:
Total real estate investments, net $55,016,984 $48,316,984
Mortgages receivable 5,943,450 5,943,450
Total assets 64,147,555 57,647,555
Total liabilities 32,836,680 26,336,680
Redeemable Convertible Preferred Stock 13,106,970 13,106,970
Total Stockholder's Equity 18,203,905 18,203,905
</TABLE>
<PAGE>
INVESTMENT CONSIDERATIONS
In addition to other information in this Prospectus the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus.
Risks Associated With Indebtedness
Leverage As of December 31, 1997 the Company had outstanding
approximately $20,545,000 in long term mortgage indebtedness and $4,605,000
under its Revolving Credit facility. Upon completion of the offering and use of
the proceeds contemplated hereby, the ratio of debt to shareholders' equity will
be approximately ______________.
Near Term Maturity of Indebtedness The Company is subject to risks normally
associated with debt financing, including the risk that the Company's cash flow
will be insufficient to meet required payments of principal and interest, the
risk that existing indebtedness on the Properties (which in most cases will not
have been fully amortized at maturity) will not be able to be refinanced or that
the terms of such refinancing will not be as favorable as the terms of the
existing indebtedness. A portion of the Company's mortgage indebtedness will
become due by 2002, requiring payments of $4,238,000 in 1999,$1,139,000 in 2000,
$256,000 in 2001 and $1,559,000 in 2002. From 1998 through 2008 the Company will
have to refinance an aggregate of $18,973,000.
Because only a small portion of the principal of the Company's
mortgage indebtedness will be repaid prior to maturity and the Company does not
plan to retain sufficient cash to repay such indebtedness at maturity, it will
be necessary to refinance debt through additional debt refinancing or equity
offerings. If the Company is unable to refinance this indebtedness on acceptable
terms, the Company may be forced to dispose of properties upon disadvantageous
terms, which might result in losses to the Company and might adversely affect
cash available for distributions to stockholders. If prevailing interest rates,
or other factors at the time of refinancing result in higher interest rates on
refinancing, the Company's interest expense would increase, which would
adversely affect the Company's payments of cash distributions to Common
stockholders. Further, if a property or properties are mortgaged to
collateralize payment of indebtedness and the Company is unable to meet mortgage
payments, the property or properties could be foreclosed upon by the mortgagee
with a consequent loss of income and asset value to the Company. Even with
respect to non-recourse indebtedness, the lender may have the right to recover
deficiencies from the Company in certain circumstances, including environmental
liabilities.
No Limitation on Debt. The governing instruments of the Company do
not contain any limitation on the amount of indebtedness the Company may incur.
Accordingly, the Board of Directors could permit the Company to become too
highly leveraged, which could adversely affect the Company.
Real Estate Investment Risks
General. Income from real property investments and the Company's
resulting ability to make cash distributions to Common stockholders may be
affected by the general economic climate, by changes in the national and/or
regional economic climate, competitive factors, changing consumer habits or
retailing trends and changing demographics and traffic patterns. In addition
real estate values may be affected by such factors as government regulations,
interest rate levels, availability of financing, zoning or tax laws, and
potential liability under environmental and other laws.
Dependence on Rental Income. A significant percentage of the
Company's income is derived from rental income from the Properties. As a result,
the Company's income and ability to make cash distributions to stockholders
would be adversely affected if the tenant of a material property (a property
which accounts for more than 10% of the Company's aggregate gross revenues) or a
significant number of tenants were unable to meet their obligations to the
Company or if a significant amount of space at the Company's Properties became
vacant. In the event of a default by a tenant, the Company may experience delays
in enforcing its rights as landlord and may incur substantial costs in
protecting its investment. The bankruptcy or insolvency of a major tenant may
have an adverse effect on the Company.
Market Illiquidity Real estate investments are relatively
illiquid. Therefore, the Company is limited in its ability to vary its portfolio
in response to economic changes and may encounter difficulty in disposing of
properties when tenants vacate (either at the expiration of the applicable lease
or otherwise).
Competition. Numerous companies compete with the Company in seeking
properties for acquisition.
Investment in Mortgages. Although the Company has successfully
invested in mortgages in the past, it has no current plans to invest in
mortgages. If the Company were to invest in mortgages in the future, it would be
subject to the risks of such investments, which include the risk that borrowers
may not be able to make debt service payments or pay principal when due and the
risk that the value of the mortgaged property may be less than the amount owed.
Adverse Consequences of Failure to Qualify as a REIT.
Taxation as a Corporation. The Company believes that it has operated so
as to qualify as a REIT under the Internal Revenue Code ("Code") since its
organization. Qualification as a REIT involves the application of technical and
complex Code provisions for which there are only limited judicial and
administrative interpretations. The determination of various factual matters and
circumstances not entirely within the Company's control may affect the Company's
ability to qualify as a REIT. For example, in order to qualify as a REIT, at
least 95% of the Company's gross income in any year must be derived from
qualifying sources and the Company must make distributions to shareholders
aggregating annually at least 95% of its REIT taxable income (excluding capital
gains). In addition, no assurance can be given that legislation, new
regulations, administrative interpretations or court decisions will not
significantly change the tax laws with respect to qualification as a REIT or the
federal income tax consequences of such qualification. The Company is relying on
the opinion of Herrick, Feinstein LLP, tax counsel to the Company, to the effect
that the Company has been organized in conformity with the requirements under
the Code and that the Company's proposed method of operation will enable it to
meet the requirements for qualification and taxation as a REIT. See "Federal
Income Tax Considerations." Such legal opinion is based on various assumptions
and factual representations by the Company regarding the Company's ability to
meet the various requirements for qualification as a REIT, and no assurance can
be given that actual operating results will meet these requirements. Such legal
opinion is not binding on the Internal Revenue Service.
If the Company fails to qualify as a REIT, it will be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates and would not be allowed a deduction
in computing its taxable income for amounts distributed to its stockholders. In
addition, unless entitled to relief under certain statutory provisions, the
Company will be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification is lost. The additional tax would
significantly reduce the cash flow available for distribution to stockholders.
See "Federal Income Tax Considerations - Failure to Qualify."
REIT Distribution Requirements and Potential Impact of Borrowings.
To obtain the favorable tax treatment associated with REIT's qualifying under
the Code, the Company generally will be required each year to distribute to its
stockholders at least 95% of its net taxable income. In addition, the Company
will be subject to a 4% nondeductible excise tax on the amount, if any, by which
certain distributions paid by it with respect to any calendar year are less than
the sum of 85% of its ordinary income, 95% of its capital gain net income and
100% of its undistributed income from prior years.
Difference in timing between the receipt of income, the payment of
expenses and the inclusion of such income and the deduction of such expenses in
arriving at taxable income, or the effect of nondeductible capital expenditures,
the creation of reserves or required debt or amortization payments, could
require the Company to borrow funds on a short-term basis to meet the
distribution requirements that are necessary to achieve the tax benefits
associated with qualifying as a REIT. In such instances, the Company might need
to borrow funds in order to avoid adverse tax consequences even if management
believed that then prevailing market conditions were not generally favorable for
such borrowings.
<PAGE>
Risks Associated with Preferred Stock "Put" Option.
The Company has 808,776 shares of Redeemable Convertible Preferred
Stock ("Preferred Stock") outstanding. The Preferred Stock affords the preferred
stockholders the option to "put" the Preferred Stock to the Company at a price
of $16.50 per share during the ninety day period commencing July 1, 1999. It is
not contemplated that any Preferred Stock will be converted to Common Stock
unless the conversion rate is favorable. At the current market price for the
Company's Common Stock, the conversion rate is not favorable. Preferred
stockholders may determine to retain Preferred Stock because of the dividend
rate ($1.60 per annum per share) and/or because of the conversion feature. See
"Description of Capital Stock, Preferred Stock." However, if all the Preferred
Stockholders exercise the "put" option the cost to the Company will be
$13,344,804. The Company may be forced to borrow funds, on a secured or
unsecured basis, to fund the payment due as a result of exercise of the "put"
option or might have to dispose of properties on disadvantageous terms to cover
such payment. There is no assurance that loans will be available for this
purpose, when the funds are required, or that interest rates will be acceptable
at that time.
Environmental Risks
Under various federal, state and local laws, ordinances and
regulations, an owner or operator of real estate may be required to investigate
and clean up hazardous or toxic substances or petroleum product releases at such
property and may be held liable to a governmental entity or to third parties for
property damage and for investigation and clean-up costs incurred by such
parties in connection with contamination. The cost of investigation, remediation
or removal of such substances may be substantial, and the presence of such
substances, or the failure to properly remediate such substances, may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as collateral. In connection with the ownership, operation and
management of real properties, the Company may be considered an owner or
operator of such properties or as having arranged for the disposal or treatment
of hazardous or toxic substance and, therefore, potentially liable for removal
or remediation costs, as well as certain other related costs, including
governmental fines and injuries to persons and property. For a more complete
discussion of environmental regulation affecting the Properties, see
"Properties-Environmental Matters."
Management believes that environmental studies made with respect
to substantially all of the Properties have not revealed environmental
liabilities that would have a material adverse effect on the Company's business,
results of operations and liquidity. However, no assurances can be given that
existing environmental studies with respect to any of the Properties reveal all
environmental liabilities, that any prior owner of a Property did not create any
material environmental condition not known to the Company, or that a material
environmental condition does not otherwise exist (or may exist in the future) as
to any one or more Properties. If such a material environmental condition does
in fact exist (or exists in the future), it could have an adverse impact upon
the Company's financial condition, results of operations and liquidity.
Conflicts of Interest
The Company's policy is that it will not engage in any transaction
with any director, officer, principal stockholder or affiliate of a director,
officer or principal stockholder without the approval of a majority of the
directors of the Company, including a majority of the unaffiliated directors. In
addition, the Company will not acquire a property from or dispose of a property
to any director, officer or principal stockholder or affiliate of a director,
officer or principal stockholder without a "fairness" or similar opinion from an
investment banker or real estate appraiser that the transaction is fair,
competitive and commercially reasonable and the approval of a majority of the
unaffiliated directors. Reference is made to the caption "Certain Relationships
and Related Transactions" for a discussion of transactions between the Company
and entities affiliated with officers, directors or principal stockholders of
the Company or affiliates thereof.
There is no assurance that the Company's conflicts of interest policy
has or will successfully eliminate the influence of potential conflicts of
interest, and if they are not successful, decisions could be made that might
fail to reflect fully the interests of all stockholders.
Dependence on Key Personnel
The Company is dependent on the efforts of Fredric H. Gould, Chairman
of the Board, and Matthew Gould, President and Chief Executive Officer. Neither
devotes full time to the affairs of the Company, but both devote such time as is
necessary to carry out their respective duties. Loss of the services of either
of them could have an adverse effect on the business of the Company. Neither has
an employment agreement with the Company.
<PAGE>
THE COMPANY
General
The Company is a self administered and self managed real estate
investment trust ("REIT") incorporated under the laws of Maryland on December
20, 1982. The primary business of the Company is to acquire, own and manage
improved, free standing, commercial real estate operated by the lessee under a
long-term net lease. Its focus is the acquisition, ownership and management of
improved real property leased to retail businesses under long term commercial
net leases. The Company, from time to time, will acquire and own improved
commercial real estate net leased to a corporation or government agency and
improved real property (such as a multi family apartment building, office
building or industrial building) leased under a long-term lease to an occupant
or operator. Under the typical net lease and long-term lease, rental and other
payments to be made by the lessee are payable without diminution for any reason.
The lessee, in addition to its rent obligation, is generally responsible for
payment of all charges attributable to the property, such as real estate taxes,
assessments, water and sewer rents and charges, governmental charges and all
utility and other charges incurred in the operation of the property. The lessee,
is also generally responsible for maintaining the property, including ordinary
maintenance and repair and restoration following a casualty or partial
condemnation. The rental provisions in a net lease transaction may include, but
may not be limited to, rent payable on a stepped basis (rentals increase at
specified intervals), an indexed basis (rentals increase pursuant to a formula
such as the consumer price index), a percentage basis (minimum rental payments
plus additional rentals in the form of participation in the sales derived from
the business conducted at the property), or a combination of the foregoing.
Investment Policy
The Company's business strategy is focused on acquiring improved,
commercial property subject to a long-term net lease which has scheduled rent
increases. The Company's investment policies, as articulated in its by-laws, as
amended, are as follows:
Types of Investments - The Company is permitted to invest in any type
of real property, mortgage loans (and in both cases in interests therein) and
other investments of any nature, without limitation, provided such investment
does not adversely affect the Company's ability to qualify as a REIT under the
Internal Revenue Code. No limitation is set on the number of properties or
mortgage loans in which the Company may invest, the amount or percentage of the
Company's assets which may be invested in any specific property or on the
concentration of investments in any geographic area in the United States. The
Company may consider investments in any type of real property and in mortgage
loans secured by real property; however as stated above, the current investment
policy of the Company is to invest in improved, commercial real estate under
long term net lease. The Company does not intend to make construction loans or
loans secured by mortgages on undeveloped land. Although it has not done so in
the past, the Company may issue securities in exchange for properties which fit
its investment criteria. The Company intends to pursue a national operating
strategy, but does not intend to purchase properties located outside of the
United States.
After termination of any lease relating to any of the Company's
properties (either at lease expiration or early termination), the Company will
seek to relet or sell such property in a manner which will maximize the return
to the Company, considering the income and residual potential of such property.
The Company may also consider the sale or other disposition of any property
prior to termination of the relevant lease if such sale or other disposition
appears advantageous. The Company may take purchase money obligations as part
payment in lieu of cash in connection with any sale and may take into account
local custom and prevailing market conditions in negotiating the terms of
repayment. It will be the Company's policy to use any cash realized from the
sale or other disposition of properties, net of required payments under its
credit facility and net of required distributions to shareholders to maintain
its REIT status, to acquire additional properties.
Incurrence of Debt - The directors of the Company, in the exercise of
their business judgment, are permitted to determine the level of debt and the
terms and conditions of any financing or refinancing. There is no limitation on
the level of debt which the Company may incur. The Company borrows money, on a
secured and unsecured basis, the proceeds of which are used for property
acquisitions and for working capital purpose.
The investment objectives of the Company are (i) to protect the
Company's capital; (ii) to provide current income; and (iii) to provide the
opportunity for increases in income and capital appreciation. In evaluating
potential net lease investments, the Company considers, among other factors (i)
the intrinsic value of the property, given its location and use, (ii) local
demographics (population, occupancy levels, rental trends), (iii) the lessee's
adequacy from a financial point of view to meet operational needs and lease
obligations, (iv) the return on equity to the Company, and (v) potential for
capital appreciation. The intrinsic value of the property, essentially its
location and the local demographics, are given greater weight in the acquisition
process than the tenant's credit worthiness, although the tenant's financial
condition is a factor given significant consideration in the acquisition
process.
From time to time, the Company may invest in shares of another REIT
or in the shares of an entity not involved in real estate investments, provided
that any such investment does not adversely affect the Company's ability to
qualify as a REIT under the Internal Revenue Code. If the Company makes any
investments in shares of another entity in the future, it will make the
investment in such a way that it will not be treated as an investment company
under the Investment Company Act of 1940. The Company does not intend to
underwrite the securities of other issuers.
<PAGE>
Credit Agreement
On March 1, 1996 the Company entered into a revolving credit
agreement ("Credit Agreement") with Bank Leumi Trust Company of New York ("Bank
Leumi"). Borrowings under the Credit Agreement are used to provide the Company
with funds to acquire properties. The Credit Agreement matures February 28, 1999
with a right for the Company to extend the Credit Agreement until February 29,
2000. Bank Leumi has agreed to advance up to $5,000,000 on a revolving basis and
has agreed to a total $15,000,000 facility (including the $5,000,000 that Bank
Leumi has committed for) on a pro rata participating basis. In June, 1997, First
Bank of the Americas (now Commercial Bank of New York) joined in the Credit
Agreement to the extent of $4,000,000. Accordingly, the total availability under
the Credit Agreement is $9,000,000 and can be increased to a maximum of
$15,000,000 either by adding other banking institutions or by the present
participants increasing the extent of availability under the Credit Agreement.
The Company pays interest under the Credit Agreement at the rate of prime plus
1/2% on funds borrowed on an interest only basis, plus a 1/4% servicing fee on
the outstanding balance to Bank Leumi. Net proceeds of certain events (e.g.,
sale of property, financing of properties) must be applied to reduce the loan.
As collateral for any advances taken by the Company under the
Credit Agreement, the Company has pledged the stock of each of its subsidiaries
and the wrap around mortgage the Company holds on a property located on East
16th Street in New York City (see "Mortgages Receivable" below). The Company has
agreed to maintain at least $250,000 on deposit with Bank Leumi.
The Credit Agreement contains affirmative and negative covenants
including a covenant that (i) through February 28, 1999 the Company's net worth,
as defined, will not be less than the greater of $28,000,000 and two times the
revolving credit loans outstanding and thereafter the $28,000,000 increases to
$30,000,000; (ii) that cash flow, as defined, for each fiscal year through the
1998 fiscal year shall be at least $3,000,000, increasing to $3,4000,000 for the
1999 fiscal year and thereafter, and (iii) at least two of Fredric H. Gould,
Matthew J. Gould and Jeffrey A. Gould shall be involved in the day to day
management of the Company.
Mortgages Receivable
In 1992 and 1993, during a downturn in the real estate markets
nationally, the Company took advantage of opportunities to purchase mortgages
receivable at a discount and to originate a mortgage loan, all of which resulted
in the Company generating above average yields to maturity. The Company has not
acquired or originated any mortgages receivable since January, 1995. The only
significant mortgage receivable held at December 31, 1997 is described as
follows:
- On July 30, 1993, the Federal Deposit Insurance Corporation ("FDIC") sold
to an entity related to the Company, a $23,000,000 first mortgage secured by an
office building located on East 16th Street in Manhattan, New York. The sale was
made by the FDIC pursuant to public auction. The successful bidder paid
$19,000,300 for the mortgage, which carries an interest rate of 8% per annum.
The office building which secures this mortgage is owned by a partnership in
which Gould Investors L.P., an affiliated entity, is a general partner and owns
substantially all partnership interests. See "Certain Relationships and Related
Transactions" for a discussion of the affiliation of Gould Investors L.P. and
certain persons affiliated with Gould Investors L.P. with the Company.
Simultaneously with the closing an unrelated party advanced $13,181,000, the
Company advanced $6,080,000 (including closing costs), and the mortgage was
severed into a first mortgage of $13,181,000 paying interest at 9-1/2% per annum
held by such unrelated party and a subordinate wrap mortgage of $9,819,000 held
by the Company. Both the first mortgage and wrap mortgage mature in 2005 at
which time the first mortgage will have been fully amortized and the wrap
mortgage will have a principal balance of approximately $4,000,000. The
principal balance of the wrap mortgage held by the Company was $7,974,030 at
December 31, 1997 and the book balance, after discount, was $5,653,412 at
December 31, 1997.
The building which secures the first mortgage and the wrap mortgage is net
leased to the City of New York. The lease expires in 2005 with one renewal
option of five years. The City has a limited right to terminate the lease. The
first mortgage and the wrap mortgage are nonrecourse.
PROPERTIES
The Company, at December 31, 1997, owned fee title to 36 properties
and a "sandwich" lease position with respect to one property. The 36 properties
(referred to herein collectively as the "Properties" and individually as a
"Property") are located in 14 states. A limited liability company, in which the
Company is the principal member, has entered into contract to purchase a
property located in Brooklyn, New York for a consideration of $6,700,000 (see
"Additional Information Concerning Certain of the Properties" under this caption
for a description of this property).
<PAGE>
<TABLE>
<CAPTION>
The following sets forth certain information relating to the
Company's Properties.
RENEWAL
NET CURRENT OPTIONS
RENTABLE ANNUAL EXPIRATION (NUMBER
PROPERTY LOCATION TENANT PROPERTY TYPE LAND AREA SQ. FT. RENT DATE OF YEARS)
- ----------------- ------ ------------- --------- ------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
I45 Service Road and
Mount Houston Road Freestanding 5 (25
Houston, TX The Kroger Retail 2.665 Acres 38,448 $149,947 3/7/00 years)
Company
5600 Britton Pkwy. Kittle's Home Freestanding 5 (25
Columbus, OH Furnishing Center, Retail 6.228 Acres 97,328 $738,764 11/30/2011 years)
Inc.(1)
13751 S. Tamiami Barnes & Noble Freestanding 4 (20
Trail, Ft. Myers, FL Superstores,Inc. Retail 31,315 Sq.Ft. 29,993 $467,000 1/31/17 years)
(2)
1987 Mt. Zion Rd. The Sports Freestanding 4 (20
Clayton County, GA Authority Retail 5.5 Acres 50,400 $390,600 10/31/14 years)
Inc.
9000 E. Peakview Ave. Gart Bros. Freestanding 3 (15
Greenwood Village, CO Sporting Goods Retail 3.2 Acres 45,000 $423,000 1/31/16 years)
Company
490 Oakbend Drive Just For Freestanding 10/31/16 2 (10
Lewisville, TX Feet, Inc. Retail 1.9768 Acres 21,043 $355,559 years)
6933 Lee Highway K Mart Freestanding 8 (40
Chattanooga, TN Corporation(3) Retail 6.3 Acres 72,897 $399,238 11/30/06 years)
1st Ave. NE & Hwy. 100 Ultimate Freestanding 4 (20
Cedar Rapids, IA Akquisition Corp. Retail 1.52 Acres 15,400 $157,850 6/30/15 years)
(4)
RENEWAL
NET CURRENT OPTIONS
RENTABLE ANNUAL EXPIRATION (NUMBER
PROPERTY LOCATION TENANT PROPERTY TYPE LAND AREA SQ. FT. RENT DATE OF YEARS)
- ----------------- ------ ------------- --------- ------- ---- ---- ---------
900 Central Texas Hwy. Hollywood Freestanding 2 (10
Killeen, TX Entertainment Corp. Retail 48,177 Sq.Ft. 8,000 $141,200 6/30/10 years)
US Highway 59 Hollywood Freestanding 2 (10
Rosenberg, TX Entertainment Corp. Retail 34,000 Sq.Ft. 8,000 $111,800 1/31/10 years)
Gasoline Svc.
Station with
5600 S. Cedar Street Total Freestanding 2 (20
Lansing, MI Petroleum, Inc. Retail 53,733 Sq.Ft. 7,807 $69,148 5/31/11 years)
Gasoline Svc.
Station with
4384 Kalamazoo Ave. Total Freestanding 2 (20
Kentwood, MI Petroleum, Inc. Retail 45,745 Sq.Ft. 6,434 $45,969 5/31/11 years)
Gasoline Svc.
Station with
1499 S. Lincoln Road Total Freestanding 2 (20
Flint, MI Petroleum, Inc. Retail 59,242 Sq.Ft. 7,335 $91,216 5/31/11 years)
Gasoline Svc.
Station with
1504 Center Avenue Total Freestanding 2 (20
Essexville, MI Petroleum, Inc. Retail 68,882 Sq.Ft. 6,980 $57,966 5/31/11 years)
Gasoline Svc.
Station with
112 Ashman Circle Total Freestanding 2 (20
Midland, MI Petroleum, Inc. Retail 24,000 Sq.Ft. 6,067 $78,763 5/31/11 years)
<PAGE>
RENEWAL
NET CURRENT OPTIONS
RENTABLE ANNUAL EXPIRATION (NUMBER
PROPERTY LOCATION TENANT PROPERTY TYPE LAND AREA SQ. FT. RENT DATE OF YEARS)
- ----------------- ------ ------------- --------- ------- ---- ---- ---------
Gasoline Svc.
Station with
6500 Pierson Road Total Freestanding 2 (20
Flint, MI Petroleum, Inc. Retail 74,910 Sq.Ft. 13,145 $99,044 5/31/11 years)
Gasoline Svc.
Station with
7492 Gratiot Road Total Freestanding 2 (20
Saginaw, MI Petroleum, Inc. Retail 63,557 Sq.Ft. 8,781 $61,490 5/31/11 years)
Gasoline Svc.
Station with
2046 28th Street Total Freestanding 2 (20
Wyoming, MI Petroleum, Inc. Retail 75,080 Sq.Ft. 10,506 $65,292 5/31/11 years)
Gasoline Svc.
Station with
901 South US 27 Total Freestanding 2 (20
St. Johns, MI Petroleum, Inc. Retail 36,382 Sq.Ft. 6,588 $77,929 5/31/11 years)
Gasoline Svc.
1050 Columbia Ave. Total Station with
Battle Creek, MI Petroleum, Inc. Freestanding 2 (20
Retail 30,451 Sq.Ft. 6,813 $68,982 5/31/11 years)
Gasoline Svc.
Station with
1988 South Cedar Total Freestanding 2 (20
Imlay City, MI Petroleum, Inc. Retail 66,278 Sq.Ft. 8,883 $98,865 5/31/11 years)
<PAGE>
RENEWAL
NET CURRENT OPTIONS
RENTABLE ANNUAL EXPIRATION (NUMBER
PROPERTY LOCATION TENANT PROPERTY TYPE LAND AREA SQ. FT. RENT DATE OF YEARS)
- ----------------- ------ ------------- --------- ------- ---- ---- ---------
Gasoline Svc.
Station with
279 Baldwin Street Total Freestanding 2 (20
Jennison, MI Petroleum, Inc. Retail 62,795 Sq.Ft. 8,767 $60,125 5/31/11 years)
Gasoline Svc.
Station with
3210 Plainfield Ave. Total Freestanding 2 (20
Grand Rapids, MI Petroleum, Inc. Retail 44,283 Sq.Ft. 7,869 $55,911 5/31/11 years)
119 Madison Avenue Stamford Multifamily 126 rental
New York, NY Realty Apt. House/ 14,658 Sq.Ft.units and $550,000 2/28/38 --
Associates, Retail 6 retail
Inc.(5) stores
375,000 Sq.
Ft. + 21,000
7007 N.W. 37 Ave. United States Industrial Sq.Ft. 2 (30
Miami, FL Cold Storage, Inc. Building(6) 12.5 Acres Mezzanine $425,000 4/30/10 years)
Two-Screen
Theatre
2131 6th Avenue Twin Freestanding Containing
Seattle, WA 78 Associates Movie Theatre 19,480 Sq.Ft. 1,445 Seats $18,000 12/31/51 --
(7)
6660 Broughton Ave. Woodside Industrial 3 (75
Columbus, OH 78 Associates Building 246,936 Sq.Ft. 55,370 $42,000 6/30/04 years)
(7)
<PAGE>
RENEWAL
NET CURRENT OPTIONS
RENTABLE ANNUAL EXPIRATION (NUMBER
PROPERTY LOCATION TENANT PROPERTY TYPE LAND AREA SQ. FT. RENT DATE OF YEARS)
- ----------------- ------ ------------- --------- ------- ---- ---- ---------
Athens Food
US Hwy. 25 Bypass Systems, Inc. an Freestanding 1 (10
Greenwood, SC Arby Franchise Retail 25,359 Sq.Ft. 2,755 $74,000 2/28/10 years)
8824 Ranier Avenue Payless Shoe Freestanding 3 (15
Seattle, WA Source, Inc. (8) Retail 15,625 Sq.Ft. 3,038 $53,078 12/31/01 years)
1205 E. El Dorado St. Payless Shoe Freestanding 4 (20
Decatur, IL Source, Inc. (8) Retail 24,396 Sq.Ft. 3,060 $46,000 12/31/01 years)
5670 W. 3500 St. S. Payless Shoe Freestanding 3 (15
West Valley, UT Source, Inc. (8) Retail 16,563 Sq.Ft. 3,200 $56,733 12/31/01 years)
1101 Gartland Ave. Payless Shoe Freestanding 1 (2
Nashville, TN Source, Inc. Retail 16,117 Sq.Ft. 3,053 $27,477 12/31/99 years)
329 E. 47th Street Payless Shoe Freestanding 3 (15
Chicago, IL Source, Inc. (8) Retail 3,500 Sq.Ft. 3,065 $41,496 12/31/01 years)
2818 N. Court Road Freestanding 2 (6
Ottumwa, IA Hy-Vee, Inc. Retail 13,020 Sq.Ft. 3,072 $19,200 12/31/99 years)
2837 E. Ledbetter Dr. Abdelsalam Freestanding 1 (5
Dallas, TX Salaheddin Retail 14,270 Sq.Ft. 3,060 $21,600 6/30/02 years)
628 W. 14th Street Freestanding
Chicago Heights, IL Vacant (9) Retail 14,028 Sq.Ft. 3,062 -- -- --
951 State Avenue Freestanding
Kansas City, KS Vacant (9) Retail 17,875 Sq.Ft. 3,120 -- -- --
</TABLE>
<PAGE>
(1) Masco Corporation guarantees 25% of the basic rent during the original
lease term.
(2) The lease is guaranteed by Barnes & Noble, Inc.
(3) KMart Corporation has subleased the entire space to Rhodes, Inc.
(4) This lease is guaranteed by Ultimate Electronics, Inc.
(5) If tenant converts the property to cooperative ownership, the lease
term is extended for 150 years from the date of conversion.
(6) The Company holds a "sandwich" lease position. It is the tenant under a
master lease and Landlord under an operating lease.
(7) The Company leases these properties to unrelated third parties. The
Seattle property is leased by the Company's tenant to United Artists Theatre
Circuit, Inc., and the Columbus Property to the Kroger Company.
(8) The May Department Store Company was the original tenant under these
leases and remains contingently liable under these leases.
(9) Formerly occupied by Payless Shoes Source, Inc., whose lease for these
properties expired on December 31, 1996 without renewal.
<PAGE>
Additional Information Concerning Certain Of The Properties
As of December 31, 1997, the following Properties owned by the
Company (and one Property which a limited liability company in which the Company
is the principal member has contracted to acquire)either had a book value equal
to or greater than 10% of the total assets of the Company or revenues which
accounted for more than 10% of the Company's aggregate gross revenues.
Columbus, Ohio Property
Description of Columbus, Ohio Property
The Columbus, Ohio Property, constructed in 1996, is located at
5600 Britton Parkway, West of 1-270. The property is in a suburb of Columbus,
approximately 12 miles Northwest of downtown Columbus. This 6.228 acre property
is improved with a 97,378 square foot furniture showroom/retail store, of which
93,978 is located on grade and 3,400 is mezzanine office space. The property
contains 270 parking spaces.
Description of Columbus, Ohio Property Lease
Lease Term The Property is leased to Kittles' Home Furnishing Center, Inc.
("Kittles") for a fifteen year term expiring November 30, 2011. The Tenant has
five successive five year renewal options.
Amounts Payable Under the Columbus, Ohio Lease The basic annual rental is
$738,764 through November 1999, increasing to $807,267 per annum for the period
December 1999 to November 2002 and increasing every three years thereafter
during the original term.
The lease is a triple net lease and requires the Tenant to pay, in
addition to basic annual rent, all real estate taxes, assessments, insurance,
common area maintenance and structural and non-structural repairs.
Maintenance and Modifications The Tenant is required to keep the Property in
good condition and repair, including all structural and non-structural portions
(roof, foundations, floors, building systems) and all sidewalks, landscaping and
driveways.
The Tenant is precluded from making any structural alterations to
the building and building systems, and to the exterior of the building, without
Landlord's prior consent which is not to be unreasonably withheld or delayed.
Tenant is permitted to make interior non-structural alterations without
Landlord's consent, subject to the satisfaction of certain conditions specified
in the lease.
Insurance Landlord is required to carry fire, extended coverage, vandalism, and
malicious mischief and similar risk insurance insuring the Property (excluding
Tenants merchandise, trade fixtures, equipment and other personal property) for
the full replacement value. Tenant is to reimburse Landlord for Landlord's
annual premium costs.
Tenant is required to carry liability insurance.
Damage to or Condemnation of Columbus, Ohio Property If the building is damaged
or destroyed by fire or other casualty Landlord, within 120 days, is required to
commence repair and within 210 days restore the building to substantially the
condition it was in prior to the casualty.
In the event any portion of the building is taken by eminent domain so
that Tenant is unable to carry on its business in substantially the same manner
as prior to the taking, then the lease shall terminate at the election of either
Landlord or Tenant. If more than 20% of the parking area is taken by
condemnation, Tenant has the right to terminate the lease as of the date of
taking. If, after a taking by eminent domain, neither Landlord or Tenant elects
to terminate the lease, Tenant shall remain in the portion of the building not
taken, Landlord is required to restore the remaining portion to a complete unit
of like quality and character and rental payments are to be adjusted on an
equitable basis. If Landlord is required to restore it is not required to spend
more for the restoration that it received in the condemnation as an award, less
any amount paid to a mortgagee.
Mortgage
In December, 1997 the Company obtained a $4,325,000 non-recourse
first mortgage loan from Lehman Brothers Holding, Inc. The mortgage bears
interest at 7.33% per annum and matures in December, 2007. The mortgage is being
amortized based on a 30 year amortization schedule. Assuming no additional
payments are made on the principal in advance of the maturity date, the
principal balance due at maturity will be approximately $3,800,000. The Company
has the option of prepaying this mortgage in whole or in part provided it pays a
prepayment premium based on a yield maintenance formula.
Total Petroleum Properties
Description of Total Petroleum Properties
Although the Total Petroleum Properties consist of thirteen
separate properties located in various towns and cities in the State of
Michigan, they are considered as one property for the purpose of determining if
they are "materially important" real properties. The Total Petroleum Properties
are all service stations and include gasoline pumping islands, a service area
and a retail building used as a convenience store.
Description of Total Petroleum Leases
Lease Term The Total Petroleum Properties have 13 separate but
identical leases dated as of May 15, 1991 (Total Petroleum Leases). The primary
lease term for the Total Petroleum Properties is 20 years ending on May 31,
2011. Total Petroleum has the right to extend the leases for two 10 year renewal
terms, but the renewal option can only be exercised on an all or none basis. The
Total Petroleum Leases contain a cross default provision which provides that on
a monetary default resulting in the termination of a lease, the Landlord has a
right to terminate any or all of the other leases.
Amounts Payable under the Total Petroleum Leases The combined
annual rent for all 13 properties is $912,456 through May 14, 1998, increasing
by 3% each May 15th throughout the term of the lease. The leases are net leases,
which requires Total to pay all real estate taxes, assessments, and all utility
charges.
Maintenance and Modifications Total Petroleum is required, at its
expense, to maintain the Total Petroleum Properties in good repair and is
responsible to keep each property in reasonably clean condition. The Tenant at
its sole expense may make any non-structural alterations, additions,
replacements or improvements to the property without the Landlord's consent. The
Tenant is required to obtain the Landlord's prior written consent for structural
alterations, additions, replacements or improvements which consent will not be
unreasonably withheld.
Insurance Total Petroleum is required to maintain insurance at its
expense providing for fire with standard extended risk coverage to the extent of
the full replacement cost. So long as the Tenant's net worth exceeds
$100,000,000 the deductible may be that which is provided in Total Petroleum's
master corporate insurance policy, and if its net worth falls below $100,000,000
then the deductible shall not exceed $250,000 without Landlord's consent. In
Management's opinion the Total Petroleum Properties are adequately covered by
insurance.
Damage to or Condemnation of Property If any of the Total Petroleum
Properties is damaged or destroyed by fire or other casualty there is to be no
rent abatement and Total Petroleum is required to repair and restore the
premises in a reasonable diligent manner. If, however, the premises are rendered
untenantable, Total Petroleum may terminate the lease in which event it shall
pay to the Company an amount sufficient to restore the premises to the condition
existing as of the date the lease was executed, reasonable wear and tear
excepted.
If all or any part of any of the properties is taken by
condemnation so as to render the remaining portion of the property unsuitable
for Tenant's business, then the rent due under the lease shall be equitably
adjusted until such time as the Tenant provides Landlord with written notice
that it elects to terminate the lease. If however, the Tenant does not vacate
the property within ninety days of such taking then it is conclusively presumed
that such taking is not extensive enough to render the premises unsuitable for
Total Petroleum's business. In the event of a taking, damages awarded are
payable as follows: (i) Total Petroleum is entitled to a portion of the award
attributable to the value of its leasehold and (ii) Landlord is entitled to the
value of its reversion. In allocating between the value of the leasehold and the
reversion, the value of improvements and betterments made by the Tenant is to be
equitably divided between leasehold and reversion. Each party is entitled to
file a claim in any condemnation proceeding.
Option to Purchase Total Petroleum has been granted an option to
purchase all locations at fair market value, excluding the value of the
improvements made by it. This option may be exercised during the last six months
of the term of the lease. Fair market value is to be determined by an appraisal
process.
Right of First Refusal Total Petroleum has been granted a right of
first refusal to purchase a Total Petroleum Property from the Company for the
same purchase price and on the same terms and conditions as a bona fide offer to
purchase received by the Company from an unrelated party which is engaged in, or
plans to engage in the business of selling petroleum products, which offer the
Company intends to accept.
Mortgage The Total Petroleum Properties are owned free and clear of
mortgages.
Gold Street, Brooklyn, New York Property
Purchase Contact: A limited liability company, in which the Company is the
principal member, has entered into a contract to purchase the Gold Street
Property for a consideration of $6,700,000. The closing is expected to occur in
April, 1998.
Description of Gold Street Property The Gold Street Property, located on
Flatbush Avenue and Gold Street in the downtown area of Brooklyn, New York, is a
66,000 square foot training and office facility (six stories), located on a
15,000 square foot parcel of land containing 27 parking spaces.
Description of Gold Street Property Lease
Lease Term: The Property is leased to the New York City Transit Authority
pursuant to a net lease which commenced on October 16, 1987 and expires on
October 15, 2002. As part of the consolidation of the Transit Police and the NYC
Police Department, the Property is now occupied by the NYC Police Department.
Amount Payable Under the Lease The annual fixed rent under the lease is
$850,000. The lease requires the Tenant to pay all real estate taxes, water and
sewer and utility charges.
Maintenance and Modifications Tenant is responsible, at its cost and expense,
for the care of the Property and is to make all repairs, interior and exterior,
and structural and non-structural; however, Landlord is responsible (subject to
reimbursement by Tenant, as described) for repair to structural components
(footings,piers or buttresses, columns, beams, exterior walls and load bearing
walls). Structural components do not include building systems, roof or windows
and window frames. The Tenant is required to reimburse Landlord for the first
$25,000 of repairs to structural components in each lease year on a cumulative
basis, up to $375,000 over the lease term. Tenant cannot make structural
alterations without Landlord's prior consent, which is not to be unreasonably
withheld, provided any such changes will not (i) change the nature or appearance
of the building, (ii) change the rentable square footage, (iii) increase or
decrease the size or change the shape of the structure, and/or (iv) cause any
structure to be erected on the parking area. Tenant can make non-structural
interior changes and alterations without Landlord's consent but is required to
deliver to Landlord copies of all permits, as-built plans and an architects
certification that the alterations are non-structural.
Insurance Tenant is self-insured. Tenant indemnifies Landlord against all
damages and losses (including reasonable attorneys fees) resulting from any
claim against Landlord regarding any item which is an obligation of Tenant under
the lease.
Damage to Gold Street Property In case of damage to or total or partial
destruction of any improvements, Landlord, at its cost, shall either restore and
rebuild or erect a new building. However, if there is total or substantial
damage of the improvement, Landlord has the option to cancel the lease on not
less than 150 days notice.
Mortgage The Company intends to obtain a mortgage secured by this Property.
North Fork Bank has issued a commitment, subject to the satisfaction of certain
conditions, that it will lend $4,500,000 with respect to this Property, at an
interest rate of 7.5% per annum and a 25 year amortization schedule, over a five
year term.
Term of Limited Liability Company
The Company will fund the purchase price and closing costs. A limited liability
company will be formed to acquire title to the property. The other member of the
limited liability company will be the person who introduced the transaction to
the Company. The limited liability company's organizational documents have not
been finalized. It is contemplated that the minority member will receive an
annual distribution of $20,000; thereafter the Company will receive all cash
flow until it has received repayment of its entire investment plus a 15% return;
thereafter all cash flow will be distributed 95% to the Company and 5% to the
minority member.
<PAGE>
<TABLE>
<CAPTION>
Lease Expirations
The following table sets forth scheduled lease expirations for all
leases for the Properties as of December 31, 1997.
Current
Net Rentable Annual % of Rents
Square Feet Rents Under Represented
Year of Lease Number of Leases Subject to Expiring By Expiring
Expiration Expiring (1) Expiring Leases Leases (2) Leases
- ---------- ------------ --------------- ---------- ------
<S> <C> <C> <C> <C>
1998 0 - - -
1999 2 6,125 $ 46,677 0.83%
2000 1 38,448 149,947 2.68%
2001 4 12,363 197,309 3.52%
2002 1 3,060 21,600 0.39%
2003 0 - - -
2004 1 55,370 42,000 0.75%
2005 0 - - -
2006 1 72,897 359,640 6.42%
2007 0 - - -
2008 and thereafter 2 923,494 4,783,471 85.41%
------- --------- ------
1,111,757 5,600,644 100%
========= ========= ====
</TABLE>
(1) Lease expirations assume tenants do not exercise existing renewal
options.
(2) Reflects monthly base rent provided for under terms of each expiring
lease as in effect on December 31, 1997 multiplied by 12 and does not take into
account any contractual rent escalations.
(3) The Company's two vacant properties are not included in the above
table.
<PAGE>
Indebtedness
The following table sets forth certain information regarding the
mortgage indebtedness of the Company as of December 31, 1997.
<TABLE>
<CAPTION>
CURRENT
INTEREST PRINCIPAL PROJECTED ANNUAL MATURITY BALANCEDUE
PROPERTY LOCATION RATE AMOUNT INTEREST PAYMENTS DATE(1) AT MATURITY
- ----------------- ---- ------ ----------------- ------- -----------
(000) (000) (000)
<S> <C> <C> <C> <C> <C>
Columbus, OH 7.33% $4,325 321 1/1/08 3,762
Fort Myers, FL 7.80% $3,210 252 1/1/04 2,881
Clayton County, GA 8.45% $2,363 198 9/1/06 1,960
Greenwood Village, CO 8.75% $2,671 232 3/31/06 2,254
Lewisville, TX 8.75% $1,572 135 1/1/17 0
Cedar Rapids, IA 8.5% $ 952 80 12/31/00 874
Killeen, TX 9.1% $ 715 64 8/14/02 667
Rosenberg, TX 8.55% $ 677 57 12/5/02 616
New York, NY 8.75% $4,062 352 6/14/99 3,966
</TABLE>
(1) Assumes the Company does not extend any mortgage pursuant to the terms of
the mortgage.
<PAGE>
Competition
The Company faces competition for the acquisition of net leased
properties from other REITs, investment companies, insurance companies, pension
funds and private individuals, some of whom have greater resources than the
Company. The Company also faces indirect competition from institutions that
provide or arrange for other types of commercial financing, such as traditional
mortgage financing and traditional bank financing. The Company believes that its
management's experience in real estate, mortgage lending, credit underwriting
and transaction structuring allows it to compete effectively for properties.
Environmental Matters
Under various federal, state and local environmental laws, regulations
and ordinances, current or former owners of real estate, may be required to
investigate and clean up hazardous or toxic chemicals, substances or waste or
petroleum products or waste (collectively, "Hazardous Materials") released on,
under, in or from such property, and may be held liable to governmental entities
or to third parties for certain damage and for investigation and clean-up costs
incurred by such parties in connection with the release or threatened release of
Hazardous Materials. Such laws typically impose responsibility and liability
without regard to whether the owner knew of or was responsible for the presence
of Hazardous Materials, and the liability under such laws has been interpreted
to be joint and several under such circumstances. The Company's leases generally
provide that the tenant is responsible for all environmental liability and for
compliance with environmental regulations relating to the tenant's operations.
Such a contractual arrangement does not eliminate the Company's statutory
liability or preclude claims against the Company by governmental authorities or
persons who are not a party to such an arrangement. Contractual arrangements in
the Company's leases may provide a basis for the Company to recover from the
tenant damages or costs for which the Company has been found liable.
The cost of investigation and clean-up of Hazardous Materials on, under,
in or from property can be substantial, and the fact that the property has had a
release of Hazardous Materials, even if remediated, may adversely affect the
value of the property and the owner's ability to sell or lease the property or
to borrow using the property as collateral. In addition, some environmental laws
create a lien on a property in favor of the government for damages and costs it
incurs in connection with the release or threatened release of Hazardous
Materials, and certain state environmental laws provide that such a lien has
priority over all other encumbrances on the property or that a lien can be
imposed on other property owned by the responsible party. Finally, the presence
of Hazardous Materials on a property could result in a claim by a private party
for personal injury or a claim by a neighboring property owner for property
damage.
Other federal, state and local laws and regulations govern the removal
or encapsulation of asbestos-containing material when such material is in poor
condition or in the event of building remodeling, renovation or demolition.
Still other federal, state and local statutes, regulations and ordinances may
require the removal or upgrading of underground storage tanks that are out of
service or out of compliance. In addition, federal, state and local laws,
regulations and ordinances may impose prohibitions, limitations and operational
standards on, or require permits, approvals and notifications in connection with
the discharge of wastewater and other water pollutants, the emission of air
pollutants and operation of air polluting equipment, the generation and
management of Hazardous Materials, and workplace health and safety.
Non-compliance with environmental or health and safety requirements may also
result in the need to cease or alter operations at a property, which could
affect the financial health of a tenant and its ability to make lease payments.
Furthermore, if there is a violation of such requirement in connection with a
tenant's operations, it is possible that the Company, as the owner of the
property, could be held accountable by governmental authorities for such
violation and could be required to correct the violation.
The Company typically undertakes an investigation of potential
environmental risks when evaluating an acquisition. Where warranted, Phase I
and/or Phase II assessments are performed by independent environmental
consulting and engineering firms. Phase I assessments do not involve subsurface
testing, whereas Phase II assessments involve some degree of soil and/or
groundwater testing. The Company may acquire a property which is known to have
had a release of Hazardous Materials in the past, subject to a determination of
the level of risk and potential cost of remediation. The Company normally
requires property sellers to indemnify it against any environmental problem
existing as of the date of purchase. Additionally, the Company normally
structures its leases to require the tenant to assume all responsibility for
environmental compliance or environmental remediation relating to the tenants
operations at the Property.
Except for the environmental remediation undertaken by the Company at
the Total Petroleum Properties, the Company has not been notified by any
governmental authority of or become aware of non-compliance, liability or other
claim in connection with any of the Properties.
In 1991, when the Company entered into lease agreements relating to 13
Total Petroleum Properties, the Company deposited $2,000,000 with an independent
escrow agent, to cover remediation costs relating to environmental problems
discovered at certain of the Total Petroleum Properties. The agreement between
the Company and Total Petroleum limits the Company's maximum cost to $350,000
per location, with any excess cost being the responsibility of Total Petroleum.
There are currently two locations which will require additional remediation
efforts. As of December 31, 1997 there is approximately $781,000 held by the
escrow agent, which the Company deems adequate.
<PAGE>
Regulations and Insurance
Americans With Disabilities Act and Similar Laws. Under the Americans
with Disabilities Act of 1990 (the "ADA"), all places of public accommodation
are required to meet certain Federal requirements related to access and use by
disabled persons. These requirements became effective in 1992. Although
management of the Company believes that the Properties are substantially in
compliance with present requirements of the ADA, the Company has not conducted
and does not presently intend to conduct an audit or investigation to determine
its compliance. There can be no assurance that the Company will not incur
additional costs in complying with the ADA.
Additional legislation may place further burdens or restrictions on
owners with respect to access by disabled persons. The ultimate amount of the
cost of compliance with the ADA or such legislation is not currently
ascertainable, but are not expected to have a material effect on the Company.
Insurance. Under substantially all leases, the Company's tenants are
responsible for providing adequate insurance on the Properties they lease. The
Company believes the Properties are covered by adequate fire, flood and property
insurance.
Legal Proceedings
Neither the Company nor the Properties are presently subject to any
material litigation nor, to the Company's knowledge, is any material litigation
threatened against the Company or the Properties, other than routine litigation
arising in the ordinary course of business, which collectively are not expected
to have a material adverse effect on the business, financial condition or
results of operations of the Company.
Use of Proceeds
The Company intends to use the proceeds derived from this Rights
Offering, net of expenses of approximately $120,000, to repay debt of $4,605,000
due under its Credit Agreement and for working capital purposes. The funds
allocated to working capital will be used primarily for property acquisitions.
Pending use of such proceeds the Company will invest such proceeds in short term
income-producing investments which are consistent with the Company's
qualification for taxation as a real estate investment trust.
<PAGE>
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS
The Company's Common Stock and Preferred Stock trade on the American
Stock Exchange under the symbols OLP and OLP Pr, respectively. The following
table sets forth the high and low prices for the Common Stock and Preferred
Stock of the Company as reported by the American Stock Exchange and the per
share cash distributions paid by the Company on the Common Stock and Preferred
Stock during each quarter of the years ended December 31, 1996 and 1997.
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
DISTRIBUTIONS DISTRIBUTIONS
1996 HIGH LOW PER SHARE HIGH LOW PER SHARE
- ---- ---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
First Quarter 14-1/8 13 $.30 16-7/8 16-1/4 $.40
Second Quarter 13-5/8 13-3/8 $.30 17 16-1/4 $.40
Third Quarter 13-1/2 12-5/8 $.30 16-7/8 16-1/4 $.40
Fourth Quarter 13-1/2 12-5/8 $.30* 17-1/8 16-1/4 $.40*
1997
First Quarter 13-3/4 12-3/4 $.30 17-5/8 16-1/2 $.40
Second Quarter 13-3/4 13-1/4 $.30 17-1/8 16-5/16 $.40
Third Quarter 14 13-1/8 $.30 17-7/8 16-1/2 $.40
Fourth Quarter 14-5/8 13-5/8 $.30* 17-7/8 16-7/8 $.40*
</TABLE>
*A cash distribution of $.30 and $.40 was paid on the Common Stock and
Preferred Stock, respectively, on January 2 ,1997 and January 5, 1998. These
distributions are reported as being paid in the fourth quarter of the prior
year.
<PAGE>
On _______________, 1998, the closing sale price of the Common Stock as
reported by the American Stock Exchange was $________ per share. As of March 2,
1998 the approximate number of holders of record of the Common Stock and
Preferred Stock was 397 and 175, respectively.
In the future, the Company's ability to make cash distributions to its
stockholders will be affected by a number of factors, including the revenues
received from its Properties, the operating expenses of the Company, the
interest expense incurred on outstanding indebtedness, and the ability of
tenants to meet their obligations under leases.
One or more of the foregoing factors could limit the Company's ability to
maintain distributions at the current level.
Management believes that the amount of cash not distributed will be
sufficient to cover: (i) costs associated with the renewal or replacement of
current tenants as their leases expire, (ii) recurring capital expenditures that
will not be reimbursed by tenants and, (iii) unforeseen cash needs. The expected
amount of distributions will not allow the Company, using only cash from
operations, to retire all of its debt when due, and therefore the Company will
be required to seek additional debt or equity financings, and/or sell
Properties, to repay such debt.
Distributions by the Company to the extent of its current or accumulated
earnings and profits for Federal income tax purposes, other than capital gain
dividends, will be taxable to stockholders as ordinary dividend income. Capital
gain dividends generally will be treated as long-term capital gains.
Distributions in excess of earnings and profits generally will be treated as a
non-taxable reduction of the stockholders' basis in the stock to the extent
thereof, and thereafter as taxable gain. Distributions treated as non-taxable
reduction in basis will have the effect of deferring taxation until the sale of
a stockholder's capital stock. For a discussion of the tax treatment of
distributions to holders of shares of capital stock, see "Federal Income Tax
Considerations--Taxation of Taxable U.S. Stockholders."
<PAGE>
CAPITALIZATION
The following table sets forth the Company's unaudited capitalization as
of December 31, 1997, after giving effect to Gould Investors L.P. fully
exercising its Basic Subscription Right relating to 392,981 Shares of Common
Stock and exercising its Over-Subscription Privilege for 376,250 shares. The
information set forth in the following table should be read in conjunction with
the consolidated financial statements and notes thereto included elsewhere in
this Prospectus, as well as "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
December 31, 1997
-----------------
Historical Pro Forma
---------- ---------
<S> <C> <C>
Mortgages and other notes payable $25,150,276 $20,545,248
Redeemable Convertible Preferred Stock (1)
$1.00 par value, $1.60 cumulative annual
dividend, 2,300,000 shares authorized;
808,776 shares issued and outstanding 13,106,970 13,106,975
Stockholders' equity(2)
CommonStock,$1.00 par value,25,000,000 shares authorized;
1,544,314 and 2,360,639 shares issued and outstanding,
respectively 1,561,450 2,330,681
Paid-in capital 14,419,609 23,530,381
Net unrealized gain on available-for-sale
securities 146,706 146,706
Accumulated undistributed income 2,076,140 2,076,140
--------- ---------
Total stockholders' equity 18,203,905 28,083,908
---------- ----------
Total capitalization $56,461,151 $61,736,126
----------- -----------
</TABLE>
(1) The Preferred Stock has a stated liquidation preference of $16.50 per
share and is convertible into .825 of a share of Common Stock. The holders of
the Preferred Stock have a right to "put" it to the Company at $16.50 per share
during the ninety day period commencing July 1, 1999.
(2) Does not include (i) 44,000 shares of Common Stock reserved for
issuance under the 1989 and 1996 Stock Option Plans and (ii) 667,240 shares of
Common Stock reserved for issuance upon conversion of the Preferred Stock.
<PAGE>
SELECTED FINANCIAL DATA
The following are highlights of the Company's operations which are derived
from the audited financial statements of the Company for the years ended
December 31, 1997, 1996, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
INCOME STATEMENT DATA 1997 1996 1995 1994 1993
- --------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
- -Revenues $6,284,809 $5,511,556 $4,890,962 $4,041,378 $3,348,419
- -Gain on Sale
of Investments
and Real Estate 599,251 -- -- -- 168,631
- -Provision for
Valuation
Adjustment and
Impairment -- (659,000) -- -- (258,744)
- -Net Income 2,984,192 2,173,952 3,096,302 2,861,137 2,435,269
Calculation of
Net Income
Applicable to
Common
Stockholders:
- -Net Income 2,984,192 2,173,952 3,096,302 2,861,137 2,435,269
- -Less: Dividends
and Accretion
on Preferred
Stock 1,450,220 1,448,359 1,446,519 1,444,703 1,442,907
- -Net Income
Applicable
to Common
Stockholders $1,533,972 $725,593 $1,649,783 $1,416,434 $992,362
- -Weighted Average
Number of Common
Shares
Outstanding
- Basic 1,522,967 1,447,413 1,409,371 1,356,989 1,338,619
- Diluted 1,529,203 1,459,198 1,423,361 1,365,143 1,353,935
- -Net Income Per
Common Share: (Note a)
-Basic $1.01 $.50 $1.17 $1.04 $.74
-Diluted $1.00 $.50 $1.16 $1.04 $.73
- -Cash Distributions
Per Share of:
-Common Stock $1.20 $1.20 $1.03 $.86 $.94
-Preferred Stock $1.60 $1.60 $1.60 $1.60 $1.60
</TABLE>
(a) The earnings per share amounts prior to 1997 have been restated as
required to comply with Statement of Financial Accounting Standards No.
128, Earnings Per Share. For further discussion of earnings per share
and the impact of Statement No. 128, see Note 2 to the Consolidated
Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
STATEMENT DATA 1997 1996 1995 1994 1993
- -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
- -Total Real
Estate
Investments, Net $48,316,984 $42,889,213 $24,253,765 $10,996,534 $ 5,627,909
- -Investments in
US Government
Obligations and
Securities -- -- 1,274,747 3,972,256 4,856,453
- -Mortgages and
Note Receivables 5,943,450 6,049,033 7,564,716 16,096,224 17,274,039
- -Total Assets 57,647,555 52,522,988 38,040,246 37,652,773 32,383,674
- -Total Liabilities 26,336,680 21,987,633 7,532,267 7,680,937 3,360,236
- -Redeemable
Convertible
Preferred Stock 13,106,970 12,950,792 12,796,475 12,643,998 12,493,337
- -Total Stock-
holders' Equity 18,203,905 17,442,841 17,711,504 17,327,838 16,530,101
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company's primary sources of liquidity are cash generated from
operating activities, cash and cash equivalents, funds available under a
revolving credit facility (of which approximately $4,395,000 was available at
December 31, 1997) and funds obtainable from mortgages to be secured by real
estate investments.
In March, 1996 the Company entered into a $5 million revolving
credit agreement ("Credit Agreement") with Bank Leumi Trust Company of New York
("Bank Leumi"). Under the terms of the Credit Agreement the Company can add
additional lenders to provide a maximum total facility of $15,000,000. In June
1997, the Company closed on a $4,000,000 participation interest with Commercial
Bank of New York (formerly First Bank of the Americas), increasing the total
facility to $9,000,000. Borrowings under the Credit Agreement will provide the
Company with funds, when needed, to acquire additional properties. The Credit
Agreement matures February 28, 1999 with a right for the Company to extend the
Credit Agreement until February 29, 2000.
The Company is currently in discussions concerning the acquisition of
additional net leased properties. Cash provided from operations and the
Company's cash position will provide funds for cash distributions to
stockholders and operating expenses. These sources of funds, as well as funds
available under the Credit Agreement, will provide funds for future property
acquisitions. Funds raised in the Rights Offering will be used primarily for
property acquisitions. It will continue to be the Company's policy to make
sufficient cash distributions to stockholders in order for the Company to
maintain its real estate investment trust status under the Internal Revenue
Code.
In connection with the lease agreements with Total Petroleum, Inc.
("Total Petroleum") consummated in 1991, the Company agreed to expend certain
funds to remediate environmental problems at certain locations net leased to
Total Petroleum. It was agreed that the net cost to the Company would not exceed
$350,000 per location, with any excess being the responsibility of Total
Petroleum. At that time the Company deposited $2,000,000 with an independent
escrow agent to insure compliance by the Company with its obligations with
respect to the environmental clean up. At December 31, 1997 there are two
locations which require additional remediation efforts. The Company believes
that the $781,000 held by the escrow agent will be adequate to cover any
additional environmental costs at the Total Petroleum locations.
There will be no effect on the Company's liquidity relating to the
year 2000 issue because during 1997 the Company acquired computer hardware and
software to handle the Company's accounting and real estate management. The
computer software is capable of handling all issues relating to the year 2000.
<PAGE>
Comparison of Years Ended December 31, 1997 and 1996
As a result of the acquisition of five properties in 1996 and two
properties in 1997 rental income increased by $1,163,203 to $5,341,491 for the
year ended December 31, 1997 as compared to the year ended December 31, 1996.
The decrease in interest income from related parties of $299,571 from
$1,132,150 for the year ended December 31, 1996 to $832,579 for the year ended
December 31, 1997 is substantially due to the payoff in full of a senior note
receivable during August 1996.
Interest and other income decreased to $110,739 in 1997 from $201,118 in 1996
primarily due to a decrease in interest earned on U.S. Government securities
resulting from the sale of such securities, the proceeds of which were used to
purchase properties.
A $301,754 increase in depreciation and amortization expense to $1,023,345
results primarily from depreciation on properties acquired during 1996 and 1997.
Also contributing to the increase was the amortization of capitalized costs
incurred in connection with the Company's credit facility and placing mortgages
on its properties.
The increase in interest-mortgages payable from $891,953 in 1996 to $1,517,126
in 1997 is due to interest paid on mortgages placed on properties acquired
during 1996 and 1997. Interest - bank note payable amounted to $210,305 and
$110,185 for the years ended December 31, 1997 and 1996, respectively, resulting
from borrowings under the Credit Agreement.
Borrowings under the Credit Agreement were made to facilitate property
acquisitions.
General and administrative costs decreased by $33,781 from $663,201 for the year
ended December 31, 1996 to $629,420 for the year ended December 31, 1997 due to
a combination of factors including a decrease in professional fees. In addition,
the year ended December 31, 1996 included various fees and costs incurred with
the implementation of the Company's distribution reinvestment plan.
At December 31, 1996, the Company owned five properties which had been leased to
a retail chain of stores. The initial term with respect to the leases expired on
December 31, 1996. Two of these properties were under contract of sale on
December 31, 1996 (both sales closed during 1997), and three were vacant (two of
which are still vacant and one of which has since been relet). The Company is
actively seeking a buyer or tenant for the two vacant properties. At December
31, 1996 the Company recorded a provision for valuation adjustment on the two
properties which were under contract of sale based on the sales prices. In
addition, the Company had determined that the estimated fair value of the three
vacant properties were lower than their carrying amounts and thus, the Company
had recorded a provision for the differences. The total provision taken on these
five properties amounted to $659,000. There was no comparable provision taken in
1997.
On August 5, 1997, the property owned by a limited liability company in
which the Company was a majority member was sold and a gain of $599,251 was
realized on the sale. The Company's share of the gain is $383,915 (after
deducting the minority interest share of the gain of $215,336).
Comparision of Years Ended December 31, 1996 and 1995
In view of the Company's acquisition of nineteen properties in 1995
and five properties in 1996, rental income increased by $1,512,831 to $4,178,288
for the year ended December 31, 1996 from $2,665,457 for the year ended December
31, 1995. The straight-lining of rents during the year ended December 31, 1996
contributed $218,961 to the increase in rental income.
The decrease in interest income from related parties of $746,112
from $1,878,262 to $1,132,150 is substantially due to accelerated principal
collections during 1995 on a senior note receivable which resulted in unusually
large amortization of the discount on such note during 1995 and additionally,
resulted in a substantial decrease in interest earned on such note during 1996.
This note was collected in full during August 1996. Also contributing to the
decrease in interest earned was the payoff in full during March 1996 of an
$845,000 mortgage receivable.
Interest and other income decreased to $201,118 in 1996 from
$347,243 in 1995 primarily due to a decrease in interest earned on U.S.
Government securities resulting from the sale of such investments, the proceeds
of which were used to purchase properties.
A $232,946 increase in depreciation and amortization expense to
$712,591 for the year ended December 31, 1996 results from depreciation on
properties acquired during 1995 and 1996. Also contributing to the increase was
the amortization of capitalized costs incurred in connection with the Company
obtaining a bank credit facility and placing mortgages on its properties.
The increase in interest-mortgages payable from $453,684 in 1995 to
$891,953 in 1996 is due to interest paid on mortgages placed in connection with
property acquisitions during 1995 and 1996. Interest - bank note payable
amounted to $110,185 during 1996 resulting from borrowings under a revolving
credit agreement which was entered into during 1996.
General and administrative costs of $663,201 reflect an increase of
$86,264 from the prior year expense of $576,937 and is due to a combination of
factors including various fees and other costs incurred with the implementation
and maintenance of the Company's distribution reinvestment plan and an increase
in professional fees.
At December 31, 1996 the Company owned five properties leased to a
chain of retail stores, all of which leases expired on December 31, 1996. Two of
those properties were under contract of sale on December 31, 1996, one was relet
and two became vacant. The Company is actively seeking a buyer or tenant for the
two vacant properties. The Company recorded a provision for valuation adjustment
on the two properties under contract of sale since the sales prices were lower
than their carrying amounts and thus the Company took a provision for the
difference. The total provision taken on these five properties amounts to
$659,000. There was no comparable provision taken in 1995.
<PAGE>
MANAGEMENT
Directors and Executive Officers. The following sets forth information with
respect to the directors and executive officers of the Company:
NAME AGE POSITION WITH THE COMPANY
Fredric H. Gould 62 Chairman of the Board
Joseph Amato 61 Director
Charles Biederman 64 Director
Arthur Hurand 81 Director
Marshall Rose 61 Director
Matthew J. Gould 38 President and Chief Executive Officer
Simeon Brinberg 64 Vice President
David W. Kalish 51 Vice President and Chief Financial Officer
Nathan Kupin 83 Senior Vice President
Jeffrey Gould 33 Vice President
Mark H. Lundy 35 Secretary
Seth D. Kobay 43 Vice President and Treasurer
Karen Dunleavy 39 Vice President, Financial
Fredric H. Gould. Mr. Gould has been Chairman of the Board of the
Company since 1989. Mr. Gould has served as Chairman of the Board of Trustees of
BRT Realty Trust, a real estate investment trust, since 1984 and Chief Executive
Officer of BRT Realty Trust since 1996. Since 1985 Mr. Gould has been a
principal executive officer of the managing general partner of Gould Investors
L.P., a limited partnership engaged in the ownership and operation of real
properties and he also serves as a general partner of Gould Investors L.P. He is
President of the advisor to BRT Realty Trust and a director of Sunstone Hotel
Investors, Inc.
<PAGE>
Joseph Amato. Mr. Amato has been engaged in real estate development and
management for approximately thirty years. He is President of Kent Management
Corp.
Charles Biederman. Mr. Biederman has been executive Vice President of
Sunstone Hotel Investors, Inc., a publicly traded REIT engaged in hotel
ownership, since 1994. Mr. Biederman has also been engaged in real estate
development for more than thirty years and has been President of Woodstone
Homes, Inc., engaged in luxury home construction in the Vail, Colorado area for
more than the past five years.
Arthur Hurand. Mr Hurand is a private investor and has been for more than
the past five years. He has been engaged in the ownership and operation of real
properties for more than forty years. He is a trustee of BRT Realty Trust.
Marshall Rose. Mr. Rose has been a director of the Company since 1989. He
has been a trustee of BRT Realty Trust since 1986, and served as a general
partner of Gould Investors L.P. from 1988 to November 1997. Mr. Rose is also
President and Chief Executive Officer of Georgetown Equities, Inc., a real
estate consulting firm, and serves as a director of Estee Lauder, Inc. and
Golden Book Family Entertainment, Inc.
Matthew J. Gould. Mr. Gould has been President and Chief Executive Officer
of the Company since 1989. He has been a Vice President of BRT Realty Trust
since 1986, a Vice President of the managing general partner of Gould Investors
L.P. from 1986 to 1996 and President since 1996. He also serves as a Vice
President of the advisor to BRT Realty Trust.
Simeon Brinberg. Mr. Brinberg has served as Vice President of the Company
since 1989. He has been Secretary of BRT Realty Trust since 1983, a Senior Vice
President of BRT Realty Trust since 1988 and a Vice President of the managing
general partner of Gould Investors L.P. since 1988. He is a director of Witco
Corporation.
David W. Kalish. Mr. Kalish has served as Vice President and Chief
Financial Officer of the Company since June 1990. Mr. Kalish is also a Vice
President and Chief Financial Officer of BRT Realty Trust and Vice President and
Chief Financial Officer of the managing general partner of Gould Investors L.P.
since June 1990. For more than five years prior to June 1990, Mr. Kalish, a
certified public accountant, was a partner of Buchbinder Tunick & Company,
certified public accountants.
Nathan Kupin. In addition to serving as a Senior Vice President of
the Company since 1989, Mr. Kupin has been a Trustee and Vice President of BRT
Realty Trust since 1983. He is also Vice Chairman of the Board of Directors of
the managing general partner of Gould Investors L.P. and a director of the
advisor to BRT Realty Trust.
<PAGE>
Jeffrey Gould. Mr. Gould has been a Vice President of the Company since
1989. Mr. Gould was a Vice President of BRT Realty Trust from January 1988 to
March 1993, Executive Vice President and Chief Operating Officer of BRT from
March 1993 to March 1996, and President and Chief Operating Officer since March
1996. Mr. Gould has served as a Trustee of BRT Realty Trust since March 1997.
Mark H. Lundy. In addition to being Secretary of the Company since
June 1993, Mr. Lundy has been a Vice President of BRT since April 1993 and a
Vice President of the managing general partner of Gould Investors L.P. since
July 1990. Prior to July 1990 he was an associate with the law firm of
Dickstein, Shapiro and Moran, Washington, D.C.
Seth D. Kobay. Mr. Kobay has been Vice President and Treasurer of the
Company since August 1994. He has been Vice President and Treasurer of BRT
Realty Trust since March 1994 and Vice President of Operations of the managing
general partner of Gould Investors L.P. since 1986.
Karen Dunleavy. Ms. Dunleavy has been Vice President, Financial of the
Company since August 1994. She has served as Treasurer of the managing general
partner of Gould Investors L.P. since 1986.
Matthew J. Gould and Jeffrey Gould are Fredric H. Gould's sons.
Board of Directors and Committees
The Company is managed by a five member Board of Directors, a
majority of whom are independent of the Company's management. Messrs. Amato,
Biederman and Hurand comprise the Company's independent directors (the
"Independent Directors"). The Board of Directors is divided into three classes
serving staggered three-year terms. The Board is composed of two Class 1
directors (Messrs. Gould and Hurand), two Class 2 directors (Messrs. Rose and
Biederman), and one Class 3 director (Mr. Amato), whose terms will expire upon
the election of directors at the annual meeting of stockholders held following
the fiscal years ending December 31, 2000, 1999 and 1998, respectively. At each
annual meeting of stockholders, directors will be reelected or elected for a
full term of three years to succeed those directors whose terms are expiring.
Audit Committee. The Board of Directors has established an Audit
Committee consisting of Messrs. Amato, Biederman and Hurand. The Audit Committee
makes recommendations concerning the engagement of independent public
accountants, reviews with independent public accountants the results of the
audit engagement, approves professional services provided by the independent
accountants, reviews the independence of the independent accountants, considers
the range of audit and non-audit fees, and reviews the adequacy of the Company's
internal accounting controls.
<PAGE>
Compensation Committee Interlocks. The Compensation Committee consists of
Messrs. Beiderman and Hurand, neither of whom is or has been an officer or
employee of the Company. Messrs. Biederman and Fredric Gould serve as directors
of Sunstone Hotel Investors, Inc. and Messrs. Hurand, Fredric Gould and Rose are
trustees of BRT Realty Trust. For a description of the background of each of
these individuals, see "Directors and Executive Officers."
Compensation of Directors. The Company compensates its directors, who are
not officers of the Company, with fees for their services as directors. The fee
paid to each of such directors currently is $10,000 annually.
Limitation of Liability. The Company's Articles of Incorporation
provides that to the maximum extent that Maryland law in effect from time to
time permits limitation of liability of directors and officers, no director or
officer shall be liable to the Company or its stockholders for money damages.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following summary compensation table includes information with
respect to compensation paid and accrued by the Company for services rendered in
all capacities to the Company during the fiscal years ended December 31, 1997,
1996 and 1995 for the Chief Executive Officer of the Company. No executive
officer of the Company other than the Chief Executive Officer received, directly
or indirectly, annual compensation in 1997, 1996 or 1995 in excess of $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
Awards
Other Securities/
Annual Restricted Underlying Payouts
Name and Principal Salary Bonus Compen- Stock Options/ LTIP All Other
Position Year $ $(1) sation (2) Awards($) SARs(#) Payout($) Compensation (3)
- ------------------ ------- ------- -------- ------------- --------- ------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Matthew J. Gould 1997 $140,000 0 - - - - $9,600
President and 1996 $132,000 0 - - - - $10,578
Chief Executive 1995 $125,000 $25,000 - - - - $8,789
Officer (3)
</TABLE>
- ----------
(1) The $25,000 bonus reflected for 1995 was awarded by the Compensation
Committee subsequent to completion of the 1995 financial statements and although
attributable to 1995 the $25,000 was not paid or accrued until 1996.
(2) The only type of Other Annual Compensation for the Chief Executive
Officer was reimbursement to REIT Management Corp., an affiliated entity, for an
allocated portion of pension expense paid for the Chief Executive Officer (see
footnote 3 below).
(3) Represents the amount reimbursed by the Company to an affiliated entity
for an allocated portion of the pension expense paid for the Chief Executive
Officer.
<PAGE>
Stock Option Plan
The Company's directors adopted a stock option plan on October 16,
1989 covering 110,000 shares ("1989 Plan") and a stock option plan on December
6, 1996 covering 125,000 shares ("1996 Plan"). Both plans were approved by
stockholders. Options are granted at per share exercise prices at least equal to
the fair market value on the date of grant. Neither the 1989 Plan or the 1996
Plan provides for stock appreciation rights.
Options Granted in 1997
The following table sets forth information concerning the grant of stock
options in 1997 to the Company's Chairman of the Board and President and Chief
Executive Officer.
<TABLE>
<CAPTION>
Individual Grants(1)
Potential Realizable
% of Total Value at Assumed
Options Annual Rates of Stock
Granted Exercise or Price Appreciation For
Options to Employees Base Price Option Term (2)
Name Granted in Fiscal Year ($/sh) Expiration Date 5% 10%
- ---- ------- -------------- ---------- --------------- --- ----
<S> <C> <C> <C> <C> <C> <C>
Fredric H. Gould 4,500 11% $13.50 3/20/02 $3,037 $6,075
Matthew J. Gould 6,000 15% $13.50 3/20/02 $4,050 $8,100
</TABLE>
(1) Options were granted on March 21, 1997.
(2) These amounts, based on assumed appreciation rates of 5% and 10% prescribed
by the Securities and Exchange Commission rules, are not intended to forecast
possible appreciation of the Company's stock price. These numbers do not take
into account certain provisions of options providing for termination of the
option following termination of employment, non-transferability or phased-in
vesting. The Company did not use an alternate formula for a grant date valuation
as it is not aware of any formula which will determine with reasonable accuracy
a present value based on future unknown or volatile factors. Future compensation
resulting from option grants is based solely on the performance of the Company
stock price.
<PAGE>
The following table sets forth information with respect to the
exercise of stock options by the Company's Chairman of the Board and President
and Chief Executive Officer in 1997 and the number and value of unexercised
options held by each of them at December 31, 1997.
<TABLE>
<CAPTION>
Stock Options Exercised and Fiscal Year End Option Values in 1997
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End at Fiscal Year End (2)
Shares -----------------------------------------------------
Acquired Value
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Fredric H. Gould 9,000 $37,688 1,125 3,375 $5,766 $17,297
Matthew J. Gould - - 1,500 4,500 $7,688 $23,063
</TABLE>
- ----------
(1) Value realized is the aggregate market value, on the date of exercise,
of the shares acquired, less the aggregate exercise price paid for such shares.
(2) Value of unexercised options is the aggregate market value of the
underlying shares (based on the closing price on December 31, 1997, which was
$14-1/4 per share) less the aggregate exercise price for such shares.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following relationships should be noted: Fredric H. Gould,
Chairman of the Board of the Company, is Chairman of the Board of BRT Realty
Trust, ("BRT"), a General Partner of Gould Investors L.P. ("Gould")and Chairman
of the Board and sole shareholder of Georgetown Partners, Inc.,("Georgetown"),
managing general partner of Gould. Matthew Gould, President and Chief Executive
Officer of the Company, is a Vice President of BRT and President of the Managing
General Partner of Gould and Jeffrey Gould, a Vice President of the Company, is
President of BRT and Vice President of the corporate managing general partner of
Gould. In addition, David W. Kalish, Simeon Brinberg, Nathan Kupin and Mark
Lundy, executive officers of the Company, are executive officers of BRT and
executive officers of the corporate managing general partner of Gould. Nathan
Kupin also serves as a Trustee of BRT. Marshall Rose is a director of the
Company and a trustee of BRT and served as a general partner of Gould until
November 30, 1997. Arthur Hurand is a director of the Company and a trustee of
BRT Realty Trust.
The Company and related entities, including Gould, occupy common
office space and use certain personnel in common. In 1997, $179,260 of common
general and administrative expenses, including rent, telecommunication services,
computer services, bookkeeping, secretarial and other clerical services and
legal and accounting services, were allocated to the Company. This amount
includes $43,523, $47,520 and $11,595, allocated to the Company for legal
services and accounting services (a portion of which was capitalized) performed
by Simeon Brinberg and Mark H. Lundy and David W. Kalish, respectively. The
allocation of common general and administrative expenses is computed on a
quarterly basis and is based on the time devoted by executive, administrative
and clerical personnel to the affairs of each participating entity.
In January 1992, the Company made a first mortgage loan to Gould in
the amount of $1,200,000. The loan, which matured in January, 1995 was extended
to January 31, 1997 at an interest rate of 11% and required minimum amortization
of $5,000 per month. This mortgage receivable was secured by the commercial
space and four cooperative apartments located on East 86th Street, in Manhattan,
N.Y. The loan was repaid in full in March, 1996. On the date this transaction
was entered into by the Company with Gould and when it was extended it was
management's judgment that the loan was well secured and provided a yield at
least as favorable as could have been obtained from an unrelated third party The
President of the Company, who is also an officer of the managing general partner
of Gould, presented this opportunity to the Board, which unanimously approved
the transaction.
On February 26, 1993 the Company purchased from an unrelated entity
28.9% of a 16.67% portion of an indebtedness due to various institutions by BRT.
The Company paid $3,215,142 for a $4,626,720 share of the principal amount of
such indebtedness. The Company paid the same price (i.e., received the same
discount) for its portion of the indebtedness as the unrelated entity paid. The
debt was bought by the unrelated entity from the Federal Deposit Insurance
Corporation ("FDIC") in a competitive public auction. The principal earned
interest at prime plus one percent and required minimum principal payments
through its maturity date of June 30, 1997. This indebtedness was paid in full
in August 1996. This opportunity was brought to the attention of the Company by
the officers of BRT because of the beneficial yield to maturity on this
investment. The purchase of this indebtedness was unanimously approved by the
directors of the Company.
On July 30, 1993, as a result of a public auction, the FDIC sold to
an entity related to the Company, for a consideration of $19,000,300 a
$23,000,000 first mortgage, providing for an interest rate of 8% per annum,
secured by an office building located in Manhattan, New York. The office
building which secures this mortgage is owned by a partnership in which Gould is
the general partner and in which Gould owns substantially all of the partnership
interests. Simultaneously with the purchase, $13,181,000 was advanced by an
unrelated party, $6,080,000 (which includes closing costs) was advanced by the
Company, and the mortgage was severed into a first mortgage of $13,181,000
paying interest at 9 1/2% per annum held by the unrelated party and a
subordinate wrap mortgage of $9,819,000 held by the Company. Both the first
mortgage and the wrap mortgage mature in 2005 at which time the first mortgage
will be fully amortized and the wrap mortgage will have a principal balance of
approximately $4,000,000. The Company receives monthly principal and interest
payments of $79,318 and at December 31, 1997 its principal balance had been
reduced to approximately $7,974,000. The largest aggregate amount outstanding on
this indebtedness during 1997 was $8,387,000. Interest income, including
amortization of the discount of $334,200, amounted to $832,579 for the year
ended 1997. The opportunity to bid for this mortgage was brought to the
Company's attention by Fredric H. Gould, an executive officer of the Company and
a general partner and executive officer of the managing general partner of
Gould. The Company determined the amount of its bid after exploring its ability
to obtain financing and then examining the yield to maturity (approximately
14.5% per annum) and the risk. This transaction was unanimously approved by the
directors of the Company. The building which secures the first mortgage and the
wrap mortgage is leased to the City of New York. The lease expires in 2005 with
an option to renew for an additional five years and provides the City with a
limited right of termination. The first mortgage and the wrap mortgage are
nonrecourse to the owner of the building.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership of
Common Stock and Preferred Stock of the Company by each of the Company's
executive officers, directors and executive officers and directors as a group,
and by all persons known by the Company to be the beneficial owner of more than
five percent of the Company's outstanding voting power as of December 31, 1997.
To the Company's knowledge, each person identified in the table has sole voting
and investment power with respect to all shares shown as beneficially owned by
such person, except as otherwise set forth in the notes to the table. Unless
otherwise indicated, the address of each person listed below is 60 Cutter Mill
Road, Great Neck, NY 11021.
NUMBER OF SHARES
OF COMMON STOCK/ PERCENT OF PERCENT OF
NAME PREFERRED STOCK CLASS VOTING POWER
Gould Investors L.P. (1) 392,981/0 24.8/0 19.8
Fredric H. Gould (1) (2) 632,326/7,500 39.9/* 31.9
Matthew Gould (1) (3)(6) 443,901/6,900 28.0/* 22.5
Jeffrey Gould (4) (6) 47,498/3,000 2.9/* 2.6
Marshall Rose (5) 119,751/0 7.6/0* 6.0
Joseph Amato 219/0
Charles Biederman 5,000/0 * *
Arthur Hurand 32,748/0 * *
Karen Dunleavy (6) 850/100 * *
Simeon Brinberg (6) 9,890/500 * *
David W. Kalish (6) 8,300/200 * *
Seth Kobay (6) 750 * *
Mark Lundy (6) 8,500 * *
All Executive Officers and
Directors as a group (13 in
number) 916,752/18,100(6) 57.8/2.2% 46.5
* Less than 5%
(1) Fredric H. Gould is general partner of Gould Investors L.P. and he and
Matthew Gould are executive officers of the corporate managing general partner
of Gould Investors L.P.
(2) Includes 141,307 shares of Common Stock owned directly, 392,981 shares of
Common Stock owned by Gould Investors L.P. and 106,557 owned by entities and
trusts over which Mr. Gould has shared voting and dispositive power. Does not
include 30,862 shares of Common Stock and 2,800 shares of Preferred Stock owned
by Mr. Gould's spouse, as to which shares Mr. Gould disclaims any beneficial
interest.
(3) Includes 54,419 shares of Common Stock owned directly, 3,520 shares of
Common Stock owned as custodian for minor children (as to which shares Mr. Gould
disclaims any beneficial interest), 392,981 shares of Common Stock owned by
Gould Investors L.P. and options to purchase 1,500 shares (which are currently
exercisable or are exercisable within 60 days). With respect to the Preferred
Stock, 1,200 shares are owned as custodian for minor children (as to which
shares Mr. Gould disclaims any beneficial interest). Does not include 1,578
shares of Common Stock and 500 shares of Preferred Stock owned by Mr. Gould's
spouse, as to which shares Mr. Gould disclaims any beneficial interest.
(4) Includes 976 shares of Common Stock owned as custodian for minor children
(as to which shares Mr. Gould disclaims any beneficial interest) and options to
purchase 1,500 shares (which are currently exercisable or are exercisable within
60 days). Does not include 976 shares owned by Mr. Gould's spouse, as to which
shares Mr. Gould disclaims any beneficial interest.
(5) Includes 8,630 shares of Common Stock owned directly, 1,668 shares owned by
trusts over which Mr. Rose has sole voting and dispositive power (as to which
shares Mr. Rose disclaims any beneficial interest) and 109,454 shares of Common
Stock owned by entities over which Mr. Rose has sole voting and dispositive
power.
(6) Includes all currently exercisable options or options which are exercisable
within 60 days.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary of the terms of the capital stock of the Company does
not purport to be complete and is subject to and qualified in its entirety by
reference to Maryland law and to the Company's charter and bylaws.
General
The charter of the Company provides that the Company may issue up to
27,300,000 shares of capital stock, consisting of 25,000,000 shares of common
stock, par value $1.00 per share (the "Common Stock"), and 2,300,000 shares of
preferred stock, par value $1.00 per share. As of January 3, 1998, 1,574,894
shares of Common Stock and 808,776 shares of Redeemable Convertible Preferred
Stock ("Preferred Stock") were issued and outstanding. Under Maryland law,
stockholders generally are not liable for the corporation's debts or obligations
solely as a result of their status as stockholders.
Common Stock
Subject to the preferential rights of any other shares or series of
capital stock, holders of shares of Common Stock are entitled to receive
distributions on such shares if, as and when authorized and declared by the
Board of Directors of the Company out of assets legally available and to share
ratably in the assets of the Company legally available for distribution to its
stockholders in the event of its liquidation, dissolution or winding-up after
payment of, or adequate provision for, all known debts and liabilities of the
Company. Holders of shares of Redeemable Convertible Preferred Stock are
entitled to receive, when and as declared by the Board of Directors cumulative
cash distributions at the annual rate of $1.60 per share in preference to
dividends on the Common Stock.
Each outstanding share of Common Stock entitles the holder to one
vote and each outstanding share of Redeemable Convertible Preferred Stock to
one-half vote on all matters submitted to a vote of stockholders, including the
election of directors. There is no cumulative voting in the election of
directors, which means that the holders of a majority of the outstanding shares
of Common Stock and Preferred Stock, voting as one class, can elect all of the
directors then standing for election and the holders of the remaining shares of
Common Stock and Preferred Stock will not be able to elect any directors.
Holders of shares of Common Stock have no preference, conversion,
sinking fund, redemption, exchange or preemptive rights to subscribe for any
securities of the Company.
Pursuant to the Maryland General Corporation Law, (MGCL) a
corporation generally cannot (except under and in compliance with specifically
enumerated provisions of the MGCL) dissolve, amend its charter, merge, sell all
or substantially all of its assets, engage in a share exchange or engage in
similar transactions outside the ordinary course of business unless approved by
the affirmative vote of stockholders holding at least two-thirds of the shares
entitled to vote on the matter unless a lesser percentage (but not less than a
majority of all of the votes entitled to be cast on the matter) is set forth in
the corporation's charter. The Company's charter provides for approval of any
such action by a majority of the votes entitled to be cast in the matter, except
in the case of amendment of the charter provisions relating to removal of
directors, classification of the Board of Directors, voting rights of the Common
Stock or voting requirements for charter amendments. In addition, a number of
other provisions of the MGCL could have a significant effect on the shares of
Common Stock and the rights and obligations of holders thereof. See "Certain
Provisions of Maryland Law and the Company's Charter and Bylaws--Control Share
Acquisitions."
Preferred Stock
Dividend Rights
The holders of the Preferred Stock are entitled to receive, when and
as declared by the Company's Board of Directors, cumulative cash dividends at
the annual rate of $1.60 per share, payable quarterly on January 1, April 1,
July 1 and October 1. Dividends are cumulative and have a preference over
dividends on Common Stock and any other junior stock of the Company that may be
outstanding from time to time.
Voting Rights
The holders of Preferred Stock are entitled to one-half vote per
share on any matters to be voted upon by the Company's stockholders, including
the election of directors. The holders of the Preferred Stock and Common Stock
vote as one class. In addition, the holders of the Preferred Stock will have the
right to elect two directors as a class in the event of a default in the payment
of dividends in an amount equivalent to eight consecutive quarter-annual
payments. Without the approval of the holders of at least two-thirds of the
outstanding shares of Preferred Stock, additional shares of Preferred Stock
cannot be issued and the Charter can not be amended to change the rights of the
Preferred Stock or to create any class of stock having a preference as to
dividends or assets over the Preferred Stock. Without approval of the holders of
at least a majority of the outstanding shares of Preferred Stock, the Company
cannot create any additional preferred stock with preferences equal to the
Preferred Stock.
Liquidation Rights
Holders of Preferred Stock have a preference of $16.50 per share
plus accrued and unpaid dividends in case of either the voluntary or involuntary
liquidation or dissolution of the Company. No distribution ahead of the
Preferred Stock will be permitted on the Common Stock or any other junior stock
of the Company.
<PAGE>
Redemption
Provided that there is no arrearage in the payment of dividends on
the Preferred Stock, the Preferred Stock will be redeemable upon notice, at the
option of the Company, at the following prices per share (plus, in each case,
accrued and unpaid dividends to the date fixed for redemption): (i) $16.70 per
share, if redeemed between July 1, 1997 and June 30, 1998; and (ii) $16.50 per
share, if redeemed after July 1, 1998. No sinking fund is required.
"Put" Option
Holders of Preferred Stock would have a right to require the Company to
purchase their shares of Preferred Stock at $16.50 per share, plus accrued and
unpaid dividends to the date of such purchase, during a 90 day period commending
July 1, 1999.
Conversion Rights
Each share of Preferred Stock is convertible at any time, at the
option of the holder thereof, into 0.825 of a share of Common Stock upon
surrender of a share of Preferred Stock. The conversion right is subject to
adjustment in certain events, including subdivisions or combinations of Common
Stock, declaration of stock dividends, issuance of rights to subscribe for stock
or other securities, change of shares of Common Stock into shares of any other
class or classes of stock, mergers and consolidations. Upon conversion, no
adjustment will be made for cumulative dividends except that any unpaid
dividends will constitute a debt of the Company to the converting stockholder.
No fractional shares will be issued upon conversion, but in lieu thereof the
Company will pay the then market value of any such fraction in cash.
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of material federal income tax considerations
regarding the Company and the Common Stock being registered by the Company is
based on current law. The information set forth below, to the extent that it
constitutes matters of law, or legal conclusions, is the opinion of Herrick,
Feinstein LLP, tax counsel to the Company, as to the material federal income tax
considerations relevant to holders of the Common Stock. This discussion does not
purport to deal with all aspects of taxation that may be relevant to particular
stockholders in light of their personal investment or tax circumstances, or to
certain types of stockholders (including insurance companies, financial
institutions or broker-dealers, tax-exempt organizations, foreign corporations
and persons who are not citizens or residents of the United States, subject to
special treatment under the federal income tax laws. The information in this
section is based on the Code, current, temporary and proposed Treasury
Regulations thereunder, the legislative history of the Code, current
administrative interpretations and practices of the IRS (including its practices
and policies as endorsed in private letter rulings, which are not binding on the
IRS except with respect to a taxpayer that receives such a ruling), and court
decisions, all as of the date hereof. The Taxpayer Relief Act of 1997 (the "1997
Act") was enacted on August 5, 1997. The 1997 Act contains provisions which
generally make it easier to operate and to continue to qualify as a REIT for
taxable years beginning after the date of enactment (which, for the Company,
would be applicable commencing with its taxable year beginning January 1, 1998).
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OR HER OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE,
OWNERSHIP AND SALE OF THE SHARES OF COMMON STOCK, INCLUDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE
AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
Taxation of the Company
General. The Company has elected to be taxed as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"),
since inception. The Company believes that it has been organized and has
operated in such a manner as to qualify for taxation as a REIT under the Code,
and the Company intends to continue to operate in such a manner.
These sections of the Code are technical and complex. The following
sets forth the material aspects of the sections that govern the federal income
tax treatment of a REIT and its stockholders. This summary is qualified in its
entirety by the applicable Code provisions, rules and regulations promulgated
thereunder, and administrative and judicial interpretations thereof.
<PAGE>
In the opinion of Herrick, Feinstein, LLP, the Company has been
organized in conformity with the requirements for qualification as a REIT, and
its method of operation has enabled and will enable it to meet the requirements
for continued qualification and taxation as a REIT under the Code. It must be
emphasized that this opinion is based on various factual assumptions relating to
the organization and operation of the Company, and is conditioned upon certain
representations made by the Company as to factual matters. In addition, this
opinion is based upon the factual representations of the Company concerning its
business and properties as set forth in this Prospectus and assumes that the
actions described in this Prospectus have been completed as described. Moreover,
such qualification and taxation as a REIT depends upon the Company's ability to
meet, through actual annual operating results, distribution levels and diversity
of stock ownership, the various qualification tests imposed under the Code
discussed below, the results of which have not been and will not be reviewed by
Brinberg and Lundy. Accordingly, no assurance can be given that the actual
results of the Company's operation for any particular taxable year will satisfy
such requirements. Further, the anticipated income tax treatment described in
this Prospectus may be changed, perhaps retroactively, by legislative or
administrative action at any time. See "Failure to Qualify."
If the Company qualifies for taxation as a REIT, it generally will
not be subject to federal corporate income taxes on its net income that is
currently distributed to stockholders. This treatment substantially eliminates
the "double taxation" (at the corporate and stockholder levels) that generally
results from investment in a corporation. However, the Company will be subject
to federal income tax as follows: first, the Company will be taxed at regular
corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains. Second, under certain circumstances, the
Company may be subject to the "alternative minimum tax" on its terms of tax
preference. Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" which is held primarily for sale to
customers in the ordinary cause of business or (ii) other nonqualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if the Company has net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of business
other than foreclosure property), such income will be subject to a 100% tax.
Fifth, if the Company should fail to satisfy the 75% gross income test or the
95% gross income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (a) the gross income
attributable to the greater of the amount by which the Company fails the 75% or
95% test multiplied by (b) a fraction intended to reflect the Company's
profitability. Sixth, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain net income for such year, and (iii) any
undistributed taxable income from prior periods, the Company would be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed.
Requirements for Qualification. The Code defines a REIT as a
corporation, trust or association (1) which is managed by one or more trustees
or directors; (2) the beneficial ownership of which is evidenced by transferable
shares, or by transferable certificates of beneficial interest; (3) which would
be taxable as a domestic corporation, but for Sections 856 through 859 of the
Code; (4) which is neither a financial institution nor an insurance company
subject to certain provisions of the Code; (5) the beneficial ownership of which
is held by 100 or more persons; (6) during the last half of each taxable year
not more than 50% in value of the outstanding stock of which is owned, directly
or constructively, by five or fewer individuals (as defined in the Code to
include certain entities); and (7) which meets certain other tests, described
below, regarding the nature of its income and assets. The Code provides that
conditions (1) to (4), inclusive, must be met during the entire taxable year and
that condition (5) must be met during at least 335 days of a taxable year of
twelve months, or during a proportionate part of a taxable year of less than
twelve months. For purposes of conditions (5) and (6), pension funds and certain
other tax-exempt entities are treated as individuals, subject to a
"look-through" exception in the case of condition (6).
The Company has satisfied condition (5) and believes that it has
issued sufficient shares to allow it to satisfy condition (6). In addition, the
Company's charter provides for restrictions regarding ownership and transfer of
shares, which restrictions are intended to assist the Company in continuing to
satisfy the share ownership requirements described in (5) and (6) above. Such
ownership and transfer restrictions are described in "Description of Capital
Stock-Restrictions on Ownership, Transfer and Conversion." These restrictions
may not ensure that the Company will, in all cases, be able to satisfy the share
ownership requirements described above, primarily (though not exclusively) as a
result of fluctuations in value among the different classes of the Company's
capital stock. If the Company fails to satisfy such share ownership
requirements, the Company's status as a REIT will terminate. See "Failure to
Qualify".
In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. The Company has and will continue to have a
calendar taxable year.
Ownership of Subsidiaries. The Company owns certain of its Properties
through subsidiaries. Code Section 856(i) provides that a corporation which is a
"qualified REIT subsidiary" (defined as any corporation if 100 percent of the
stock of such corporation is held by the REIT at all times during the period
such corporation was in existence) shall not be treated as a separate
corporation, and all assets, liabilities, and items of income, deduction, and
credit of a "qualified REIT subsidiary" shall be treated as assets, liabilities
and such items of income, etc. (as the case may be) of the REIT. Each of the
Company's subsidiaries qualify as "qualified REIT subsidiaries" within the
meaning of the Code. Thus, in applying the requirements described herein, the
Company's subsidiaries are ignored, and all assets, liabilities and items of
income, deduction and credit of such subsidiaries are treated as assets,
liabilities and items of income, deduction, and credit of the Company.
Income Tests. In order to maintain qualification as a REIT, the
Company annually must satisfy three gross income requirements. First, at least
75% of the Company's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property" and, in certain circumstances, interest) or from
certain types of temporary investments. Second, at least 95% of the Company's
gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived from such real property investments, dividends,
interest and gain from the sale or disposition of stock or securities (or from
any combination of the foregoing). Third, for taxable years beginning on or
before August 5, 1997, short-term gain from the sale or other disposition of
stock or securities, gain from prohibited transactions, and gain on the sale or
other disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of the Company's gross income (including gross income from prohibited
transactions) for each taxable year.
Rents received by the Company will qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described above
only if several conditions are met. First, the amount of rent must not be based
in whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents received
from a tenant will not qualify as "rents from real property" in satisfying the
gross income tests if the REIT, or an actual or constructive owner of 10% or
more of the REIT, actually or constructively owns 10% or more of such tenant (a
"Related Party Tenant"). For the Company's taxable year which begins on January
1, 1998 and for all taxable years thereafter, only partners who own 25% or more
of the capital or profits interest in a partnership are included in the
determination of whether a tenant is a "Related Party Tenant." Third, if rent
attributable to personal property, leased in connection with a lease of real
property, is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Finally, for rents received to qualify as "rents
from real property," the REIT generally must not operate or manage the property
or furnish or render services to the tenants of such property, other than
through an independent contractor from whom the REIT derives no revenue. The
REIT may, however, directly perform certain services that are "usually or
customarily rendered" in connection with the rental of space for occupancy only
and are not otherwise considered "rendered to the occupant" of the property. The
Company has not and will not (i) charge rent for any property that is based in
whole or in part on the income or profits of any person (except by reason of
being based on a percentage of receipts or sales, as described above), (ii) rent
any property to a Related Party Tenant (unless the Board of Directors determines
in its discretion that the rent received from such Related Party Tenant is not
material and will not jeopardize the Company's status as a REIT), (iii) derive
rental income attributable to personal property (other than personal property
leased in connection with the lease of real property, the amount of which is
less than 15% of the total rent received under the lease), or (iv) perform
services considered to be rendered to the occupant of the property, other than
through an independent contractor from whom the Company derives no revenue.
For taxable years of the Company beginning after August 5, 1997, if
the Company provides services to a tenant that are other than those usually or
customarily provided in connection with the rental of space for occupancy only,
amounts received or accrued by the Company for any such services will not be
treated as "rents from real property" for purposes of the REIT gross income
tests but will not cause other amounts received with respect to the property to
fail to be treated as "rents from real property" if the amounts received in
respect of such services, together with amounts received for certain management
services, do not exceed 1% of all amounts received or accrued by the Company
during the taxable year with respect to such property. If the 1% threshold is
exceeded, then all amounts received or accrued by the Company with respect to
the property will not qualify as "rents from real property," even if the
impermissible services are provided to some, but not all, of the tenants of the
property.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
These relief provisions will be generally available if the Company's failure to
meet such tests was due to reasonable cause and not due to willful neglect, the
Company attaches a schedule of the sources of its income to its federal income
tax return, and any incorrect information on the schedule was not due to fraud
with intent to evade tax. It is not possible, however, to state whether in all
circumstances the Company would be entitled to the benefit of these relief
provisions. If these relief provisions are inapplicable to a particular set of
circumstances involving the Company, the Company will not qualify as a REIT. As
discussed above in "Taxation of the Company - General," even if these relief
provisions apply, a tax would be imposed with respect to the excess net income.
No similar mitigation provision provides relief if the Company fails the 30%
gross income test. In such case, for taxable years beginning before January 1,
1998, the Company would cease to qualify as a REIT.
<PAGE>
Any gain realized by the Company on the sale of any property held as
inventory or other property held primarily for sale to customers in the ordinary
course of business will be treated as income from a prohibited transaction that
is subject to a 100% penalty tax. Such prohibited transaction income may also
have an adverse effect upon the Company's ability to satisfy the income tests
for qualification as a REIT. Under existing law, whether property is held as
inventory or primarily for sale to customers in the ordinary course of a trade
or business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. The Company holds it
Properties for investment with a view to long-term appreciation, engages in the
business of acquiring, owning, and operating the Properties and makes occasional
sales of Properties consistent with its investment objectives. There can be no
assurance, however, that the IRS might not contend that that one or more of such
sales is subject to the 100% penalty tax.
Asset Tests. The Company, at the close of each quarter of its taxable
year, must also satisfy three tests relating to the nature of its assets. First,
at least 75% of the value of the Company's total assets must be represented by
real estate assets, cash, cash items and government securities. Second, not more
than 25% of the Company's total assets may be represented by securities other
than those in the 75% asset class. Third, of the investments included in the 25%
asset class, the value of any one issuer's securities owned by the Company may
not exceed 5% of the value of the Company's total assets and the Company may not
own more than 10% of any one issuer's outstanding voting securities.
After initially meeting the asset tests at the close of any quarter,
the Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. The Company has maintained and will continue to maintain adequate
records of the value of its assets to ensure compliance with the asset tests and
to take such other actions within the 30 days after the close of any quarter as
may be required to cure any noncompliance. If the Company fails to cure
noncompliance with the asset tests within such time period, the Company would
cease to qualify as a REIT.
Annual Distribution Requirements. The Company, in order to qualify as
a REIT, is required to distribute dividends (other than capital gain dividends)
to its stockholders in an amount at least equal to (A) the sum of (i) 95% of the
Company's "REIT taxable income" (computed without regard to the dividends paid
deduction and the Company's net capital gain) and (ii) 95% of the net income
(after tax), if any, from foreclosure property, minus (B) the sum of certain
items of non cash income. Such distributions must be paid in the taxable year to
which they relate, or in the following taxable year if declared before the
Company timely files its tax return for such year and if paid on or before the
first regular dividend payment after such declaration. To the extent that the
Company does not distribute all of its net capital gain or distributes at least
95%, but less than 100%, of its "REIT taxable income," as adjusted, it will be
subject to tax thereon at regular ordinary and capital gain corporate tax rates.
The Company has made and intends to make timely distributions sufficient to
satisfy these annual distribution requirements.
For the Company's taxable year beginning on January 1, 1998 and for all
taxable years thereafter, undistributed capital gains may be so designated by
the Company and are includable in the income of the holders of Common Shares.
Such holders are treated as having paid the capital gains tax imposed on the
Company on the designated amounts included in their income as long-term capital
gains. Such shareholders would receive an increase in their basis for income
recognized and a decrease in their basis for taxes paid by the Company. See
"Taxation of Taxable U. S. Shareholders."
Under certain circumstances, the Company may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to stockholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year. Thus, the Company
may be able to avoid being taxed on amounts distributed as deficiency dividends;
however, the Company will be required to pay interest based upon the amount of
any deduction taken for deficiency dividends.
Furthermore, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain income for such year, and (iii) any
undistributed taxable income from prior periods, the Company would be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed.
Failure To Qualify
If the Company fails to qualify for taxation as a REIT in any taxable
year, and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which the
Company fails to qualify will not be deductible by the Company nor will they be
required to be made. As a result, the Company's failure to qualify as a REIT
would reduce the cash available for distribution by the Company to its
stockholders. In addition, if the Company fails to qualify as a REIT, all
distributions to stockholders will be taxable as ordinary income, to the extent
of the Company's current and accumulated earnings and profits, and, subject to
certain limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, the Company will also be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether in all circumstances the Company would be
entitled to such statutory relief.
<PAGE>
Taxation of Taxable U.S. Stockholders
As used herein, the term "U.S. Stockholder" means a holder of shares
of Common Stock who (for United States federal income tax purposes) (i) is a
citizen or resident of the United States, (ii) is a corporation, partnership, or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) is an estate or trust the income
of which is subject to United States federal income taxation regardless of its
source.
As long as the Company qualifies as a REIT, distributions made by the
Company out of its current or accumulated earnings and profits (and not
designated as capital gain dividends) will constitute dividends taxable to its
taxable U.S. Stockholders as ordinary income. Such distributions will not be
eligible for the dividends-received deduction in the case of U.S. Stockholders
that are corporations. For purposes of determining whether distributions to
holders of Common Stock are of out of current accumulated earnings and profits,
the earnings and profits of the Company will be allocated first to the Preferred
Stock (to the extent of the preferred distribution on such stock), then to the
Common Stock.
Distributions made by the Company that are properly designated by the
Company as capital gain dividends will be taxable to taxable U.S. Stockholders
as long-term capital gains (to the extent that they do not exceed the Company's
actual net capital gain for the taxable year) without regard to the period for
which a U.S. Stockholder has held his shares of stock. U.S. Stockholders that
are corporations may, however, be required to treat up to 20% of certain capital
gain dividends as ordinary income.
To the extent that the Company makes distributions (not designated as
capital gain dividends) in excess of its current and accumulated earnings and
profits, such distributions will be treated first as a tax-free return of
capital to each U.S. Stockholder, reducing the adjusted basis which such U.S.
Stockholder has in his shares of stock for tax purposes by the amount of such
distribution (but not below zero), with distributions in excess of a U.S.
Stockholder's adjusted basis in his shares taxable as capital gains (provided
that the shares have been held as a capital asset). Dividends declared by the
Company in October, November, or December of any year and payable to a
stockholder of record on a specified date in any such month shall be treated as
both paid by the Company and received by the stockholder on December 31 of such
year, provided that the dividend is actually paid by the Company on or before
January 31 of the following calendar year. Stockholders may not include in their
own income tax returns any net operating losses or capital losses of the
Company.
<PAGE>
For taxable years of the Company beginning after August 5, 1997, U.S.
shareholders holding Shares at the close of the Company's taxable year will be
required to include, in computing their long-term capital gains for the taxable
year in which the last day of the Company's taxable year fails, such amounts as
the Company may designate in a written notice mailed to its shareholders. The
Company may not designate amounts in excess of the Company's undistributed net
capital gain for the taxable year. Each U.S. shareholder required to include
such a designated amount in determining such shareholder's long-term capital
gains will be deemed to have paid, in the taxable year of the inclusion, the tax
paid by the Company in respect of such undistributed net capital gains. U.S.
shareholders subject to these rules will be allowed a credit or a refund, as the
case may be, for the tax deemed to have been paid by such shareholders. U.S.
shareholders will increase their basis in their Shares by the difference between
the amount of such includable gains and the tax deemed paid by the shareholder
in respect of such gains.
<PAGE>
THE OFFER
The Company is issuing offers to holders of record of its Common
Stock and Preferred Stock at the close of business on March 24, 1998(the "Record
Date")non-transferable Rights ("Rights") to subscribe for and purchase shares of
Common Stock at the subscription price set forth on the cover page of this
Prospectus (the "Subscription Price") pursuant to the Basic Subscription
Privilege and Over-Subscription Privilege described below.
Rights to be Issued
Holders of Common Stock and Preferred Stock on the Record Date will
receive one Right with respect to each share held.
Rights Certificates: Rights to subscribe are evidenced by
non-transferable Rights Certificates, each Certificate evidencing the total
number of Rights to which the holder is entitled. Rights Certificates may not be
transferred and Rights may not be divided or combined.
Expiration Date: The Rights expire on 5:00 PM New York City time, on June
15, 1998 (the "Expiration Date"). To subscribe, the Rights Certificates and
payment must be received by the Subscription Agent, at their offices at:
By Overnight or
Express Delivery, By Facsimile Transmission:
By Hand Delivery or
First Class Mail:
American Stock Transfer & American Stock Transfer &
Trust Company Trust Company
Reorganization Department Reorganization Department
40 Wall Street (718)234-5001
New York, NY 10005
(the "Offices"), not later than 5:00 PM New York City time, on the Expiration
Date. Rights Certificate holders who elect to send their Certificates to the
Subscription Agent by mail should allow adequate time for actual receipt prior
to the time specified above. Rights Certificates received by the Subscription
Agent at the Offices after 5:00 PM New York City time, on the Expiration Date,
will not be accepted and will be returned except under the circumstances
described under "Exercise and Payment."
Over-Subscription Privilege
A holder who exercises his Rights may oversubscribe at the
Subscription Price for up to two additional shares of Common Stock for each
share of Common Stock purchased by the holder under the Basic Subscription
Privilege. ("Over-Subscription Privilege"). Common Stock will be available for
purchase pursuant to the Over-Subscription Privilege, if any, to the extent that
the maximum of 2,383,670 shares of Common Stock are not subscribed for through
the exercise of Rights by the Expiration Date. If the shares of Common Stock so
available are not sufficient to satisfy all subscriptions pursuant to the
Over-Subscription Privilege, the available shares of Common Stock will be
allocated pro rata among the holders of Rights who exercise the
Over-Subscription Privilege based upon the proportion that the number of Rights
exercised by each holder of Rights who exercises his Over-Subscription Privilege
bears to the aggregate number of Rights exercised by all holders of Rights who
exercise their Over-Subscription Privilege.
<PAGE>
Exercise and Payment
Rights to subscribe may be exercised by filling in and signing the
subscription form on the Rights Certificate and returning the Rights Certificate
together with payment in full for all shares of Common Stock subscribed for by
mail or otherwise to the Subscription Agent at the Offices. Payment in full of
the Subscription Price ($_____ per Share) must be received at the Office of the
Subscription Agent not later than 5:00 PM New York City time on the Expiration
Date. Except in cases of satisfactory late delivery of Rights Certificates
provided for in the next paragraph, the Rights Certificates being exercised must
accompany such payment. Payment must be made by cashier's check, bank draft or
money order and should be made payable to One Liberty Properties, Inc.
If prior to the Expiration Date the Subscription Agent has received
the full Subscription Price, together with a written telegraphic guarantee (use
telefax number) from a bank, trust company or a member of the New York Stock
Exchange, other national securities exchange, or the National Association of
Securities Dealers, Inc. that the Rights Certificate with respect to the Shares
of Common Stock subscribed for has been properly completed and executed and will
be received by the Subscription Agent prior to 10:00 AM New York City time on
June 22, 1998 together with such other supporting material as the Subscription
Agent may request, such subscription will be accepted subject to receipt of the
duly exercised Rights Certificate.
Rights to oversubscribe pursuant to the Over-Subscription Privilege
together with the aggregate subscription price for all shares subscribed for
pursuant to the Over-Subscription Privilege may be exercised by completing
Section 2 of the Rights Certificate at the time the Rights are exercised.
All questions as to the validity, form, eligibility (including time
of receipt) and acceptance of any subscription (including any subscription
pursuant to the Over-Subscription Privilege) will be determined by the Company,
in its sole discretion, whose determination shall be binding. The Company
reserves the absolute right to reject any subscription (including any
subscription pursuant to the Oversubscription Privilege) if such subscription is
not in proper form or if the acceptance thereof or the issuance of Common Shares
pursuant thereto could, in the opinion of the Company's counsel, be deemed
unlawful. The Company also reserves the right to waive any defect with regard to
any particular subscription. Neither the Company nor the Subscription Agent
shall be under any duty to give notification of any defects of irregularities in
subscriptions, nor shall any of them incur any liability for failure to give
such notification.
<PAGE>
Gould Investors L.P. which owns 24.9% of the outstanding shares of
Common Stock as of the Record Date, has agreed to exercise fully to purchase an
aggregate of 392,981 Shares of Common Stock. It has also advised the Company
that it will exercise its Over-Subscription Privilege to the extent of 376,250
shares.
EXPERTS
The consolidated financial statements of One Liberty Properties,
Inc. as of December 31, 1997 and 1996 and each of the three years in the period
ended December 31, 1997, and the statement of revenues and certain expenses of
300 Gold Street for the year ended December 31, 1997, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Common Stock offered in connection with the
Rights Offering have been passed upon by Brinberg and Lundy, 60 Cutter Mill
Road, Great Neck, NY. Simeon Brinberg and Mark Lundy, partners of Brinberg and
Lundy, are officers and stockholders of the Company.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed and in the Securities Act
and is therefore unenforceable.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement
on Form S-11 (together with any amendments thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of Common Stock offered hereby. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and to the exhibits and
schedules filed therewith. The Registration Statement, including exhibits and
schedules thereto, may be inspected at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of all or any part thereof may be obtained from such office upon
payment of the prescribed fees. Statements contained in this Prospectus or in
any document incorporated in this Prospectus by reference as to the contents of
any contract, agreement or other document referred to herein or therein are not
necessarily complete. With respect to each such contract, agreement or other
document filed with the Commission as an exhibit, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 ("Exchange Act") and in accordance therewith
files reports, proxy statements, and other information with the Securities and
Exchange Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington DC 20549, 7 World Trade Center,
New York, NY 10048, and 500 West Madison Street, Chicago, Illinois 60661-2511.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, DC 20549 at prescribed
rates. Such reports, proxy statements and other information can also be
inspected at the office of the American Stock Exchange, 86 Trinity Place, New
York, NY 10006. The Company is an electronic filer. The Commission contains a
web site that contains reports, proxy statements and other information regarding
the Company at http://www.sec.gov.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
One Liberty Properties, Inc.:
Report Of Independent Auditors
Consolidated Balance Sheets
As Of December 31, 1997 And
1996 (Audited)
Consolidated Statements Of Income
For The Three Years Ended
December 31, 1997 (Audited)
Consolidated Statements Of Stockholders'
Equity For The Three Years Ended
December 31, 1997 (Audited)
Consolidated Statements Of Cash Flows
For The Three Years Ended
December 31, 1997 (Audited)
Notes To Consolidated Financial
Statements, December 31, 1997
ProForma Condensed Consolidated Balance Sheet
as of December 31, 1997 (Unaudited)
ProForma Condensed Consolidated Statement of Income
for the Year Ended December 31, 1997 (Unaudited)
300 Gold Street:
Report of Independent Auditors
Statement of Revenues and Certain Expenses
for the Year Ended December 31, 1997
Notes to Statement of Revenues and Certain Expenses
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
One Liberty Properties, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of One Liberty
Properties, Inc. and Subsidiaries (the "Company") as of December 31, 1997 and
1996, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. Our audits also included the financial statement schedules listed in the
Item 36 of Part II of this Registration Statement (Form S-11). These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of One
Liberty Properties, Inc. and Subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
New York, New York
February 18, 1998
<PAGE>
<TABLE>
<CAPTION>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
December 31,
1997 1996
---- ----
<S> <C> <C>
Real estate investments, at cost (Notes 3, 4, and 6)
Land $ 12,210,147 $ 11,040,590
Buildings 38,641,419 33,695,317
---------- ----------
50,851,566 44,735,907
Less accumulated depreciation 2,534,582 1,846,694
--------- ---------
48,316,984 42,889,213
Mortgages receivable - less unamortized discount -
(substantially all from related parties) (Notes 5 and 6) 5,943,450 6,049,033
Cash and cash equivalents 1,606,364 2,478,580
Unbilled rent receivable 665,052 304,828
Rent, interest, deposits and other receivables 300,584 66,908
Investment in BRT Realty Trust - (related party) (Note 2) 240,384 199,068
Deferred financing costs 510,123 480,640
Other 64,614 54,718
------ ------
$ 57,647,555 $ 52,522,988
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable (Note 6) $ 20,545,247 $ 16,846,921
Note payable - bank (Note 6) 4,605,029 3,900,000
Accrued expenses and other liabilities 394,459 475,109
Dividends payable 791,945 765,603
------- -------
26,336,680 21,987,633
---------- ----------
Commitments and contingencies (Notes 3 and 7) - -
Minority interest in subsidiary (Note 3) - 141,722
- ----------- -------
Redeemable Convertible Preferred Stock,
$1 par value; $1.60 cumulative annual dividend;
2,300,000 shares authorized; 808,776 shares issued;
liquidation and redemption values of $16.50 (Note 7) 13,106,970 12,950,792
------ - ---------- ----------
Stockholders' equity (Notes 6,9,10 and 11):
Common Stock, $1 par value; 25,000,000 shares authorized;
1,561,450 and 1,473,642 shares issued and outstanding 1,561,450 1,473,642
Paid-in capital 14,419,609 13,650,737
Net unrealized gain on available-for-sale securities (Note 2) 146,706 97,673
Accumulated undistributed net income 2,076,140 2,220,789
--------- ---------
18,203,905 17,442,841
---------- ----------
$57,647,555 $52,522,988
=========== ===========
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Year Ended December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income (Note 3) $ 5,341,491 $ 4,178,288 $ 2,665,457
Interest from related parties (Note 5) 832,579 1,132,150 1,878,262
Interest and other income 110,739 201,118 347,243
------- ------- -------
6,284,809 5,511,556 4,890,962
--------- --------- ---------
Expenses:
Depreciation and amortization 1,023,345 712,591 479,645
Interest - mortgages payable 1,517,126 891,953 453,684
Interest - bank 210,305 110,185 -
Leasehold rent 288,833 288,833 284,394
General and administrative (Note 8) 629,420 663,201 576,937
Provision for valuation adjustment of real estate
(Note 4) - 659,000 -
- --------- ------- ---------
3,669,029 3,325,763 1,794,660
--------- --------- ---------
Income before gain on sale of real estate
and minority interest 2,615,780 2,185,793 3,096,302
Gain on sale of real estate including minority
interest share of $215,336 (Note 3) 599,251 - -
------- --------- ---------
Income before minority interest 3,215,031 2,185,793 3,096,302
Minority interest (230,839) (11,841) -
-------- ------- ----------
Net income $ 2,984,192 $ 2,173,952 $3,096,302
=========== =========== ==========
Calculation of net income applicable
to common stockholders:
Net income $ 2,984,192 $ 2,173,952 $ 3,096,302
Less dividends and accretion on preferred stock 1,450,220 1,448,359 1,446,519
--------- --------- ---------
Net income applicable to common stockholders $ 1,533,972 $ 725,593 $ 1,649,783
=========== =========== ===============
Weighted average number of common
shares outstanding:
Basic 1,522,967 1,447,413 1,409,371
========= ========= =========
Diluted 1,529,203 1,459,198 1,423,361
========= ========= =========
Net income per common share (Notes 2 and 11):
Basic $ 1.01 $ .50 $ 1.17
============ ============ ============
Diluted $ 1.00 $ .50 $ 1.16
============ ============ ============
Cash distributions per share:
Common Stock $ 1.20 $ 1.20 $ 1.03
============ ============ ============
Preferred Stock $ 1.60 $ 1.60 $ 1.60
============ ============ ============
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the three years ended December 31, 1997
Net Unrealized
Gain (Loss) on Accumulated
Common Paid-in Available-for- Undistributed
Stock Capital Sale Securities Net Income Total
----- ------- --------------- ---------- -----
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1994 $ 1,399,119 $ 13,233,109 $ (34,913) $ 2,730,523 $17,327,838
Net income - - - 3,096,302 3,096,302
Distributions - Common Stock
($1.03 per share) - - - (1,449,397) (1,449,397)
Distributions - Preferred Stock
($1.60 per share) - - - (1,294,042) (1,294,042)
Accretion on Preferred Stock - (152,477) - - (152,477)
Exercise of options 17,000 138,125 - - 155,125
Net unrealized gain on available-
for-sale securities (Note 2) - - 28,155 - 28,155
--------- --------- ------ --------- ------
Balances, December 31, 1995 1,416,119 13,218,757 (6,758) 3,083,386 17,711,504
Net income - - - 2,173,952 2,173,952
Distributions - Common Stock
($1.20 per share) - - - (1,742,507) (1,742,507)
Distributions - Preferred Stock
($1.60 per share) - - - (1,294,042) (1,294,042)
Accretion on Preferred Stock - (154,317) - - (154,317)
Exercise of options 23,500 190,937 - - 214,437
Shares issued through dividend
reinvestment plan 34,023 395,360 - - 429,383
Net unrealized gain on available-
for-sale securities (Note 2) - - 104,431 - 104,431
--------- --------- ------- ------- --------
Balances, December 31, 1996 1,473,642 13,650,737 97,673 2,220,789 17,442,841
Net income - - - 2,984,192 2,984,192
Distributions - Common Stock
($1.20 per share) - - - (1,834,799) (1,834,799)
Distributions - Preferred Stock
($1.60 per share) - - - (1,294,042) (1,294,042)
Accretion on Preferred Stock - (156,178) - - (156,178)
Exercise of options 29,000 235,625 - - 264,625
Shares issued through dividend
reinvestment plan 58,808 689,425 - - 748,233
Net unrealized gain on available-
for-sale securities (Note 2) - - 49,033 - 49,033
---------- ---------- ------ --------- ------
Balances, December 31, 1997 $ 1,561,450 $14,419,609 $ 146,706 $ 2,076,140 $18,203,905
=========== =========== ========== ============ ===========
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Year Ended December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,984,192 $ 2,173,952 $ 3,096,302
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of real estate (599,251) - -
(Increase) decrease in rental income from
straightlining of rent (360,224) (218,061) 86,780
Provision for valuation adjustment - 659,000 -
Depreciation and amortization 1,023,345 712,591 479,645
Minority interest in earnings of subsidiary 230,839 11,841 -
Changes in assets and liabilities:
Decrease (increase) in rent, interest, deposits and
other receivables (221,508) 611,739 (328,461)
Increase (decrease) in accrued expenses
and other liabilities (80,650) 281,342 (5,123)
------- ------- ------
Net cash provided by operating activities 2,976,743 4,232,404 3,329,143
--------- --------- ---------
Cash flows from investing activities:
Additions to real estate (10,058,389) (19,940,571) (3,819,323)
Net proceeds from sale of real estate 4,347,429 - -
Costs of acquisition of real estate and mortgage receivable
from Gould Investors L.P. - related party - - (90,514)
Collection of mortgages receivable - (including $79,032,
$961,789 and $148,291 from related parties in 1997,
1996 and 1995) 105,583 987,108 169,388
Collection of senior secured note receivable - BRT Realty
Trust - related party - 528,575 1,579,618
Sale of U.S. Government obligations and
securities, net - 1,310,553 2,806,713
Investment by minority interest in subsidiary - 167,980 -
Payments to minority interest by subsidiary (396,333) (38,099) -
Other 42,249 (2,248) (14,986)
------ ------ -------
Net cash (used in) provided by investing activities (5,959,461) (16,986,702) 630,896
---------- ----------- -------
Cash flows from financing activities:
Proceeds from bank borrowings, net of repayments 705,029 3,900,000 -
Proceeds from mortgages payable 5,925,000 10,375,000 2,413,350
Payment of financing costs (203,212) (392,826) (85,225)
Repayment of mortgages payable (2,226,674) (118,233) (2,806,843)
Exercise of stock options 264,625 214,437 155,125
Cash distributions - Common Stock (1,808,457) (1,725,250) (1,199,451)
Cash distributions - Preferred Stock (1,294,042) (1,294,042) (1,294,042)
Issuance of shares through dividend reinvestment plan 748,233 429,383 -
------- ------- -----------
Net cash provided by (used in) financing activities 2,110,502 11,388,469 (2,817,086)
--------- ---------- ----------
Net (decrease) increase in cash and cash equivalents (872,216) (1,365,829) 1,142,953
Cash and cash equivalents at beginning of year 2,478,580 3,844,409 2,701,456
--------- --------- ---------
Cash and cash equivalents at end of year $ 1,606,364 $ 2,478,580 $ 3,844,409
=========== ============ ============
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Continued
Year Ended December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for interest expense $1,727,603 $ 914,506 $ 467,116
Cash paid during the year for income taxes 17,058 58,437 43,784
Supplemental schedule of noncash investing and
financing activities:
Acquisition of real estate and mortgage receivable
from Gould Investors L.P., a related party - - (9,861,729)
Consideration for acquisition from Gould
Investors L.P.:
Extinguishment of mortgage receivable - - 6,850,000
Transfer of BRT preferred stock - - 2,455,355
Transfer of BRT common stock - - 556,374
See accompanying notes.
</TABLE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1997
NOTE 1 - ORGANIZATION AND BACKGROUND
One Liberty Properties, Inc. (the "Company") was incorporated in
1982 in the state of Maryland. The Company is a self-managed Real
Estate Investment Trust ("REIT") which currently participates in
net leasing transactions and has engaged in other real property
transactions and invested in real property mortgages.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of One
Liberty Properties, Inc., its wholly-owned subsidiaries and a
majority-owned limited liability company (see Note 3). Material
intercompany items and transactions have been eliminated. One
Liberty Properties, Inc., its subsidiaries and the limited
liability company are hereinafter referred to as the Company.
Reclassification of Financial Statements
Certain amounts reported in previous consolidated financial
statements have been reclassified in the accompanying consolidated
financial statements to conform to the current year's
presentation.
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results
could differ from those estimates.
Income Recognition
Rental income includes the base rent that each tenant is required
to pay in accordance with the terms of their respective leases
reported on a straight-line basis over the initial term of the
lease. Mortgage receivable discount is amortized over the
remaining life, utilizing the interest method, based on the
Company's evaluation of the collectibility of the carrying amount
of the mortgage.
Depreciation
Depreciation of buildings is computed on the straight-line method over an
estimated useful life of 40 years for commercial properties and 27 and one half
years for residential properties.
Deferred Financing Costs
Mortgage and credit line costs are deferred and amortized on a
straight-line basis over the terms of the respective debt obligations.
<PAGE>
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Federal Income Taxes
The Company has qualified as a real estate investment trust under
the applicable provisions of the Internal Revenue Code. Under
these provisions, the Company will not be subject to federal
income taxes on amounts distributed to stockholders providing it
distributes substantially all of its taxable income and meets
certain other conditions.
Distributions made during 1997 included approximately 3% attributable to
capital gains, with the balance to ordinary income. All distributions made
during 1996 were attributable to ordinary income.
Investments in Debt and Equity Securities
In accordance with Statement of Financial Accounting Standards
#115, Accounting for Certain Investments in Debt and Equity
Securities, the Company accounts for its investment in common
shares of BRT Realty Trust ("BRT"), a related party of the
Company, at fair value as "available-for-sale" securities.
The Company's investment in 30,048 common shares of BRT
(accounting for less than 1% of the total voting power of BRT),
purchased at a cost of $97,656 has a fair market value at December
31, 1997 of $240,384 resulting in an unrealized holding gain of
$142,728. In addition, the Company has invested $33,194 in equity
securities which have a fair market value of $37,172 at December
31, 1997. The aggregate net unrealized holding gain of $146,706 is
excluded from earnings and reported as a separate component of
stockholders' equity.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments:
Mortgages receivable: Two mortgage loans of the Company with
outstanding balances aggregating $290,038 are currently fixed at
interest rates which approximate market. Accordingly, these
balances approximate their fair values. The remaining mortgage
loan was purchased by the Company at a discount, which is being
amortized by the Company over the life of the mortgage. The
Company expects to receive a yield to maturity of approximately
14.5%. The Company estimates the fair value of the loan to
approximate its face amount of $7,974,030 at December 31, 1997.
The loan is being carried on the balance sheet at $5,653,412, the
difference representing the remaining unamortized discount of
$2,320,618.
Cash and short term investments: The carrying amounts reported in
the balance sheet for these instruments approximate their fair values.
Investment in BRT Realty Trust: Since this investment is
considered "available-for-sale", it is reported in the balance sheet based upon
quoted market price.
Note and mortgages payable: The Company determined the estimated
fair value of its debt by discounting future cash payments at
their effective rates of interest, which approximate current
market rates of interest for similar loans. Accordingly, there is
no material difference between their carrying amount and fair
value.
<PAGE>
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Redeemable convertible preferred stock: Based on the December 31, 1997
quoted market price per share of $16.875, the fair value of the Company's
redeemable convertible preferred stock is $13,648,095.
Accretion on Preferred Stock
The Company has Preferred Stock outstanding which is both
redeemable and convertible. The stock was initially recorded in
the financial statements at its fair value based upon the initial
average trades on the American Stock Exchange. The amount by which
the redemption value exceeds the carrying value is being accreted
using the interest method over the life of the redemption period.
Earnings Per Common Share
In 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share. Statement 128 replaced the
calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods
have been presented, and where appropriate, restated to conform to
the Statement 128 requirements.
For the years ended December 31, 1997, 1996 and 1995, basic
earnings per share was determined by dividing net income
applicable to common stockholders for the year by the weighted
average number of shares of Common Stock outstanding during each
year.
Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue Common Stock
were exercised or converted into Common Stock or resulted in the
issuance of Common Stock that then shared in the earnings of the
Company. For the years ended December 31, 1997, 1996 and 1995
diluted earnings per share was determined by dividing net income
applicable to common stockholders for the year by the total of the
weighted average number of shares of Common Stock outstanding plus
the dilutive effect of the Company's outstanding options (6,236,
11,785 and 13,990 for the years ended 1997, 1996 and 1995,
respectively) using the treasury stock method. The Preferred Stock
was not considered for the purpose of computing diluted earnings
per share because their assumed conversion is antidilutive. See
Note 11 for information regarding a Registration Statement filed
February 1998 by the Company with the Securities and Exchange
Commission with respect to a rights offering to be made to its
shareholders.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with
maturities of three months or less when purchased.
<PAGE>
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Valuation Allowance on Real Estate Owned
During the year ended December 31, 1996, the Company adopted
Statement of Financial Accounting Standards Board No. 121 ("FASB
121"), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which requires the Company to
make a review of each real estate asset held for use for which
indicators of impairment are present, to determine whether the
carrying amount of the asset will be recovered. Recognition of
impairment is required if the undiscounted cash flows estimated to
be generated by those assets are less than the assets' carrying
amount. Measurement is based upon the fair market value of the
asset. FASB 121 also requires that long-lived assets that are
expected to be disposed of be reported at the lower of carrying
amount or fair value less costs to sell.
Segment Reporting
In June, 1997 the Financial Accounting Standards Board issued
Statement No. 131, Disclosure About Segments of an Enterprise and
Related Information, which is effective for financial statements
issued for periods beginning after December 15, 1997. Statement
No. 131 requires disclosures about segments of an enterprise and
related information regarding the different types of business
activities in which an enterprise engages and the different
economic environments in which it operates. The Company does not
believe that the implementation of Statement No. 131 will have a
material impact on its financial statements.
NOTE 3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS
The rental properties owned at December 31, 1997 are leased under
noncancellable operating leases to corporate tenants with current
expirations ranging from 1999 to 2051, with certain tenant renewal
rights. All lease agreements are net lease arrangements which
require the tenant to pay not only rent but all the expenses of
the leased property including maintenance, taxes, utilities and
insurance. Certain lease agreements provide for periodic rental
increases and others provide for increases based on the consumer
price index.
The minimum future rentals to be received over the next five years
on the operating leases in effect at December 31, 1997 are as follows:
Year Ending
December 31,
1998$ 5,600,644
1999 5,675,774
2000 5,659,776
2001 5,694,085
2002 5,595,962
<PAGE>
NOTE 3 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (Continued)
Included in the minimum future rentals are rentals from a property owned in
fee by an unrelated third party. The Company pays annual fixed leasehold rent of
$288,833 through April 2010 and has a right to extend the lease for up to three
15 year and one 14 year renewal options.
At December 31, 1997, the Company has recorded an unbilled rent receivable
aggregating $665,052, representing rent reported on a straight-line basis in
excess of rental payments required under the initial term of the respective
leases. This amount is to be billed and received pursuant to the lease terms
over the next twenty years. The minimum future rentals presented above include
amounts applicable to the repayment of these unbilled rent receivables.
For the year ended December 31, 1997, the following assets generated
revenues for the Company in amounts exceeding 10% of the Company's total
revenues:
For the Year Ended December 31, 1997
------------------------------------
Description Revenue % of Total Revenues
- ----------- ------- -------------------
Mortgage receivable - related party (a) $ 832,579 13.25%
Total Petroleum properties (b) 1,092,606 17.38%
(a) See note 5 - Mortgages Receivable (i) for other information.
(b) Total Petroleum, an operator of combination gas station and retail
convenience stores, is a tenant in thirteen of the Company's properties, all
located in the State of Michigan.
In connection with the Total Petroleum lease agreement in 1991, the Company
deposited $2,000,000 with an independent escrow agent, which represented the
estimated maximum amount to remediate environmental problems discovered at
certain locations. The agreement limits the maximum payment to approximately
$350,000 per location. At December 31, 1997, there are two locations which
require additional remediation efforts. The Company believes the approximate
$781,000 held by the escrow agent will be adequate to cover any additional
environmental costs.
Sale of Real Estate
On August 5, 1997, the property owned by a limited liability company in
which the Company was a majority member was sold and the limited liability
company was liquidated. A gain of approximately $599,000 was realized on the
sale. The Company's share of the gain is approximately $384,000 after deducting
the minority interest portion.
NOTE 4 - PROVISION FOR VALUATION ADJUSTMENT
At December 1996, the Company owned five retail properties which had been
leased to a retail chain of stores. The initial term with respect to the leases
expired on December 31, 1996. As of December 31, 1996 two of these properties
were under contract of sale (both sales closed during 1997) and three were
vacant (two are still vacant). The Company is actively seeking a buyer or tenant
for the two vacant properties.
At December 31, 1996 the Company recorded a provision for valuation
adjustment on the two properties which were under contract of sale based on the
sales prices. In addition, the Company had determined that the estimated fair
value of the three vacant properties were lower than their carrying amounts and
thus, the Company had taken a provision for the differences. The total provision
taken on these five properties during the year ended December 31, 1996 which
amounted to $659,000 had been presented as a reduction to real estate
investments on the balance sheet.
NOTE 5 - MORTGAGES RECEIVABLE AND PRINCIPAL RELATED PARTY TRANSACTION
Mortgages receivable at December 31, 1997 and 1996 consist of the
following:
1997 1996
---- ----
Affiliate
---------
Entity substantially owned by
Gould Investors L.P. (net of
unamortized discount of
$2,320,618 and $2,654,818) (i) $ 5,653,412 $ 5,732,445
Non-affiliate
-------------
Other 290,038 316,588
------- -------
$ 5,943,450 $ 6,049,033
=========== ===========
Annual maturities of mortgages receivable during the next five years and
thereafter are summarized as follows:
Year Ending December 31,
------------------------
1998 $ 768,574
1999 508,251
2000 532,820
2001 555,355
2002 567,871
2003 and thereafter 5,331,197
---- ---------
Total 8,264,068
Less: Unamortized discount 2,320,618
---------
Net carrying amount - mortgages receivable $ 5,943,450
============
(i) On July 30, 1993, as a result of a public auction, the Federal Deposit
Insurance Corporation sold to an entity related to the Company, for a
consideration of $19,000,300, a $23,000,000 first mortgage, providing for an
interest rate of 8% per annum, secured by a single tenant office building
located in Manhattan, New York. The office building which secures this mortgage
is owned by a partnership in which
NOTE 5 - MORTGAGES RECEIVABLE AND PRINCIPAL RELATED PARTY TRANSACTION
(Continued)
Gould Investors L.P. ("Gould") is General Partner and in which Gould owns
substantially all of the partnership interests. Simultaneously with the
purchase, $13,181,000 was advanced by an unrelated party, $6,080,000 (which
includes closing costs) was advanced by the Company, and the mortgage was
severed into a first mortgage of $13,181,000 paying interest at 9 1/2% per annum
held by the unrelated party and a subordinate wrap mortgage of $9,819,000 held
by the Company. Both the first mortgage and the wrap mortgage mature in 2005 at
which time the first mortgage will be fully amortized and the wrap mortgage will
have a principal balance of approximately $4,000,000. The Company receives
monthly principal and interest payments of $79,318 and at December 31, 1997 and
1996 its principal balance had been reduced to approximately $7,974,000 and
$8,387,000, respectively. The original discount of $3,738,400 is being amortized
by the Company over the life of the mortgage. The Company expects to receive a
yield to maturity of approximately 14.5%. Interest income, including
amortization of the discount of $334,200, $327,600 and $319,500, amounted to
$832,579, $848,200 and $861,750 for the years ended 1997, 1996 and 1995,
respectively.
The building which secures the first mortgage and the wrap mortgage is
leased in its entirety to the City of New York. The lease expires in 2005 with
an option to renew for an additional five years and provides the City with a
limited right of termination. The first mortgage and the wrap mortgage are
nonrecourse to the owner of the building. The transaction was approved by the
independent directors of the Company. The directors who are affiliated with the
Company and Gould abstained from voting on the transaction.
At December 31, 1997 and 1996 Gould owned 384,462 and 542,825 shares of the
common stock of the Company or 24.6% and 36.8% of the equity interest and 19.6%
and 28.9% of the voting rights, respectively.
NOTE 6 - DEBT OBLIGATIONS
Mortgages Payable
At December 31, 1997 there are nine outstanding mortgages payable, all of
which are secured by individual real estate investments with an aggregate
carrying value of $33,163,742 before accumulated depreciation. The mortgages
bear interest at rates ranging from 7.3% to 9.1%, and mature between 1999 and
2017.
Scheduled principal repayments during the next five years and thereafter
are as follows:
Year Ending
December 31,
------------
1998 $ 281,128
1999 4,237,515
2000 1,139,019
2001 255,795
2002 1,559,362
2003 and thereafter 13,072,428
---- ----------
Total $ 20,545,247
=============
NOTE 6 - DEBT OBLIGATIONS (Continued)
Note Payable - Bank
On March 1, 1996 the Company entered into a $5 million revolving credit
agreement ("Credit Agreement") with Bank Leumi Trust Company of New York ("Bank
Leumi"). Under the terms of the Credit Agreement the Company can add additional
lenders to provide a maximum total facility of $15,000,000. In June 1997, the
Company closed on a $4,000,000 participation interest with Commercial Bank of
New York (formerly First Bank of the Americas), increasing the total facility to
$9,000,000. Borrowings under the Credit Agreement are being used to provide the
Company with funds, when needed, to acquire additional properties. The Credit
Agreement matures February 28, 1999 with a right for the Company to extend the
Credit Agreement until February 29, 2000. The Company pays interest under the
Credit Agreement at the rate of prime plus 1/2% on funds borrowed on an interest
only basis,plus a 1/4% servicing fee on the outstanding balance to Bank Leumi.
Net proceeds of certain events (e.g. sale of property, financing of properties)
must be applied to reduce the loan.
As collateral for any advances taken by the Company under the Credit
Agreement, the Company has pledged the stock of each of its subsidiaries and
certain mortgages receivable. In addition, the Company's subsidiaries have
guaranteed all loans under the Credit Agreement. The Credit Agreement contains
certain affirmative and negative convenants as well as specified guarantees. The
Company has agreed to maintain at least $250,000 on deposit with Bank Leumi and
is in compliance with all requirements.
At December 31, 1997, $4,605,029 was outstanding under the Credit
Agreement.
NOTE 7 - REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Preferred Stock has the following rights, qualifications and
conditions: (i) a cumulative dividend preference of $1.60 per share per annum;
(ii) a liquidation preference of $16.50 per share; (iii) a right to convert each
share of Preferred Stock at any time into .825 of a share of Common Stock; (iv)
redeemable by the Company after July 1, 1997 at $16.70 per share and at premiums
declining to $16.50 on July 1, 1998 and thereafter; (v) an option by each
preferred holder to put the Preferred Stock to the Company at $16.50 per share
for the period commencing July 1, 1999 and ending on September 28, 1999; and
(vi) one-half vote per share.
NOTE 8 - OTHER RELATED PARTY TRANSACTIONS
Gould charged the Company $179,260, $175,969, $210,357 during the years
ended December 31, 1997, 1996 and 1995, respectively, for allocated general and
administrative expenses and payroll based on time incurred by various employees.
A company controlled by certain directors and officers of the Company was
paid mortgage brokerage fees of $24,134 during the year ended December 31, 1995.
See Note 5 for other related party transaction information.
NOTE 9 - STOCK OPTIONS
On December 6, 1996, the directors of the Company adopted the 1996 Stock
Option Plan (Incentive/Nonstatutory Stock Option Plan), whereby a maximum of
125,000 shares of common stock of the Company are reserved for issuance to
employees, officers, directors, consultants and advisors to the Company.
Incentive stock options are granted at per share amounts at least equal to their
fair market value at the date of grant, whereas for nonstatutory stock options
the exercise price may be any amount determined by the Board of Directors. The
options will expire no later than ten years after the date on which the option
was granted.
On March 21, 1997, the Directors of the Company granted, under the 1996
Stock Option Plan, options to purchase a total of 40,500 shares of common stock
at $13.50 per share to a number of the Company's officers and employees. The
options are cumulatively exercisable at a rate of 25% per annum, commencing
after six months, and expire five years after the date of grant. At December 31,
1997 options to purchase 10,125 shares are exercisable, none of which have been
exercised.
On November 17, 1989, the directors of the Company granted, under the 1989
Stock Option Plan, options to purchase a total of 110,000 shares of Common Stock
at $11 per share to a number of the Company's officers and employees. In 1994,
one officer exercised 20,000 of these options and the balance expired. On June
6, 1991, the directors of the Company granted to each of the three independent
directors of the Company an option to purchase 5,000 shares of Common Stock at
$9.125 per share. During 1995 and 1996, two directors exercised 10,000 of these
options and during 1996 the remaining 5,000 options expired. On March 4, 1993,
the Board of Directors granted, also under the 1989 Stock Option Plan, options
to purchase a total of 100,000 common shares at $9.125 per share to a number of
officers and employees of the Company. At December 31, 1997, all 100,000 options
had been exercised.
Stock options under the 1989 Stock Option Plan are granted at per share
amounts at least equal to their fair market value at the date of grant. The
options are cumulatively exercisable at a rate of 25% per annum and expire five
years after the date of grant. A maximum of 225,000 common shares were reserved
for issuance under the 1989 Stock Option Plan, of which 95,000 are available for
grant at December 31, 1997.
The Company elected Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees ("APB 25"), and related interpretations in
accounting for its employee stock options. Under APB 25, no compensation expense
is recognized because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant. The
alternative fair value accounting provided for under FASB No. 123, Accounting
for Stock-Based Compensation, is not applicable because it requires use of
option valuation models that were not developed for use in valuing employee
stock options.
NOTE 9 - STOCK OPTIONS (Continued)
Pro forma information regarding net income and earnings per share is
required by FASB No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method. The fair
value for these options was estimated at the date of the grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions: risk free interest rate of 6.49%, dividend yield of 8.5%,
volatility factor of the expected market price of the Company's Common Stock
based on historical results of .117; and an expected life of 4 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and changes in the
subjective input assumptions can materially affect the fair value estimate,
management believes the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options. The Company has
elected not to present pro forma information because the impact on the reported
net income and earnings per share is immaterial.
Changes in the number of common shares under all option arrangements are
summarized as follows:
Year Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
Outstanding at beginning of period 29,000 57,500 74,500
Granted 40,500 - -
Option prices $13.50-$9.125 - -
Exercisable at end of period 10,125 29,000 32,500
Exercised 29,000 23,500 17,000
Expired - 5,000 -
Outstanding at end of period 40,500 29,000 57,500
Option price per share outstanding $13.50 $9.125 $9.125
As of December 31, 1997 the outstanding options had a remaining contractual
life of approximately 4.2 years and an exercise price of $13.50.
NOTE 10 - DISTRIBUTION REINVESTMENT PLAN
In May, 1996, the Company implemented a Distribution Reinvestment Plan (the
"Plan"). The Plan provides owners of record of 100 shares or more of its common
and/or preferred stock the opportunity to reinvest cash distributions in
newly-issued common stock of the Company at a five percent discount from the
market price. No open market purchases are made under the Plan. During the years
ended December 31, 1997 and 1996, the Company issued 58,808 and 34,023 common
shares, respectively, under the Plan.
NOTE 11 - SUBSEQUENT EVENTS
On February 10, 1998, the Company filed a Registration Statement with the
Securities and Exchange Commission ("SEC") with respect to a rights offering to
be made to its stockholders. Upon effectiveness of the Registration Statement,
the Company will issue to each common and preferred stockholder, one
nontransferable right for each share owned of record on the record date
entitling the holder to purchase one share of common stock at a price which will
be approximately 5% to 10% below market at or about the time the Registration
Statement is declared effective by the SEC. In addition, each common and
preferred stockholder will be afforded the opportunity to over-subscribe to the
extent of two additional shares, but, in order for the over-subscription
privilege to come into effect a stockholder must have fully exercised the basic
subscription privilege.
A limited liability company, in which the Company is the majority member,
expects to close on the purchase of a commercial building during March, 1998.
The purchase price will be $6,700,000. The Company expects to close on mortgage
financing for $4,500,000 simultaneously with the purchase. Interest on the
mortgage will be at the rate of 7.5% per annum. The entire property is leased to
the New York City Transit Authority at an annual rental of $850,000 with a lease
that expires in October, 2002.
NOTE 12 - QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
Quarter Ended
-------------
Total
March 31 June 30 September 30 December 31 For Year
-------- ------- ------------ ----------- --------
(In thousands, except per share data)
1997
- ----
<S> <C> <C> <C> <C> <C>
Revenues $1,566 $1,567 $1,493 $1,659 $6,285
Net income 639 641 1,005 (a) 699 2,984
Net income applicable to
common stockholders 277 279 642 336 1,534
Net income per common share (b):
Basic .19 .18 .42 .22 1.01
Diluted .18 .18 .42 .22 1.00
(a) Net income includes gain on sale of real estate of $599,251 and is
after minority interest of $230,839 (substantially attributable to such gain).
See Note 3.
(b) The earnings per share amounts for the quarter ended March 31, 1997
have been restated to comply with Statement of Financial Accounting Standards
No. 128, Earnings Per Share.
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
-------------
Total
March 31 June 30 September 30 December 31 For Year
-------- ------- ------------ ----------- --------
(In thousands, except per share data)
1996
- ----
<S> <C> <C> <C> <C> <C>
Revenues(b) $1,094 $1,288 $1,594 $1,536 $5,512
Net income (a) (b) 577 368 791 438 2,174
Net income applicable to
common stockholders (b) 215 6 429 76 726
Basic and diluted net
income per common share .15 - .29 .05 .50
(a) Net income reflects provision for valuation adjustment of real estate
amounting to $314,000, $145,000 and $200,000 for the quarters ending June 30,
1996, September 30, 1996 and December 31, 1996, respectively.
(b) Includes approximately $41,000, $103,000 and $88,000 (or $.03, $.07 and
$.06 per common share) of income from accelerated payments on a senior note
receivable for the quarters ending March 31, 1996, June 30, 1996 and September
30, 1996, respectively. The note receivable was paid in full during August 1996.
</TABLE>
<TABLE>
<CAPTION>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
ProForma Condensed Consolidated Balance Sheet
As of December 31, 1997
(Unaudited)
ASSETS
ProForma
Adjust-
Historical ments(A) ProForma
---------- -------- --------
<S> <C> <C> <C>
Real estate investments, at cost
Land $ 12,210,147 $ 1,340,000 $ 13,550,147
Buildings 38,641,419 5,360,000 44,001,419
---------- --------- ----------
50,851,566 6,700,000 57,551,566
Less accumulated depreciation 2,534,582 2,534,582
---------- ---------- ---------
48,316,984 6,700,000 55,016,984
Mortgages receivable - less unamortized discount -
(substantially all from related parties) 5,943,450 5,943,450
Cash and cash equivalents 1,606,364 (200,000) 1,406,364
Unbilled rent receivable 665,052 665,052
Rent, interest, deposits and other receivables 300,584 300,584
Investment in BRT Realty Trust - (related party) 240,384 240,384
Deferred financing costs 510,123 510,123
Other 64,614 64,614
------ ------------ ----------
$57,647,555 $6,500,000 $64,147,555
=========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable $20,545,247 $ 4,500,000 $25,045,247
Note payable - bank 4,605,029 2,000,000 6,605,029
Accrued expenses and other liabilities 394,459 394,459
Dividends payable 791,945 791,945
------- ----------- -------
26,336,680 6,500,000 32,836,680
---------- --------- ----------
Redeemable Convertible Preferred Stock,
$1 par value; $1.60 cumulative annual dividend;
2,300,000 shares authorized; 808,776 shares issued;
liquidation and redemption values of $16.50 13,106,970 13,106,970
---------- ----------
Stockholders' equity:
Common Stock, $1 par value; 25,000,000 shares authorized;
1,561,450 and 1,473,642 shares issued and outstanding 1,561,450 1,561,450
Paid-in capital 14,419,609 14,419,609
Net unrealized gain on available-for-sale securities 146,706 146,706
Accumulated undistributed net income 2,076,140 2,076,140
---------- ----------
18,203,905 18,203,905
---------- ----------
$57,647,555 $ 6,500,000 $64,147,555
=========== =========== ===========
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
ProForma Condensed Consolidated Statement of Income
For the Year Ended December 31, 1997
(Unaudited)
ProForma
Adjust-
Historical ments (B) ProForma
---------- --------- --------
<S> <C> <C> <C>
Revenues:
Rental income $ 5,341,491 $ 843,165 $ 6,184,656
Interest from related parties 832,579 832,579
Interest and other income 110,739 (6,000) 104,739
-------- --------- ---------
6,284,809 837,165 7,121,974
--------- ------- ---------
Expenses:
Depreciation and amortization 1,023,345 134,000 1,157,345
Interest - mortgages payable 1,517,126 337,500 1,854,626
Interest - bank 210,305 178,800 389,105
Leasehold rent 288,833 288,833
General and administrative 629,420 - 629,420
------- ------------ -------
3,669,029 650,300 4,319,329
--------- ------- ---------
Income before gain on sale of real estate
and minority interest 2,615,780 186,865 2,802,645
Gain on sale of real estate including minority
interest share of $215,336 599,251 599,251
---------- -------------- ---------
Income before minority interest 3,215,031 186,865 3,401,896
Minority interest (230,839) (20,000) (250,839)
----------- ------------ ---------
Net income $ 2,984,192 $ 166,865 $3,151,057
=========== ========== =========
Calculation of net income applicable to common stockholders:
Net income $ 2,984,192 $3,151,057
Less dividends and accretion on preferred stock 1,450,220 1,450,220
--------- ---------
Net income applicable to common stockholders $ 1,533,972 $1,700,837
=========== ===========
Weighted average number of common shares outstanding:
Basic 1,522,967 1,522,967
========= =========
Diluted 1,529,203 1,529,203
========= =========
Net income per common share:
Basic $ 1.01 $ 1.12
============== ==============
Diluted $ 1.00 $ 1.12
============== ==============
Cash distributions per share:
Common Stock $ 1.20
==============
Preferred Stock $ 1.60
==============
See accompanying notes.
</TABLE>
<PAGE>
Notes to ProForma Financial Statements
(Unaudited)
ProForma Condensed Consolidated Balance Sheet
As of December 31, 1997
(A) Reflects the expected acquisition of 300 Gold Street in Brooklyn, New York
at December 31, 1997 with cash, borrowings under a mortgage note and borrowings
under the line of credit.
ProForma Condensed Consolidated Statement of Income
For the Year Ended December 31, 1997
(B) Reflects the revenues and expenses of 300 Gold Street in Brooklyn, New York
in addition to the increase in interest expense associated with additional
borrowings and a decrease in interest income as a result of a decrease in cash
and cash equivalents as if the property were purchased at January 1, 1997.
<PAGE>
Report of Independent Auditors
To the Board of Directors of
One Liberty Properties, Inc.
We have audited the statement of revenues and certain expenses of the
property at 300 Gold Street (the "Property"), as described in Note 1, for the
year ended December 31, 1997. This financial statement is the responsibility of
management of the Property. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission for inclusion in the Registration Statement (Form S-11)
of One Liberty Properties, Inc., and is not intended to be a complete
presentation of the Property's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Property as
described in Note 1 for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.
March 11, 1998 Ernst & Young LLP
New York, New York
300 Gold Street
Statement of Revenues and Certain Expenses (Note 1)
For the year ended December 31, 1997
Revenues:
Base rent $ 768,333
Certain expenses:
Management fees 12,000
------
Revenues in excess of certain expenses $ 756,333
=========
See accompanying notes.
300 Gold Street
Notes to Statement of Revenues and Certain Expenses
December 31, 1997
1. Basis of Presentation
Presented herein is the statement of revenues and certain expenses related
to the operations of the property, located at 300 Gold Street (also known as
131-143 Flatbush Avenue) in the borough of Brooklyn in New York City, (the
"Property"). The Property is comprised of an office building containing 66,000
square feet.
The accompanying financial statements have been prepared in accordance with
the applicable rules and regulations of the Securities and Exchange Commission
for the acquisition of real estate properties. Accordingly, the financial
statements exclude certain expenses that may not be comparable to those expected
to be incurred by One Liberty Properties, Inc. (the "Company") in the proposed
future operations of the Property. It is expected that the Property will be
acquired by the Company in April, 1998. Items excluded consist of interest,
amortization and depreciation.
2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. Revenue Recognition and Concentration of Revenue
The Property is leased by the New York City Transit Authority (the
"Tenant") under an operating lease which expires on October 15, 2002. The lease
provides for fixed net rent payments of $800,000 per annum until October 15,
1997 at which time the fixed net rent payments increase to $850,000 per annum
through the lease expiration. The fixed net rent is net to the landlord, with
the Tenant assuming the sole responsibility for the condition, operation,
maintenance and management of the Property. Minimum rental income is recognized
on a straight-line basis over the term of the lease. The excess of amounts due
pursuant to the underlying lease over amounts so recognized amounted to
approximately $ 42,083 for the year ended December 31, 1997.
300 Gold Street
Notes to Statement of Revenues and Certain Expenses (continued)
4. Management Agreement
During 1997 the Property was managed by CRG Management, LLC. As
consideration for performing such services, CRG Management, LLC receives a fee
equal to $1,000 per month.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 31. Other Expenses of Issuance and Distribution
The following is an estimate of the expenses to be incurred in connection
with the sale of the Common Stock registered hereby, all of which will be paid
by the Registrant:
Accounting Fees 20,000
Legal Fees 25,000
Printing 20,000
Listing Fee -
American Stock Exchange 7,500
Agents Fees 20,000
Registration Fees 9,975
Miscellaneous 17,525
Total Expenses $120,000
Item 32. Sales to Special Parties
See Item 33.
Item 33. Recent Sale of Unexpected Securities
The only securities sold by the Company within the past three years which
were not registered under the Securities Act of 1933 were shares sold upon the
exercise stock options as follows:
PRICE TOTAL
DATE OF NUMBER PER PURCHASE
NAME SALE OF SHARES SHARE PRICE
---- ---- --------- ----- -----
Fredric H. Gould 6/20/97 9,000 9.125 $82,125
Marshall Rose 6/19/95 1,500 9.125 13,688
3/12/96 1,500 9.125 13,688
Charles Biederman 3/29/95 5,000 9.125 45,625
Matthew J. Gould 6/19/96 3,250 9.125 29,656
3/12/96 3,250 9.125 29,656
Israel Rosenzweig 6/19/95 3,250 9.125 29,656
6/20/97 3,250 9.125 29,656
Jeffrey Gould 6/19/95 3,000 9.125 27,375
6/20/97 3,000 9.125 27,375
David W. Kalish 6/19/95 1,000 9.125 9,125
2/12/96 2,500 9.125 22,813
Mark H. Lundy 3/12/96 7,000 9.125 63,875
Hurand & Hurand LLC 3/12/96 5,000 9.125 45,625
Simeon Brinberg 12/18/96 1,000 9.125 9,125
6/20/97 3,000 9.125 27,375
9/12/97 1,500 9.125 13,688
12/18/97 3,500 9.125 31,938
Daniel Lembo 12/18/97 3,500 9.125 31,938
----- ------
TOTAL 64,000 $584,000
====== ========
All shares were sold for cash. Each purchaser was an officer/director or
employee of the Company or affiliate thereof and took the shares for investment
purposes. Accordingly, the shares were issued pursuant to the exemption provided
for in Section 4(2) of the Act. The Certificates issued were legended and stop
transfer orders were placed against the shares.
Item 34. Indemnification of Officers and Directors.
The Company's Articles of Incorporation and By Laws provide that each
director, officer and employee of the Company shall be indemnified by the
Company to the full extent permitted by the General Laws of the State of
Maryland, now or hereafter in force. The Articles of Incorporation further
provide that to the maximum extent that Maryland law in effect from time to time
permits limitation of liability of directors and officers, no director or
officer shall be liable to the Company or its stockholders for money damages.
The Company does not maintain officers and directors liability insurance.
Item 35. Treatment of Proceeds from Stock Being Registered.
The difference between $1.00 per share and the net cash proceeds from the
sale of the shares of Common Stock offered by this Registration Statement will
be credited to the Company's Paid-in Capital account.
Item 36. Financial Statements and Exhibits
(a) The following financial statements of the Company are included in this
Registration Statement.
Report of Independent Auditors
Statements (Audited)
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income for the
three years ended December 31, 1997
Consolidated Statements of
Stockholders' Equity for the three years ended
December 31, 1997
Consolidated Statements of
Cash Flows for the three years ended
December 31, 1997
Schedules
Schedule III - Consolidated Real Estate
and Accumulated Depreciation -
December 31, 1997 (Audited)
Schedule IV - Mortgage Loans on Real Estate -
December 31, 1997 (Audited)
(b) Exhibits
3.1 Articles of Incorporation, as amended, of the Company, filed as Exhibit
3.1 to the Company's Form 10-Q for the quarter ended September 30, 1985, which
Exhibit is incorporated herein by reference.
3.2 Amendment to Articles of Incorporation, filed as Exhibit to the
Company's Form 10-Q for the quarter ended June 30, 1989, which Exhibit is
incorporated herein by reference.
3.3 Amendment to Articles of Incorporation, filed as an Exhibit to the
Company's Form 10-Q for the quarter ended June 30, 1990, which Exhibit is
incorporated herein by reference.
3.4 By-Laws of the Company, as amended, filed as an Exhibit to the
Company's Form 10-Q for the quarter ended June 30, 1989, which Exhibit is
incorporated herein by reference.
3.5 Amendment to By-Law filed as an Exhibit to the Company's Form 10-Q for
the quarter ended June 30, 1990, which Exhibit is incorporated herein by
reference.
5.1 Opinion of Brinberg and Lundy. Filed herewith.*
8.1 Opinion regarding tax matters. Filed herewith.*
10.1 Lease dated January 17, 1989 and modification thereof dated as of
February 15, 1989 between Crystal Management, Inc., as Landlord and Stamford
Realty Associates, Inc. as tenant with respect to Madison Avenue, New York, New
York, filed as an exhibit to the Company's Form 8-K dated June 27, 1994 and
incorporated herein by reference.
10.2 Form of lease entered into with Total Petroleum with respect to 13
Total Petroleum properties filed as an exhibit to the Company's Form 10-K dated
March 23, 1995 andincorporated herein by reference.
10.3 Lease dated November 7, 1996 between OLP Ft. Myers, Inc. and Barnes &
Noble Superstores, Inc. with respect to the Fort Myers, Florida property. Filed
as an exhibit to the Company's 10-K for the year ended December 31, 1996, which
Exhibit is incorporated herein by reference.
10.4 Credit Agreement dated March 1, 1996 between the Company and Bank
Leumi Trust Company of New York filed as an exhibit to the Company's Form 10-K
for the year ended December 31, 1995, which Exhibit is incorporated herein by
reference.
10.5 Lease dated September 14, 1995 between Galbreath Equities, Inc; as
Landlord, and Kittle's Home Furnishings Center, as Tenant, with respect to
Columbus, Ohio Property, filed as an exhibit to the Company's Form 8-K dated
December 12, 1997 and incorporated herein by reference.
10.6 Agreement assignment and Assumption Bid regarding acquisition of Gold
Street Property. Lease dated July, 1987 between 300 Realty Co. and the New York
City Transit Authority with respect to the Gold Street Property. Filed
herewith.*
10.7 Subscription Form for Exercise of Rights and related forms related to
exercise of rights. Filed herewith.*
21.1 Subsidiaries of registrant, filed as an exhibit to the Company's Form
10-K for the year ended December 31, 1997 and incorporated herein by reference.
23.1 Consent of Ernst & Young LLP. Filed herewith.*
23.2 Consent of Brinberg and Lundy and Herrick, Feinstein to be contained
in opinion to be filed by Amendment.
Item 37. Undertakings
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
B. The undersigned Registrant hereby undertakes to supplement the
prospectus after the expiration of the subscription period, to set forth the
results of the subscription offer.
C. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the SEC such indemnification is against public
policy, as expressed in the Securities Act, and is therefore unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether or not such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Village of Great Neck Plaza, State of New York, on the 26th
day of March, 1998.
ONE LIBERTY PROPERTIES, INC.
Registrant
S/Matthew Gould
Matthew Gould, President
<PAGE>
Directors, Principal Executive Officers and Principal Financial Officers:
Signature Title Date
*s/Fredric H. Gould Chairman of the Board of March 26, 1998
- -------------------
Fredric H. Gould Directors
S/Matthew Gould President and Chief March 26, 1998
- ---------------
Matthew Gould Executive Officer
*s/Charles Biederman Director March 26, 1998
- --------------------
Charles Biederman
*s/Joseph Amato Director March 26, 1998
- ---------------
Joseph A. Amato
*s/Marshall Rose Director March 26, 1998
- ----------------
Marshall Rose
*s/Arthur Hurand Director March 26, 1998
- ----------------
Arthur Hurand
*s/David W. Kalish Vice President and Chief March 26, 1998
- ------------------
David W. Kalish Financial Officer
* By Matthew Gould, as attorney-in-fact
<PAGE>
<TABLE>
<CAPTION>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Schedule III - Consolidated Real Estate and Accumulated Depreciation
December 31, 1997
Initial Cost Gross Amount at Which Carried At Life on Which
to Company December 31, 1997 Depreciation in
Latest Income
Statement Is
Accumulated Date Of Date Computed
Encumbrances Land Buildings Land Buildings Total Depreciation Construction Acquired (Years)
------------ ---- --------- ---- --------- ----- ------------ ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Free Standing
Retail Locations:
Columbus, OH $4,325,000 $1,445,232 $5,780,926 $1,445,232 $5,780,926 $7,226,158 $18,065 1996 November 19, 1997 40
Ft. Myers, FL 3,209,748 1,013,463 4,053,848 1,013,463 4,053,848 5,067,311 114,020 1996 November 7, 1996 40
Denver, CO 2,670,659 811,896 3,247,582 811,896 3,247,582 4,059,478 138,699 1995 April 9, 1996 40
Atlanta, GA 2,363,061 802,721 3,210,886 802,721 3,210,886 4,013,607 110,374 1994 August 14, 1996 40
Lewisville, TX 1,571,786 685,737 2,742,946 685,737 2,742,946 3,428,683 82,860 1996 October 11, 1996 40
Miscellaneous 2,343,078 5,693,337 14,366,139 5,589,037 14,170,439 19,759,476 1,425,208 Various Various 40
Apartment Building:
New York, NY 4,061,915 1,109,836 4,439,346 1,109,836 4,439,346 5,549,182 571,735 1910 June 14, 1994 27.5
Land Under
Improvements:
Miscellaneous - 752,225 - 752,225 - 752,225 - Various Various -
Industrial:
Miami, FL - - 995,446 - 995,446 995,446 73,621 1967 January 19, 1995 40
$20,545,24 $12,314,447 $38,837,119 $12,210,147 $38,641,41 $50,851,566 $2,534,582
========== =========== =========== =========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes To Schedule III - Consolidated Real Estate
And Accumulated Depreciation
(a) Reconciliation of "Real Estate and Accumulated Depreciation"
Year Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Investment in real estate:
Balance, beginning of year $ 44,735,907 $ 25,454,336 $ 11,750,268
Addition: Land and buildings 10,058,389 19,940,571 13,704,068
Deductions:
Cost of properties sold (3,942,730) - -
Valuation allowance (c) - (659,000) -
---------- -------- ----------
Balance, end of year $ 50,851,566 $ 44,735,907 $ 25,454,336
============ ============ =============
Accumulated depreciation:
Balance, beginning of year $ 1,846,694 $ 1,200,571 $ 753,734
Addition: depreciation 893,123 646,123 446,837
Deduction: accumulated
depreciation related to
properties sold (205,235) - -
-------- ---------- -----------
Balance, end of year $ 2,534,582 $ 1,846,694 $ 1,200,571
============ ============== =============
(b) The aggregate cost of the properties is the same for federal income tax
purposes.
(c) During the year ended December 31, 1996, the Company took a provision
for valuation adjustment of real estate totaling $659,000. See Note 4 to the
consolidated financial statements for other information.
</TABLE>
<TABLE>
<CAPTION>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Schedule IV - Mortgage Loans on Real Estate
December 31, 1997
Carrying
Number of Intrest Maturity Periodic Face Amount Amount of
Description Loans Rate Date Payment Terms of Mortgage Mortgage
<S> <C> <C> <C> <C> <C> <C>
First mortgage loans:
Land and building/retail 1 9.75% Month to $3,550 monthly allocated $246,144 $246,144
Bad Axe, MI Month to interest and principal.
Land and building/office 1 14.5%(b) Feb-05 $79,318 monthly allocated to 7,974,030 (c) 5,653,412
New York, NY interest and principal, balance of
$4,073,525 due at maturity.
Second mortgage loan:
Land and building/commercial 1 10.25% Oct-01 $1,158 monthly allocated to 43,894 43,894
- ------ ------
Seattle, WA interest and principal,
self-liquidates by maturity
Total 3 $8,264,068 $5,943,450
= ========== ==========
</TABLE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Schedule IV - Mortgage Loans on Real Estate
December 31, 1997
Notes to the Schedule:
(a) The following summary reconciles mortgages receivable at their carrying
values:
1997 1996
---- ----
Balance at beginning of year $ 6,049,033 $ 7,036,141
Addition:
Amortization of discount 334,200 327,600
Deduction:
Collections of principal 439,783 1,314,708
Balance at end of year $ 5,943,450 $ 6,049,033
(b) Represents the expected yield to maturity which includes amortization
of discount and interest collections.
(c) The face amount of mortgage is before an unamortized discount of
$2,320,618. Mortgage was pledged as collateral to Credit Agreement.
<PAGE>
Index of Exhibits
Exhibit 5.1 Opinion of Brinberg & Lundy
Exhibit 8.1 Tax Opinion
Exhibit 10.6 Agreement of Assignment and Assumption
of Bid and Lease with respect to Gold
Street Property
Exhibit 10.7 Subscription Certificate
Exhibit 23.1 Consent of Ernst & Young LLP
<PAGE>
Exhibit 5.1
BRINBERG & LUNDY
60 Cutter Mill Road, Suite 303
Great Neck, NY 11021
ONE LIBERTY PROPERTIES, INC.
60 Cutter Mill Road
Great Neck, New York 11021
Gentlemen:
We have acted as counsel to One Liberty Properties, Inc. (the "Company") in
connection with the preparation and filing of a Registration Statement on Form
S-11 for the registration under the Securities Act of 1933, as amended of
2,383,670 shares of common stock, $1.00 par value ("Common Stock"). As such
counsel we are familiar with the Certificate of Incorporation, as amended and
the by-laws, as amended, of the Company and with the corporate proceedings taken
by the Company in connection with the preparation and filing of such
Registration Statement and in connection with the issuance of the shares of
Common Stock to which the Registration Statement relates.
Based upon the foregoing, we are of the opinion that:
1. The Company is duly organized validly existing and in good standing under the
laws of the State of Maryland.
2. The 2,383,670 shares of Common Stock to be issued by the Company in
connection with a Rights Offering being made to its common stockholders and
preferred stockholders, as described in the Registration Statement, have
been duly authorized and when issued as described in the Registration
Statement, will be legally issued, fully paid and non-assessable.
We know that we are referred to under the heading "Legal Matters" in the
Prospectus forming a part of the Registration Statement, and we hereby consent
to such use of our name in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
s/BRINBERG & LUNDY
BRINBERG & LUNDY
SB/lm
(OLPNOT)
<PAGE>
Exhibit 8.1
HERRICK,FEINSTEIN LLP
A LIMITED LIABILITY PARTNERSHIP
2 PARK AVENUE
NEW YORK, N.Y. 10016
104 CARNEGIE CENTER (212) 592-1400 FACSIMILE
PRINCETON, NJ. 08540-6232 (212) 889-7577
TELEPHONE (609) 452 -3800
FACSIMILE (609) 520-9095
March 24, 1998
One Liberty Properties, Inc.
60 Cutter Mill Road
Great Neck, NY 11021
Gentlemen:
We have acted as Special Tax Counsel to One Liberty Properties,
Inc. (the "Company"), in connection with the preparation of a
registration statement on Form S-11 (the "Registration Statement") and
prospectus annexed thereto (the "Prospectus"), initially filed with the
Securities and Exchange Commission on February 10, 1998 (No.
333-45937), with respect to the offering and sale (the "Offering") of
shares of Common Stock, $1.00 par value (the "Shares") of the Company.
You have requested our opinion on certain federal income tax matters in
connection with the Offering.
In rendering the opinions expressed herein, we are acting
solely in our capacity as special tax counsel to the Company. We do not
represent the Company generally or exclusively and, therefore, we are
not generally familiar with all of the affairs of the Company. As to
matters of fact, we have examined and relied upon, without
investigation or verification, the representations in the Registration
Statement, the Prospectus, letters provided by the Company to us and
legal counsel, schedules prepared by the Company and prepared or
reviewed by its outside auditors which relate to the Company's
compliance with various REIT qualification tests and additional
information and representations from officers of the Company with
respect to various factual matters relating to the Company's operations
and stock ownership and to the Company's expectations to continue to
meet certain diversity of ownership tests on a basis consistent with
past practice and of its intention to operate in a manner consistent
with its past operations, subject to any changes described in the
Prospectus. We have also relied on good standing certificates obtained
from the Secretary of State of Maryland which certify that the Company
was duly organized and is in good standing under the laws of the
jurisdiction of its formation. We have relied, without independent
investigation or verification, upon the authenticity of the documents,
and upon the accuracy of representations, described above.
Based upon and subject to the foregoing, and the qualifications
set forth above and below, it is our opinion that:
1. The description of the federal income tax conclusions
contained in the Prospectus under the caption "Federal Income Tax
Considerations" are correct in all material respects, and the
discussion contained therein fairly summarizes the federal income tax
considerations that may be material to a holder of the common shares.
2. The Company was organized and has operated in conformity
with the requirements for qualification as a REIT under the Code and
the Company's proposed method of operation, if continued without any
change, should enable it to continue to so qualify.
The opinion expressed herein is based on the Code, the
Treasury Department's regulations which interpret the Code, and
relevant judicial and administrative precedent, all of which are
subject to change, on a retroactive basis, at any time. Any such
changes could adversely impact the opinion rendered herein and the tax
consequences to the Company and the investors in the Shares. During the
course of our engagement, after reasonable investigation, nothing has
come to our attention which would cause us to question the accuracy of
the documents or other information provided to us by the Company or the
veracity of the information or representations provided to us by the
Company or Company's counsel. As noted above, the examination of these
documents, the accumulation of the information contained therein and
representations of the Company and its counsel formed a material part
of the basis on which we formed our opinion. Should anything occur, or
already have occurred, that would compromise the accuracy of the
aforementioned documents of the veracity of the aforementioned
information and representations, our opinion as expressed herein may
not and should not be relied upon.
Our opinion is valid as of the date of this letter. We have
not been retained, nor are we obligated, to monitor or update this
opinion for future conditions that may affect this opinion. Potential
investors in the Shares are urged to seek and rely on the tax advice of
a qualified professional and not upon this opinion letter. Our opinion
is limited to the tax matters specifically enumerated herein and we
have not considered any other federal income tax matters, any state or
local income tax issues, nor any non U.S. tax issues, potentially
impacting upon an investment in the Shares. The opinion expressed
herein is not binding upon the IRS and should not be construed to
indicate IRS approval of the Company's qualifying status as a REIT for
the years considered herein. Accordingly, although the opinions
expressed herein reflect our assessment of the likely outcome of
litigation and other adversarial proceedings based on an analysis of
the existing tax authorities relating to the issues, absolute
assurances cannot be given because the opinions expressed herein are
subject to the stated limitations and qualifications set forth above
and below. It is also important to note that no assurance can be given
that the Company would in fact litigate any of the matters addressed
herein.
We understand that our opinion will be attached as an Exhibit
to the Registration Statement and will be referred to in the Prospectus
that is part of the Registration Statement which will be delivered to
prospective purchasers of the Shares, and we hereby consent to use of
our opinion in this respect only. This opinion may not be used by the
Company or by anyone else, without our express permission, for any
other purpose.
No opinion is expressed herein concerning the accuracy of any
statement set forth in the Registration Statement and/or Prospectus and
no opinion is expressed concerning whether disclosure has been made
therein of all necessary and relevant material information.
Furthermore, we express no opinion with respect to the compliance by
the Company with either state or federal securities statutes or rules
and regulations promulgated thereunder or of any other laws or
regulations both state and federal which may be relevant to the
Offering or an investor's decision concerning the purchases and holding
or the sale of the Shares offered. The foregoing opinion is limited to
the matters stated in this letter and no opinion shall be implied or
inferred beyond the matters expressly stated.
Very truly yours,
HERRICK, FEINSTEIN LLP
<PAGE>
Exhibit 10.6
AGREEMENT OF ASSIGNMENT
AND ASSUMPTION OF BID
This Agreement of Assignment and Assumption of Bid (this
"Agreement"), dated January , 1998, made by and between WHCS Real Estate Limited
Partnership (the "Seller"), a Delaware limited partnership, having an office c/o
The Archon Group 1275 K Street NW Suite 900, Washington D.C. 20005, and One
Liberty Properties, Inc. (the "Purchaser"), a Real Estate Investment Trust,
having an address at 60 Cutter Mill Road, Great Neck, New York 11021.
R E C I T A L S
WHEREAS, Seller is the holder of that certain Consolidation,
Modification and Extension Agreement (together with the mortgages referenced
therein, collectively, the "Mortgage"), dated June 21, 1988, made by and among
80 Nassau Associates, Thames Realty Co., 27-29 Thames Associates, 41-43 John
Associates and 300 Gold Associates (collectively, the "Mortgagor"), as
mortgagor, and CrossLand Savings, FSB, as mortgagee, encumbering five (5)
separate parcels of real property, including the parcel of real property located
at 300 Gold Street, Brooklyn, New York which parcel is more particularly
described on Exhibit A annexed hereto and made a part hereof (such parcel of
real property, together with the improvements located thereon, collectively, the
"Mortgaged Premises");
<PAGE>
WHEREAS, that certain mortgage foreclosure action (the
"Action") entitled CROSSLAND FEDERAL SAVINGS BANK, Plaintiff, against 80 NASSAU
ASSOCIATES, A New York General Partnership, THAMES REALTY CO., A New York
General Partnership, 27-29 THAMES ASSOCIATES, A New York General Partnership,
41-43 JOHN ASSOCIATES, A New York General Partnership, 300 GOLD ASSOCIATES, A
New York General Partnership, ELIE S. SUTTON, JOSEPH S. SUTTON, RALPH S. SUTTON,
TEMPCO INCORPORATED, NEW YORK CITY DEPARTMENT OF HOUSING PRESERVATION AND
DEVELOPMENT, NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, CENTRAL ELEVATOR INC.,
JOB LOT TRADING CO., INC., 135 GREENWICH ST. REAL ESTATE CORP., NEW YORK CITY
TRANSIT AUTHORITY, THE PEOPLE OF THE STATE OF NEW YORK, THE CITY OF NEW YORK,
"JOHN DOE" NOS. 1-25, Defendants, Index No. 93-130476 in the Supreme Court,
County of New York has been commenced;
WHEREAS, pursuant to the Action, a judgment of foreclosure and
sale (the "Judgment") was issued in favor of Seller as the successor in interest
to the plaintiff in the Action with respect to the Mortgaged Premises;
WHEREAS, Purchaser acknowledges the Judgment provided for a
sale of the Mortgaged Premises at a public auction (the "Auction Sale");
WHEREAS The Mortgaged Premises were offered for sale at the
Auction Sale held on August 21, 1996, pursuant to the Terms of Sale, annexed
hereto as Exhibit B (the "Terms of Sale");
<PAGE>
WHEREAS Seller was the successful bidder at the Auction Sale for $1,087,700
and executed the Memorandum of Sale, as required by the Terms of Sale (the
"Memorandum").
WHEREAS, Purchaser desires to purchase and assume, and Seller
desires to sell and assign without recourse, representation or warranty to or by
Seller of any kind or nature whatsoever, except as herein specifically set
forth, express or implied, whether in law or in equity, Seller's successful bid
at the Auction Sale, and all of Seller's rights and obligations to purchase and
acquire the Mortgaged Premises pursuant to the Terms of Sale and the Memorandum
on the terms and conditions hereinafter set forth.
WHEREAS Seller has not deposited any money with the Referee, Rebecca H.
Rawson, Esq. (the "Referee") on account of the Purchase Price (defined below)
pursuant to the Bid.
NOW THEREFORE, for and in consideration of the sum of $10.00
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Agreement to Sell and Buy. Seller agrees to sell, transfer
and assign to Purchaser without recourse, representation or warranty, except as
herein specifically set forth, to or by Seller of any kind or nature whatsoever,
express or implied, whether in law or in equity all of Seller's rights and
obligations as successful bidder to purchase the Mortgaged Premises (such rights
and obligations being hereinafter referred to collectively as the "Bid"), and
Purchaser agrees to purchase, accept and assume the Bid from Seller, on the
terms and conditions set forth in this Agreement. Notwithstanding anything to
the contrary contained in this Agreement, the Action, the Judgment, the Terms of
Sale or otherwise, Seller retains all rights to enforce any and all guaranties,
to seek a deficiency judgment, to deal with all collateral (other than the
Mortgaged Premises) in any manner Seller desires and to sue on the notes or any
of the other loan documents evidencing or relating to all or any portion of the
indebtedness secured by the Mortgage; it being the intent of the parties hereto
that Purchaser's sole right as purchaser of the Bid shall be to acquire the
Mortgaged Premises pursuant to the Terms of Sale.
2. Closing; Closing Date. The closing (the "Closing") of the
sale, transfer and assignment of the Bid and the purchase, acceptance and
assumption of the Bid shall occur simultaneously with the acquisition by
Purchaser of the Mortgaged Premises pursuant to the Terms of Sale, which
acquisition shall occur within fifteen (15) days after the expiration of
Purchaser's Due Diligence Period set forth in Paragraph 6 hereof (the "Closing
Date"). The Closing shall take place at the offices of Seller's attorneys,
Harris Beach & Wilcox, LLP, at 250 Park Avenue, New York, New York or at
Purchaser's lending institution located in the Borough of Manhattan.
<PAGE>
3. Assignment Price and Purchase Price.
a. Assignment Price. The price to be paid to Seller by
Purchaser for the assignment of the Bid (the "Assignment Price") is Five Million
Six Hundred Twelve Thousand Three Hundred and 00/100 Dollars ($5,612,300.00).
The Assignment Price shall be paid to Seller at Closing.
b. Purchase Price. In accordance with the terms of the
Memorandum, the price to be paid by Purchaser to acquire the Premises is the
successful bid amount of One Million Eighty Seven Thousand Seven Hundred and
00/100 Dollars ($1,087,700.00) (the "Purchase Price"). The Purchase Price shall
be paid at the Closing in accordance with the provisions of the Terms of Sale.
4. Payment of the Assignment Price. The Assignment Price shall
be payable as follows: (i) simultaneously with Purchaser's execution of this
Agreement, Purchaser shall execute and deliver to Seller an escrow agreement in
the form annexed hereto and made a part hereof as Exhibit D (the "Escrow
Agreement") together with an unendorsed check of Purchaser or an official bank
check, in each case drawn on a member of the New York Clearing House Association
(the "NYCHA"), in the amount of One Hundred Thousand Dollars ($100,000.00) (the
"Contract Deposit") payable to the order of "Harris Beach & Wilcox, LLP as
escrow agent", to be held in escrow by Harris Beach & Wilcox, LLP (the "Escrow
Agent") in accordance with the terms and conditions of the Escrow Agreement and
(ii) on the Closing Date, Purchaser shall deliver to Seller an unendorsed
certified check of Purchaser or an official bank check, in each case drawn on a
member of the NYCHA, in an amount equal to the Assignment Price less the
Contract Deposit (such amount being hereinafter referred to as the "Balance").
Unless Purchaser defaults in its material obligations under this Agreement, the
Terms of Sale or the Acknowledgment, the Escrow Agent shall, on the Closing
Date, upon payment by Purchaser to Seller of the Balance, deliver to the Referee
the Contract Deposit to be applied on account of the Bid Price. If the Closing
does not occur, the interest on the Contract Deposit, if any, shall be paid to
the party entitled to the Contract Deposit. If the Closing does occur, the
interest on the Contract Deposit, if any, shall be paid to Seller.
5. Conditions to Closing. Purchaser's obligation to purchase
and assume the Bid is subject to and conditioned upon the Referee transferring
such title as is required pursuant to the Terms of Sale, subject only to: (i)
such items set forth in the Terms of Sale, (ii) such items that Chicago Title
Insurance Company, licensed or authorized to issue title insurance in the State
of New York ("Title Company"), shall be willing to insure in accordance with its
standard form of title policy approved by the New York State Insurance
Department, (iii) such items as have been waived pursuant to, or as otherwise
provided in, Section 5 of this Agreement and (iv) the following exceptions to
title set forth in A through M below (the items referred to in clauses (i)
through and including (iv) of this Section 5 are hereinafter collectively
referred to as the "Permitted Encumbrance"), it being the parties' intent that
the provisions of clause (iv) shall control in the event of any conflict between
the items set forth in said clause (iv) and the items set forth in clause (i)):
A. zoning and subdivision laws and regulations, and landmark, historic or
wetlands designations;
B. consents for the erection of any structures on, under or above any
streets on which the Mortgaged Premises abut;
C. encroachments of stoops, areas, cellar steps, trim and cornices, if any,
upon any street or highway;
D. real estate taxes, water charges, and sewer rents, subject to
apportionment as hereinafter provided;
E. party walls and party wall agreements;
F. any state of facts that a current survey of. the Mortgaged Premises and
a physical inspection of the Mortgaged Premises would disclose, provided same
does not render title unmarketable;
G. revocable nature of rights, if any, to maintain vaults and chutes under
the sidewalk;
H. rights of electric, gas, steam, telephone, cable, water and any other
utility companies to lay, maintain, install and repair pipes, lines, poles,
conduits, cables, boxes and related equipment upon, under and above the
Mortgaged Premises;
I. the standard printed exceptions set forth in Schedule B of a standard
form of title policy approved by the New York State Insurance Department;
J. any other matter which a Title Company shall be willing,
without special premium, to omit as an exception to coverage or to insure
against collection out of or enforcement against the Mortgaged Premises;
K. all notes or notices of violations of law or municipal
ordinances, orders or requirements noted in or issued by the Departments of
Housing and Building, Fire, Labor, Health or other State or Municipal Department
against or affecting the Mortgaged Premises; and
L. covenants, easements, agreements and restrictions of record
not presently violated by the existing improvements located on the Mortgaged
Premises, provided same do not result in rights of reversion.
M. the leases and tenancies existing in the Mortgaged Premises as of the
day of Closing.
(v) Purch aser understands and agrees that Seller shall not be liable to
Purchaser if the Referee for any reason whatsoever refuses to convey title to
the Mortgaged Premises to Purchaser unless such refusal is caused by the acts or
omissions of Seller or those acting on behalf of Seller, the Seller being
entitled to assign the bid.
<PAGE>
(vi) If the conditions set forth in this Section 5 are not satisfied on
or before the Closing Date for any reason whatsoever, other than Seller's
willful default, then Purchaser's sole remedy shall be to cancel this Agreement
by written notice to Seller given within five (5) business days after the
Closing Date and, upon such cancellation, the Escrow Agent shall return the
Contract Deposit to Purchaser, this Agreement shall be deemed null and void and
neither party hereto shall have any further rights, obligations or liabilities
against the other hereunder or otherwise with respect to the transactions
contemplated by this Agreement, except that tin the event of Seller's willful
default, Seller shall reimburse Purchaser for its actual out-of-pocket expenses.
Notwithstanding the above, in the event of Seller's willful default, Purchaser
shall be entitled to the remedy of specific performance.
6. Right of Inspection. A. During the period ending at 5:00
p.m. (local time at the Mortgaged Premises) on the thirtieth (30th) day
following delivery of a fully executed counterpart of this Agreement to
Purchaser's attorney, Mark H. Lundy, Esq. (hereinafter referred to as the
"Inspection Period"), Purchaser shall have the right to make a physical
inspection of the Mortgaged Premises, including an inspection of the
environmental condition thereof pursuant to the terms and conditions of this
Agreement, and to examine at the Mortgaged Premises (or the property manager's
office located in Manhattan, as the case may be) documents and files located at
the Mortgaged Premises or the property manager's office concerning the leasing,
maintenance and operation of the Mortgaged Premises, but excluding Seller's
limited liability company, partnership and/or corporate records, internal
memoranda, financial projections, budgets, appraisals, accounting and tax
records and similar proprietary, confidential or privileged information
(collectively, the "Confidential Documents").
B. Purchaser understands and agrees that any on-site
inspections of the Mortgaged Premises shall occur at reasonable times agreed
upon by Seller and Purchaser after reasonable prior written notice to Seller and
shall be conducted so as not to interfere unreasonably with the use of the
Mortgaged Premises by Seller or its tenants. In no event shall Purchaser be
permitted to conduct any testing with respect to property of tenants of the
Mortgaged Premises. Seller reserves the right to have a representative present
during any such inspections. If Purchaser desires to do any invasive testing at
the Mortgaged Premises, Purchaser shall do so only after notifying Seller and
obtaining Sellers prior written consent thereto, which consent may be subject to
any terms and conditions imposed by Seller in its sole discretion, including
without limitation the prompt restoration of the Mortgaged Premises to its
condition prior to any such inspections or tests, at Purchaser's sole cost and
expense, and the delivery to Seller of a general liability insurance policy
naming the Seller as an additional insured in form, scope and amount
satisfactory to Seller and with an insurance company approved by Seller. At
Seller's option, Purchaser will furnish to Seller copies of any reports received
by Purchaser relating to any inspections of the Mortgaged Premises. Purchaser
agrees to protect, indemnify, defend and hold Seller harmless from and against
any claim for liabilities, losses, costs, expenses (including reasonable
attorneys' fees), damages or injuries arising out of or resulting from the
inspection and testing of the Mortgaged Premises by Purchaser or its agents or
consultants, and notwithstanding anything to the contrary in this Agreement,
such obligation to indemnify and hold harmless Seller shall survive Closing or
any termination of this Agreement.
c. It is agreed and understood by and between Purchaser and
the Seller that at any time during the Inspection Period that Purchaser may
terminate this Agreement and that the Contract Deposit shall be returned to
Purchaser, provided that Purchaser has tendered a notice pursuant to Section 18
hereunder prior to the expiration of the Inspection Period (the "Termination
Notice"). It is agreed that the Purchaser may terminate this Agreement for any
reason, during the Inspection Period TIME BEING OF THE ESSENCE. If Purchaser
fails for any reason whatsoever to give Seller the Termination Notice, pursuant
to this the terms herein, and before the expiration of the Inspection Period, it
is hereby agreed that option to terminate this agreement as set forth in Section
6(c) is waived and shall be of no force and effect. Notwithstanding anything to
the contrary contained in this agreement Purchasers shall have the right object
to adverse changes in the title affecting the Mortgage Premises notice of which
are received from the Title Company during or after the expiration of the
Inspection Period.
7. Environmental Report. Purchaser will conduct prior expiration of the
Inspection Period, its own investigation of the environmental condition and
physical condition of the Mortgaged Premises to the extent Purchaser deems such
an investigation to be necessary or appropriate.
8.Title Examination: Limitation of Seller's Liability.
(a) Purchaser agrees that, after receipt of a fully executed
copy of this Agreement, it will promptly order a current title report with
respect to the Mortgaged Premises. Purchaser shall cause a copy of each title
report and any additions thereto to be delivered by Purchaser's title company to
Harris Beach & Wilcox, LLP contemporaneously with their delivery to Purchaser.
(b) Purchaser shall, within fifteen (15) days of receipt of a title report
and each addition thereto, give written notice to Seller (the "Objection
Notice") of any liens, encumbrances or other objections to title affecting the
Mortgaged Premises that Purchaser wants removed on or prior to the Closing,
other than the Permitted Encumbrances (collectively, the "Objections"). If
Purchaser delivers to Seller an Objection Notice within such fifteen (15) day
period, then all matters disclosed on the title report or addition thereto, as
the case may be, which are not objected to in such Objection Notice shall
irrevocably be deemed to be Permitted Encumbrances. If Purchaser fails to
deliver to Seller an Objection Notice within such fifteen (15) day period, then
all matters disclosed on the title report or addition thereto, as the case may
be, shall irrevocably be deemed to be Permitted Encumbrances. Upon receipt of
the Objection Notice, Seller, in Seller's sole and absolute discretion, by
notice given to Purchaser within fifteen (15) days after receipt of the
Objection Notice, shall elect either (i) to take such action as Seller may deem
advisable to remove, remedy, discharge or comply with the Objections that were
disclosed in the Objection Notice or (ii) to terminate this Agreement. If Seller
elects to remove, remedy, discharge or comply with any Objections that were
disclosed in the Objection Notice, then Seller shall be entitled to a reasonable
adjournment or adjournments of the Closing, for up to forty-five (45) days.
(c) If for any reason whatsoever, Seller shall not have
succeeded in removing, remedying, discharging or complying with any
Objections that were disclosed in the Objection Notice on or prior to the
Closing Date, and Purchaser is unwilling to waive the same and to close on the
acquisition of the Mortgaged Premises without abatement of the Bid Price or the
Assignment Price, then the Closing Date shall automatically be adjourned for ten
(10) days and either party may terminate this Agreement by notice to the other
given within such ten (10) day period. If this Agreement is terminated pursuant
to this Section 8 (other than as a result of Purchaser's or Seller's default),
then the Escrow Agent shall return the Contract Deposit and any interest earned
thereon to Purchaser, this Agreement shall be deemed null and void and neither
party hereto shall have any further rights, obligations or liabilities against
the other hereunder or otherwise with respect to the transactions contemplated
by this Agreement. Notwithstanding anything to the contrary, including without
limitation, Seller's election pursuant to clause (i) of Section 8(b) of this
Agreement, Seller shall not be required to bring any action or proceeding or to
incur any expense in order to enable the Referee to convey title to the
Mortgaged Premises as required by this Agreement. If neither party hereto
terminates this Agreement within the ten (10) day period described above, then
Purchaser shall be deemed to have waived all Objections and to have elected to
proceed to close the transactions described in this Agreement without any
abatement in the Bid Price or the Assignment Price and the Closing Date shall be
set by Seller, subject to the terms and conditions set forth in Section 2 of
this Agreement, within such ten (10) day period.
9. Outside Date. If the Closing shall not have occurred for
any reason (other than Seller's default under this Agreement, in which case the
provisions of Section 13(a) of this Agreement shall control, or Purchaser's
default under this Agreement, in which case the provisions of Section 13(b) of
this Agreement shall control), including, without limitation, by reason of any
action of the Mortgagor or of any guarantor of all or any portion of the
indebtedness secured by the Mortgage or of any principal, partner, agent or
representative of any of the foregoing, then this Agreement shall automatically
be terminated and be deemed null and void, the Escrow Agent shall return the
Contract Deposit to Purchaser and neither party hereto shall have any further
rights, obligations or liabilities against the other hereunder or otherwise with
respect to the transactions contemplated by this Agreement. The provisions of
this Section 9 shall not affect Seller's right to adjourn the Closing from time
to time as otherwise provided in this Agreement.
10. Closing Documents.
(a) At the Closing, Seller and Purchaser shall each execute,
acknowledge and deliver the following:
(i) An Assignment and Assumption of Bid in the form
annexed hereto and made a part hereof as Exhibit D; and
(ii) A New York City Real Property Transfer Tax Return and New York State
Combined Real Estate Transfer Tax Return and Credit Line Mortgage Form TP-584
and TP-584.1 (collectively, the "Tax Returns") in connection with the assignment
of the Bid;
<PAGE>
(b) At the Closing, Purchaser shall execute, acknowledge and
deliver the Tax Returns in connection with the delivery of the Referee's Deed;
(c) At the Closing, Purchaser shall execute, acknowledge and
deliver any other documents deemed reasonably necessary by Seller or by the
Referee to effectuate the transactions contemplated by this Agreement.
11. Closing Adjustments. To the extent that, as of the
Closing Date, any real estate taxes, water charges, sewer charges, assessments
or charges for street vaults affecting the Mortgaged Premises or other expenses
relating to the Mortgaged Premises shall have been paid and relate to a period
ending after the Closing Date (or if any of the proceeds of the Auction Sale
shall be applied to pay same or if Seller shall pay same in connection with the
Closing), then Purchaser shall reimburse Seller at the Closing for the Pro rata
portion thereof allocable to the period from and after the Closing Date. To the
extent that, as of the Closing Date, any real estate taxes, water charges, sewer
charges, assessments or charges for street vaults affecting the Mortgaged
Premises or other expenses relating to the Mortgaged Premises have not been paid
for the period ending as of midnight of the day immediately preceding the
Closing Date (and the proceeds of the Auction Sale are not being applied to pay
same, Seller is not paying same in connection with the Closing, same may become
liens on the Mortgaged Premises after the Closing Date and no tenant occupying a
portion of the Mortgaged Premises (a "Tenant") is obligated to pay or reimburse
the landlord under its lease for same), then Seller shall pay to Purchaser at
the Closing an amount equal to the pro rata portion thereof allocable to the
period ending as of midnight of the day immediately preceding the Closing Date.
All rents actually received from Tenants for the month in which the Closing
occurs shall be apportioned as of the Closing Date. There shall be no other
adjustments between the parties except as set forth in this Section 13 and in
Section 14 of this Agreement.
12. Intentionally Omitted
13. Default: Liquidated Damages.
(a) If Seller defaults in any of its obligations under this
Agreement, Purchaser's sole and exclusive remedy shall be either (i) to commence
an action in court for specific performance, or (ii) to terminate this Agreement
by giving notice to Seller within ten (10) days of Seller's default, in which
event the Escrow Agent shall return the Contract Deposit together with interest
earned thereon to Purchaser, this Agreement shall be deemed null and void and
neither party hereto shall have any further rights, obligations or liabilities
against the other hereunder or otherwise with respect to the transactions
contemplated by this Agreement.
(b) If Purchaser defaults in any of its obligations under
this Agreement, or if it should fail to close in accordance with the Terms of
Sale and/or this Agreement, the damages to Seller, while substantial, would be
difficult or impossible to determine with any kind of mathematical precision.
Thus, in such event, Seller will be entitled to, as liquidated damages, the
Contract Deposit, as Seller's sole remedy. Purchaser hereby acknowledges and
agrees that the provisions of this Section 15(b) represent an agreed upon
measure of damages and are not to be deemed a forfeiture or penalty.
14. Seller's Right to Adiourn the Closing. If Seller is unable
to close the transaction contemplated hereby on the Closing Date, then Seller
shall, at its sole discretion, elect by giving notice to Purchaser on or prior
to the scheduled date for the Closing to either (i) adjourn the date for the
Closing for a period not longer than thirty (30) days from the original closing
date and not any extended date, or (ii) terminate this Agreement, in which case
the Escrow Agent shall return the Contract Deposit to Purchaser, this Agreement
shall be deemed null and void and neither party hereto shall have any further
rights, obligations or liabilities against the other hereunder or otherwise with
respect to the transactions contemplated by this Agreement.
15. Broker. Purchaser and Seller represent to one another that
no agent, finder or broker, licensed or otherwise, other than Brittania
Services, Inc. and CRG Real Estate Services, LLC (collectively, the "Broker"),
brought about this transaction. Purchaser further represents that no agent,
finder or broker, licensed or otherwise, other than the Broker, brought the
Mortgaged Premises to Purchaser's attention or had any communication with
Purchaser in regard to the same. Seller shall pay, pursuant to a separate
agreement, any commission, fee or other compensation owing to the Broker as a
result of the transaction contemplated by this Agreement. Nothing contained in
this Agreement shall give any rights to the Broker (or any other party) to any
brokerage commission or other compensation in connection with the transactions
contemplated herein and any right to any such commission, fee or other
compensation shall be governed by a separate agreement. Purchaser and Seller
hereby agree to indemnify and hold the other party harmless from and against any
and all claims, liabilities, damages, costs and expenses (including, without
limitation, reasonable attorneys' fees) arising out of or in connection with any
claim arising out of a breach of the foregoing representations by such party.
The provisions of this Section 15 shall survive the Closing or earlier
termination of this Agreement.
16. Transfer Taxes. Seller shall pay the New York State Real
Estate Transfer Tax and New York City Real Property Transfer Tax (collectively,
the "Transfer Taxes") due on account of the assignment of Bid by Seller to
Purchaser and the conveyance of the Mortgaged Premises by the Referee to
Purchaser. Any and all Transfer Taxes which become due on account of any
assignment of this Agreement by Purchaser shall be paid by Purchaser. At the
Closing, Purchaser shall deliver to the Title Company issuing fee title
insurance in connection with acquisition of the Mortgaged Premises by Purchaser,
unendorsed certified checks of Purchaser, or official bank checks or such other
form of payment as is acceptable to such Title Company, payable to the order of
the appropriate governmental authorities, for the portion of the Transfer Taxes
to be paid pursuant to this Section 16.
17. No Other Representations or Warranties. Except as
specifically set forth herein, Purchaser hereby acknowledges and agrees that
Seller has not made, does not make and is unwilling to make any representations
or warranties as to any matter or thing affecting or related to the Mortgaged
Premises or title thereto or the transactions contemplated hereby, that
Purchaser has or will have inspected the Mortgaged Premises, including all of
the improvements situated thereon, and shall take the same "AS-IS WHERE-IS AND
WITH ALL FAULTS" and in its condition as of the Closing Date, and that Purchaser
is not relying upon any statement or representation made by Seller or any third
party, other than those expressly set forth herein. Notwithstanding the above,
Purchaser's obligations under this Agreement are conditioned upon there being no
material change in the condition of the Mortgaged Premises between the date of
this Agreement and the Closing Date.
18. Notices. Any notice, demand or request which under the
provisions of this Agreement may be or is required to be given shall be in
writing and shall be mailed by registered or certified mail, return receipt
requested, delivered in person or by Federal Express or other reputable
overnight courier, with receipt acknowledged, to Seller at the above address,
with a copy to Harris Beach & Wilcox, LLP, 250 Park Avenue, New York, New York
10177, Attn: C. Alan Reddy, Esq. and to Purchaser at the above address, with a
copy to Mark Lundy, Esq., c/o One Liberty Properties, Inc., 60 Cutter Mill Road,
Suite 303, Great Neck, New York 11021. Any notice, demand or request which is
(i) mailed shall be deemed to have been given three (3) days after the date of
mailing or (ii) delivered in person or by overnight courier shall be deemed
given on the date the notice was received. Counsel for either party shall be
authorized to give notices on behalf of the party which it represents. Addresses
for any party or its counsel may be changed by notice given in accordance with
this Section 18.
19. No Survival. Upon the acceptance by Purchaser of the
assignment and assumption of the Bid, all obligations, liabilities and
agreements on the part of Seller and all conditions to Purchaser's obligations
hereunder shall be deemed satisfied and discharged in full except those, if any,
which are herein specifically stated to survive closing. Unless otherwise
stated, no representation or warranty of Seller shall survive the Closing
hereunder.
20. No Assignment. This Agreement may not be assigned by
Purchaser without the express prior written consent of Seller and the assumption
by Purchaser's assignee. Any assignment or purported or attempted assignment
made without such consent shall be void and of no force or effect.
Notwithstanding the above, Purchaser may assign this Agreement without the
consent of Seller to an entity in which Purchaser has a majority interest.
Seller may not assign its interest except to Purchaser.
21. Modifications: Successors: Governing Law: Merger. This
Agreement may not be modified, changed, terminated or waived in any manner
whatsoever, except pursuant to a written agreement executed by both parties to
this Agreement. This Agreement shall be binding on, and inure to the benefit of,
Seller's and Purchaser's respective successors and assigns. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York. All prior agreements, letters and discussions of any nature whatsoever
regarding the Mortgaged Premises, the Mortgage or the transactions contemplated
by this Agreement are hereby merged into this Agreement, which is the full and
complete understanding of the parties with respect to the subject matter hereof.
22. Indemnity. Purchaser shall indemnify, defend and save
Seller harmless from each act or failure to act of Purchaser or any of
Purchaser's agents which may give rise to any liability, damage, cost or expense
to Seller in connection with the entry onto the Premises by Purchaser or any of
Purchasers agents prior to Closing.
23. No Recording. Without the prior written consent of Seller, neither this
Agreement nor a memorandum thereof shall be recorded by Purchaser, and such
recordation of this Agreement or memorandum thereof by Purchaser without the
prior written consent of Seller shall constitute a default hereunder by
Purchaser.
24. Counterparts. This Agreement may be executed in two or
more counterparts, each of which may be executed by one or more of the parties
hereto, but all of which, when taken together, shall constitute but one
Agreement binding upon all parties hereto.
25. Lease. Notwithstanding anything to the contrary contained
herein, Purchaser's obligations hereunder are conditioned upon (i) the Lease
dated September 10, 1987 between 300 Realty Co., as Landlord and The New York
City Transit Authority, as Tenant (the "Lease"),(a copy of which is annexed
hereto as Exhibit E) being in full force and effect with no material defaults,
it being understood that Seller may not terminate, amend or otherwise modify the
Lease without the prior written consent of Purchaser, and (ii) that Seller has
delivered to Purchaser an estoppel certificate from the Tenant under the Lease
in the form provided for in Article XIV of the Lease.
27. Notwithstanding anything to the contrary set forth herein in this
Agreement (i) in the event of any discrepancy between this Agreement and the
Terms of Sale, this Agreement shall govern and (ii) Purchaser shall not be
liable under the Terms of Sale and any fees called for therein shall be paid by
Seller.
SELLER: WHCS REAL ESTATE LIMITED PARTNERSHIP
a Delaware limited partnership
By: WHCS Gen-Par, Inc., a Delaware Corporation,
General Partner
By:/s/
Name: Stephen M. Abelman
Title: Assistant Vice President
PURCHASER: ONE LIBERTY PROPERTIES, INC.
By:/s/
Name: Mark H. Lundy
Title: Secretary
<PAGE>
LEASE made as of the day of July, 1987, between 300 REALTY CO., a New York
corporation having an office at 12th floor, 100 William Street, New York, New
York 10038, (hereinafter referred to as "Landlord") and THE NEW YORK CITY
TRANSIT AUTHORITY, a New York corporation having offices c/o Metropolitan
Transportation Authority Real Estate Department, 347 Madison Avenue, New York,
New York 10017 (hereinafter to as "Tenant").
Landlord and Tenant agree as follows:
Landlord hereby leases to Tenant and Tenant
hereby hires from Landlord the entire premises (the "Premises") located at and
known as
and by the street address 300 Gold Street, also known as 131-143 Flatbush
Avenue, Borough of Brooklyn, County of Kings, City and State of New York,
subject to any condition a search of title to the Premises may reveal, to have
and to hold the Premises for a term commencing on October 16, 1987, and ending
at midnight on October 15, 2002, unless sooner terminated as hereinafter
provided. Landlord represents to Tenant that Landlord is sole owner of fee title
to the land and the building comprising the Premises. Landlord represents that
the only mortgage presently encumbering the Premises is Independence Savings
Bank ("Present Mortgagee") mortgage number 3873107 having a maturity date of
December 1, 1987. Landlord represents that neither the land nor the building
comprising the Premises is presently under contract of sale.
ARTICLE I
RENT
SECTION 1. Tenant shall pay as rent for the Premises, without
demand or offset, the following:
(a) a fixed net rent ("fixed net rent") at the rate of Six Hundred Seventy-Five
Thousand Dollars ($675,000.00) per annum during the period October 16, 1987 to
and including October 15, 1992; Seven Hundred Fifty Thousand Dollars
($750,000.00) per annum during the period October 16, 1992 to and including
October 15, 1994; Eight Hundred Thousand Dollars ($800,000.00) per annum during
the period October 16, 1994, to and including October 15, 1997; and Eight
Hundred Fifty Thousand Dollars ($850,000.00) per annum during the period October
16, 1997, to and including October 15, 2002.
(b) all other sums and charges required to be paid by Tenant under the terms of
this Lease which shall be deemed to be and are sometimes hereinafter referred to
as "additional rent."
SECTION 2. The fixed net rent shall be payable in
equal monthly installments, in advance, on the first day of each and every
month.
In the event that the term of this Lease commences on a date other than the
first day of any calendar month, the fixed net rent for the Premises for the
period up to the first day of the succeeding calendar month shall be a pro rata
portion of the monthly installment of fixed net rent hereinbefore referred to.
SECTION 3. Tenant shall pay the fixed net rent
and additional rent in lawful money of the United States which shall be legal
tender
for the payment of all debts, public and private, at the time of payment, and
that portion thereof which is payable directly to Landlord shall be paid to
Landlord or its designee at the principal office of the Landlord or such
designee, as the case may be, or at such other place as Landlord may designate
by notice.
SECTION 4. The fixed net rent shall be absolutely net to
Landlord. The contents of the immediately preceding sentence shall not be deemed
to limit the obligations of Landlord set forth in this Lease, if any.
ARTICLE II
REPAIRS AND MAINTENANCE
SECTION 1. Tenant, at its sole cost and expense shall be responsible for
and shall take care of the Premises, and improvements thereon, the land,
sidewalks, curbs, and vaults, if any, adjoining the Premises, and shall keep all
of the same in good order and condition, and shall not suffer or commit waste or
injury, and shall make all appropriate repairs thereto, interior and exterior,
structural (subject to the terms of Section 2 of this Article II) and
nonstructural, ordinary as well as extraordinary, foreseen as well as
unforeseen. When used in this Lease, the term "repairs" shall include, when
appropriate, replacements, renewals or substitutions.
SECTION 2. Anything to the contrary contained in Section 1 of this Article
II notwithstanding, Landlord shall be responsible for repairs to the structural
components (the "Structural Components") which support the structure comprising
the building at the Premises and any asbestos removal required in accordance
with Article IV hereof. Structural Components are defined as footings, piers or
buttresses, columns, beams, slabs, exterior walls and load bearing walls.
Landlord shall not be responsible for repairs to Structural Components in the
event said repairs result from the negligence, acts and/or omissions of Tenant,
Tenant's agents, representatives or invitees. Anything to the contrary contained
in this Section 2 notwithstanding, Structural Components shall specifically not
include (i) any systems of the building, mechanical or otherwise, and the
equipment and fixtures comprising said systems, (ii) the roof of the building or
(iii) windows and window frames. Landlord shall not be responsible for
maintenance, painting or decoration. Landlord's obligations set forth in this
first paragraph of this Section 2 are subject to the terms and conditions of the
second paragraph of this Section 2 set forth immediately below.
Anything to the contrary contained in the first paragraph of this
Section 2 set forth immediately above notwithstanding, Tenant shall be
responsible to reimburse Landlord for the cost of repairs to Structural
Components made by Landlord in accordance with the first paragraph of this
Section 2 as follows:
(i) Tenant shall reimburse Landlord for the first $25,000.00
of the cost of repairs to Structural Components made by Landlord in
each year of the Lease (a year of the Lease shall run from October 16
through and including October 15) up to a maximum of $375,000.00 over
the term of this Lease.
(ii) Any excess in Landlord's cost of repairs to Structural
Components above $25,000.00 in any year of the Lease shall apply to
Tenant's obligations under this Section 2 for any other year of the
Lease during which Landlord's cost of repairs to Structural Components
is less than S25,000.00. The above-described year or years of the Lease
during which Landlord's cost of repairs to Structural Components is
less than $25,000.00 may occur either prior to or subsequent to the
subject year of the Lease during which Landlord's cost of repairs to
Structural Components is greater than S25,000.00.
(iii) The sums to be paid by Tenant to Landlord under this
Section 2 shall be deemed to be additional rent due under this Lease
and shall be due and payable not more than thirty (30) days after
Landlord bills Tenant for the same in each instance.
SECTION 3. Tenant, at its expense, shall keep the Premises and
improvements thereon clean and orderly and the sidewalks free from snow, ice,
rubbish and other obstructions.
ARTICLE III
TAXES AND ASSESSMENTS
SECTION 1. Tenant shall pay, or cause to be paid, as additional rent,
directly to the taxing authorities, no later than the last day on which they may
be paid without penalty or interest, all real estate taxes, assessments (or
installments thereof,) sewer rent, and water changes, and all other taxes and
charges (sometimes herein referred to collectively as "Impositions" and
individually as "Imposition") levied or imposed with respect to the Premises and
the improvements thereon and the land upon which the Premises is located (the
"land") or arising from the use, occupancy or possession by Tenant of the
Premises and the improvements. Landlord acknowledges that Tenant represents that
Tenant is exempt from paying any Impositions in accordance with New York State
Public Authorities Law Section 1216, and in the event Tenant is indeed so exempt
Landlord shall cooperate with Tenant at no out-of-pocket expense to Landlord (as
Tenant shall pay any such out-of-pocket expense) in Tenant's application for
said exemption. In no event shall Tenant's pursuing said exemption result in
Landlord's being responsible to pay the subject Imposition. With respect to
water and sewer charges only, the bills shall be sent to Landlord or Tenant and
the party receiving any such bill shall pay the same timely; in the event
Landlord pays any such bill, Tenant shall reimburse Landlord in full for such
payment within thirty (30) days of Landlord's presenting Tenant with evidence of
such payment; anything to the contrary contained in the immediately preceding
clause notwithstanding, Landlord shall only make such advancement of funds in
payment of water and sewer charges on behalf of the present Tenant at the time
of execution of this Lease, and in the event of assignment of this Lease (by
merger or otherwise), Landlord shall only be responsible to forward the bill to
Tenant and Tenant shall be responsible for timely payment; the party receiving
the receipt for payment of water and sewer charges shall send a copy of said
receipt to the other party within thirty (30) days of receipt of the same.
SECTION 2. Tenant's obligation to pay any assessments shall apply to
assessments, or installments thereof, which shall become due or payable during
the term hereof. Tenant however may take the benefit of the provisions of any
statute or ordinance permitting any such assessments to be paid in installments
over a period of time, but Tenant shall be obligated to pay all installments of
such assessments prior to the and of the term of this Lease regardless of
whether all said installments shall become due and payable during the term of
this Lease.
SECTION 3. Impositions, if any, (excepting assessments which are treated in
Section 2 of this Article III) whether or not a lien upon the Premises and/or
the improvements thereon, shall be apportioned between Landlord and Tenant upon
any termination of this Lease (other than a termination resulting from Tenant's
default) as of the date of such termination; it being intended that Tenant shall
pay as additional rent that portion of the Impositions as is allocable to the
term of this Lease.
SECTION 4. Tenant, at its sole cost and expense, may contest any
Impositions for the term of this Lease in any manner permitted by law, in
Tenant's name, and whenever necessary in Landlord's name. Landlord will
cooperate with Tenant provided such action is without out-of-pocket expense to
Landlord (as Tenant shall pay any such out-of-pocket expense) and that Landlord
will not incur any liability by reason thereof. Such contest may include appeals
from any judgments, decrees or orders until a final determination is made by a
court or governmental department or authority having final jurisdiction in the
matter. However, notwithstanding such contest, Tenant shall pay the contested
Imposition in the manner and on the dates provided for in this Article III. Any
tax refund with respect to Impositions paid by Tenant for the term of this Lease
shall be the property of Tenant.
SECTION 5. Tenant shall not be obligated to pay any franchise, excise,
corporate, estate, inheritance, successions, capital levy or transfer tax of
Landlord or any income, profits or revenue tax upon the income of Landlord or
any other tax, assessment, charge or levy upon the rent reserved under this
Lease. However, if a tax is levied upon the rent reserved hereunder in lieu of
or as a substitute in whole or in part for any of the Impositions, Tenant shall
pay it. Landlord acknowledges that Tenant represents that Tenant is exempt from
paying any Impositions in accordance with New York State Public Authorities Law
Section 1216, and in the event Tenant is indeed so exempt Landlord shall
cooperate with Tenant at no out-of-pocket expense to Landlord (as Tenant shall
pay any such out-of-pocket expense) in Tenant's application for said exemption.
In no event shall Tenant's pursuing said exemption result in Landlord's being
responsible to pay the subject tax levied upon the rent reserved hereunder as
described above.
SECTION 6. Subject to the terms of Section 1 of this Article III, Tenant
shall make payment of Impositions in a manner which will permit Tenant to obtain
a receipt therefor simultaneously with the payment therefor (for example, by
certified check). Tenant, within ten (10) days of its receipt of each relevant
receipt, shall furnish to Landlord photocopies of bills as receipted by the
taxing authorities.
SECTION 7. Tenant, at its sole cost and expense, shall pay all license and
permit fees, vault fees (if any) and charges, public utility charges, bridge,
tunnel and conduit franchise charges referable to the Premises and any vault (if
any) adjoining the Premises.
ARTICLE IV
COMPLIANCE WITH LAWS
SECTION 1. Tenant, at Tenant's sole cost and expense, shall
promptly and diligently comply with all now and hereafter existing laws and
ordinances and the orders, rules, regulations and requirements of federal, state
and municipal governments and departments thereof and quasi-governmental
offices, and the orders, rules, regulations and requirements of the applicable
Board of Fire Underwriters, if any, or of any other Board now or hereafter
constituted exercising similar functions, now or hereafter applicable to the
Premises, the land, the sidewalks, curbs, and vaults adjoining the Premises and
any improvements thereon and any work done thereat, ordinary or extraordinary,
foreseen or unforeseen, and whether or not such compliance shall require
structural changes or alterations.
Anything to the contrary contained in this Section 1
notwithstanding, Landlord shall be responsible to comply with New York City laws
in effect on and after the date of this Lease with regard to the removal of
asbestos from the Premises. Landlord's responsibility set forth in the
immediately preceding sentence shall not apply to (i) the removal of asbestos
which Tenant has brought into the Premises or (ii) any removal of asbestos
required in order to comply with laws which requirement for removal has resulted
from the act or omission of Tenant or (iii) any removal of asbestos required by
laws which specify that such compliance is a tenant obligation. Landlord's
responsibility set forth in this second paragraph of this Section 1 of Article
IV is subject to Tenant's cooperating with Landlord at no out-of-pocket expense
to Tenant including but not limited to Tenant's cooperating with Landlord's
moving Tenant's equipment and other items of personal property and generally
making relevant portions of the Premises accessible for the purpose of
Landlord's fulfilling said responsibility. Anything to the contrary contained in
this Lease notwithstanding, any sums expended by Landlord under Landlord's
obligations set forth in this second paragraph of this Section 1 of Article IV
shall be deemed to be included in the sums for which Landlord shall be entitled
to reimbursement from Tenant subject to the terms of Section 2 of Article II of
this Lease.
SECTION 2. Tenant, at Tenant's sole cost and expense,
in Tenant's name and, whenever necessary, in Landlord's name (provided Tenant
first
obtains the prior written consent of Landlord which consent shall not be
unreasonably withheld) may contest, in any manner permitted by law, the validity
or enforcement of any such law, ordinance, order, rule, regulation or
requirement and, if permitted by law, may defer compliance therewith pending
such contest (which contest shall be diligently prosecuted by Tenant) provided
that (a) such non-compliance shall not subject Landlord to criminal prosecution
or civil penalty, and (b) Landlord's estate in the Premises shall not be subject
to sale or be in jeopardy or be encumbered by reason of such non-compliance.
Subject to the terms of this Section 2, Landlord shall cooperate with Tenant
provided such action is without out-of-pocket expense to Landlord (as Tenant
shall pay any such out-of-pocket expense) and that Landlord will not incur any
liability by reason thereof.
ARTICLE V
INVALIDITY OF PARTICULAR PROVISIONS
If any term, covenant or condition of this Lease
or the application thereof to any person or circumstances, to any extent, shall
be
invalid or unenforceable, the remainder of this Lease, or the application of
such term, covenant or condition to persons or circumstances other than those as
to which it is held invalid and unenforceable shall not be affected thereby and
each term, covenant and condition of this Lease shall be valid and enforceable
to the fullest extent permitted by law.
ARTICLE VI USE OF PREMISES
The Premises may be used and occupied for a
police academy and related general offices for Tenant and ancillary parking and
for no
other purpose.
ARTICLE VII
RESPONSIBILITY FOR LEASED PREMISES
Subject to Landlord's obligations set forth in Section 2 of
Article II of this Lease, Tenant assumes the sole responsibility for the
condition, operation, maintenance and management of the Premises and holds
Landlord harmless from any claims on account thereof and Landlord shall have no
responsibility in respect thereof and shall have no liability for damage to the
property of Tenant or any tenant, subtenant or other occupant of or visitor to
the Premises or any portion thereof on any account or for any reason whatsoever;
provided, however, that nothing herein contained shall be construed to require
Tenant to pay the principal, or the interest, if any, payable on any
indebtedness secured by any mortgage constituting a lien on the fee simple of
the Premises under which Landlord is the mortgagor. Anything contained in this
Article VII to the contrary notwithstanding, Landlord shall be responsible for
Landlord's negligence at the Premises occurring during the term of this lease.
ARTICLE VIII
ASSIGNMENT AND SUBLETTING
SECTION 1. Tenant will not by operation of law or otherwise, (a) assign,
mortgage or encumber this Lease, or (b) sublet all or a portion of the Premises,
without first obtaining Landlord's prior express written consent in each
instance, which Landlord shall not unreasonably withhold or unduly delay. Tenant
must first submit to Landlord a true copy of the fully executed assignment or
sublease document prior to Landlord's review of the subject transaction for
consent. The consent by Landlord to any assignment or subletting shall not in
any manner be construed to relieve Tenant from obtaining Landlord's express
written consent to any other or further assignment or subletting nor shall any
such consent by Landlord or any assignment of this Lease or subletting of the
Premises by Tenant serve to relieve or release Tenant from its obligations to
fully and faithfully observe and perform all of the terms, covenants and
conditions of this Lease on Tenant's part to be observed and performed for which
the named Tenant herein shall remain primarily liable. Tenant shall furnish to
Landlord within five (5) days after execution thereof, a true copy of each such
assignment or sublease.
SECTION 2. Each sublease, license and concession and any renewal, extension
or modification thereof shall be and shall contain a provision (self-operative
and without further instruments of subordination) that it is subject and
subordinate to this Lease and any amendments, modifications and renewals hereof.
SECTION 3. As a condition of Landlord's consent to any assignment or
sublease:
(1) Tenant, at the time (a) of requesting Landlord's consent and (b) the
assignment becomes effective or the sublease term commences, shall not be in
default in the payment of any fixed net rent, additional rent, or other sums or
charges provided to be paid by Tenant hereunder and further that Tenant is not
then otherwise in default under this Lease;
(2) Each assignee of this Lease shall assume in writing all of the terms,
covenants and conditions of this Lease on the part of Tenant hereunder to be
performed and observed.
SECTION 4. If this Lease shall be assigned, or if the Premises or any part
thereof be sublet or occupied by any person or persons other than Tenant,
Landlord may, after default by Tenant, collect rent from the assignee, subtenant
or occupant and apply the net amount collected (which may be treated by Landlord
as rent or as use and occupancy) reserved to the rent herein but no such
assignment, subletting, occupancy or collection of rent shall be deemed a waiver
of the covenants in this Article VIII, nor shall it be deemed acceptance of the
assignee, subtenant, or occupant as a tenant, or a release of Tenant from the
full performance by Tenant of all the terms, conditions and covenants of this
Lease.
SECTION 5. Each permitted assignee or transferee shall assume and be deemed
to have assumed all obligations of the Tenant under this Lease and shall be and
remain liable jointly and severally with Tenant for the payment of the fixed net
rent, additional rent and adjustment of rent, and other charges, and for the due
performance of all the terms, covenants, conditions and agreements herein
contained on Tenant's part to be performed for the term of this Lease and any
renewals and modifications hereof. No assignment shall be binding on Landlord
unless, as hereinbefore provided, such assignee or Tenant shall deliver to
Landlord a duplicate original of the instrument of assignment which contains a
covenant of assumption by the assignee of all of the obligations aforesaid and
shall obtain from Landlord the aforesaid written consent prior thereto. Any
assignment, sublease or agreement permitting the use and occupancy of the
premises to which Landlord shall not have expressly consented in writing shall
be deemed null and void and of no force and effect.
SECTION 6. For the purposes of this Lease, any sale, transfer or assignment
of a majority of the issued and outstanding stock of a corporate tenant shall be
deemed an assignment.
SECTION 7. Anything to the contrary contained in this Article VIII
notwithstanding, Tenant, without being subject to the options afforded Landlord
herein, shall have the right to assign this Lease to the City or State of New
York or any entity into or with which Tenant is merged or consolidated subject
to all of the terms and conditions of this Lease.
ARTICLE IX
MECHANICS' LIENS
If any mechanics' liens shall be filed against
the Premises or any improvements thereon, other than those resulting from
Landlord's
work for which Landlord shall be responsible, Tenant, at its sole cost and
expense, (whether or not such a lien is valid or enforceable as such), within
thirty (30) days after the date of filing thereof, shall take such action by
bonding deposit, payment or otherwise as will discharge such lien, and Tenant
shall indemnify and save Landlord harmless against all costs, expenses,
liabilities, losses, fines and penalties, including reasonable attorneys fees
and disbursements resulting therefrom. The provisions of this Article IX shall
survive the expiration or sooner termination of this Lease.
ARTICLE X
INSURANCE
Tenant represents and Landlord acknowledges that Tenant is
self-insured. Therefore, Tenant shall not be required under the terms of this
Lease to obtain any particular insurance coverage with respect to the Premises.
Notwithstanding the foregoing, Tenant's status as a self-insured shall not
excuse Tenant from any liability or obligation under this Lease; to the
contrary, Tenant specifically agrees that Tenant shall at all times be
financially prepared to fulfill its obligations under this Lease without the
protection afforded by insurance coverage obtained from an outside entity.
Tenant indemnifies Landlord against any and all damages, losses or costs,
including but not limited to Landlord's reasonable attorneys fees and
disbursements, resulting from the claim of any party made against Landlord
regarding any item which is an obligation of Tenant under this Lease (subject to
the terms of General Obligations Law Section 5-321).
ARTICLE XI
DAMAGE AND DESTRUCTION
SECTION 1. In case of damage to or total or partial destruction of any
improvements now or hereafter located on the Premises, Landlord at its sole cost
and expense (whether or not the insurance proceeds are sufficient to cover the
cost thereof) diligently shall either:
(a) restore, replace, repair, rebuild or alter the damaged or destroyed
improvements, as nearly as practicable to the condition and character (exclusive
of Tenant's property or improvements therein) existing immediately prior to such
damage or destruction, or
(b) at its election, erect a new building and concomitant building equipment or
improvement.
Anything to the contrary contained in this Section 1
notwithstanding, in case of substantial or total damage or destruction of any
improvements now or hereafter located on the Premises, Landlord shall have the
option to cancel this Lease by written notice sent to Tenant not more than one
hundred fifty (150) days after the relevant damage or destruction setting forth
a new termination date for this Lease which new termination date shall be thirty
(30) days subsequent to the date of the above described Landlord's cancellation
notice.
SECTION 2. Commencing with calendar year 1988 Tenant shall
pay to Landlord as additional rent under this Lease, one hundred percent (100%)
of the cost of Landlord's Special Multi-Peril (SMP) insurance policy (or the
substitute policy or policies therefor) to the extent said cost is in excess of
Landlord's cost for said policy for calendar year 1987. In the event Landlord's
policy is part of a package policy covering properties in addition to the
Premises, the additional rent
under this Section 2 shall be calculated with regard to the cost of said
insurance allocated solely to the Premises. Tenant shall pay the sum due under
this Section 2 within ten (10) days of being billed by Landlord, in whole or in
part, for the same. For any year during the term of this Lease which covers only
a portion of a calendar year, the additional rent, if any, under this Section 2
shall be calculated on a pro rata basis comparing the cost for the subject year
against the cost for an equal portion of calendar year 1987.
SECTION 3. There shall be an abatement of fixed net rent under this Lease
by reason of damage or destruction to or at the Premises provided the Premises
are (i) untenantable, (ii) vacant and (iii) not used by Tenant. In the event the
Premises are partially (i) untenantable, (ii) vacant and (iii) not used by
Tenant, the abatement of fixed net rent shall be on a pro rata basis reflecting
that portion of the Premises so affected.
SECTION 4. Tenant hereby waives any and all
rights of Tenant under Section 227 of the Real Property Law of the State of New
York or
any other law of like import now or hereafter enacted.
SECTION 5. Tenant warrants and represents that in
the event the Premises becomes vacant (for reasons other than an insured peril),
Tenant shall continue to provide services and personnel to maintain the
Premises, the system of the Premises and security for the Premises.
ARTICLE XII
CHANGES AND ALTERATIONS
SECTION 1. Tenant may not make any structural changes, alterations or
additions to the Premises or any part thereof without first obtaining Landlord's
prior written consent in each instance, which consent shall not be unreasonably
withheld by Landlord provided Tenant's proposed changes, alterations or
additions will not: (i) change the nature, character or appearance of the
Premises (e.g. painting the building, putting up signs shall not be considered
to change the nature, character or appearance of the Premises); (ii) change the
amount of rentable square footage for the building portion of the Premises;
(iii) increase or decrease the size or change the shape of the structure of the
building portion of the Premises; and/or (iv) cause any structure to be erected
on the parking portion of the Premises. Tenant shall promptly deliver to
Landlord copies of all permits and approvals and as-built plans obtained by
Tenant in conjunction with any such structural changes, alterations or
additions.
SECTION 2. Tenant shall be permitted to make nonstructural interior
changes, alterations or additions to the Premises without obtaining Landlord's
prior written consent. Tenant shall promptly deliver to Landlord copies of all
permits and approvals and as-built plans obtained by Tenant in conjunction with
any such non-structural changes, alterations or additions. Tenant shall furnish
Landlord, prior to performing any work, with a certificate of Tenant's
architect, certifying that the desired changes, alterations or additions that
Tenant wishes to make are in effect non-structural. Anything to the contrary
contained in this Section 2 notwithstanding, in the event Tenant performs a
non-structural interior change, alteration or addition which is other than a
typical and ordinary office installation, Landlord shall have the right to
require Tenant, at its own expense, to remove such change, alteration or
addition and restore the subject space to its condition existing as of the
commencement date of this Lease, which removal and restoration shall be
completed on or before the later of (i) the termination date of this Lease or
(ii) a date sixty (60) days subsequent to Landlord's notice requiring said
removal and restoration.
SECTION 3. Tenant shall promptly furnish Landlord with copies of all plans
for all changes, alterations and additions, structural and non-structural,
exterior and interior, at the Premises (i) filed by Tenant with the Building
Department of the City of New York or other municipal authority or (ii) for
which work governmental permits and authorizations are required to be obtained.
SECTION 4.(a) No change or alteration shall be undertaken
until Tenant shall have procured and paid for all municipal and other
governmental permits and authorization of the various municipal departments and
governmental subdivisions having jurisdiction which are required with respect to
the particular phase of said change or alteration to be undertaken, and Landlord
agrees, at no expense to Landlord, to join in the application for such permits
or authorizations whenever such action is necessary, provided any plans required
to be filed in connection with any such application which require the approval
of Landlord pursuant to the foregoing subdivision have been approved as therein
provided.
(b) All work performed in connection with any
change or alteration shall be performed promptly and in a good and workmanlike
manner
of first class materials and in compliance with the building and zoning laws of
the City of New York and with all other laws, ordinances, orders, rules,
regulations and requirements of all federal, state and municipal governments and
the appropriate departments, commissions, boards and officers thereof,
applicable thereto and in accordance with all applicable orders, rules and
regulations of the New York Board of Fire Underwriters or any other body now or
hereafter constituted exercising similar functions.
(c) At all times when any changes or alterations
are in progress, there shall be maintained workmen's compensation insurance
covering
all persons employed in connection with the change or alteration and with
respect to whom death or bodily injury claims could be asserted against
Landlord, Tenant or the Premises, and general liability insurance for the mutual
benefit of Landlord and Tenant expressly covering the additional hazards due to
the change or alteration, with limits of not less than $5,000,000 per occurrence
in the event of death or bodily injury to persons with limits of $1,000,000 for
property damage or a combined single limit of $5,000,000 per occurrence. All
insurance of the character in this subdivision described shall be in a company
or companies of recognized responsibility licensed by the New York State
Department of Insurance to do business in the State of New York. Not less than
ten (10) days before the premium of each such policy shall become due and
payable and the amount thereof shall have been determined, Tenant agrees to pay
said premium or cause the same to be paid and simultaneously therewith furnish
Landlord with evidence of such payment.
(d) The cost of any changes and alterations shall
be paid when due in cash or its equivalent, so that the Premises shall be free
of
liens for labor and materials supplied to or claimed to have been supplied to
the Premises and free from any encumbrances, chattel mortgages, conditional
bills of sale, security interests or financing statements.
(e) No changes and alterations shall, when completed, tie in or connect the
Premises with any other building or structure or any adjoining property unless
and only to the extent approved in writing by Landlord.
SECTION 5. Upon the completion of any and all work performed at the
Premises Tenant shall obtain all related governmental and quasi-governmental
sign-offs, if required, and Tenant shall submit copies of the same to Landlord
within ten (10) days of the receipt of the same.
ARTICLE XII-A
BUILDING "AS IS"; VIOLATIONS
SECTION 1. Tenant accepts the Premises in its "as is" condition in all
respects on the commencement date of the term of this Lease and Tenant shall be
required to cure and effect the discharge of any and all violations affecting
the Premises which became or become of record on and after July 21, 1987. In
addition to the foregoing, Tenant shall comply with all requirements of Local
Law 5 of the City of New York to the extent that same applies to the Premises.
In addition to Tenant's responsibility regarding violations set forth above in
this Section 1, Tenant shall also be required to cure and cause the discharge of
any and all violations existing prior to July 21, 1987 provided the relevant
violation is the responsibility of Tenant under the Prior Lease (defined below
in Section 2 of this Article XII-A). Anything to the contrary contained in this
Section 1 of this Article XII-A notwithstanding, Landlord shall be responsible
to cure and discharge violations with respect to Structural Components (as
discussed in Section 2 of Article II of this Lease), except Tenant shall be
responsible to cure and discharge any such violations which result from the
negligence, acts and/or omissions of Tenant.
SECTION 2. Anything to the contrary contained in this Article XII-A
notwithstanding, Landlord agrees to perform certain work at the Premises.
Landlord and Tenant acknowledge that the Tenant is presently the tenant of the
Premises under the lease (the "Prior Lease") between Landlord and the New York
City Transit Authority dated November 18, 1971. Tenant agrees that Landlord
shall be permitted to perform the work ("Landlord's Work") set forth more
specifically below in Section 3 of this Article XII-A during the term of the
Prior Lease by Tenant's providing Landlord with access to the Premises during
normal business hours and other times as requested by Landlord and by the New
York City Transit Authority's cooperating with Landlord's moving Tenant's
equipment and other items of personal property and generally making relevant
portions of the Premises accessible for the Landlord's Work to be performed as
requested by Landlord. Landlord agrees to perform Landlord's Work within twelve
(12) months of the full execution of this Lease subject to delays caused by
items outside of the control of Landlord including but not limited to weather
conditions, labor disputes, obtaining permits, Tenant caused delays, etc. for
which delays Landlord's time for completion shall be extended for a period of
time equal to the period of any such delay. Strictly as an accommodation to
Tenant, Landlord shall endeavor to give Tenant notice of any such delay which
will result in Landlord's time for completion being extended. In the event
Landlord does not complete Landlord's Work in a timely manner in accordance with
the terms of the immediately preceding sentence, Tenant's sole remedy shall be
the right to complete Landlord's Work and to be reimbursed for the reasonable
costs incurred by Tenant in completing Landlord's Work. In order to be
reimbursed as provided for in the immediately preceding sentence, Tenant agrees
to provide Landlord with true copies of receipted bills which confirm all sums
for which Tenant requests reimbursement. In the event Tenant has not been
reimbursed as provided for in the immediately preceding two sentences within
forty-five (45) days after submitting to Landlord written request for
reimbursement accompanied by the above-described true copies of receipted bills,
then Tenant shall have the right to offset basic rent payments in order to
obtain said reimbursement in a sum equal to the reimbursement amount. Tenant
agrees to provide Landlord with ten (10) days prior written notice before Tenant
commences to complete Landlord's Work. Tenant acknowledges that upon Landlord's
completion of Landlord's Work Landlord shall have no responsibility for
maintaining any of the items included in Landlord's Work, but rather Tenant
shall be responsible to maintain said items and to surrender the same to
Landlord in good condition reasonable wear and tear excepted at the end of the
term of this Lease in accordance with the terms and conditions set forth in this
Lease.
Landlord agrees to assign to Tenant assignable warranties covering
Landlord's Work, if any. Landlord shall enforce its contractual rights, if any,
with contractors performing Landlord's Work to effect proper workmanship by said
contractors in performing Landlord's Work; the contents of this sentence shall
not be deemed to be a guaranty of said work by Landlord.
SECTION 3. The Landlord's Work to be performed by Landlord in accordance
with the terms of Section 2 of this Article XII-A is as follows:
(a) paint the exterior of the building portion of the Premises at previously
painted surfaces including pointing and caulking said surfaces as necessary.
(b) install a new ninety (90) pound roof over the existing roof on the garage
portion of the Premises.
(c) install the following new air-conditioning units:
(i) one (1) 7 and 1/2 ton unit (1st floor).
(ii) two (2) 10 ton units (1st and 6th floors)
(iii) eleven (11) 15 ton units (one on 1st floor and two on each of 2nd through
6th floors).
(d) repair air-conditioning controls to operate properly for the
replacement air-conditioning units set forth in clause (c)above.
(e) install new boiler which shall be a Rockwell model MP 200 burner iron
fireman model A04-9-8 or in the event said model is not available an equivalent.
(f) install a separate hot water heater of as great a capacity as is reasonably
capable of fitting in the boiler room under present conditions.
(g) replace broken window panes as follows:
6th floor - Room 601,2; Room 602,2; Gym,7. 5th floor - Room 501,2; 504,2; 506,1;
507,2; 508,2; men's toilet,1. 4th floor - Room 408,1; 421,2; 460,1; men's
toilet, 1. 3rd Floor - Room 309,3, Stairway, east side of building, 6th floor
landing, 1. Stairway, west side of building, 5th floor, 6; 4th floor, 4; 2nd
floor, 2; front door lobby, 1.
(h) make minor repairs to the Gold Street entrance door to the Premises so that
it operates properly.
(i) repair approximately twenty-four hundred (2400) square feet of sidewalk on
the Flatbush Avenue side of the Premises.
(j) repair following broken ceiling tiles:
6th floor - Room 602,1; Gym, 8; women's and men's toilets, 2 each.
5th Floor - Room 500,1; 501,6; 503,3, 504,28; 505,4; 506,1; 507,6; 511,6; men's
toilet,3; hallway, 5.
4th floor - Men's toilet, 5; Room 408,2.
3rd floor - Men's toilet,1; Hall, 17; Room 301,2; 304,1; 305,2; 306/08,6; 309,1.
2nd floor - Room 203,2; 204,11; 206,1; 207,1; hall,9
1st floor lobby, 8; hall,2; women's room,1; Range/Basement, 16; toilet,2.
(k) rehabilitate overhead steel garage doors so that they operate properly
(1) replaster following wall areas where required:
Room 601-602,gym, women's toilet. Room 504.
4th floor - women's toilet.
2nd floor - women's toilet, hallway, Room 204.
1st floor - women's toilet, entrance vestibule, Gold Street side.
(m) repaint all rooms and hallways on the 1st, 2nd, 3rd, 5th and Basement (Range
only) floors and repaint both stairways, basement through roof; said repainting
to be limited to previously painted surfaces.
(n) patch or resurface concrete front entrance steps to correct deterioration.
ARTICLE XIII
SURRENDER OF PREMISES: OWNERSHIP OF IMPROVEMENTS
SECTION 1. Until the termination of this Lease, title to any improvements
erected or installed by Tenant on the Premises before or after the entering into
of this Lease shall remain in Tenant, and Tenant alone shall be entitled to
claim all depreciation on Tenant's income tax returns for improvements. Upon any
termination of this Lease, all improvements then on the Premises must be fully
paid for by Tenant and shall become the property of Landlord, without payment or
offset, and shall be surrendered in accordance with the provisions of Section 2
of this Article XIII. Anything to the contrary contained in this Article XIII
notwithstanding, Tenant shall be permitted to remove fixtures specifically
incidental to law enforcement provided Tenant repairs Premises in relation to
said removal.
SECTION 2. Upon any termination of this Lease, Tenant shall peaceably and
quietly surrender the Premises and any improvements thereon in good order,
repair and condition.
SECTION 3. Ownership of all improvements located in or at the Premises,
except as otherwise specifically set forth in Section 1 of this Article XIII,
shall belong to Landlord, and Landlord alone shall be entitled to claim all
depreciation on Landlord's income tax returns for any such improvements.
ARTICLE XIV
NOTICES AND CERTIFICATES
SECTION 1. Any notice, consent, approval, request or demand
required or permitted to be given in this Lease shall be in writing sent by
registered or certified mail, return receipt requested, as the case bay be, to
Landlord at 12th Floor, 100 William Street, New York, New York 10038 and to
Tenant c/o Metropolitan Transportation Authority, 347 Madison Avenue, New York,
New York 10017 Attention: Director of Real Estate and to General Counsel, New
York City Transit Authority, 370 Jay Street, Brooklyn, New York 11201, or to
such other addresses as Landlord or Tenant shall designate in the manner herein
provided. Such notice, consent, approval, request or demand shall be deemed to
have been given on the date three (3) days after it shall have been mailed as
aforesaid.
SECTION 2. Within fifteen (15) days after request
by Tenant, Landlord, from time to time and without charge, shall deliver to
Tenant
or to a person, firm or corporation specified by Tenant, a duly executed and
acknowledged instrument certifying:
(a) that this Lease is unmodified and in full force and effect, or, if there has
been any modification, that the same is in full force and effect, as modified;
(b) whether Landlord knows of any default by Tenant in the performance by Tenant
of the terms, covenants and conditions of this Lease, and specifying the nature
of such defaults, if any; and
(c) the dates to which the fixed net rent and additional rent have been paid.
SECTION 3. Within fifteen (15) business days
after request by Landlord, Tenant, from time to time and without charge, shall
deliver to
Landlord or to a person, firm or corporation specified by Landlord, a duly
executed and acknowledged instrument certifying:
(a) that this Lease is unmodified and in full force and effect, or if there has
been any modification, that the same is in full force and effect as modified;
(b) whether Tenant knows of any default by Tenant or Landlord in the performance
by Tenant or Landlord of the terms, covenants and conditions of this Lease, and
specifying the nature of such defaults, if any; and
(c) whether Tenant knows of any then existing setoffs or defenses by Tenant to
the enforcement by Landlord of the terms, covenants and conditions of this Lease
and any modification thereto, and, if so, specifying them.
ARTICLE XV
WAIVERS, ETC.
The failure of Landlord or Tenant to insist upon
the strict performance of any of the terms, covenants and conditions of this
Lease,
or to exercise any right or remedy herein contained, shall not be construed as a
waiver or relinquishment for the future of such term, covenant or condition or
right or remedy. This Lease may not be changed or terminated orally.
ARTICLE XVI
QUIET ENJOYMENT
Tenant, subject to the terms of this lease, upon
paying the fixed net rent and additional rent and performing the other terms,
covenants and conditions of this Lease shall and may peaceably and quietly have,
hold, occupy, possess and enjoy the Premises during the term of this Lease.
ARTICLE XVII
EXCAVATIONS ON ADJOINING PROPERTY
If an excavation or other building operation shall be about to
be made or shall be made upon any adjoining premises or streets, at no
out-of-pocket expense to Tenant, Tenant agrees to cooperate with Landlord's
shoring the foundations of any building on the Premises and walls thereof, and
doing any other act or thing necessary for the preservation of any such building
and Landlord shall not be liable for any inconvenience, annoyance, disturbance
or loss of business or other damage arising therefrom, and Tenant's obligations
hereunder shall not be affected by reason thereof. Landlord and Tenant will
cooperate with each other, but at no expense to Tenant, in any action brought by
Landlord in conjunction with Landlord's actions under this Article XVII.
ARTICLE XVIII
TENANT'S ACCESS
Tenant shall be permitted access to the Premises twenty-four (24) hours a day
and seven (7) days a week.
ARTICLE XIX
NO SERVICES PROVIDED BY LANDLORD
(TENANT TO OBTAIN OWN HEAT, ELECTRICITY, WATER AND OTHER UTILITIES)
SECTION 1. Tenant acknowledges and it is expressly agreed that Landlord
shall not be required to furnish any services or supply any water, electricity,
gas, steam heat or any other utility to Tenant or to the Premises.
SECTION 2. Tenant shall obtain and pay for Tenant's entire supply of
electricity by direct application to and arrangement with the utility company
servicing the Premises and for the installation of any additional meter(s) and
electrical equipment as may be necessary in connection therewith (all of which
shall be at Tenant's sole cost and expense) and Landlord shall permit its wires
and conduits and any existing electric meter(s) in the building located at the
Premises to be utilized by Tenant for such purposes.
SECTION 3. All water supplied to any portion of the building located at the
Premises shall be measured by present water meter(s) or other meter(s) installed
by Tenant, at Tenant's sole cost and expense, and thereafter maintained,
throughout the term hereof at Tenant's sole cost and expense, in good working
order and repair to register such water consumption.
Tenant shall pay for all water consumption at the Premises and all charges
in connection therewith directly to the municipal authorities and Tenant shall
furnish to Landlord, promptly upon Tenant's receipt of the same, photocopies of
receipted water bills.
ARTICLE XX
CONDITIONAL LIMITATIONS, ETC.
SECTION 1. If at any time during the term of
this Lease:
(a) Tenant shall file a petition in bankruptcy or insolvency or for
reorganization or arrangement or for the appointment of a receiver of all or a
portion of Tenant's property, or
(b) any involuntary petition of the kind referred to in subdivision (a) of this
Section 1 shall be filed against Tenant and such petition shall not be vacated
or withdrawn within ninety (90) days after the date of filing thereof, or
(c) Tenant shall be adjudicated a bankrupt by any court, or
(d) Tenant shall make an assignment for the benefit of creditors, or
(e) a permanent receiver shall be appointed for the property of Tenant by order
of a court of competent jurisdiction by reason of the insolvency of Tenant
(except where such receiver shall be appointed in an involuntary proceeding, if
he shall not be withdrawn within ninety (90) days after the date of his
appointment), Landlord, at its option, may terminate this Lease on not less than
twenty (20) days' notice to Tenant, and this Lease shall come to an end upon the
date specified in said notice as though such date marked the natural expiration
of the term of this Lease, and upon such termination, Tenant shall quit and
surrender the Premises to Landlord.
The word "Tenant", as used in this Section 1, shall be deemed to mean that
Tenant herein named, or in the event of an assignment of this Lease by the
Tenant herein named or by any subsequent Tenant, in accordance with the
provisions of Article VIII, such word shall be deemed to mean only the then
assignee Tenant. Landlord shall not exercise the option to terminate this Lease
under the provisions of this Section 1 if all of the other terms, covenants and
conditions of this Lease, including without limitation, the payment of fixed net
rent and additional rent as and when they become due are performed by the
receiver or trustee or by the assignee for the benefit of creditors or by a
leasehold mortgagee or by any person, firm or corporation having an interest in
this Lease or, if the Tenant consists of more than one person, by any such
person other than the person who is bankrupt or insolvent.
SECTION 2. If:(a) Tenant shall fail to make any payment of any fixed net
rent, additional rent or other charges when the same becomes due and payable and
such default shall continue for a period of ten (10) days after notice by
Landlord to Tenant, or (b) (i) Tenant shall be in default in the performance of
any of the other terms, covenants and conditions of this Lease and such default
shall not have been remedied within thirty (30) days [except if nonremedy will
expose Landlord to civil or criminal penalties then fifteen (15) days] after
notice by Landlord to Tenant specifying such default and requiring it to be
remedied within such period of thirty (30) days [except if nonremedy will expose
Landlord to civil or criminal penalties then fifteen [15] days), or (ii) where
such default reasonably cannot be remedied within such period of fifteen (15) or
thirty (30) days, if Tenant shall not have commenced the remedying thereof
within such period of time and shall not be proceeding with due diligence to
remedy it, then Landlord, at its election, may terminate this Lease on not less
than sixty (60) days' notice to Tenant and this Lease shall come to an end upon
the date specified in said notice as though such date marked the natural
expiration of the term of this Lease, and upon such termination Tenant shall
quit and surrender the Premises to Landlord.
SECTION 3. If this Lease shall have been
terminated, pursuant to any of the provisions of this Article XX, or if Tenant
shall be in
default in the payment of fixed net rent, additional rent or other charges when
the same becomes due and payable and such default shall continue for a period of
ten (10) days after notice by Landlord to Tenant:
Landlord may upon notice to Tenant reenter and resume possession of the Premises
and the buildings and improvements thereon and remove all persons and property
therefrom either by summary dispossess proceedings or by a suitable action or
proceeding, at law or in equity, or by force or otherwise, without being liable
for any damage therefor.
SECTION 4. The words "re-enter" and "re-entry" as
used in this Article XX, are not restricted to their technical legal meaning.
SECTION 5. Omit.
SECTION 6. At any time (a) within thirty (30)
days prior to the expiration of the term of this Lease, or (b) after Landlord or
Tenant
shall have served any proper notice of termination of this Lease as provided for
in this Lease, but prior to the date of termination, or (c) after Landlord shall
have commenced a summary dispossess proceeding or an appropriate action or
proceeding to recover possession of the Premises but prior to the termination of
this Lease by reason of the issuance of a warrant in the dispossess proceeding
or the entry of a judgment in such other action or proceeding, all right, title
and interest of Tenant in and to all subleases, license agreements and
concession agreements affecting the Premises and the rent and fees payable
thereunder shall, at the option of Landlord exercised by Landlord's notice to
Tenant, be deemed to be assigned by Tenant to Landlord as of the date of the
service of such notice exercising such option subject to the prior assignment to
the leasehold mortgagee. Such assignment shall be deemed to be and shall be
effected as of the date of service of such notice without execution by Tenant of
any instrument. However, Tenant, at Landlord's request, shall execute,
acknowledge and deliver to Landlord an instrument in recordable form, confirming
such assignment.
SECTION 8. If this Lease is terminated under the
provisions of this Article XX, or if Landlord shall re-enter the leased premises
under the provisions of this Article XX, or in the event of the termination of
this Lease, or of re-entry, by or under any summary dispossess or other
proceeding or action or any provision of law by reason of default hereunder on
the part of Tenant, Tenant shall pay to Landlord as damages, at the election of
Landlord, on a monthly basis through the end of the term of this Lease (as if
this Lease had not been terminated), sums equal to the fixed net rent plus the
additional rent (as above presumed) payable hereunder which would have been
payable by Tenant had this Lease not been so terminated, or had Landlord not so
re-entered the Premises, payable upon the due dates therefor specified herein
following such termination or such reentry and until the expiration date of the
term of this Lease as set forth in this Lease had this Lease not been so
terminated, provided, however, that if Landlord shall relet the Premises during
said period, Landlord shall credit Tenant with the net rents received by
Landlord from such reletting, such net rents to be determined by first deducting
from the gross rents as and when received by Landlord from such reletting the
expenses incurred or paid by Landlord in terminating this Lease or in
re-entering the Premises and in securing possession thereof, as well as the
reasonable expenses of reletting, including brokers' commissions, consultants'
fees, rent concessions, advertising and all other reasonable and actual expenses
properly chargeable against the Premises and the rental therefrom but not
including preparing the Premises for new tenants; it being understood that any
such reletting may be for a period shorter or longer than the remaining term of
this Lease; but in no event shall Tenant be entitled to receive any excess of
such net rents over the sums payable by Tenant to Landlord hereunder, or shall
Tenant be entitled in any suit for the collection of damages pursuant to this
subsection to a credit in respect of any net rents from a reletting, except to
the extent that such net rents are actually received by Landlord. If the
Premises or any part thereof should be relet in combination with other space,
then proper apportionment on a square foot basis shall be made of the rent
received from such reletting and of the expenses of reletting.
If the Premises or any part thereof be relet by
Landlord for the unexpired portion of the term of this Lease, or any part
thereof,
before presentation of proof of such damages to any court, commission or
tribunal, the amount of rent reserved upon such reletting shall, prima facie, be
the fair and reasonable rental value for the Premises, or part thereof, so relet
during the term of the reletting.
Landlord shall not be obligated to but shall
attempt to (which attempt shall be deemed to be satisfactory to Tenant) relet
the
Premises in connection with this Section 8.
SECTION 9. Suit or suits for the recovery of such damages, or any installments
thereof, may be brought by Landlord from time to time at its election, and
nothing contained herein shall be deemed to require Landlord to postpone suit
until the date when the term of this Lease would have expired if it had not been
so terminated under the provisions of this Article XX or under any provision of
law, or had Landlord not re-entered the Premises. Nothing herein contained shall
be construed to limit or preclude recovery by Landlord against Tenant of any
sums or damages to which, in addition to the damages particularly provided for
above, Landlord may lawfully be be entitled by reason of any default hereunder
on the part of Tenant. Nothing herein contained shall be construed to limit or
prejudice the right of Landlord to prove for and obtain as damages by reason of
the termination of this Lease or re-entry on the Premises for the default of
Tenant under this Lease, an amount equal to the maximum allowed by any statute
or rule of law in effect at the time when, and governing the proceedings in
which, such damages are to be proved whether or not such amount be greater,
equal to, or less than any of the sums referred to in Section 8 of this Article
XX.
ARTICLE XXI
INSPECTION OF PREMISES BY LANDLORD
SECTION 1. Landlord, its agents or designees, shall have the right to enter
the Premises and the improvements thereon during reasonable business hours, and,
with respect to subdivisions (a) and (c), on reasonable notice to Tenant, for
the purpose of:
(a) inspecting them, and
(b) making any repairs to the Premises and performing any work therein that may
be necessary by reason of Tenant's default under any of the terms, covenants and
conditions of this Lease continuing beyond the applicable periods of grace and
(c) exhibiting the Premises for the purpose of sale, lease or mortgage.
Nothing in this Lease shall imply or impose any duty on Landlord to do any
work which Tenant is required to perform under this Lease and the performance
thereof by Landlord shall not constitute a waiver of Tenant's default.
SECTION 2. Landlord shall be permitted, during the last twelve (12) months
of the term of this Lease, to exhibit "for sale" and/or "for lease" signage on,
at and about the Premises in a customary manner. No such signage shall block
access to and from windows at the Premises.
ARTICLE XXII
LIMITATION OF LANDLORD'S LIABILITY
The term "Landlord", as used in this Lease, so far as Landlord's covenants
and agreements under this Lease are concerned, shall be limited to mean and
include only the owner or owners at the time in question of the fee title to the
Premises. In the event of any conveyance of such fee title, and regardless of
whether the grantee is financially responsible or solvent and notwithstanding
that the grantor may be a stockholder, officer or director of a corporate
grantee, Landlord herein named and each subsequent grantor shall be
automatically relieved, from and after the date of such conveyance, of all
personal liability as respects the performance of any of Landlord's covenants
and agreements thereafter to be performed, and such grantee shall be bound by
all such covenants and agreements; it being intended that Landlord's covenants
and agreements shall be binding on Landlord, its successors and assigns, only
during and in respect of their successive periods of ownership. However,
Landlord or such grantor shall turn over to the grantee all monies, if any, then
held by Landlord or such grantor on behalf of Tenant, and shall assign to such
grantee all right, title and interest of Landlord or such grantor in and to the
sums held by any depositary on behalf of Tenant under the terms, covenants and
conditions of this Lease. Tenant shall not look to any disclosed, or undisclosed
principal of any Landlord for performance of any of the terms, covenants and
conditions of this Lease.
ARTICLE XXIV
SUBORDINATION
SECTION 1. Landlord represents that Landlord is the fee owner
of the Premises.
SECTION 2. This Lease is subject and subordinate to the existing fee
mortgage affecting Premises and to all renewals, modifications, consolidations
and extensions of such mortgage and (subject to the provisions of Section 3 of
this Article XXIV) to all future mortgages which may hereafter affect the
Premises and to all renewals, modifications, consolidations, replacements and
extensions of such future mortgages. Landlord shall use its reasonable best
efforts (without the expenditure of money) to procure and deliver to Tenant a
non-disturbance agreement from the Present Mortgagee containing provisions no
less favorable to Tenant than contained in Section 4 of this Article XXIV
("Protection Provisions"); it being understood and agreed, however, that
Landlord shall have no obligation to procure such non-disturbance agreement.
SECTION 3. Notwithstanding anything to the contrary contained in this
Article XXIV, this Lease shall not be subordinate to any future fee mortgages or
to any renewals, modifications, consolidations, replacements and extensions
thereof (hereinafter all of the foregoing are collectively referred to as the
"Mortgage") unless and until Landlord shall procure and deliver to Tenant a
non-disturbance agreement from the holder of such Mortgage containing provisions
no less favorable to Tenant than contained in Section 4 of this Article XXIV.
Tenant agrees to enter into an attornment agreement with any holder of a
Mortgage that provides Tenant with a non-disturbance agreement with respect to
said Mortgage.
SECTION 4. The Protective Provisions to be contained in the non-disturbance
agreement referred to in Section 3 above shall provide in substance that unless
Tenant shall be in default under this Lease and the time to cure such default
has expired:
1. Neither Tenant nor any person claiming through or under Tenant shall be named
or joined as a party defendant in any action, suit or proceeding which may be
instituted or taken by the holder of any such Mortgage to foreclose its Mortgage
to collect the debt secured thereby;
2. Neither Tenant nor any person claiming through or under Tenant shall be
evicted from the Premises, nor shall the leasehold estate or possession of
Tenant or any person claiming through or under Tenant be terminated or
disturbed, nor shall any of the rights of Tenant or any person claiming through
or under Tenant be affected in any way, by reason of any default or event of
default under any such Mortgage; and in any case the rights under the Lease of
Tenant shall not be diminished, reduced or adversely affected in any way
whatsoever by reason of any default or event of default under such Mortgage or
the foreclosing of such Mortgage by reason of any default or event of default
thereunder;
3. if, at any time, the holder of such Mortgage (or such person's successors or
assigns, who acquires the interest of Landlord under this Lease through
foreclosure, or a deed in lieu of foreclosure, or otherwise) shall succeed to
the rights of Landlord under this Lease as a result of a default or event of
default under such Mortgage, as the case may be, and if Tenant is not then in
default under this Lease beyond the time permitted herein to cure such default,
then (1) this Lease shall not terminate, (2) Tenant shall attorn to and
recognize the person so succeeding to Landlord's rights (herein sometimes called
"Successor Lessor") as Tenant's landlord under this Lease, upon the then
executory terms and conditions of this Lease, and (3) Successor Lessor shall
accept such attornment and recognize Tenant as the Successor Lessor's tenant
under this Lease. Upon such attornment and recognition, this Lease shall
continue in full force and effect as, or as if it were, a direct lease between
the Successor Lessor and Tenant upon all of the then executory terms, conditions
and covenants as are set forth in this Lease.
SECTION 5. At the request of the Landlord or any such mortgagee, Tenant,
for itself, its successors and/or assigns, agrees to promptly execute any
certificate of subordination, provided the certificate and the subordination
provisions embodied therein are not in conflict with the subordination terms
provided in this Article XXIV.
ARTICLE XXV
BROKER
Tenant and Landlord covenant and represent that
they have dealt with no broker in connection with this Lease or the Premises
other
than Sylvan Lawrence Company, Inc. ("SLC"), and Tenant and Landlord agree to
hold the other party harmless from any claims for commission or other fees made
by any other broker claiming to have dealt with Tenant or Landlord respectively
in connection with this Lease or with the Premises. Landlord shall pay any
brokerage fees claimed by SLC and shall indemnify Tenant against any such claim
made by SLC.
ARTICLE XXVI
CONDEMNATION
SECTION 1. If at any time during the term of this Lease title to the whole
or materially all of the Premises shall be taken by the exercise of the right of
condemnation or eminent domain or by agreement between Landlord and those
authorized to exercise such right, this Lease shall terminate and expire on the
date when Landlord shall be divested of its interest of such taking and all
fixed net rent, additional rent and other charges shall be apportioned and paid
to the date of such taking. In such event, Tenant shall be entitled to
apportionment of fixed net rent and additional rent theretofore prepaid by
Tenant. For purposes of this Section 1, "materially all of the Premises" shall
be deemed to have been taken if the portion of the Premises not so taken cannot
be so repaired or reconstructed as to constitute a complete, rentable structure
available for the full intended use set forth in this Lease.
SECTION 2. If the whole or materially all of the demised premises shall be
taken by the exercise of a right of condemnation or eminent domain or by
agreement between Landlord and those authorized to exercise such right whereby
the term of this Lease would cease and expire as provided in Section 1 hereof,
Tenant shall have no claim for the value of any unexpired term of this Lease nor
have any right to participate in any condemnation award made as a result of such
taking. Anything to the contrary contained in the immediately preceding sentence
notwithstanding, Tenant shall be permitted to make a separate claim for Tenant's
costs of relocation and for fixtures specified in this Lease to remain the
property of Tenant under all circumstances provided (i) such separate claim is
permitted and (ii) such claim does not interfere with or result in a reduction
in any award to Landlord.
SECTION 3. If at anytime during the term of this Lease, title to less than
the whole or materially all of the Premises shall be taken as aforesaid, all of
the award or awards shall be paid over to Landlord. Repair and restoration of
the Premises shall be Landlord's responsibility.
SECTION 4. In the event title to less than the whole or materially all of
the Premises shall be taken as aforesaid, the terms, covenants and conditions of
this Lease shall not be modified by reason of said taking, except fixed net rent
shall be apportioned and equitably reduced from date of such taking.
ARTICLE XXVII
USE OF VAULT SPACE
Any vaults, if any, projecting beyond the building line, the use of which
is granted or licensed by the City of New York or by any other governmental
authority having jurisdiction thereover are not included in the Premises, but
Tenant may occupy and use them, during the term of this Lease, subject to such
laws, rules and regulations as may be imposed by the governmental authorities
granting or licensing such use. No revocation of such grant or license shall in
any way affect this Lease or the amount of fixed net rent or additional rent
payable by Tenant hereunder. If any such grant or license shall be revoked,
Tenant, at Tenant's sole cost and expense, shall do or cause to be done all work
necessary to comply with the order of revocation.
ARTICLE XXVIII
NO MERGER OF FEE AND LEASEHOLD ESTATES
There shall be no merger of this Lease nor of the leasehold estate created
by this Lease with the fee estate in the Premises or any part thereof by reason
of the fact that the same person, firm or corporation or other entity may
acquire or own such estates directly or indirectly, and no such merger shall
occur until all persons, firms, corporations and other entities, including the
leasehold mortgagee, having any interest in this Lease and the leasehold estate
created hereby and the fee estate in the Premises or any part thereof shall join
in a written instrument effecting such merger and shall duly record it.
ARTICLE XXIX
NO REPRESENTATION BY LANDLORD
Landlord has made no representations whatsoever with respect to the
Premises, except as herein expressly set forth. This Lease contains the entire
agreement between Landlord and Tenant and all prior negotiations and agreements
are merged herein. Without limiting the generality of the foregoing, no
representations have been made by Landlord as to the condition of the Premises
or the use to which they may be put nor as to the operating expenses thereof.
Except for any provisions to the contrary contained in this Lease, if any,
Tenant assumes the sole responsibility for the condition, maintenance and
management of the Premises and Landlord shall have no liability for damage to
any property on the Premises on any account or for any reason whatsoever.
ARTICLE XXX
DRAINS
Without limiting the generality of Tenant's maintenance obligations under this
Lease, Tenant shall at its sole cost and expense keep the drains, wastepipes,
sewer and connections with the Premises' main sewers, in or appurtenant to the
Premises (the "Drainpipes") in repair and free from obstructions. Further,
Tenant shall install grease traps where necessary to keep the Drainpipes free of
grease. Tenant shall also promptly repair any leaks in the Drainpipes. In the
event Tenant fails to properly perform the foregoing, Landlord may after
reasonable notice to the Tenant, have the same done at the Tenant's sole cost
and expense and all charges therefor shall be deemed additional rent hereunder.
ARTICLE XXXI
PERMITS
Tenant shall at Tenant's sole cost and expense obtain and maintain each and
every applicable permit, license, franchise or other authorization required for
the installation, maintenance and operation at the Premises of all of Tenant's
equipment therein, including but not limited to all equipment installed or
utilized by Tenant or Landlord.
ARTICLE XXXII
WAIVER OF COUNTERCLAIM
Tenant shall and hereby does waive its right and agrees not to interpose
any counterclaim or offset of whatever nature or description in any proceeding
or action which may be instituted by Landlord against Tenant to recover
possession of the Premises or for the collection of fixed net rent, additional
rent or other charges. This Article XXXII shall survive the termination or any
cancellation of this Lease or the term thereof. Nothing, however, contained in
this Article XXXII shall preclude Tenant from instituting a separate action
against Landlord with respect to any claim that Tenant may have against Landlord
or from moving to consolidate such action with any action or proceeding which
may have been instituted by Landlord; it being understood, however, that
Landlord may oppose any motion of consolidation.
ARTICLE XXXIII
ATTORNMENT
At the option of the Landlord or any successor landlord or the holder of
any mortgage affecting the Premises, Tenant agrees that neither the cancellation
nor termination of any ground or underlying lease to which this lease may
hereafter become subject or subordinate, nor any foreclosure of any mortgage
affecting the Premises nor the institution of any suit, action summary or other
proceeding against the Landlord herein or any successor landlord, or any
foreclosure proceedings brought by the holder of any such mortgage to recover
possession of such property, shall by operation of law or otherwise result in
cancellation or termination of this Lease or the obligations of the Tenant
hereunder, and upon the request of any such Landlord, successor landlord, or the
holder of such mortgage, Tenant covenants and agrees to attorn to the Landlord
or to any successor to the Landlord's interest in the Premises, or to such
holder of such mortgage or to the purchaser of the Premises in foreclosure.
ARTICLE XXXIV
"OMIT"
ARTICLE XXXV
"OMIT"
ARTICLE XXXVI
MEMORANDUM OF LEASE
The parties will at any time, at the request of either party, promptly
execute duplicate originals of an instrument in recordable form, which will
constitute a short form memorandum of this Lease, setting forth a description of
the Premises, the term of this Lease and any other provisions thereof, excepting
the rental provisions, as either party may request. Either party shall have the
right to record said memorandum of this Lease.
ARTICLE XXXVII
MISCELLANEOUS
SECTION 1. This Lease may be executed in any number of counterparts, each
of which shall be an original but all of which shall constitute one and the same
instrument.
SECTION 2. This Lease shall be governed under the laws of the State of New
York.
SECTION 3. The submission by Landlord of this Lease to Tenant shall confer
no rights nor impose any obligation on either party unless and until both
Landlord and Tenant shall have executed this Lease and duplicate originals have
been delivered to the respective parties hereto.
SECTION 4. The obligations of Tenant set forth in this Lease which are
intended to be performed and completed prior to the expiration of this Lease
shall survive the expiration or earlier termination of this Lease.
ARTICLE XXXVIII
SUCCESSORS BOUND
This Lease shall inure to the benefit of and be binding upon Landlord and
Tenant and their respective distributees, personal representatives, successors
and assigns except as otherwise provided herein.
<PAGE>
Non-Transferrable
Certificate for Rights
THE RIGHTS EVIDENCED HEREBY WILL EXPIRE AT 5:00 P.M., EASTERN TIME,
ON JUNE 15, 1998
(See Reverse hereof)
Certificate
No. _________
SUBSCRIPTION CERTIFICATE
Evidencing Right to Purchase Shares of Common Stock
Expiration Date June 15, 1998 ______ Rights
SUBSCRIPTION PRICE $_____ PER SHARE
ONE LIBERTY PROPERTIES, INC.
Incorporated under the laws of Maryland
REGISTERED OWNER:
<PAGE>
THIS CERTIFIES THAT
Is the registered owner of the number of Rights set forth above, each of
which entitles the owner to subscribe to purchase one share of Common Stock of
One Liberty Properties, Inc., a Maryland corporation (the "Company"), for each
Right held. The price to be paid to exercise each Right is ______.
The Rights are exercisable until 5:00 p.m., Eastern Time, on June 15, 1998. The
Rights are only exercisable upon the terms specified herein. The exercise of all
of the Rights represented by this certificate shall also entitle the holder to
exercise the Oversubscription Privilege to purchase shares not purchased by the
other holders of Rights, as more fully described in the Company's Prospectus
dated March ___, 1998.
The holder of this Rights Certificate, as such, shall not be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Common Stock
which may at any time be issuable upon the exercise hereof, nor shall anything
contained herein be construed to confer upon the holder hereof, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting of the
Company, or to give or withhold consent to any corporate action, or, to receive
notice of meetings or other actions affecting stockholders, or otherwise, until
all or a portion of the Rights evidenced by this Right Certificate have been
exercised and the shares of Common Stock have been issued
<PAGE>
This Certificate shall not be valid for any purpose unless countersigned by the
Rights Agent.
Witness the facsimile seal of the Company and facsimile signature of the proper
officers thereof.
DATED: March 31, 1998 Attest:
ONE LIBERTY PROPERTIES, INC.
By __________________________ ____________________________
MATTHEW J. GOULD, PRESIDENT MARK H. LUNDY, SECRETARY
SECTION 1 - BASIC SUBSCRIPTION EXERCISE
TO EXERCISE THE BASIC SUBSCRIPTION PRIVILEGE, complete this Section 1 and
Section 3 below and return this Subscription Certificate, with your payment to
American Stock Transfer & Trust Company at the address set forth in Section 3.
Number of Rights Exercised: ___________________________________
(Note: No fractional Rights may be exercised)
Payment due on exercise of Basic Subscription Privilege is number of Rights
exercised x ______ per Right exercised = $___________.
- ----------------------------------------------------------------------------
SECTION 2 - OVERSUBSCRIPTION EXERCISE
TO EXERCISE THE OVERSUBSCRIPTION PRIVILEGE, complete this Section 2 as well as
Section 1 and Section 3. You may not exercise the Oversubscription Privilege
unless you have exercised your Basic Subscription Privilege in full or, in the
case of securities held in street name, the particular beneficial owner has
exercised his Basic Subscription Privilege in full. (The actual number of shares
available for purchase will depend upon the number of basic Rights exercised by
all holders, and the other shareholders exercising the Oversubscription
Privilege, and is subject to proration as described in the Prospectus).
Number of Shares Subscribed For: _______________________(cannot exceed two
times the number of shares subject to the Basic Subscription Privilege).
Payment due on exercise of Oversubscription Privilege is number of Shares
subscribed for x _____ per Share = $ __________.
- ----------------------------------------------------------------------------
SECTION 3 - PAYMENT INSTRUCTIONS
Payment in Full For All Shares Subscribed For Under Section 1 and Section 2
Must Accompany this Certificate
Total payment* due under Section 1 plus Section 2 = $_______________. (*Make
your check payable to American Stock Transfer & Trust Company)
I hereby certify that I have been provided with a copy of the Prospectus and
tender payment of the purchase price for the shares sought to be purchased.
Authorized Signature of Subscriber ________________________________________
Print Name ________________________________________________________________
Telephone Number(s): ( )_________________________________________________
Social Security No.: ______________________________________________________
Please mail, deliver or wire transfer cash, check or money order payable to
American Stock Transfer & Trust Company for the total amount due to the Rights
Agent at the appropriate address below:
By Overnight or Express Delivery,
By Hand Delivery, or First Class Mail: By Facsimile Transmission:
American Stock Transfer & Trust Co. American Stock Transfer & Trust Co.
Reorganization Dept. Reorganization Dept.
40 Wall Street (718) 234-5001
New York, NY 10005
If you have any questions, call: American Stock Transfer at (718) 921-8200
- ----------------------------------------------------------------------------
SECTION 4 - DELIVERY INSTRUCTIONS
(Fill out ONLY if delivery is to be made to an address not shown on the other
side of this Certificate).
Name: ______________________________________________________________________
Address: ___________________________________________________________________
(Section2)
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 18, 1998, with respect to the consolidated
financial statements of One Liberty Properties, Inc. and March 11, 1998 with
respect to the statement of revenues and certain expenses of 300 Gold Street, in
the Registration Statement (Form S-11 No.333-45937) and related Prospectus of
One Liberty Properties, Inc. for the registration of 2,383,670 shares of its
common stock.
New York, New York Ernst & Young,LLP
March 26, 1998
