Use these links to rapidly review the documentTABLE OF CONTENTS Form 10-KPART IV
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31 | ||
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Or | ||
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 001-09279
ONE LIBERTY PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND (State or other jurisdiction of Incorporation or Organization) | 13-3147497 (I.R.S. employer Identification No.) | |
60 Cutter Mill Road, Great Neck, New York (Address of principal executive offices) | 11021 (Zip Code) |
Registrant's
Registrant’s telephone number, including area code:(516) (516) 466-3100
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol | Name of exchange on which registered | |||||
Common Stock, par value $1.00 per share | | OLP | | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:NONE
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes o◻No ý⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o◻No ý⌧
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý⌧ No o◻
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý⌧ No o◻
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company or an emerging growth company. See definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "small” “small reporting company"company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company ☒Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act. o◻
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Ifsecurities areregistered pursuant toSection 12(b)oftheAct,indicate bycheckmarkwhether thefinancial statements oftheregistrant included inthefilingreflectthecorrection ofanerrortopreviously issued financial statements. ☐
Indicate bycheckmarkwhether anyofthoseerrorcorrectionsarerestatementsthatrequired arecoveryanalysis ofincentive-based compensation received byanyoftheregistrant’sexecutive officers during therelevant recovery period pursuant to§240.10D-1(b). ☐
Indicate by check mark whether registrant is a shell company (defined in Rule 12b-2 of the Act). Yes o☐ No ý☒
As of June 30, 20172023 (the last business day of the registrant'sregistrant’s most recently completed second quarter), the aggregate market value of all common equity held by non-affiliates of the registrant, computed by reference to the price at which common equity was last sold on said date, was approximately $338$329 million.
As of March 1, 2018,2024, the registrant had 19,068,33621,253,398 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the 20182024 annual meeting of stockholders of One Liberty Properties, Inc., to be filed pursuant to Regulation 14A not later than April 30, 2018,29, 2024, are incorporated by reference into Part III of this Annual Report on Form 10-K.
Item No. | | Page(s) | ||||
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PART I |
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1. | Business | 1 | ||||
1A. | Risk Factors | 9 | ||||
1B. | Unresolved Staff Comments | 19 | ||||
2. | Properties | 19 | ||||
3. | Legal Proceedings | 25 | ||||
4. | Mine Safety Disclosures | 25 | ||||
PART II |
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5. | Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 26 | ||||
6. | Selected Financial Data | 28 | ||||
7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 32 | ||||
7A. | Quantitative and Qualitative Disclosures About Market Risk | 46 | ||||
8. | Financial Statements and Supplementary Data | 47 | ||||
9. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure | 47 | ||||
9A. | Controls and Procedures | 47 | ||||
9B. | Other Information | 48 | ||||
PART III |
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10. | Directors, Executive Officers and Corporate Governance | 51 | ||||
11. | Executive Compensation | 52 | ||||
12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 52 | ||||
13. | Certain Relationships and Related Transactions, and Director Independence | 53 | ||||
14. | Principal Accountant Fees and Services | 53 | ||||
PART IV |
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15. | Exhibits and Financial Statement Schedules | 54 | ||||
16. | Form 10-K Summary | 56 | ||||
Signatures | 57 |
Explanatory Note In the narrative portion of this Annual Report on Form 10-K, except as otherwise indicated or the context otherwise requires: Cautionary Note Regarding Forward-Looking Statements This Annual Report on Form 10-K, together with other statements and information publicly disseminated by us, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provision for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “could,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions or variations thereof and include, without limitation, statements regarding our future estimated contractual rental income, funds from operations, adjusted funds from operations and our dividend. Among other things, forward looking statements with respect to (i) estimates of rental income for 2024 may exclude variable rent, (ii) anticipated property sales may not be completed during the period indicated or at all, and (iii) estimates of gains from property sales are subject to adjustment, among other things, because actual closing costs may differ from the estimated costs. You should not rely on forward-looking statements since they involve known and 1 unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect actual results, performance or achievements. The uncertainties, risks and factors which may cause actual results to differ materially from current expectations include, but are not limited to: In light of the factors referred to above, the future events discussed or incorporated by reference in this report and other documents we file with the SEC may not occur, and actual results, performance or achievements could differ materially from those anticipated or implied in the forward-looking statements. Given these uncertainties, you should not rely on any forward-looking statements. Except as may be required under the United States federal securities laws, we undertake no obligation to publicly update our forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make in our reports that are filed with or furnished to the SEC. 2 PART I General We are a self-administered and self-managed real estate investment trust, also known as a REIT. We As of December 31, We maintain a website at www.1liberty.com. The reports and other documents that we electronically file with, or furnish to, the SEC pursuant to Section 13 or 15(d) of the In 2023, we: 3 Subsequent to Our Business Objective Our business objective is to Acquisition Strategies We seek to acquire properties throughout the United States that have locations, demographics and other investment attributes that we believe to be attractive. We believe that long-term leases provide a predictable income stream over the term of the lease, making fluctuations in market rental rates and in real estate values less significant to achieving our overall investment objectives. Our primary Generally, we hold the properties we acquire for an extended period of time. Our investment criteria are intended to identify properties from which increased asset value and overall return can be realized from an extended period of ownership. Although our investment criteria favor an extended period of ownership, we will dispose of a property if we regard the disposition of the property as an opportunity to realize the overall value of the property sooner or to avoid future risks by achieving a determinable return from the property. We identify properties through the network of contacts Our charter documents do not limit the number of properties in which we may invest, the amount or percentage of our assets that may be invested in any specific property or property type, or the concentration of investments in any region in the United States. We do not intend to acquire properties located outside of the United States. We will continue to form entities to acquire interests in real properties, either alone or with other investors, and we may acquire interests in joint ventures or other entities that own real property. It is our policy, and the policy of our affiliated entities (as described below), that any investment opportunity presented to us or to any of our affiliated entities that involves the acquisition of a net leased property, a ground lease (other than a ground lease of a multi-family property) or a community shopping center, will first be offered to us and may not be pursued by any of our affiliated entities unless we decline the opportunity. Further, to the extent our affiliates are unable or unwilling to pursue an acquisition of a multi-family property (including a ground lease of a multi-family property), we may pursue such transaction if it meets our investment objectives. Our affiliated entities include Gould Investors L.P. (“Gould Investors”), a master limited partnership involved primarily in the ownership and operation of a diversified portfolio of real estate assets, BRT Apartments Corp., a NYSE listed multi-family REIT and Majestic Property Management Corp., a property management company, which is wholly owned by Fredric H. Gould, our vice chairman. Investment Evaluation In evaluating potential investments, we consider, among other criteria, the following: 5 Our Tenants The following table sets forth information about the diversification of our tenants by industry sector as of December 31, Percentage of Number of Number of 2024 Contractual 2024 Contractual Type of Property Tenants Properties Rental Income (1) Rental Income Industrial 67 55 $ 47,114,698 66.1 Retail—General 53 27 11,160,441 15.7 Retail—Furniture 2 10 3,983,899 5.6 Health & Fitness 1 3 2,645,989 3.7 Retail—Office Supply(2) 1 5 2,085,527 2.9 Other 4 3 1,908,522 2.7 Restaurant 6 3 1,179,911 1.7 Theater 1 2 1,176,619 1.6 135 108 $ 71,255,606 100.0 Industrial Retail—General Retail—Furniture(1) Restaurant Health & Fitness Retail—Supermarket Retail—Office Supply(2) Theater Other Many of our tenants (including franchisees of national chains) operate on a national basis including, among others, Advanced Auto, Our Leases Most of our leases are net leases under which the tenant, in addition to its rental obligation, typically is responsible, directly or indirectly for expenses attributable to the operation of the property, such as real estate taxes and assessments, insurance and ordinary maintenance and repairs. The tenant is also generally responsible for maintaining the property and for restoration following a casualty or partial condemnation. The tenant is typically obligated to indemnify us for claims arising from the property and is responsible for maintaining insurance coverage for the property it leases and naming us an additional insured. Under some net leases, we are responsible for structural repairs, including foundation and slab, roof repair or replacement and restoration following a casualty event, and at several properties we are responsible for certain expenses related to the operation and maintenance of the property. Leases representing 69.2% of our 2024 contractual rental income provide for either periodic contractual rent increases Generally, our strategy is to acquire properties that are subject to existing long-term leases or to enter into long-term leases with our tenants. Our leases generally provide the tenant with one or more renewal options. The weighted average remaining term of our leases was 5.5 years, 5.9 years and 6.0 years at December 31, 2023, 2022 and 2021, respectively. The following table sets forth scheduled expirations of leases at our properties as of December 31, Percentage of Approximate 2024 Contractual Number of Square Footage 2024 Contractual Rental Income Expiring Subject to Rental Income Under Represented by Year of Lease Expiration (1) Leases Expiring Leases (2) Expiring Leases Expiring Leases 2024 15 647,889 $ 2,575,111 3.6 2025 15 660,289 5,477,987 7.7 2026 19 1,007,595 6,229,965 8.7 2027 35 2,185,789 14,520,670 20.4 2028 22 1,442,680 9,831,127 13.8 2029 13 1,276,554 7,174,637 10.1 2030 13 625,026 6,679,464 9.4 2031 7 864,358 4,320,061 6.1 2032 9 325,456 3,250,054 4.6 2033 10 860,631 7,533,634 10.5 2034 and thereafter 7 829,976 3,662,896 5.1 165 10,726,243 $ 71,255,606 100.0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 and thereafter Financing, Re-Renting and Disposition of Our Properties Our We mortgage specific properties on a non-recourse basis, subject to With respect to properties we acquire on a free and clear basis, we usually seek to obtain long-term fixed-rate mortgage financing, when available at acceptable terms, shortly after the acquisition of such property to avoid the risk of movement of interest rates and fluctuating supply and demand in the mortgage markets. We also will acquire a property that is subject to (and will assume) a fixed-rate mortgage. Substantially all of our mortgages provide for amortization of part of the principal balance during the term, thereby reducing the refinancing risk at maturity. Some of our properties may be financed on a cross-defaulted or cross-collateralized basis, and we may collateralize a single financing with more than one property. In advance of the termination or expiration of any lease relating to any of our properties, we investment for income purposes and do not typically engage in the turnover of investments. We will consider the sale of a property if a sale appears advantageous in view of our investment objectives. If there is a substantial tax gain, we may seek to enter into a tax deferred transaction and reinvest the proceeds in another property. Cash realized from the sale of properties, net of required payoffs of the related mortgage debt, if any, required paydowns of our credit facility, and distributions to stockholders, is available for general working capital purposes and the acquisition of additional properties. Competition The U.S. commercial real estate investment market, and in particular, the market for industrial properties, is highly competitive. We compete with many entities engaged in the acquisition, leasing and operation of commercial properties. As such, we compete with other investors for a limited supply of properties Regulation Environmental Investments in real property create the potential for environmental liability on the part of the owner or operator of such real property. If hazardous substances are discovered on or emanating from a property, the owner or operator of the property may be held strictly liable for all costs and liabilities relating to such hazardous substances. We generally obtain a Phase I environmental study (which involves inspection without soil sampling or ground water analysis) conducted by independent environmental consultants prior to acquiring a property and, in certain instances, have conducted additional investigations. We do not believe that there are hazardous substances existing on our properties that would have a material adverse effect on our business, financial position or results of operations. We do not carry insurance coverage for the types of environmental risks described above. We believe that we are in compliance, in all material respects, with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. Furthermore, we have not been notified by any governmental authority of any noncompliance, liability or other claim in connection with any of our properties, that we believe would have a material adverse effect on our business, financial position or results of operations. Americans with Disabilities Act of 1990 Our 8 Other Regulations Human Capital Resources As of December 31, 2023, we had 10 full-time employees In We provide a competitive benefits program to help meet the needs of our employees. In addition to salaries, the program includes annual cash bonuses, stock awards, contributions to a pension plan, healthcare and insurance benefits, health savings accounts, paid time off, family leave and an education benefit. Employees are offered great flexibility to meet personal and family needs and regular opportunities to participate in professional development programs. Most of our employees have a long tenure with us, which we believe is indicative of our employees’ satisfaction with the work environment we provide. We maintain a work environment that is free from discrimination or harassment on the 9 Information about our Executive Officers Set forth below is a list of our executive officers whose terms expire at our 2024 annual board of directors’ meeting. The business history of our executive officers, who are also directors, will be provided in our proxy statement to be filed with the SEC not later than April 29, 2024: NAME AGE POSITION WITH THE COMPANY Matthew J. Gould* 64 Chairman of the Board Fredric H. Gould* 88 Vice Chairman of the Board Patrick J. Callan, Jr. 61 President, Chief Executive Officer and Director Lawrence G. Ricketts, Jr. 47 Executive Vice President and Chief Operating Officer Jeffrey A. Gould* 58 Senior Vice President and Director Isaac Kalish** 48 Senior Vice President and Chief Financial Officer David W. Kalish** 76 Senior Vice President—Financial Officer Mark H. Lundy 61 Senior Vice President Israel Rosenzweig 76 Senior Vice President Richard M. Figueroa 56 Senior Vice President Justin Clair 41 Executive Vice President Mili Mathew 40 Vice President—Financial Alysa Block 63 Treasurer * Matthew J. Gould and Jeffrey A. Gould are Fredric H. Gould’s sons. ** Isaac Kalish is David W. Kalish’s son. Lawrence G. Ricketts, Jr. Mr. Ricketts has been our Chief Operating Officer since 2008, Executive Vice President since 2006 and served as Vice President from Isaac Kalish. Mr. Kalish has served as our Chief Financial Officer since 2023, as Senior Vice President since 2022 and as Vice President from 2013 through 2022. He has served as Treasurer of the managing general partner of Gould Investors since 2013 and as its Assistant Treasurer from 2012, as Senior Vice President since 2022, as Vice President and Treasurer of BRT Apartments Corp. since 2013 and 2014, respectively, and as its Assistant Treasurer from 2009 through 2013. He is a certified public accountant. David W. Kalish. Mr. Kalish has served since 2023 as our Senior Vice President-Finance, and from Mark H. Lundy. Mr. Lundy has served as our Israel Rosenzweig. Mr. Rosenzweig has served as our Richard M. Figueroa. Mr. Figueroa has served as our Senior Vice President since 2019, as Vice President from 2001 through 2019, as Vice President of BRT Apartments from 2002 through 2019 and as Vice President of the managing general partner of Gould Investors since 1999. Mr. Figueroa is an attorney admitted to 10 Mili Mathew. Ms. Mathew has served as Chief Accounting Officer since 2023, Vice President—Financial, since 2022, as Assistant Vice President—Financial, from 2020 through 2022, and has been employed by us since 2014. Alysa Block. Ms. Block has been our Treasurer since 2007 and served as Assistant Treasurer from 1997 to 2007. Ms. Block also served as the Set forth below is a discussion of certain risks affecting our business. The categorization of risks set forth below is meant to help you better understand the risks facing our business and is not intended to limit your consideration of the possible effects of these risks to the listed categories. Any Risks Related to Our Business If we are unable to re-rent properties upon the expiration of our leases or if our tenants default or seek bankruptcy protection, our rental income will be reduced and we would incur additional costs. Substantially all of our rental income is derived from rent paid by our tenants. From Percentage of Number of 2024 Contractual 2024 Contractual Leases Expiring December 31, Leases Rental Income Rental Income 2024 - 2026 49 $ 14,283,063 20.0 2027 - 2029 70 31,526,434 44.3 If our tenants, and in particular, our significant tenants, (i) do not renew their leases upon 11 Our portfolio of properties is concentrated in the industrial and Approximately Traditional retail tenants account for 24.2% of our 2024 contractual rental income and the competition that such tenants face from e-commerce retail sales could adversely affect our business. Approximately 24.2% of our 2024 contractual rental income is derived from retail tenants, including 5.6% from tenants engaged in selling furniture (i.e., Havertys Furniture accounts for 4.7% of 2024 contractual rental income) and 2.9% from a tenant engaged in selling office supplies (i.e., Office Depot, a tenant at five properties, one of which is currently closed but for which the tenant continues to pay rent and the lease expires in May 2025). Because e-commerce retailers (unlike “bricks and mortar” or “traditional” retailers) may be able to provide customers with better pricing and the ease, comfort and safety of shopping from their home or office, our retail tenants face extensive competition from e-commerce retailers. E-commerce sales decrease the need for traditional retail outlets and reduce retailers’ space and property requirements. This adversely impacts our ability to rent space at our retail properties and increases competition for retail tenants thereby reducing the rent we would receive at these properties and adversely affecting our results of operations, cash flow and financial condition. Approximately 22.3% of our 2024 contractual rental income is derived from five tenants. The default, financial distress or failure of any of these tenants, Write-offs of unbilled rent receivables and intangible lease assets will reduce our net income, total assets and stockholders’ equity and may result in breaches of financial covenants under our credit facility. At December 31, 2023, the aggregate of our unbilled rent receivable and intangible lease assets is $31.3 million (including $14.7 million of intangible lease assets): six tenants ( 12 The concentration of our properties in certain states makes our revenues and the value of our portfolio vulnerable to adverse changes in local economic conditions. Approximately 47.2% of our 2024 contractual rental income is derived from Declines in the value of our properties could result in impairment charges. If we are presented with indicators of impairment in the value of a particular property or group of properties, we will be required to perform an impairment analysis for such property or properties. If we determine that any of our properties at which indicators of impairment exist have undiscounted cash flows below the net book value of such property, we will be required to recognize an impairment charge for the difference between the fair value and the book value during the quarter in which we make such determination. Any impairment charge would reduce our net income and stockholder’s equity. Our The tenants of our net-leased properties are responsible for maintenance and other day-to-day management of the properties. If a property is not adequately maintained in accordance with the terms of the applicable lease, we may incur expenses for deferred maintenance or other liabilities once the property is no longer leased. While we visit our properties on an intermittent basis, these visits are not comprehensive inspections and deferred maintenance items may go unnoticed. While our leases generally provide for recourse against the tenant in these instances, a bankrupt or financially-troubled tenant may be more likely to A significant portion of our leases are long-term and do not have fair market rental rate adjustments, which could negatively impact our income and reduce the amount of funds available to make distributions to stockholders. A significant portion of our rental income comes from long-term net leases. There is an increased risk with Risks Related to Our Financing Activities, Indebtedness and If we are unable to refinance our mortgage loans at maturity, we may be forced to sell properties at disadvantageous terms, which would result in the loss of revenues and in a decline in the value of our portfolio. We had, as of December 31, 13 Generally, only a portion of the principal of our mortgage indebtedness will be repaid prior to or at maturity and we do not plan to retain sufficient cash to repay such indebtedness at maturity. Accordingly, to meet these obligations if they cannot be refinanced at maturity, we will have to use funds available under our credit facility, if any, and our available cash and cash equivalents to pay our mortgage debt or seek to raise funds through the financing of unencumbered properties, sale of properties or the issuance of additional equity. From We may find that the value of a property could be less than the mortgage secured by such property. We may also have to decide whether we should refinance or pay off a mortgage on a property at which the mortgage matures prior to lease expiration and the tenant may not renew the lease. In these types of situations, after evaluating various factors, including among other things, the Increases or volatility in interest rates, or reduced access to credit markets, may make it difficult for us to obtain financing, refinance mortgage debt, limit the mortgage debt available on properties we wish to acquire and limit the properties we can acquire. Even in the event that we are able to secure mortgage debt on, or otherwise finance our real estate properties, due to increased costs associated with securing financing and other factors beyond our control, we may be unable to refinance the entire outstanding loan balance or be subject to unfavorable terms (such as higher loan fees, interest rates and periodic payments) 2018 2019 2020 2021 2022 2023 and thereafter Principal Balances Weighted Average Due at Interest Rate Year Maturity Percentage 2024 $ 49,906 4.72 2025 30,850 4.32 2026 19,179 3.88 2027 38,524 3.64 2028 30,155 4.64 2029 and thereafter 168,560 4.29 We manage a substantial portion of our exposure to interest rate risk by accessing debt with staggered maturities, obtaining fixed rate mortgage debt and by fixing the interest rate on substantially all of our variable rate debt through the use of interest rate swap agreements. However, no amount of hedging activity can fully insulate us from the risks associated with changes in interest rates. Swap agreements involve risk, including that counterparties may fail to honor their obligations under these arrangements, and 14 us to pay higher interest rates on our debt obligations than would otherwise be the case. Failure to hedge effectively against interest rate risk could adversely affect our results of operations and financial condition. Because REIT stocks are often perceived as high-yield investments, investors may perceive less relative benefit to owning REIT stocks as interest rates and the yield on government treasuries and other bonds increase or are especially volatile. Accordingly, increases and volatility in interest rates may reduce the amount investors are willing to pay for our common stock. If our borrowings increase, the risk of default on our repayment obligations and our debt service requirements will also increase. Our Failure to meet interest and other payment obligations under our revolving credit facility or a breach by us of the covenants to maintain the financial ratios Certain of our 15 applicable mortgage and as otherwise provided by law, including the possible appointment of a receiver to manage the property, application of deposits or reserves maintained under the mortgage for payment of the debt, or foreclose and/or cause the forced sale of the property or asset securing such debt. A foreclosure or other forced disposition of our Risks Related to Real Estate Investments Our revenues and the value of our portfolio are affected by a number of factors that affect investments in leased real estate generally. We are subject to the general risks of investing in leased real estate. These include the non-performance of lease obligations by tenants, leasehold improvements that will be costly or difficult to remove should it become necessary to re-rent the leased space for other uses, covenants in certain retail leases that limit the types of tenants to which available space can be rented (which may limit demand or reduce the rents realized on re-renting), rights Real estate investments are relatively illiquid and their values may decline. Real estate investments are relatively illiquid. Therefore, we will be limited in our ability to reconfigure our real estate portfolio in response to economic changes. We may encounter difficulty in disposing of properties when tenants vacate either at the expiration of the applicable lease or otherwise. If we decide to sell any of our properties, our ability to sell these properties and the prices we receive on their sale may be affected by many factors, including the number of potential buyers, the number of competing properties on the market and other market conditions, as well as whether the property is leased and if it is leased, the terms of the lease. As a result, we may be unable to sell our properties for an extended period of time without incurring a loss, which would adversely affect our results of operations, liquidity and financial condition. Uninsured and underinsured losses may affect the revenues generated by, the value of, and the return from a property affected by a casualty or other claim. Most of our tenants obtain, for our benefit, comprehensive insurance covering our properties in amounts that are intended to be sufficient to provide for the replacement of the improvements at each property. However, the amount of insurance coverage maintained for any property may be insufficient (i) to pay the full replacement cost of the improvements at the property following a casualty event or (ii) if coverage is provided pursuant to a blanket policy and the tenant’s other properties are subject to insurance claims. In addition, the rent loss coverage under the policy may not extend for the full period of time that a tenant may be entitled to a rent abatement as a result of, or that may be required to complete restoration following, a casualty event. In addition, there are certain types of losses, such as those arising from earthquakes, floods, hurricanes and terrorist attacks, that may be uninsurable or that may not be economically insurable. Changes in zoning, building codes and ordinances, environmental considerations and other factors also may make it impossible or impracticable for us to use insurance proceeds to replace damaged or destroyed improvements at a property. If restoration is not or cannot be completed to the extent, or within the period of time, specified in certain of our leases, the tenant may have the right to terminate the lease. If any of these or similar events occur, it may reduce our revenues, the value of, or our return from, an affected property. 16 We have been, and We have been, and Our current and future investments in joint ventures could be adversely affected by the lack of sole decision making authority, reliance on joint venture joint venture partners and their respective affiliates, Regulatory and Tax Risks Compliance with environmental regulations and associated costs could adversely affect our results of operations and liquidity. Under various federal, state and local laws, ordinances and regulations, an owner or operator of real property may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at the property and may be held liable to a governmental entity or to third parties for property damage and for investigation and cleanup costs incurred in connection with contamination. The cost of investigation, remediation or removal of hazardous or toxic substances may be substantial, and the presence of such substances, or the failure to properly remediate a property, may adversely affect our ability to sell or rent the property or to borrow money using the property as collateral. In connection with our ownership, operation and management of real properties, we may be considered an owner or operator of the properties and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and liability for injuries to persons and property, not only with respect to properties we own now or may acquire, but also with respect to properties we have owned in the past. We cannot provide any assurance that existing environmental studies with respect to any of our properties reveal all potential environmental liabilities, that any prior owner of a property did not create any material environmental condition not known to us, or that a material environmental condition does not otherwise exist, or may not exist in the future, as to any one or more of our properties. If a material environmental condition does in 17 fact exist, or exists in the future, the remediation costs could have a material adverse impact upon our results of operations, liquidity and financial condition. Compliance with the Americans with Disabilities Act could be costly. Under the Americans with Disabilities Act of 1990, all public accommodations must meet Federal requirements for access and use by disabled persons. A determination that our properties do not comply with the Americans with Disabilities Act could result in liability for both governmental fines and damages. If we are required to make unanticipated major modifications to any of our properties to comply with the Americans with Disabilities Act, which are determined not to be the responsibility of our tenants, we could incur unanticipated expenses that could have an adverse impact upon our results of operations, liquidity and financial condition. There are Risks Related to Our transactions with affiliated entities involve conflicts of interest. From time to time we have entered into transactions with persons and entities affiliated with us and with certain of our officers and directors. Such transactions involve a potential conflict of interest and entail a risk that we could have obtained more favorable terms if we had entered into such transaction with an unaffiliated third party. Our senior management and other key personnel, including those performing services on a part-time basis, are critical to our We depend on the services of Matthew J. Gould, chairman of our board of directors, Fredric H. Gould, vice chairman of our board of directors, Patrick J. Callan, Jr., our president and chief executive officer, Lawrence G. Ricketts, Jr., our executive vice president and chief operating officer, Isaac Kalish, our chief financial Certain provisions of our charter, our Bylaws, as amended, and Maryland law may inhibit a change in control that stockholders consider favorable and could also limit the market price of our common stock. Failure to qualify as a REIT could result in material adverse tax consequences and could significantly reduce cash available for distributions. We operate so as to qualify as a REIT under the Code. Qualification as a REIT involves the application of technical and complex legal provisions for which there are limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT. 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. If we fail to quality as a REIT, we will be subject to federal, certain additional state and local income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates and would not be allowed a deduction in computing our taxable income for amounts distributed to stockholders. In addition, unless entitled to relief under certain statutory provisions, we would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. The additional tax would reduce significantly our net income and the cash available to pay dividends. 19 We are subject to certain distribution requirements that may result in our having to borrow funds at unfavorable rates. To obtain the favorable tax treatment associated with being a REIT, we generally are required, among other things, to distribute to our stockholders at least 90% of our ordinary taxable income As a result of differences in timing between the receipt of income and the payment of expenses, and the inclusion of such income and the deduction of such expenses in arriving at taxable income, and the effect of nondeductible capital expenditures Compliance with REIT requirements may hinder our ability to maximize profits. In order to qualify as a REIT for Federal income tax purposes, we must continually satisfy tests concerning, among other things, our sources of income, the amounts we distribute to our stockholders and the ownership of our stock. We may also be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. Accordingly, compliance with REIT requirements In order to qualify as a REIT, we must also ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and real estate assets. Any investment in securities cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, no more than 5% of the value of our assets can consist of the securities of any one issuer, other than a qualified REIT security. If we fail to comply with these requirements, we must dispose of such portion of these securities in excess of these percentages within 30 days after the end of the calendar quarter in order to avoid losing our REIT status and suffering adverse tax consequences. This requirement could cause us to dispose of assets for consideration that is less than their true value and could lead to an adverse impact on our results of operations and financial condition. If we reduce or do not increase our dividend, the market value of our common stock may decline. The level of our dividend is established by our board of directors from time to time based on a variety of factors, including our cash available for distribution, funds from operations, adjusted funds from operations and maintenance of our REIT status. Various factors could cause our board of directors to decrease or not increase our dividend, including tenant defaults or bankruptcies resulting in a material reduction in our funds from operations, a material loss resulting from an adverse change in the value of one or more of our properties, or insufficient income to cover our dividends. It is possible that a portion of the dividends we would pay in 2023 would constitute a return of capital and in such event we would not be required to pay such sum to maintain our REIT status. If our board of directors determines to reduce or not increase our dividend for the foregoing or any other reason, the market value of our common stock could be adversely affected. The stock market is volatile, and fluctuations in our operating results, removal from various indices and other factors could cause our stock price to decline. The stock market has experienced, and may continue to experience, fluctuations that significantly impact the market prices of securities issued by many companies. Market fluctuations could adversely affect our stock price. These fluctuations have often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations, as well as general economic, systemic, political and market conditions, such as pandemics, recessions, loss of investor confidence, interest rate changes, government shutdowns, or trade wars, may negatively affect the market price of our common stock. Moreover, our operating results may fluctuate and vary from period to period due to the risk factors set forth herein. 20 Although our common stock is quoted on the New York Stock Exchange, the volume of trades on any given day has been limited historically, as a result of which stockholders might not have been able to sell or purchase our common stock at the volume, price or time desired. Further, if our common stock is removed from the Russell 3000® Index because it does not meet the criteria for continued inclusion in such index, index funds, institutional investors, or other holders attempting to track the composition of that index may be required to sell our common stock, which would adversely impact the price and frequency at which it trades. General Business Risks Enhanced market and economic volatility due to adverse economic and geopolitical conditions, health crises or dislocations in the credit markets, could have a material adverse effect on our results of operations, financial condition and ability to pay dividends. Our business may be adversely affected by market and economic volatility experienced by the U.S. and global economies, the real estate industry as a whole and/or the local economies in the markets in which our properties are located. Such adverse conditions may be due to, among other issues, rising inflation and interest rates, volatility in the public equity and debt markets, labor market challenges and international economic and other conditions, including pandemics, geopolitical instability (such as the war in Ukraine), sanctions and other conditions beyond our control. These current conditions, or similar conditions existing in the future, may adversely affect our results of operations, financial condition and ability to pay dividends as a result of one or more of the following, among other potential consequences: 21 Breaches of information technology systems could materially harm our business and reputation. We collect and retain on information technology systems, certain financial, personal and other sensitive information provided by third parties, including tenants, vendors, employees and joint venture partners. We also rely on information technology systems for the collection and distribution of funds. We have been, and continue to be, subject to cybersecurity attacks although we have not incurred any significant loss therefrom. There can be no assurance that we will be able to prevent unauthorized access to sensitive information or the unauthorized distribution of funds. Any loss of this information or unauthorized distribution of funds as a result of a cybersecurity attack may result in loss of funds to which we are entitled, legal liability and costs (including damages and penalties), as well as damage to our reputation, that could materially and adversely affect our business. Actual or threatened epidemics, pandemics, outbreaks, or other public health crises may adversely affect our tenants’ financial condition and the profitability of our properties. Our business and the businesses of our tenants could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the COVID-19 pandemic. The risk, or public perception of the risk, of a pandemic or media coverage of infectious diseases could cause customers to avoid retail properties, and with respect to our properties generally, could cause temporary or long-term disruptions in our tenants’ supply chains and/or delays in the delivery of our tenants’ inventory. Moreover, an epidemic, pandemic, outbreak or other public health crisis, such as COVID-19, could cause the on-site employees of our tenants to avoid our tenants’ properties, which could adversely affect our tenants’ ability to adequately manage their businesses. Risks related to an epidemic, pandemic or other health crisis, such as COVID-19, could also lead to the complete or partial closure of one or more of our tenants’ stores or facilities. Such events could adversely impact our tenants’ sales and/or cause the temporary closure of our tenants’ businesses, which could severely disrupt their operations and the rental revenue we generate from our leases with them. The ultimate extent of the impact of any epidemic, pandemic or other health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic or other health crisis and actions taken to contain or prevent their further spread, among others. These and other potential impacts of an epidemic, pandemic or other health crisis, such as COVID-19, could therefore materially and adversely affect our business, financial condition and results of operations. The failure of any bank in which we deposit our funds could have an adverse impact on our financial condition. We have diversified our cash and cash equivalents between several banking institutions in an attempt to minimize exposure to any one of these entities. However, the Federal Deposit Insurance Corporation only insures accounts in amounts up to $250,000 per depositor per insured bank. We currently have cash and cash equivalents deposited in certain financial institutions significantly in excess of federally insured levels. If any of the banking institutions in which we have deposited funds ultimately fails, we may lose our deposits over $250,000. The loss of our deposits may have an adverse effect on our financial condition. We are dependent on third party software for our financial reporting processes and systems. We are dependent on third party software, and in particular, Yardi’s property management software, for generating tenant invoices, collecting receivables, paying payables and preparing financial reports. If the software does not perform as required (including non-performance resulting from the software vendors’ unwillingness or inability to maintain or upgrade the functionality of the software), our ability to conduct operations would be adversely affected. 22 Item 1B. Unresolved Staff Comments. None. Item 1C. Cybersecurity. Our information technology, communication networks, enterprise applications, accounting and financial reporting platforms and related systems are integral to our operations. We use these systems, among others, for internal communications, for accounting and record-keeping functions, and for many other key aspects of our business. Our operations rely on securing, collecting, storing, transmitting, and processing of proprietary and confidential data. We have deployed various safeguards designed to protect our information technology (“IT”) systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality and access controls. At the management level, these cybersecurity defense systems are overseen by our network administrator who performs services for us on a part-time basis pursuant to the Compensation and Services Agreement. Our network administrator has more than 20 years of experience with IT systems and holds various IT certifications. Our network administrator reports to, and is in regular contact with, our Chief Financial Officer and Senior Vice President-Financial. These officers do not have formal IT or cybersecurity training. In the event of a cybersecurity incident, among other things, the network administrator and these officers would consult with one another and, as needed or appropriate, other members of management to determine the appropriate course of action (including whether such incident should be reported to other members of management and/or the audit committee and whether public disclosure should, or is, required to be made). Our internal auditor performs certain procedures to test the integrity and functionality of our IT systems (which includes a high-level review of our cybersecurity defenses). In addition, we have retained a third-party cybersecurity consulting firm that (i) advises us as to cybersecurity matters (including prevailing cybersecurity threats), (ii) performs, on a periodic basis, assessments of our cybersecurity defenses and (iii) on a continuous basis, monitors our IT systems for cybersecurity threats and intrusions. We are not aware of any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect us. See “Item 1A. Risk Factors” in this Annual Report for additional discussion about cybersecurity-related risks. To operate our business, we use certain third-party service providers to perform a variety of functions. We seek to engage reliable, reputable service providers that maintain cybersecurity programs and we generally rely on such providers to maintain appropriate cybersecurity practices. At the Board level, our cybersecurity practices are overseen by the audit committee as part of its oversight of our risk management activities. The committee meets periodically with, among others, our internal auditor and network administrator to review and discuss cybersecurity matters. Item 2. Properties. As of December 31, Our principal executive office is located at 60 Cutter Mill Road, Suite 303, Great Neck, New York. We believe that our facilities are satisfactory for our current and projected needs. 23 Our Properties The following table details, as of December 31, Percentage of Approximate 2024 Contractual 2024 Contractual Square Footage Rental Income Location Type of Property Rental Income of Building per Square Foot Fort Mill, SC Industrial 4.3 701,595 $ 4.40 Hauppauge, NY Industrial 4.1 201,614 14.61 Baltimore, MD Industrial 3.5 367,000 6.87 Royersford, PA (1) Retail 3.4 194,600 12.52 El Paso, TX Industrial 3.3 419,821 5.55 Lebanon, TN Industrial 3.0 540,200 3.91 Fort Mill, SC Industrial 2.9 303,188 6.75 Littleton, CO (2) Retail 2.3 101,618 19.12 Secaucus, NJ Health & Fitness 2.1 44,863 33.43 Pittston, PA Industrial 2.0 249,600 5.81 El Paso, TX (3) Retail 2.0 110,179 13.28 McCalla, AL Industrial 1.9 294,000 4.71 Brooklyn, NY Office 1.9 66,000 20.39 Delport, MO (4) Industrial 1.8 339,094 3.68 Lowell, AR Industrial 1.7 248,370 4.95 Moorestown, NJ Industrial 1.7 219,881 5.57 Ankeny, IA (4) Industrial 1.7 208,234 5.76 Joppa, MD Industrial 1.7 258,710 4.60 Englewood, CO Industrial 1.5 63,882 16.47 Tucker, GA Health & Fitness 1.4 58,800 17.45 Pennsburg, PA (4) Industrial 1.4 291,203 3.36 St. Louis Park, MN (4) Retail 1.3 131,710 7.14 Dalton, GA Industrial 1.3 212,740 4.33 Indianapolis, IN Industrial 1.2 125,622 6.92 Greenville, SC (5) Industrial 1.2 142,200 5.83 Bakersfield, CA Industrial 1.1 218,116 3.71 Blythewood, SC (4) Industrial 1.1 177,040 4.55 Ronkonkoma, NY (4) Industrial 1.0 90,599 8.15 Greenville, SC (5) Industrial 1.0 128,000 5.70 Green Park, MO Industrial 1.0 119,680 6.02 Greensboro, NC Theater 1.0 61,213 11.41 Huntersville, NC Industrial 1.0 78,319 8.69 Ashland, VA Industrial 0.9 88,003 7.58 Lake Charles, LA (5) Retail—Office Supply 0.9 54,229 12.07 New Hope, MN (5) Industrial 0.9 123,892 5.28 Memphis, TN Industrial 0.9 224,749 2.88 Lehigh Acres, FL (4) Industrial 0.9 103,044 6.28 Champaign, IL (4) Retail 0.9 50,940 25.50 Chandler, AZ Industrial 0.9 62,121 10.23 Northwood, OH (4) Industrial 0.9 123,500 5.14 Moorestown, NJ Industrial 0.9 64,000 9.55 Louisville, KY Industrial 0.9 125,370 4.87 Chicago, IL Retail—Office Supply 0.8 23,939 24.37 Melville, NY Industrial 0.8 51,351 11.33 Omaha, NE Industrial 0.8 101,584 5.54 Wichita, KS Retail—Furniture 0.8 88,108 6.35 Northwood, OH (6) Industrial 0.8 126,990 4.37 Shakopee, MN Industrial 0.8 114,000 4.86 Monroe, NC Industrial 0.8 93,170 5.87 Greenville, SC Industrial 0.8 88,800 6.05 Saco, ME Industrial 0.7 131,400 3.92 Cedar Park, TX Retail—Furniture 0.7 50,810 10.00 New Hyde Park, NY Industrial 0.7 38,000 13.12 Cary, NC Retail—Office Supply 0.7 33,490 14.62 Tyler, TX Retail—Furniture 0.7 72,000 6.75 Lexington, KY Industrial 0.7 74,150 6.46 Indianapolis, IN Theater 0.7 57,688 8.28 24 Fort Mill, SC Baltimore, MD Royersford, PA(1) Round Rock, TX Lebanon, TN Hauppauge, NY El Paso, TX Beachwood, OH(2) Greensboro, NC W. Hartford, CT Littleton, CO(3) St. Louis, MO(4) Secaucus, NJ El Paso, TX(5) McCalla, AL Lincoln, NE Brooklyn, NY Wheaton, IL(2) Knoxville, TN St. Louis Park, MN(4) Fort Mill, SC Joppa, MD Ankeny, IA(4) Tucker, GA Pittston, PA Lakemoor, IL(2) Saco, ME Cedar Park, TX Hamilton, OH Columbus, OH Indianapolis, IN Indianapolis, IN Lake Charles, LA(6) Greenville, SC(7) Ft. Myers, FL Ronkonkoma, NY(4) Huntersville, NC Kennesaw, GA Memphis, TN Wichita, KS Greenville, SC(7) Champaign, IL(4) Chicago, IL New Hope, MN Percentage of Approximate 2024 Contractual 2024 Contractual Square Footage Rental Income Location Type of Property Rental Income of Building per Square Foot Rincon, GA Industrial 0.7 95,000 $ 4.95 Fort Myers, FL Industrial 0.7 52,710 8.86 Durham, NC Industrial 0.6 46,181 10.00 Plymouth, MN Industrial 0.6 82,565 5.47 Highland Ranch, CO (4) Retail 0.6 42,920 10.39 Deptford, NJ Retail 0.6 25,358 16.90 Eugene, OR Retail—Office Supply 0.6 24,978 16.37 Newport, VA Retail—Furniture 0.6 49,865 8.19 Amarillo, TX Retail—Furniture 0.6 72,027 5.64 Newark, DE Other 0.6 23,547 17.00 Hillside, IL (4) Industrial 0.6 60,832 6.55 Bensalem, PA (5) Industrial 0.6 85,663 4.61 El Paso, TX Retail—Office Supply 0.5 25,000 15.20 Lexington, KY Retail—Furniture 0.5 30,173 12.48 Richmond, VA Retail—Furniture 0.5 38,788 9.12 Woodbury, MN Retail 0.5 49,406 7.04 LaGrange, GA Industrial 0.5 80,000 4.31 Greensboro, NC Retail 0.4 12,950 24.00 Somerville, MA Retail 0.4 12,054 25.72 Gurnee, IL Retail—Furniture 0.4 22,768 13.43 Selden, NY Retail 0.4 14,555 21.00 Naples, FL Retail—Furniture 0.4 15,912 19.01 Bluffton, SC Retail—Furniture 0.4 35,011 7.92 Crystal Lake, IL Retail 0.4 32,446 8.25 Pinellas Park, FL Industrial 0.4 53,064 5.03 Hyannis, MA Retail 0.3 9,750 24.85 Myrtle Beach, SC Restaurant 0.3 6,734 34.85 Chandler, AZ Industrial 0.3 25,035 9.30 Kennesaw, GA Restaurant 0.3 4,051 54.34 Concord, NC Restaurant 0.3 4,749 46.24 Miamisburg, OH Industrial 0.3 35,707 6.03 Everett, MA Retail 0.3 18,572 11.43 Cape Girardeau, MO Retail 0.3 13,502 14.71 Marston, MA Retail 0.3 8,775 22.00 West Palm Beach, FL Industrial 0.2 10,634 14.74 Monroeville, PA Retail 0.2 6,051 25.74 Batavia, NY Retail 0.2 23,483 6.05 Nashville, TN (7) Industrial 0.2 99,500 5.17 Lawrence, KS Retail 0.2 8,600 14.04 Cuyahoga Falls, OH Retail 0.2 6,796 17.21 South Euclid, OH Retail 0.2 11,672 9.94 Hamilton, OH Health & Fitness 0.2 38,000 3.16 Hilliard, OH Retail 0.1 6,751 15.55 Port Clinton, OH Retail 0.1 6,749 15.19 Seattle, WA Retail 0.1 3,053 27.50 Rosenberg, TX Retail 0.1 8,000 10.20 Louisville, KY Industrial 0.1 9,642 6.67 Wauconda, IL (8) Industrial — 53,750 0.49 Bolingbrook, IL (8) Retail — 33,111 0.51 Kennesaw, GA (9) Retail — 32,138 — Beachwood, OH (10) Land — 349,999 — 100.0 10,851,596 25 Clemmons, NC Melville, NY Tyler, TX Athens, GA(8) Fayetteville, GA Louisville, KY Onalaska, WI Cary, NC Highlands Ranch, CO New Hyde Park, NY Houston, TX Richmond, VA Amarillo, TX Deptford, NJ Virginia Beach, VA Lexington, KY Eugene, OR Duluth, GA Newark, DE Newport News, VA Woodbury, MN El Paso, TX Columbus, OH Houston, TX Durham, NC Greensboro, NC Hyannis, MA Selden, NY Gurnee, IL Bluffton, SC Naples, FL Pinellas Park, FL Carrollton, GA Batavia, NY Philadelphia, PA Hauppauge, NY Cartersville, GA Richmond, VA Greensboro, NC W. Hartford, CT(9) Myrtle Beach, SC Somerville, MA Kennesaw, GA Bolingbrook, IL Concord, NC Cape Girardeau, MO Lawrenceville, GA Everett, MA Marston Mills, MA Miamisburg, OH Monroeville, PA Reading, PA Reading, PA West Palm Beach, FL Gettysburg, PA Hanover, PA Houston, TX Palmyra, PA Trexlertown, PA Cuyahoga Falls, OH South Euclid, OH Hilliard, OH Lawrence, KS Port Clinton, OH Indianapolis, IN Rosenberg, TX Seattle, WA Louisville, KY Crystal Lake, IL(10) Properties Owned by Joint Ventures As of December 31, 2023, we own a 50% equity interest in two joint ventures that own two properties. At December 31, 2023, our investment in these joint ventures was approximately $2.1 million and the occupancy rate at these properties, based on square footage, was 100%. Based on the leases in effect at December 31, 2023, we anticipate that our share of the base rent payable in 2024 to our joint ventures is approximately $235,000. The following table sets forth, as of December 31, Percentage of Base Rent Payable in 2024 Contributed by Approximate 2024 Type of the Applicable Square Footage Base Rent Location Property Joint Venture (1) of Building per Square Foot Savannah, GA Retail 86.7 46,058 $ 4.43 Savannah, GA (2) Restaurant 13.3 — — 100.0 46,058 26 Manahawkin, NJ(2) Milwaukee, WI Savannah, GA Savannah, GA Savannah, GA Geographic Concentration As of December 31, Percentage of 2024 2024 Contractual Contractual Approximate Number of Rental Rental Building State Properties Income Income Square Feet South Carolina 8 $ 8,543,490 12.0 1,582,568 New York 7 6,558,674 9.2 485,602 Texas 7 5,623,532 7.9 757,837 Pennsylvania 5 5,394,302 7.6 827,117 New Jersey 4 3,763,401 5.3 354,102 Maryland 2 3,712,022 5.2 625,710 North Carolina 7 3,408,365 4.8 330,072 Colorado 3 3,160,873 4.4 208,420 Georgia 6 2,981,085 4.2 482,729 Minnesota 5 2,947,312 4.1 501,573 Tennessee 3 2,886,172 4.1 864,449 Illinois 7 2,242,092 3.1 277,786 Missouri 3 2,166,440 3.0 472,276 Ohio 9 1,965,547 2.8 706,164 Florida 5 1,840,120 2.6 235,364 Kentucky 4 1,530,082 2.1 239,335 Virginia 3 1,429,279 2.0 176,656 Alabama 1 1,383,326 1.9 294,000 Indiana 2 1,347,066 1.9 183,310 Arkansas 1 1,230,498 1.7 248,370 Iowa 1 1,200,437 1.7 208,234 Massachusetts 4 957,624 1.3 49,151 Arizona 2 868,490 1.2 87,156 California 1 809,642 1.1 218,116 Kansas 2 680,367 1.0 96,708 Louisiana 1 654,718 0.9 54,229 Nebraska 1 562,293 0.8 101,584 Other (1) 4 1,408,357 2.1 182,978 108 $ 71,255,606 100.0 10,851,596 Texas South Carolina New York Pennsylvania North Carolina Ohio Georgia Tennessee Illinois Maryland Minnesota Colorado Connecticut New Jersey Missouri Indiana Virginia Florida Alabama Nebraska Iowa Massachusetts Kentucky Maine Kansas Louisiana Other The following table sets forth information, presented by state, related to the properties owned by our joint ventures as of December 31, Our Share of the Base Rent Payable in 2024 Approximate Number of to these Building State Properties Joint Ventures Square Feet Georgia 2 $ 235,140 46,058 27 New Jersey Wisconsin Georgia Mortgage Debt At December 31, The following table sets forth scheduled principal mortgage payments due on our properties as of December 31, 2018 2019 2020 2021 2022 Thereafter Total 2018 2019 2020 2021 2022 Thereafter Total PRINCIPAL YEAR PAYMENTS DUE 2024 $ 61,779 2025 41,477 2026 29,670 2027 47,923 2028 38,873 Thereafter 202,843 Total $ 422,565 The mortgages on our properties are generally non-recourse, subject to standard carve-outs. Item 3. Legal Proceedings. Not applicable. Item 4. Mine Safety Disclosures. Not applicable. 28 Part II Item 5. Market for the Our common stock is listed on the New York Stock Exchange under the symbol March 31 June 30 September 30 December 31 “OLP.” As of March We qualify as a REIT for Federal income tax purposes. In order to maintain that status, we are required to distribute to our stockholders at least 90% of our annual ordinary taxable income. The amount and timing of future distributions will be at the discretion of our board of directors and will depend upon our financial condition, earnings, business plan, cash flow and other factors. We intend to make distributions in an amount at least equal to that necessary for us to maintain our status as a real estate investment trust for Federal income tax purposes. OLP S&P 500 FTSE NAREIT Equity REITs Index Issuer Purchases of Equity Securities Approximate Total Number of Dollar Value Total Number Average of Shares Purchased of Shares that May of Shares Price Paid as Part of Publicly Yet Be Purchased Period Purchased per Share Announced Programs Under the Programs October 1, 2023 - October 31, 2023 133,667 $ 18.40 133,667 $ 8,655,224 November 1, 2023 - November 30, 2023 30,400 18.80 30,400 8,081,814 December 1, 2023 - December 31, 2023 — — — 8,081,814 Total 164,067 $ 18.47 164,067 Item 6. [Reserved.] 29 Item Overview We are a self-administered and self-managed REIT focused on acquiring, owning and managing a geographically diversified portfolio consisting of industrial and, to a lesser extent, retail properties, many of which are subject to long-term leases. Most of our leases are “net leases” under which the tenant, directly or indirectly, is responsible for paying the real estate taxes, insurance and ordinary maintenance and repairs of the property. As of December 31, 2023, we own, in 31 states, 110 properties, including three properties owned by consolidated joint ventures and two properties owned through unconsolidated joint ventures. Challenges and Uncertainties as a Result of the Volatile Economic Environment During the past two years, there has been a significant economic uncertainty due, among other things, to volatile interest rates and the challenges presented by an inflationary/potential recessionary environment. This uncertainty, volatility and the related causes may adversely impact us in the future. Due to this General Challenges and Uncertainties In addition to the challenges and uncertainties as also described under “Cautionary Note Regarding Forward-Looking Statements”, “Item 1A. Risk Factors”, and “— Challenges and Uncertainties as a Result of the Volatile Economic Environment”, we, among other things, face additional challenges and uncertainties, including the possibility we will not be able to: lease our properties on Other than with respect to our continuing focus on acquiring industrial properties, we generally seek to manage the risk of our real property portfolio and the related financing arrangements by (i) diversifying among locations, tenants, scheduled lease expirations, mortgage maturities and lenders, and (ii) minimizing our exposure to interest rate fluctuations. As a result, as of December 31, 2023: 30 OPERATING DATA Total revenues Gain on sale of real estate, net Equity in earnings of unconsolidated joint ventures Income from continuing operations Income from discontinued operations Net income attributable to One Liberty Properties, Inc. Weighted average number of common shares outstanding: Basic Diluted Net income per common share—basic Net income per common share—diluted Cash distributions declared per share of common stock BALANCE SHEET DATA Real estate investments, net Unamortized intangible lease assets, net Investment in unconsolidated joint ventures Cash and cash equivalents Total assets Mortgages payable, net of deferred financing costs Due under line of credit, net of deferred financing costs Unamortized intangible lease liabilities, net Total liabilities Total equity OTHER DATA(2) Funds from operations Funds from operations per common share: Basic Diluted Adjusted funds from operations Adjusted funds from operations per common share: Basic Diluted We monitor the risk of tenant non-payments through a variety of approaches tailored to the applicable situation. Generally, based on our assessment of the credit risk posed by our tenants, we monitor a tenant’s financial condition through one or more of the following actions: reviewing tenant financial statements or other financial information, obtaining other tenant related information, changes in tenant payment patterns, regular contact with tenant’s representatives, tenant credit checks and regular management reviews of our tenants. We may sell a property if the tenant’s financial condition is unsatisfactory. We monitor, on an ongoing basis, our expiring leases and generally approach tenants with expiring leases (including those subject to renewal options) at least a year prior to lease In acquiring properties, we balance an evaluation of the terms of the leases and the credit of the existing tenants with a fundamental analysis of the real estate to be acquired, which analysis takes into account, among other things, the estimated value of the property, local demographics and the ability to re-rent or dispose of the property on favorable terms upon lease expiration or early termination. At December 31, 2023, we have unhedged variable rate mortgage debt in the principal amount of $16.0 million of which bears a weighted average interest rate of 5.73%. The table below provides information about such debt as of December 31, 2023. Current Interest Rate Property Principal Amount Maturity Date Interest Rate Reset Date Lexington, Kentucky $ 5,279,000 June 2047 3.85 % June 2029 Kennesaw, Georgia 4,467,000 December 2041 6.50 December 2030 Hamilton, Ohio 3,969,000 September 2024 8.40 n/a Deptford, NJ 2,277,000 February 2041 3.95 February 2026 $ 15,992,000 31 Challenges and Uncertainties Facing Certain Properties and Tenants Set forth below is a description of the challenges and uncertainties facing certain tenants or properties. If these challenges, and in particular, the challenges faced by Regal Cinemas, The Vue and LA Fitness, are not resolved in a satisfactory manner, we will be adversely affected. Regal Cinemas Regal Cinemas, or Regal, is a tenant at two properties. Regal’s parent, Cineworld Group plc, filed for Chapter 11 bankruptcy protection in September 2022 and as a result, we and Regal amended the leases at these properties to, among other things, shorten the lease terms and reduce the rent payable. Specifically, prior to the amendments, the leases were scheduled to expire in 2032 and 2035 and as of January 1, 2024, without giving effect to such amendments, would have provided for an aggregate base rent of $21.0 million through the remaining lease term. After giving effect to the amendments, the leases expire in 2030 and as of January 1, 2024 provide for an aggregate base rent of $7.7 million payable over the remaining lease term. At December 31, 2023, our Indianapolis, Indiana property had mortgage debt, intangible lease liabilities and intangible lease assets of approximately $3.6 million, $527,000 and $476,000, respectively. There is no mortgage debt, intangible lease liabilities or intangible lease assets at the Greensboro, North Carolina property at which we lease the underlying fee and in turn lease the property to Regal. We estimate that the carrying costs for these two properties for the twelve months ending December 31, 2024, are approximately $1.3 million, including ground lease rent of $512,000 (which sum has historically been paid directly by Regal to the owner of the Greensboro property), real estate taxes of approximately $356,000, and debt service of $290,000. Regal is the primary obligor with respect to $460,000 of these carrying costs and we are responsible with respect to such amount if it is not paid by Regal. Because the collection of amounts owed by Regal is deemed to be less than probable, we have not accrued Regal’s base rent (but have collected all base rent payable pursuant to the amended leases) and since October 2020, have been reporting same on a cash basis. If Regal continues to face financial challenges, it will be difficult and costly (due, among other things, to the limited number of exhibitors and the unique configuration of theater properties) to find a replacement tenant. The Vue – Beachwood, Ohio A multi-family complex, which we refer to as The Vue, ground leases from us the underlying land located in Beachwood, Ohio. Since 2018, the property has faced, and we anticipate that the property will continue to face, occupancy and financial challenges, and our tenant has not paid rent since October 2020 (i.e., an aggregate of $3.9 million that would have been due had it generated specified levels of positive operating cash flow), and we anticipate that it will not pay rent for an extended period. After giving effect to debt service, the property is operating on a negative cash flow basis, and we anticipate that such trend will continue for an extended period. Since 2021 (through March 1, 2024), we provided The Vue with an aggregate of $3.4 million to cover, among other things, operating cash flow shortfalls and capital expenditures, and the amount to be funded in 2024, if any, has not been definitively determined. At December 31, 2023, (i) there are no unbilled rent receivables, intangibles or tenant origination costs associated with this property and (ii) the net book value of our land subject to this ground lease is $17.3 million and 32 LA Fitness LA Fitness leases from us three properties pursuant to three separate leases, including a 38,000 square foot health and fitness facility in Hamilton, Ohio. LA Fitness terminated the lease at the Hamilton, Ohio property effective as of May 1, 2024. As a result, we estimate that (i) from January 1, 2024 through the remaining lease term, we will generate $120,000 of rental income and (ii) that through 2024, we will incur approximately $230,000, $180,000 and $170,000 of interest expense, real estate operating expense and depreciation and amortization expense, respectively. During 2023, this property accounted for It will be difficult, due to the presence of another health and fitness facility located nearby, to re-lease this property to another health and fitness operator, and if we are unable to re-lease this property to such an operator, it will be costly to reconfigure the space for use other than as a fitness facility. We will be adversely effected if we surrender this property to the lender or if we pay off the mortgage debt without obtaining a suitable replacement tenant at this property. 2023 and Recent Developments In 2023, we: 33 Subsequent to December 31, 2023, we: Our Business Objective Our business objective is to increase stockholder value by: 34 Comparison of Years Ended December 31, 2023 and 2022 Results of Operations - Revenues The following table compares total revenues for the periods indicated: Year Ended December 31, Increase (Dollars in thousands) 2023 2022 (Decrease) % Change Rental income, net $ 90,646 $ 92,191 $ (1,545) (1.7) Lease termination fees — 25 (25) (100.0) Total revenues $ 90,646 $ 92,216 $ (1,570) (1.7) Rental income, net. The following table details the components of rental income, net, for the periods indicated: Year Ended December 31, Increase (Dollars in thousands) 2023 2022 (Decrease) % Change Acquisitions (1) $ 5,413 $ 2,472 $ 2,941 119.0 Dispositions (2) 2,470 3,641 (1,171) (32.2) Same store (3) 82,763 86,078 (3,315) (3.9) Rental income, net $ 90,646 $ 92,191 $ (1,545) (1.7) Changes at same store properties The decrease in same store rental income is due to the inclusion in 2022, of $4.6 million from the litigation settlement proceeds from The Vue, and decreases of: The decrease was offset by increases of: 35 Operating Expenses The following table compares operating expenses for the periods indicated: Year Ended December 31, Increase (Dollars in thousands) 2023 2022 (Decrease) % Change Operating expenses: Depreciation and amortization $ 24,789 $ 23,781 $ 1,008 4.2 General and administrative 15,822 15,258 564 3.7 Real estate expenses 16,444 15,508 936 6.0 State taxes 284 285 (1) (0.4) Total operating expenses $ 57,339 $ 54,832 $ 2,507 4.6 Depreciation and amortization. The increase is due primarily to: The increase was offset by: General and administrative. The increase in 2023 is due primarily to increases of (i) $441,000 of compensation expense primarily due to additional employees and higher levels of compensation, and (ii) $150,000 in professional fees related to various matters. Real estate expenses. The increase is primarily due to: The increase was offset primarily by a $237,000 decrease related to properties sold in 2022 and 2023. A substantial portion of real estate expenses are rebilled to tenants and are included in Rental income, net, on the consolidated statements of income. 36 Gain on sale of real estate, net The following table lists the sold properties and related gains, net, for the periods indicated: Year Ended December 31, Increase % (Dollars in thousands) 2023 2022 (Decrease) Change TGI Fridays restaurant property - Hauppauge, New York $ 1,534 $ — Havertys retail property - Duluth, Georgia 3,180 — TGI Fridays restaurant property - Greensboro, North Carolina 332 — Land - Lakewood, Colorado (1) 2,177 — Chuck E Cheese restaurant property - Indianapolis, Indiana 226 — TGI Fridays restaurant property - Richmond, Virginia 265 — Applebee's restaurants (2 properties) - Cartersville & Carrollton, Georgia 2,581 — Applebee's restaurant property - Lawrenceville, Georgia 989 — Havertys retail property - Virginia Beach, Virginia 1,727 — Barnes & Noble retail property - Fort Myers, Florida 3,997 Wendy's restaurants (4 properties) - Various cities, Pennsylvania — 4,649 Orlando Baking industrial property - Columbus, Ohio — 6,925 Havertys retail property - Fayetteville, Georgia — 1,125 Vacant retail property - Columbus, Ohio — 4,063 Total gain on sale of real estate, net $ 17,008 $ 16,762 $ 246 1.5 (1) The non-controlling interest’s share of the gain is $218. Other Income and Expenses The following table compares other income and expenses for the periods indicated: Year Ended December 31, Increase (Dollars in thousands) 2023 2022 (Decrease) % Change Other income and expenses: Equity in (loss) earnings of unconsolidated joint ventures $ (904) $ 400 $ (1,304) (326.0) Equity in loss from sale of unconsolidated joint venture property (108) — (108) n/a Income on settlement of litigation — 5,388 (5,388) (100.0) Other income 234 1,003 (769) (76.7) Interest: Expense (18,780) (17,569) 1,211 6.9 Amortization and write-off of deferred financing costs (839) (1,115) (276) (24.8) Equity in (loss) earnings of unconsolidated joint ventures. The decrease in 2023 relates to the multi-tenant shopping center in Manahawkin, New Jersey which we sold in December 2023 and reflects (i) our 50% share, or $850,000, of a $1.7 million impairment charge our joint venture recorded, (ii) a $256,000 decrease in base rent collected primarily from Regal Cinemas, a tenant at this property, due to a lease amendment effectuated in connection with its bankruptcy reorganization, and (iii) a $103,000 debt prepayment charge due to the early payoff of the mortgage on this property in connection with its sale. See 37 Income on settlement of litigation. In April 2022, we received $5.4 million in connection with the settlement of a lawsuit at our former Round Rock, Texas property (the “Round Rock Settlement”). (See Note 13 to our consolidated financial statements.) Other income.Included in 2022 is $918,000 representing the final property insurance recovery related to our Lake Charles, Louisiana property damaged in a 2020 hurricane. (See Note 13 to our consolidated financial statements.) Interest expense. The following table compares interest expense for the periods indicated: Year Ended December 31, Increase (Dollars in thousands) 2023 2022 (Decrease) % Change Interest expense: Mortgage interest $ 17,514 $ 16,762 $ 752 4.5 Credit line interest 1,266 807 459 56.9 Total $ 18,780 $ 17,569 $ 1,211 6.9 Mortgage interest The following table reflects the average interest rate on the weighted average principal amount of outstanding mortgage debt during the applicable year: Year Ended December 31, Increase (Dollars in thousands) 2023 2022 (Decrease) % Change Weighted average interest rate 4.18 % 4.14 % 0.04 % 1.0 Weighted average principal amount $ 416,517 $ 404,263 $ 12,254 3.0 The increase in 2023 is due primarily to the increase in the average principal amount of mortgage debt outstanding which resulted from financings effectuated in connection with refinancings and acquisitions. Credit facility interest The following table reflects the average interest rate on the average principal amount of outstanding credit line debt during the applicable year: Year Ended December 31, Increase % (Dollars in thousands) 2023 2022 (Decrease) Change Weighted average interest rate 6.69 % 3.42 % 3.27 % 95.6 Weighted average principal amount $ 15,676 $ 16,222 $ (546) (3.4) The increase in 2023 is due to the increase on the weighted average interest rate. Amortization and write-off of deferred financing costs. The decrease in 2023 is primarily due to the $221,000 write-off of deferred costs related to the mortgages on the eleven Havertys properties that were paid off in June 2022. 38 Funds from Operations and Adjusted Funds from Operations We compute funds from operations, or FFO, in accordance with the We compute adjusted funds from operations, or AFFO We believe that FFO and AFFO are useful and standard supplemental measures of the operating performance for equity REITs and are used frequently by securities analysts, investors and other interested parties in evaluating equity REITs, many of which present FFO and AFFO when reporting their operating results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization of real estate assets, which assumes that the value of real estate assets diminish FFO and AFFO do not represent net income or cash flows from Management recognizes that there are limitations in the use of FFO and AFFO. In evaluating our performance, management is careful to examine GAAP measures such as net income and cash flows from operating, investing and financing activities. 39 The GAAP net income attributable to One Liberty Properties, Inc. Add: depreciation and amortization of properties Add: our share of depreciation and amortization of unconsolidated joint ventures Add: impairment loss Add: amortization of deferred leasing costs Add: our share of amortization of deferred leasing costs of unconsolidated joint ventures Add: Federal excise tax relating to gain on sale Deduct: gain on sale of real estate Deduct: purchase price fair value adjustment Deduct: net gain on sale of real estate of unconsolidated joint ventures Adjustments for non-controlling interests NAREIT funds from operations applicable to common stock Deduct: straight-line rent accruals and amortization of lease intangibles Add (deduct): our share of straight-line rent accruals and amortization of lease intangibles of unconsolidated joint ventures Deduct: lease termination fee income Add: amortization of restricted stock compensation Add: prepayment costs on debt Add: amortization and write-off of deferred financing costs Add: our share of amortization and write-off of deferred financing costs of unconsolidated joint ventures Adjustments for non-controlling interests Adjusted funds from operations applicable to common stock Year Ended December 31, 2023 2022 GAAP net income attributable to One Liberty Properties, Inc. $ 29,614 $ 42,177 Add: depreciation and amortization of properties 24,063 23,193 Add: our share of depreciation and amortization of unconsolidated joint ventures 477 519 Add: amortization of deferred leasing costs 726 588 Add: our share of amortization of deferred leasing costs of unconsolidated joint ventures 18 21 Add: our share of impairment loss of unconsolidated joint venture property 850 — Add: equity in loss from sale of unconsolidated joint venture property 108 — Deduct: gain on sale of real estate, net (17,008) (16,762) Adjustments for non-controlling interests 148 (67) NAREIT funds from operations applicable to common stock 38,996 49,669 Deduct: straight-line rent accruals and amortization of lease intangibles (2,717) (3,240) Deduct: our share of straight-line rent accruals and amortization of lease intangibles of unconsolidated joint ventures (19) (27) Deduct: other income and income on settlement of litigation (112) (5,388) Deduct: additional rent from ground lease tenant (16) (4,626) Deduct: income on insurance recovery from casualty loss — (918) Deduct: lease termination fee income — (25) Deduct: our share of unconsolidated joint venture lease termination fee income (21) (25) Add: amortization of restricted stock and RSU compensation 5,367 5,507 Add: amortization and write-off of deferred financing costs 839 1,115 Add: amortization of lease incentives 121 44 Add: amortization of mortgage intangible assets 114 12 Add: our share of amortization of deferred financing costs of unconsolidated joint venture 42 17 Adjustments for non-controlling interests 1 14 Adjusted funds from operations applicable to common stock $ 42,595 $ 42,129 Year Ended December 31, 2023 2022 GAAP net income attributable to One Liberty Properties, Inc. $ 1.38 $ 1.99 Add: depreciation and amortization of properties 1.13 1.09 Add: our share of depreciation and amortization of unconsolidated joint ventures .02 .02 Add: amortization of deferred leasing costs .03 .03 Add: our share of amortization of deferred leasing costs of unconsolidated joint ventures — — Add: our share of impairment loss of unconsolidated joint venture property .04 — Add: equity in loss from sale of unconsolidated joint venture property .01 — Deduct: gain on sale of real estate, net (.80) (.79) Adjustments for non-controlling interests .01 — NAREIT funds from operations per share of common stock (a) 1.82 2.34 Deduct: straight-line rent accruals and amortization of lease intangibles (.13) (.16) Deduct: our share of straight-line rent accruals and amortization of lease intangibles of unconsolidated joint ventures — — Deduct: other income and income on settlement of litigation (.01) (.25) Deduct: additional rent from ground lease tenant — (.22) Deduct: income on insurance recovery from casualty loss — (.04) Deduct: lease termination fee income — — Deduct: our share of unconsolidated joint venture lease termination fee income — — Add: amortization of restricted stock and RSU compensation .25 .26 Add: amortization and write-off of deferred financing costs .04 .05 Add: amortization of lease incentives .01 — Add: amortization of mortgage intangible assets .01 — Add: our share of amortization of deferred financing costs of unconsolidated joint venture — — Adjustments for non-controlling interests — — Adjusted funds from operations per share of common stock (a) $ 1.99 $ 1.98 (a) The weighted average number of diluted common shares used to compute FFO and AFFO applicable to common stock includes unvested restricted shares that are excluded from the computation of diluted EPS. 40 GAAP net income attributable to One Liberty Properties, Inc. Add: depreciation and amortization of properties Add: our share of depreciation and amortization of unconsolidated joint ventures Add: impairment loss Add: amortization of deferred leasing costs Add: our share of amortization of deferred leasing costs of unconsolidated joint ventures Add: Federal excise tax relating to gain on sale Deduct: gain on sale of real estate Deduct: purchase price fair value adjustment Deduct: net gain on sale of real estate of unconsolidated joint ventures Adjustments for non-controlling interests NAREIT funds from operations per share of common stock Deduct: straight-line rent accruals and amortization of lease intangibles Add: our share of straight-line rent accruals and amortization of lease intangibles of unconsolidated joint ventures Deduct: lease termination fee income Add: amortization of restricted stock compensation Add: prepayment costs on debt Add: amortization and write-off of deferred financing costs Add: our share of amortization and write-off of deferred financing costs of unconsolidated joint ventures Adjustments for non-controlling interests Adjusted funds from operations per share of common stock Offsetting the decrease is a “—Comparison of Years Ended December 31, The Rental income, net Tenant reimbursements Total revenues Operating expenses: Depreciation and amortization General and administrative Real estate expenses Real estate acquisition costs Federal excise and state taxes Leasehold rent Impairment loss Total operating expenses Operating income Other income and expenses: Equity in earnings of unconsolidated joint ventures Prepayment costs on debt Other income Interest: Expense Amortization and write-off of deferred financing costs Income before gain on sale of real estate, net Interest expense: Credit facility interest Mortgage interest Total Average interest rate on mortgage debt Average principal amount of mortgage debt Gain on sale of real estate, net See Diluted per share FFO and AFFO were impacted negatively in the Comparison of Years Ended December 31, Rental income, net Tenant reimbursements Lease termination fees Total revenues Operating expenses: Depreciation and amortization General and administrative Real estate expenses Real estate acquisition costs Federal excise and state taxes Leasehold rent Total operating expenses Operating income Other income and expenses: Equity in earnings of unconsolidated joint ventures Purchase price fair value adjustment Prepayment costs on debt Other income Interest: Expense Amortization and write-off of deferred financing costs Income before gain on sale of real estate, net Interest expense: Credit facility interest Mortgage interest Total Interest rate on mortgage debt Principal amount of mortgage debt Gain on sale of real estate, net Liquidity and Capital Resources Our sources of liquidity and capital include cash flow from operations, cash and cash equivalents, borrowings under our Liquidity and Financing We expect to meet our short term (i.e., one year or less) and long term (i) operating cash requirements (including debt service and The following table sets forth, as of December 31, Amortization payments Principal due at maturity Total (Dollars in thousands) 2024 2025 2026 Total Amortization payments $ 11,873 $ 10,627 $ 10,491 $ 32,991 Principal due at maturity 49,906 30,850 19,179 99,935 Total $ 61,779 $ 41,477 $ 29,670 $ 132,926 We intend to make debt amortization payments from operating cash flow and, though no assurance can be given that we will be successful in this regard, generally intend to refinance, extend or payoff the mortgage loans which mature in We continually seek to refinance existing mortgage loans on terms we deem acceptable to generate additional liquidity. Additionally, in the normal course of our business, we sell properties when we determine that it is in our best interests, which also generates additional liquidity. Further, Typically, we utilize funds from our credit facility to acquire a property and, thereafter secure long-term, fixed rate mortgage debt on such property. We apply the proceeds from the mortgage loan to repay borrowings under the credit facility, thus providing us with the ability to re-borrow under the credit facility for the acquisition of additional properties. Material Contractual Obligations The following sets forth our material contractual obligations as of December 31, Payment due by period Less than More than (Dollars in thousands) 1 Year 1 ‑ 3 Years 4 ‑ 5 Years 5 Years Total Mortgages payable—interest and amortization $ 28,774 $ 48,305 $ 39,267 $ 64,299 $ 180,645 Mortgages payable—balances due at maturity 49,906 50,029 68,679 168,560 337,174 Credit facility (1) — — — — — Purchase obligations (2) 4,172 7,425 7,329 161 19,087 Total $ 82,852 $ 105,759 $ 115,275 $ 233,020 $ 536,906 Contractual Obligations Mortgages payable—interest and amortization Mortgages payable—balances due at maturity Credit facility(1) Purchase obligations(2) Total As of December 31, Credit Facility Our credit facility provides that subject to borrowing base requirements, we can borrow up to $100.0 million for the acquisition of commercial real estate, repayment of mortgage debt, and renovation and operating expense purposes; provided, that if used for renovation and operating expense purposes, the amount outstanding for such purposes will not exceed the lesser of $40.0 million and 40% of the borrowing base. See “—Liquidity and Capital Resources”. The facility matures December 31, 2026 and bears interest equal to 30-day SOFR plus the applicable margin. The applicable margin ranges from 175 basis points if our ratio of total debt to total value (as calculated pursuant to the facility) is equal to or less than 50%, increasing to a maximum of 275 basis points if such ratio is greater than 60%. The applicable margin was 175 basis points for each of 2023 and 2022. There is an unused facility fee of 0.25% per annum on the difference between the outstanding loan balance and $100.0 million. The credit facility requires the maintenance of $3.0 million in average deposit balances. For 2023, the weighted average interest rate on the facility was approximately 6.69% and as of February 29, 2024, the rate on the facility was 7.08%. The terms of our credit facility include certain restrictions and covenants which may limit, among other things, the incurrence of liens, and which require compliance with financial ratios relating to, among other things, the minimum amount of tangible net worth, the minimum amount of debt service coverage, the minimum amount of fixed charge coverage, the maximum amount of debt to value, the minimum level of net income, certain investment limitations and the minimum value of unencumbered properties and the number of such properties. 43 Inflation We are exposed to inflation risk as income from long-term leases is the primary source of our cash flows Cash flow provided by operating activities Cash flow used in investing activities Cash flow (used in) provided by financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Inflation may also affect the Distribution Policy We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. Accordingly, to qualify as a REIT, we must, among other things, meet a number of organizational and operational requirements, including a requirement that we distribute currently at least 90% of our ordinary taxable income to our stockholders. It is our current intention to comply with these requirements and maintain our REIT status. As a REIT, we generally will not be subject to corporate federal, state or local income taxes on taxable income we distribute currently (in accordance with the Internal Revenue Code and applicable regulations) to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal, state and local income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent tax years. It is our current intention to pay to our stockholders within the time periods prescribed by the Internal Revenue Code no less than 90%, and, if possible, 100% of our annual taxable income, including taxable gains from the sale of real estate. It will continue to be our policy to make sufficient distributions to stockholders in order for us to maintain our REIT status under the Internal Revenue Code. Our board of directors 44 Our discussion and analysis of financial condition and results of operations are We base our estimates on historical experience, current trends and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could materially differ from any of our estimates under different assumptions or conditions. Our significant accounting policies are Revenue Recognition Our main source of Purchase Accounting for Acquisition of Real Estate The fair value of real estate acquired is allocated to acquired tangible assets (which includes land, building and building improvements) and identified intangible assets and liabilities (which include the value of above, below and at-market leases and origination costs associated with in-place leases and assumed mortgages) based in each case on their fair values. The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land, building and building improvements based on our determination of the relative fair values of these assets. We assess the fair value of the lease intangibles and assumed mortgages based on estimated cash flow projections that utilize appropriate discount rates and available market information. The fair values associated with below-market rental renewal options are determined based on our experience and the relevant facts and circumstances that existed at the time of the acquisitions. The portion of the values of the leases associated with below-market renewal options that we deem reasonably certain to be exercised by the tenant are amortized to rental income over the respective renewal periods. The allocation made by us may have a positive or negative effect on net income and may have an effect on the assets and liabilities on the balance sheet. 45 Carrying Value of Real Estate Portfolio We review our real estate portfolio on a quarterly basis to ascertain if there are any indicators of impairment to the value of any of our real estate assets, including deferred costs and intangibles, to determine if there is any need for an impairment charge. In reviewing the portfolio, we examine the type of asset, the current financial statements or other available financial information of the tenant, the economic situation in the area in which the asset is located, the economic situation in the industry in which the tenant is involved and the timeliness of the payments made by the tenant under its lease, as well as any current correspondence that may have been had with the tenant, including property inspection reports. For each real estate asset owned for which indicators of impairment exist, we perform a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the asset to its carrying amount. Management’s assumptions and estimates include projected rental rates during the holding period and property capitalization rates in order to estimate undiscounted future cash flows. If the undiscounted cash flows are less than the Equity-Based Compensation We grant shares of restricted stock and restricted stock units ("RSUs") to eligible plan participants, subject to the recipient's continued service over a specified period and, with respect to the RSUs, the satisfaction of specified conditions over a specified period. The RSUs vest based upon satisfaction of specified metrics with respect to (i) average of our annual total stockholder return (“TSR Awards”) and/or (ii) average annual return of capital (“ROC Awards”), in each case as calculated pursuant to the applicable award agreement. We account for the restricted stock awards and RSUs in accordance with ASC 718, Compensation - Stock Compensation, which requires that such compensation be recognized in the financial statements based on its estimated grant-date fair value. The value of such awards is recognized as compensation expense in general and administrative expenses in the accompanying consolidated statements of operations over the applicable service periods. Grant date fair value is determined with respect to the (i) the restricted stock awards, by the closing stock price on the date of grant, (ii) TSR Awards, by using a Monte Carlo simulation relying upon various assumptions and (iii) ROC Awards, by using the closing stock price on the grant date, subject to quarterly adjustment based upon management’s projection as to the achievability of the specified metrics related to the ROC Awards. See Note 11 to our consolidated financial statements. 46 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Our primary market risk exposure is the effect of changes in interest rates on the interest cost of draws on our revolving variable rate credit facility and the effect of changes in the fair value of our interest rate swap agreements. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. We use interest rate swaps to limit interest rate risk on substantially all variable rate mortgages. These swaps are used for hedging purposes-not for speculation. We do not enter into interest rate swaps for trading purposes. At December 31, At December 31, The fair market value of our long-term debt is estimated based on discounting future cash flows at interest rates that our management believes reflect the risks associated with The following table sets forth our debt obligations by scheduled principal cash flow payments and maturity date, weighted average interest rates and estimated fair market value at December 31, For the Year Ended December 31, Fair Market (Dollars in thousands) 2024 2025 2026 2027 2028 Thereafter Total Value Fixed rate: Long‑term debt $ 61,779 $ 41,477 $ 29,670 $ 47,923 $ 38,873 $ 202,843 $ 422,565 $ 397,031 Weighted average interest rate 4.63 % 4.30 % 4.01 % 3.77 % 4.58 % 4.33 % 4.31 % 5.93 % Variable rate: Long‑term debt(1)(2) $ — $ — $ — $ — $ — $ — $ — $ — Fixed rate: Long-term debt Weighted average interest rate Variable rate: Long-term debt(1) Item 8. Financial Statements and Supplementary Data. This information appears in Item 15(a) of this Annual Report on Form 10-K and is incorporated into this Item 8 by reference thereto. 47 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures A review and evaluation was performed by our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, a management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that: Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, Based on its assessment, our management concluded that, as of December 31, There have Item 9B. Other None of our officers or directors had any contract, instruction, or written plan for the Item 9C. Disclosure Regarding Foreign Jurisdictions that Item 10. Directors, Executive Officers and Corporate Governance Apart from certain information concerning our executive officers which is set forth in Part I of this Annual Report, additional information required by this Item 10 shall be included in our proxy statement for our Item 11. Executive Compensation. The information Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Apart from the equity compensation plan information Equity Compensation Plan Information The following table provides information as of December 31, Number of securities remaining available Number of for future issuance securities Weighted average under equity to be issued exercise price compensation upon exercise of outstanding plans (excluding of outstanding options, securities options, warrants warrants reflected in Plan Category and rights(1) and rights column(a))(2) (a) (b) (c) Equity compensation plans approved by security holders 248,112 — 428,675 Equity compensation plans not approved by security holders — — — Total 248,112 — 428,675 49 Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total Item 13. Certain Relationships and Related Transactions, and Director Independence. The information Item 14. Principal Accountant Fees and Services.● the information with respect to our consolidated joint ventures is generally described as if such ventures are our wholly owned subsidiaries and information with respect to unconsolidated joint ventures is generally separately described. ● (i) all references to joint ventures refer to unconsolidated joint ventures, (ii) all interest rates with respect to debt give effect to the related interest rate derivative, if any, (iii) amounts reflected as debt reflect the gross debt owed, without deducting deferred financing costs and (iv) references to industrial properties include properties (a) a portion of which may be used for office purposes and (b) that are used for distribution, warehouse and flex purposes. ● the term “standard carve-outs,” when used in describing mortgages or mortgage financings, refers to recourse items to an otherwise non-recourse mortgage. While carve-outs vary from lender to lender and transaction to transaction, the carve-outs may include, among other things, voluntary bankruptcy filings, environmental liabilities, the sale, financing or encumbrance of the property in violation of loan documents, damage to property as a result of intentional misconduct or gross negligence, failure to pay valid taxes and other claims which could create liens on the property and the conversion of security deposits, insurance proceeds or condemnation awards. The interest rate on most of our variable rate mortgage debt has been fixed through the use of interest rate swap agreements. In addition to our being liable for “standard carve-outs”, we may also be liable, at the parent company level, for swap breakage losses on otherwise non-recourse mortgage debt that is subject to an interest rate swap agreement, if such agreement is terminated prior to its stated expiration. See Note 9 to our consolidated financial statements. ● we present information regarding our 2024 contractual rental income (which we also refer to as “contractual rental income”) – contractual rental income represents the base rent tenants are required to pay us in 2024 and does not reflect, among other things, variable rent (including amounts tenants are required to reimburse us) or the adjustments required by US Generally Accepted Accounting Principles (“GAAP”) to present rental income. We view contractual rental income as an operating – not a financial – metric and present it because we believe investors are interested in knowing the amount of cash rent we are entitled to collect. Contractual rental income is not a substitute for rental income, as determined in accordance with GAAP, and may not be comparable from year–to–year or to similar metrics presented by other REITs. See “Item 1. Business–Our Tenants”. ● our use of the term e-commerce includes the provision by the retail, restaurant, health and fitness and theater sectors of their goods and services through distribution channels other than traditional brick and mortar distribution channels. ● the financial failure of, or other default in payment by, tenants under their leases and the potential resulting vacancies; ● adverse changes and disruption in the retail, restaurant, theater and health and fitness sectors, which could impact our tenants’ ability to pay rent and expense reimbursement; ● loss or bankruptcy of one or more of our tenants, and bankruptcy laws that may limit our remedies if a tenant becomes bankrupt and rejects its lease; ● the level and volatility of interest rates; ● general economic and business conditions and developments, including those currently affecting or that may affect our economy; ● general and local real estate conditions, including any changes in the value of our real estate; ● our ability to renew or re-lease space as leases expire; ● our ability to pay dividends; ● changes in governmental laws and regulations relating to real estate and related investments; ● compliance with credit facility and mortgage debt covenants; ● the availability of, and costs associated with, sources of capital and liquidity; ● competition in our industry; ● technological changes, such as autonomous vehicles, reconfiguration of supply chains, robotics, 3D printing or other technologies; ● potential natural disasters, epidemics, pandemics or outbreak of infectious disease, such as COVID-19, and other potentially catastrophic events such as acts of war and/or terrorism; and ● the other risks, uncertainties and factors described in the reports and documents we file with the SEC including the risks, uncertainties and factors described under “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K, and in the Quarterly Reports on Form 10-Q and the other reports we file with the SEC. Generalwere incorporated in Maryland on December 20, 1982. We acquire, own and manage a geographically diversified portfolio consisting of industrial retail (including furniture stores and, supermarkets), restaurant, health and fitness and theaterto a lesser extent, retail properties, many of which are subject to long-term leases. Most of our leases are "net leases"“net leases” under which the tenant, directly or indirectly, is responsible for paying the real estate taxes, insurance and ordinary maintenance and repairs of the property. As of December 31, 2017,2023, we own 113108 properties (excluding a property disposed of in January 2018) and participate in joint ventures that own fivetwo properties. These 118110 properties are located in 3031 states and have an aggregate of approximately 10.710.9 million square feet (including an aggregate of approximately 1.2 million square46,000 square feet at properties owned by our joint ventures).2017:2023:
not part of this report.•our 2018 contractual rental income (as described below) is $67.7 million.•the occupancy rate of our properties is 99.6% based on square footage.•the weighted average remaining term of our mortgage debt is 8.8 years and the weighted average interest rate thereon is 4.22%.•● our 2024 contractual rental income (as described in “— Our Tenants”) is $71.3 million; ● the occupancy rate of our properties is 98.8% based on square footage; ● the weighted average remaining term of our mortgage debt is 5.9 years and the weighted average interest rate thereon is 4.31%; and ● the weighted average remaining term of the leases generating our 2024 contractual rental income is 5.5 years. leases generatingExchange Act can be accessed through this site, free of charge, as soon as reasonably practicable after we electronically file or furnish such reports. These filings are also available on the SEC’s website at www.sec.gov. The information on our 2018 contractual rental incomewebsite is 8.4 years. Our 2018 contractual rental income represents, after giving effect2023 and Recent Developments● sold 10 properties (i.e., seven restaurants and three retail properties) and an out-parcel at a multi-tenant retail property, for an aggregate net gain on sale of real estate of $17.0 million. The properties sold accounted for $2.5 million, or 2.7%, and $3.0 million, or 3.3 %, of 2023 and 2022 rental income, net, respectively. We estimate that, excluding any acquisitions, dispositions or lease amendments in 2024, rental income in 2024 will decrease by approximately $2.5 million from 2023 due to these sales. ● paid down our credit facility by approximately $21.8 million primarily through the use of net proceeds from property sales – as of December 31, 2023 and March 1, 2024, no amounts were outstanding on the facility. ● acquired a multi-tenant industrial property for an aggregate purchase price of $13.4 million. This property accounts for $806,000, or 1.1%, of our 2024 contractual rental income. ● through an unconsolidated joint venture in which we had a 50% equity interest, sold a multi-tenant shopping center located in Manahawkin, NJ for $36.5 million, of which our share was $18.3 million. In 2023, we recognized a $108,000 loss from the sale of this property. Our share of the net proceeds from this sale was $7.1 million. We generated, in 2023, $1.1 million (including our $850,000 share of an impairment charge) of equity in loss and in 2022 and 2021, $210,000 and $11,000, respectively, of equity in earnings from this unconsolidated joint venture. ● entered into, amended or extended 28 leases with respect to approximately 988,000 square feet. ● repurchased approximately 499,000 shares of our common stock for an aggregate purchase price of approximately $9.6 million (i.e., an average price of $19.24 per share). any abatements, concessions or adjustments, the base rent payable to us in 2018 under leases in effect at December 31, 2017. Excluded from 2018 contractual rental income are approximately $483,000 of straight-line rent, amortization of approximately $1.0 million of intangibles, $56,000 of base rent payable through January 31, 2018 with respect2023, we:● entered into a contract to sell a pad site at a multi-tenant retail shopping center in Lakewood, Colorado, which we own through a consolidated joint venture in which we hold a 90% interest, for $2.9 million. The buyer’s right to terminate the contract expired in February 2024 and the sale is anticipated to close during the quarter ending March 31, 2024. We anticipate recognizing a gain of approximately $1.8 million on this sale during the three months ending March 31, 2024, of which the non-controlling interest’s share will be approximately $180,000. a property we sold in January 2018, and our share of the base rent payable to our joint ventures, which in 2018 is approximately $2.4 million.increase stockholder value by:2017 Highlights and Recent Developments● identifying opportunistic and strategic property acquisitions consistent with our portfolio and our acquisition strategies; ● monitoring and maintaining our portfolio, and as appropriate, working with tenants to facilitate the continuation or expansion of their tenancies; ● managing our portfolio effectively, including opportunistic and strategic property sales; ● obtaining mortgage indebtedness (including refinancings) on favorable terms, ensuring that the cash flow generated by a property exceeds the debt service thereon and maintaining access to capital to finance property acquisitions; and ● maintaining and, over time, increasing our dividend. In 2017:•our rental income, net, increased by $4.1 million, or 6.4%, from 2016.•we acquired four properties for an aggregate purchase price of $43.2 million. The acquired properties account for $3.1 million, or 4.6%, of our 2018 contractual rental income.•we sold four properties, three of which were vacant, for a net gain on sale of real estate of $9.8 million. The properties sold accounted for 0.5% and 2.6% of 2017 and 2016 rental income, net, respectively.•we obtained proceeds of $21.2 million from mortgage financings, all of which relate to properties acquired in 2017.•we increased our quarterly dividend by 4.7% to $0.45 per share, commencing with the dividend declared in December 2017 and paid in January 2018.•we raised net proceeds of approximately $5.6 million from the issuance of 231,000 shares of common stock pursuant to our at-the-market equity offering program.•we re-leased four vacant properties or portions thereof. In 2017, we incurred an aggregate of $739,000 of real estate operating expenses in carrying such properties. In 2018, we will generate an aggregate of approximately $1.2 million of rental income from such properties and in the future, will not be responsible for the related operating expenses.•on January 30, 2018, we sold a multi-tenant retail property located in Fort Bend, Texas, in which we held an 85% interest, for gross proceeds of $9.2 million and paid off the $4.4 million mortgage. In the quarter ending March 31, 2018, we anticipate recognizing a gain on this sale of approximately $2.4 million. The non-controlling interests' share of the gain from the transaction will be approximately $800,000. In the narrative portion of this Annual Report on Form 10-K, except as otherwise indicated:•the information with respect to our consolidated joint ventures is generally described as if such ventures are our wholly owned subsidiaries and information with respect to unconsolidated joint ventures is generally separately described,•(i) all references to joint ventures refer to unconsolidated joint ventures, (ii) all interest rates with respect to debt give effect to the related interest rate derivative, if any, (iii) amounts reflected as debt, reflects the gross debt owed, without deducting deferred financing costs, and (iv) square footage and terms of like import refers to the total square footage of the applicable building, including common areas, if any,•2018 contractual rental income derived from multiple properties leased pursuant to a master lease is allocated among such properties based on management's estimate of the appropriate allocations, and•the rental, operating, mortgage and statistical information, excludes the Fort Bend, Texas property sold in January 2018, other than with respect to the disclosures under"Item 6. Selected Financial Data" and"Item 7. Management's Discussion and Analysis of Financial Condition—Results of Operations—Comparison of Years Ended December 31, 2017 and 2016 " and "—Results of Operations—Comparison of Years Ended December 31, 2016 and 2015."goalobjective is to acquire single-tenant properties, and in particular, industrial properties, that are subject to long-term net leases that include periodic contractual rental increases or rent increases based on increases in the consumer price index. Periodic contractual rental increases provide reliable increases in future rent payments and rent increases based on the consumer price index provide protection against inflation. Historically, long-term leases have made it easier for us to obtain longer-term, fixed-rate mortgage financing with principal amortization, thereby moderating the interest rate risk associated with financing or refinancing our property portfolio and reducing the outstanding principal balance over time. We have, however, acquired properties, and may however,continue to acquire a propertyproperties, that isare subject to a short-term leaseleases when we believe the property representsthat such properties represent a favorable opportunity for generating additional income from its re-lease or has significant residual value. Although the acquisition ofwe are focused on acquiring single-tenant properties subject to net leases, is the focus of our investment strategy, we also consider investments in, among other things, (i) properties that can be re-positioned or re-developed, and (ii) community shopping centers anchored by national or regional tenants and (iii) properties ground leased to operators of multi-family properties. We pay substantially all the operating expenses at community shopping centers, a significant portion of which is reimbursed by tenants pursuant to their leases.Table of Contentstenants. Historically, a significant portion4of our, senior management and our affiliates, senior management, which contacts include real estate brokers, private equity firms, banks and law firms. In addition, we attend industry conferences and engage in direct solicitations.•the current and projected cash flow of the property;•the estimated return on equity to us;•an evaluation of the property and improvements, given its location and use;•local demographics (population and rental trends);•the terms of tenant leases, including co-tenancy provisions and the relationship between current rents and market rents;•the ability of a tenant, if a net leased property, or major tenants, if a multi-tenant property, to meet operational needs and lease obligations;•an evaluation of the credit quality of the tenant;•the projected residual value of the property;•the potential to finance or refinance the property;•potential for income and capital appreciation;● the current and projected cash flow of the property; ● the estimated return on equity to us; ● an evaluation of the property and improvements, given its location and use; ● an evaluation of the credit quality of the tenant; ● alternate uses or tenants for the property; ● local demographics (population and rental trends); ● the purpose for which the property is used (i.e., industrial, retail or other); ● the terms of tenant leases, including co-tenancy provisions and the relationship between current rents and market rents; ● the potential to finance and/or refinance the property; ● the projected residual value of the property; ● the ability of a tenant, if a net leased property, or major tenants, if a multi-tenant property, to meet operational needs and lease obligations; ● potential for income and capital appreciation; ● occupancy of and demand for similar properties in the market area; and ● the ability of a tenant and the related property to withstand changing economic conditions and other challenges. •occupancy of and demand for similar properties in the market area; and•alternate uses or tenants for the property.Our Business Objective Our business objective is to maintain and increase, over time, the cash available for distribution to our stockholders by:•identifying opportunistic and strategic property acquisitions consistent with our portfolio and our acquisition strategies;•obtaining mortgage indebtedness (including refinancings) on favorable terms and maintaining access to capital to finance property acquisitions; and•monitoring and maintaining our portfolio, including tenant negotiations and lease amendments with tenants that are renewing, expanding or having financial difficulty; and•managing our portfolio effectively, including opportunistic and strategic property sales.Typical Property Attributes As of December 31, 2017, the properties in our portfolio have the following attributes:•Net leases. Most of our leases are net leases under which the tenant is typically responsible for real estate taxes, insurance and ordinary maintenance and repairs. We believe that investments in net leased properties offer reasonably predictable returns.•Long-term leases. Many of our leases are long-term leases. The weighted average remaining term of our leases is 8.4 years. Leases representing approximately 27.3% of our 2018 contractual rental income expire between 2023 and 2026 and leases representing approximately 36.4% of our 2018 contractual rental income expire after 2027.•Scheduled rent increases. Leases representing approximately 73.6% of our 2018 contractual rental income provide for either periodic contractual rent increases or a rent increase based on the consumer price index.2017:2023:(1) Our 2024 contractual rental income represents, after giving effect to any abatements, concessions, deferrals or adjustments, the base rent payable to us in 2024 through the stated expiration of such leases, under leases in effect at December 31, 2023. Our 2024 contractual rental income: ● Includes an aggregate of $2.9 million comprised of: (i) $1.3 million based on a negotiated but unsigned lease amendment from a tenant at our Brooklyn, New York office property, (ii) $1.2 million from Regal Cinemas, as to which there is uncertainty as to its collectability, (iii) $325,000 representing the base rent payable by Dick’s Sporting Goods (Champaign, Illinois) in the twelve months ending December 31, 2024, although such lease is subject to termination by the landlord or tenant upon 90 days’ notice and (iv) $120,000 from the LA Fitness lease in Hamilton, Ohio which terminates May 1, 2024. ● Excludes an aggregate of $1.5 million comprised of: (i) subject to the property generating specified levels of positive operating cash flow, $1.3 million of estimated variable lease payments from The Vue, a multi-family complex which ground leases the underlying land from us and as to which there is uncertainty as to when and whether the tenant will resume paying rent and (ii) $235,000 representing our share of the base rent payable to our joint ventures. (2) Includes five properties which are net leased to Office Depot pursuant to five separate leases. Four of the Office Depot leases contain cross-default provisions. Number of
Tenants Number of
Properties 2018 Contractual
Rental Income Percentage of
2018 Contractual
Rental Income 31 28 $ 25,119,990 37.1 57 35 15,963,958 23.6 3 14 6,109,003 9.0 10 16 3,185,623 4.7 1 3 3,080,333 4.5 3 3 2,718,682 4.0 1 7 2,406,728 3.6 1 2 2,293,132 3.4 5 5 6,856,708 10.1 112 113 $ 67,734,157 100.0 (1)Eleven properties are net leased to Haverty Furniture Companies, Inc., which we refer to as Haverty Furniture, pursuant to a master lease covering all such properties.(2)Includes seven properties which are net leased to Office Depot pursuant to seven separate leases. Five of the Office Depot leases contain cross-default provisions.Applebees, Barnes & Noble,Ashley Furniture, Burlington Coat Factory, CarMax,Cargill, CVS, Famous Footwear, FedEx, Ferguson Enterprises, Hobby Lobby, Home Depot USA, LA Fitness, Marshalls, Men's Wearhouse,NARDA Holdings, Inc., Northern Tool, Office Depot, Party City, PetSmart, Ross Stores, Shutterfly, TGI Friday's, The Toro Company, Urban Outfitters,US Lumber and Walgreens, Wendy's and Whole Foods, and some of our tenants operate on a regional basis, including HavertyHavertys Furniture and Giant Food Stores. Our typical lease provides6periodically throughout the term of the lease or fora rent increases pursuant to a formulaincrease based on the consumer price index. Some of our leases provide for minimum rents supplemented by additional payments based on sales derived from the property subject to the lease (i.e., percentage rent). Percentage rent from four properties contributed $263,000 to 2017 rental income,$107,000, $85,000 and $70,000 of which $174,000 was contributed by one tenant. Percentage rent contributed $42,000, and $38,000 to rental income in 20162023, 2022 and 2015,2021, respectively.2017:2023:(1) Lease expirations do not give effect to the exercise of existing renewal options. (2) Excludes an aggregate of 125,353 square feet of vacant space. Number of
Expiring
Leases Approximate
Square
Footage
Subject to
Expiring
Leases 2018 Contractual
Rental Income
Under Expiring
Leases Percentage of
2018 Contractual
Rental Income
Represented by
Expiring Leases 12 206,592 $ 1,333,898 2.0 12 321,507 2,952,389 4.4 9 110,548 1,621,506 2.4 18 578,070 4,194,598 6.2 25 2,144,389 14,424,295 21.3 13 852,141 5,689,479 8.4 6 408,093 2,069,484 3.1 10 387,202 5,410,643 8.0 11 551,229 5,266,182 7.8 33 3,827,219 24,771,683 36.4 149 9,386,990 $ 67,734,157 100.0 (1)Lease expirations assume tenants do not exercise existing renewal options. revolving credit facility provides us with a source of funds that may beis used to acquire properties, payoff existing mortgages, and to a more limited extent, invest in joint ventures, implement property improvementsimprove properties and for working capital purposes. NetGenerally, net proceeds received from the sale, financing or refinancing of properties are generally required to be used to repay amounts outstanding under our facility. See"“Item 7. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facility"Facility”.the standard carve-outs described under"Item 2. Properties—Mortgage Debt", to enhance the return on our investment in a specific property. TheGenerally, the proceeds of mortgage loans are first applied to reduce indebtedness on our credit facility and the balance may be used for other general purposes, including property acquisitions, investments in joint ventures or other entities that own real property, to reduce bank debt and for working capital purposes.capital. After7will seek to re-rentexplore re-renting or sellselling such property in a manner that willto maximize theour return, to us, considering, among other factors, the income potential and market value of such property. We acquire properties for long-termOur Joint Ventures As of December 31, 2017,In 2023, we participated in five joint ventures that ownsold ten properties (i.e., seven restaurants and three retail) and an aggregate of fiveout-parcel at a multi-tenant retail property. Generally, we sold these properties with approximately 1.2 million square feet of space. Four of the properties are retail properties and one is an industrial property. We own 50% of the equity interest in all of these joint ventures. At December 31, 2017, our investment in joint ventures was approximately $10.7 million and the occupancy rate at the properties owned by these ventures, based on square footage, was 97.6%. Based on the leases in effect at December 31, 2017, we anticipate that our share of the base rent payable in 2018due to our joint ventures is approximately $2.4 million. Leases for two properties are expected to contribute 86.5% of the aggregate base rent payable to all ofbelief that such property had achieved its maximum potential value; our joint ventures in 2018. Leasesconcern with respect to 55.6%, 11.9% and 32.5% of the aggregate base rent payable to all of our joint ventures in 2018, is payable pursuant to leases expiring from 2018 to 2019, from 2020 to 2021, and thereafter, respectively. See"Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Other Developments" for information regarding properties tenanted by Kmart.Competition We face competitionlong-term prospects for the tenant or the geographic sub-market; or our concern in our ability, on acceptable terms, to refinance the property’s mortgage debt or re-lease the property. We used a significant portion of these net proceeds to pay off $21.8 million of credit facility debt.from a variety of investors, including domestic and foreign corporationsfinancing for these properties. Competitors include traded and real estate companies, financial institutions,non-traded public REITs, private equity firms, institutional investment funds, insurance companies pension funds, investment funds, other REITs and private individuals, many of which have significant advantages over us, including a larger, more diverse group of properties and greater financial (including access to debt on more favorable terms) and other resources than we have.have and the ability or willingness to accept more risk than we believe appropriate for us. We can provide no assurance that we will be able to compete successfully in the commercial real estate industry.Structureproperties are required to comply with the Americans with Disabilities Act of 1990 and similar state and local laws and regulations (collectively, the “ADA”). The primary responsibility for complying with the ADA, (i.e., either us or our tenant) generally depends on the applicable lease, but we may incur costs if the tenant is responsible and does not comply. As of December 31, 2023, we have not been notified by any governmental authority, nor are we otherwise aware, of any non-compliance with the ADA that we believe would have a material adverse effect on our business, financial position or results of operations. NineState and local governmental authorities regulate the use of our properties. While many of our leases mandate that the tenant is primarily responsible for complying with such regulations, the tenant’s failure to comply could result in the imposition of fines or awards of damages on us, as the property owner, or restrictions on the ability to conduct business on such properties.including Patrick J. Callan, Jr.(including 5 full-time executive officers), our president and chief executive officer, Lawrence G. Ricketts, Jr., our executive vice president and chief operating officer, Justin Clair, a vice president, Karen Dunleavy, vice president-financial and five other employees,who devote substantially all of their business time to us. Our otherour activities. In addition, certain (i) executive, administrative, legal, accounting, clerical, property management, property acquisition, consulting (i.e., sale, leasing, brokerage, and clerical personnel provide theirmortgage financing), and construction supervisory services, which we refer to us on a part-time basiscollectively as the “Services”, and (ii) facilities and other resources, are provided pursuant to the compensation and services agreement described below. We entered into a compensation and services agreement withbetween us and Majestic Property Management Corp. effective, which we refer to as of January 1, 2007.“Majestic Property.” Majestic Property is wholly-owned by the Vice Chairman of our vice chairmanBoard of the boardDirectors and it provides compensation tocompensates certain of our executive officers. Pursuant to this agreement, we pay fees to Majestic Property and Majestic Property provides us with the services of all affiliated executive, administrative, legal, accounting and clerical personnel that we use on a part time basis, as well as property management services, property acquisition, sales and leasing and mortgage brokerage services. The fees we pay Majestic Property are negotiated by us and Majestic Property in consultation with our audit and compensation committees, and are approved by these committees and our independent directors.2017,2023, pursuant to the compensation and services agreement, we paid Majestic Property a fee of approximately $2.7$3.3 million for the Services plus $216,000$317,000 for our share of all direct office expenses, including rent, telephone, postage, computer services, suppliesinternet usage and internet usage.supplies. Included in the $2.7$3.3 million fee is $1,154,000$1.5 million for property management services—the feeamount for the property management services is based on 1.5% and 2.0% of the rental payments (including tenant reimbursements) actually received by us from net lease tenants and operating lease tenants, respectively. Property management fees areWe do not paid topay Majestic Property with respect to properties managed by third parties. Based on our portfolio of properties at December 31, 2017,2023, we estimate that the property management fee in 20182024 will be approximately $1,190,000.$1.4 million.compensationbasis of color, race, sex, national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression or any other status protected by applicable law, and services agreement allows usour employees are compensated without regard to benefitany of the foregoing.(i) access to,1999 through 2006.the services1990 to 2023, as Chief Financial Officer and Senior Vice President. Since 1998, he has served as Senior Vice President, Finance and from 1990 to 1998, as Vice President of a group of senior executives with significant knowledgeBRT Apartments. Since 1990, he has served as Senior Vice President and experience in the real estate industry and our company, (ii) other individuals who perform services on our behalf, and (iii) general economies of scale. If not for this agreement, we believe that a company of our size would not have access to the skills and expertise of these executives at the cost that we have incurred and will incur in the future. For a descriptionChief Financial Officer of the backgroundmanaging general partner of Gould Investors. Mr. Kalish is a certified public accountant.management, please see the information under the heading "Executive Officers" in Part ISenior Vice President since 2006 and as Vice President from 2000 through 2006. He has served as Senior Vice President of this Annual Report. See Note 12BRT Apartments since 2006, and as its Vice President from 1993 to our consolidated financial statements for information regarding equity awards to individuals performing services on our behalf pursuant to the compensation2006. Mr. Lundy has served as President and services agreement.Available Information Our Internet address is www.onelibertyproperties.com. On the Investor Information page of our web site, we post the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (the "SEC"): our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)Chief Operating Officer of the Securities Exchange Actmanaging general partner of 1934,Gould Investors since 2013 and as amended. All such filings onits Vice President from 1990 through 2012. He is an attorney admitted to practice in New York and the District of Columbia.Investor Information Web page, which also includes Forms 3, 4 and 5 filed pursuant to Section 16(a)Senior Vice President since 1997. He has served as Chairman of the Securities Exchange ActBoard of 1934,Directors of BRT Apartments since 2013, as amended, are availableVice Chairman of its Board of Directors from 2012 through 2013, and as its Senior Vice President from 1998 through 2012. Since 1997, he has served as a Vice President of the managing general partner of Gould Investors.be viewed freepractice in New York. On the Corporate Governance page of our web site, we post the following chartersJustin Clair. Mr. Clair has served as Executive Vice President since 2023, as Senior Vice President—Acquisitions from 2019 through 2023, as Vice President from 2014 through 2019, as Assistant Vice President from 2010 through 2014, and guidelines: Audit Committee Charter, Compensation Committee Charter, Nominating and Corporate Governance Committee Charter, Corporate Governance Guidelines and Code of Business Conduct and Ethics, as amended and restated. All such documents on our Corporate Governance Web page are available to be viewed free of charge. Information contained on our web site is not part of, and is not incorporated by reference into, this Annual Report on Form 10-K or our other filings with the SEC. A copy of this Annual Report on Form 10-K and those items disclosed on our Investor Information Web page and our Corporate Governance Web page are available without charge upon written request to: One Liberty Properties, Inc., 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021, Attention: Secretary.Forward-Looking Statements This Annual Report on Form 10-K, together with other statements and information publicly disseminatedhas been employed by us contains certain forward-looking statements withinsince 2006.meaningTreasurer of Section 27A of the Securities Act of 1933,BRT Apartments from 2008 through 2013, and as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statementsits Assistant Treasurer from 1997 to be covered by the safe harbor provision for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "could," "believe," "expect,"Table of Contents2008."intend," "anticipate," "estimate," "project," or similar expressions or variations thereof. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect actual results, performance or achievements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to:•the financial condition of our tenants and the performance of their lease obligations;•general economic and business conditions, including those currently affecting our nation's economy and real estate markets;•the availability of and costs associated with sources of liquidity;•accessibility of debt and equity capital markets;•general and local real estate conditions, including any changes in the value of our real estate;•compliance with credit facility covenants;•increased competition for leasing of vacant space due to current economic conditions;•changes in governmental laws and regulations relating to real estate and related investments;•the level and volatility of interest rates;•competition in our industry; and•the other risks described underItem 1A. Risk Factors. Any or all of our forward-looking statements in this report and in any other public statements we make may turn out to be incorrect. Actual results may differ from our forward-looking statements because of inaccurate assumptions we might make or because of the occurrence of known or unknown risks and uncertainties. Many factors mentioned in the discussion below will be important in determining future results. Consequently, no forward-looking statement can be guaranteed and you are cautioned not to place undue reliance on these forward- looking statements. Actual future results may vary materially. Except as may be required under the United States federal securities laws, we undertake no obligation to publicly update our forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make in our reports that are filed with or furnished to the SEC.adverse effects arisingimpacts from the realization of any of the risks discussed, including our financial condition and results of operations, may, and likely will, adversely affect many aspects of our business. In addition to the other information contained or incorporated by reference in this Form 10-K, readers should carefully consider the following risk factors:Approximately 40.2% of our 2018 contractual rental income is derived from tenants operating in the retail industry and the failure of those tenants to pay rent would significantly reduce our revenues. Approximately 40.2% of our 2018 contractual rental income is derived from retail tenants, including 9.0% from tenants engaged in retail furniture (i.e., Haverty Furniture accounts for 7.1% of2018 contractual rental income) and 3.6% from tenants engaged in office supply activities (i.e., Office Depot accounts for 3.6% of 2018 contractual rental income). Various factors could cause our retail tenants to close their locations, including difficult economic conditions and e-commerce competition. The failure of our retail tenants to meet their lease obligations, including rent payment obligations, due to these and other factors, may make it difficult for us to satisfy our operating and debt service requirements, make capital expenditures and pay dividends.20182024 through 2020,2029, the following leases with respect to 33 tenants that account for 8.8% of our 2018 contractual rental income, expire. expire:thelease expiration, of same, (ii) default on their obligations or (iii) seek rent relief, lease renegotiation or other accommodations, our revenues couldwould decline and, in certain cases, co-tenancy provisions (i.e., a tenant’s right to reduce their rent or terminate their lease if certain key tenants vacate a property) may be triggered possibly allowing other tenants at the same property to reduce their rental payments or terminate their leases. At the same time, we would remain responsible for the payment of the mortgage obligations with respect to the related properties, and would become responsible for the operating expenses related to these properties, including, among other things,(e.g., real estate taxes, maintenance and insurance. In addition, we mayinsurance) related to these properties, and, in the event of tenant defaults, would incur expenses in enforcing our rights as landlord. Our efforts to find replacement tenants may be challenged as there are a limited number of tenants interested in certain types of properties, such as our theaters (i.e., Regal Cinemas) and health and fitness centers (i.e., LA Fitness) which accounts in the aggregate for $3.8 million, or 5.4%, of 2024 contractual rental income and the cost of reconfiguring such properties to make them more attractive to a broader set of potential tenants may be prohibitive. Even if we find replacement tenants or renegotiate leases with current tenants, the terms of the new or renegotiated leases, includingafter giving effect to tenant concessions or the cost of required renovations or concessions to tenants, or the expense of the reconfiguration of a tenant's space,renovations/ reconfigurations may be less favorable than current lease terms and could reduce the amount of cash available to meet expenses and pay dividends. If we are unable to re-rent properties on favorable terms with respect to properties at which tenants facing financial difficulties default on their rent obligation to pay rent or do not renew their leases at lease expiration, our results of operations, cash flow and financial condition maywill be adversely affected. See "Item 7. Management's DiscussionAnalysisretail real estate sectors, and our business would be adversely affected by an economic downturn in either of Financial Condition or Results of Operations—Other Developments".such sectors.22.9%66.1% and 24.2% of our 20182024 contractual rental income is derived from industrial and retail tenants, respectively, and we are vulnerable to economic declines that negatively impact these sectors of the economy, which would have an adverse effect on our results of operations, liquidity and financial condition.couldor such tenant’s determination not to renew or extend their lease, would significantly reduce our revenues. HavertyFedEx, Havertys Furniture, Northern Tool, NARDA Holdings, Inc. and LA Fitness Northern Tool, Office Depot and Ferguson Enterprises account for approximately 7.1%5.5%, 4.5%4.7%, 4.2%4.3%, 3.6%4.1% and 3.5%3.7%, respectively, of our 20182024 contractual rental income.income, and the weighted average remaining lease term for such tenants is 3.7 years, 4.4 years, 5.3 years, 9.7 years and 7.0 years, respectively. The default, financial distress or bankruptcy of any of these or other significant tenants couldor such tenant’s determination not to renew or extend their lease, would significantly reduce our revenues, would cause interruptions in the receipt of, or the loss of, a significant amount of rental income and would require us to pay operating expenses (including real estate taxes) currently paid by the tenant. This could also result in the vacancy of the property or properties occupied by the defaulting or non-renewing tenant, which would significantly reduce our rental revenues and net income until the re-rental of the property or properties and could decrease the ultimate sale value of the property.Competitioni.e., Northern Tool, Famous Footwear, NARDA Holdings, Inc., FedEx, Q.E.P. Co., Inc., and LA Fitness) account for 35.6% of such sum. We are required to assess the collectability of our unbilled rent receivables and the remaining useful lives of our intangible lease assets. Such assessments take into consideration, among other things, a tenant’s payment history, financial condition, and the likelihood of collectability of future rent. If we determine that traditional retail tenants facethe collectability of a tenant’s unbilled rent receivable is not probable or that the useful life of a tenant’s intangible lease asset has changed, write-offs would be required. Such write-offs result in a reduction of our net income, total assets and stockholders’ equity and in certain circumstances may result in the breach of our financial covenants under the credit facility.e-commerce retail salesproperties located in six states — South Carolina (12.0%), New York (9.2%), Texas (7.9%), Pennsylvania (7.6%), New Jersey (5.3%) and Maryland (5.2%). As a result, a decline in the economic conditions in these states or in regions where our properties are concentrated, may have an adverse effect on the rental and occupancy rates for, and the property values of, these properties, which could adversely affectlead to a reduction of our business.rental income and/or impairment charges.retail tenants face increasing competition from e-commerce retailers. These retailersability to fully control the maintenance of our net-leased properties may be ablelimited.provide customersdefer maintenance, and it may be more difficult to enforce remedies against such a tenant.better pricing andlong-term leases, which risk is heightened in an inflationary environment, that the ease and comfort of shopping from their homecontractual rental increases in future years will fail to result in fair market rental rates during those years. If we do not accurately judge the potential for increases in market rental rates when negotiating these long-term leases or office. E-commerce sales have been obtaining an increasing percentage of retail salesif we are unable to obtain any increases in rental rates over the past few yearsterms of our leases, significant increases in future property operating costs, to the extent not covered under the net leases, could result in us receiving less than fair value from these leases. As a result, our income and this trend is expecteddistributions to continue. The continued growthour stockholders could be lower than they would otherwise be if we did not engage in long-term net leases. In addition, increases in interest rates may also negatively impact the value of e-commerce sales could decreaseour properties that are subject to long-term leases. While a significant number of our net leases provide for annual escalations in the need for traditional retail outletsrental rate, the increase in interest rates may outpace the annual escalations.reduce retailers' space and property requirements. This could adversely impact our ability to rent space at our retail properties and increase competition for retail tenants thereby reducing the rent we would receive at these properties and adversely affect our results of operations and financial condition.Table of ContentsCapital Resources2017, $392.52023, $422.6 million in mortgage debt outstanding all of which is non-recourse (subject to standard carve-outs) and our ratio of mortgage debt to total assets was 53.3%. Our joint ventures had $35.0 million in total mortgage indebtedness (all of which is non-recourse subject to standard carve-outs)carve-outs). The risks associated with our mortgage debt, and the mortgage debt of our joint ventures include the riskrisks that cash flow from properties securing the indebtedness and our available cash and cash equivalents will be insufficient to meet required payments of principal and interest.20182024 through 2022,2028, approximately $111.4$168.6 million of our mortgage debt matures—specifically, $20.4 million in 2018, $14.6 million in 2019, $11.9 million in 2020, $20.7 million in 2021 and $43.8 million in 2022. With respect to our joint ventures, approximately $14.2 million of mortgage debt matures from 2018 through 2022—specifically, $4.3 million in 2018, $877,000 in 2019, $911,000 in 2020, $948,000 in 2021, and $7.2 million in 2022.matures. If we (or our joint ventures) are unsuccessful in refinancing or extending existing mortgage indebtedness or financing unencumbered properties, selling properties on favorable terms or raising additional equity, our cash flow (or the cash flow of a joint venture) will not be sufficientinsufficient to repay all maturing mortgage debt when payments become due, and we (or a joint venture) may be forced to dispose of properties on disadvantageous terms or convey properties secured by mortgages to the mortgagees, which would lower our revenues and the value of our portfolio.tenant'stenant’s competitive position in the applicable submarket,sub-market, our and our tenant'stenant’s estimates of its prospects, consideration of alternative uses and opportunities to re-purpose or re-let the property, we may seek to renegotiate the terms of the mortgage, or to the extent that the loan is non-recourse and the terms of the mortgage cannot be satisfactorily renegotiated, forfeit the property by conveying it to the mortgagee and writing off our investment.Declines in the value of our properties could result in impairment charges. If we are presented with indications of an impairment in the value of a particular propertyVolatile or group of properties, we will be required to evaluate any such propertyincreasing interest rates, or properties. If we determine that any of our properties at which indicators of impairment exist have a faircredit market value below the net book value of such property, we will be required to recognize an impairment charge for the difference between the fair value and the book value during the quarter in which we make such determination; such impairment charges may then increase in subsequent quarters. This evaluation may lead us to write off any straight-line rent receivable and lease intangible balances recorded with respect to such property. In addition, we may incur losses from time to time if we dispose of properties for sales prices that are less than our book value.The concentration of our properties in certain statestightening, may make our revenues and the value of our portfolio vulnerable to adverse changes in local economic conditions. Many of the properties we own are located in the same or a limited number of geographic regions. Approximately 40.7% of our 2018 contractual rental income will be derived from properties located in five states—Texas (11.9%), South Carolina (8.3%), New York (7.9%), Pennsylvania (6.4%) and North Carolina (6.2%). At December 31, 2017, approximately 43.1% of the net book value of our real estate investments was located in five states—Texas (11.3%), South Carolina (9.6%), Pennsylvania (9.3%), Tennessee (7.2%) and Maryland (5.7%). As a result, a decline in the economic conditions in these states or in regions where our properties may be concentrated in the future, may have an adverse effect on the rental and occupancy rates for, and the property values of, these properties, which could lead to a reduction of our rental income and/or impairment charges.If interest rates increase or credit markets tighten, it may be more difficult for us to secure financing, which may limit our ability to finance or refinance our real estate properties, reduce the number of properties we can acquire, sell certain properties, and decrease our stock price. An increase in interest rates could reduce the amount investors are willing to pay for our common stock. Because REIT stocks are often perceived as high-yield investments, investors may perceive less relative benefit to owning REIT stocks as interest rates and the yield on government treasuries and other bonds increase. if we do refinance the loan balance.. In addition, an increase inincreasing interest rates could decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to reposition our portfolio promptly in response to changes in economic or other conditions.dispose of assets on more favorable terms. While interestInterest rates have been at historically low levels the past several years, they have recently been increasing and become increasingly volatile. At December 29, 2017 and February 28, 2018,volatile as the interest rate on the 10-year10-year treasury notenotes ranged from 0.90% to 5.02% during the three years ended December 31, 2023. At March 1, 2024, the interest rate on such notes was 2.40% and 2.87%, respectively.4.19%. If we are required to refinance mortgage debt that matures over the next several years at higher interest rates than such mortgage debt currently bears, the funds available for dividends may be reduced. The following table sets forth, as of December 31, 2017,2023, the principal balance of the mortgage payments due at maturity on our properties and the weighted average interest rate thereon (dollars in thousands): Principal
Balances
Due at Maturity Weighted
Average Interest
Rate Percentage $ 10,260 4.26 3,485 3.88 — — 8,463 4.13 31,539 3.92 214,048 4.20 that these arrangements may cause have caused The termsAt December 31, 2023, we had $422.6 million of debt outstanding all related to our revolvingmortgage debt and no debt outstanding on our credit facility. Increased leverage, whether pursuant to our credit facility limit our ability to incur indebtedness, including limiting the total indebtedness that we may incur to an amount equal to 70% of the total value (as defined in the credit facility) of our properties. Increased leverageor mortgage debt, could result in increased risk of default on our payment obligations related to borrowings and in an increase in debt service requirements, which could reduce our net income and the amount of cash available to meet expenses and to pay dividends.IfA breach of our credit facility could occur if a significant number of our tenants default or fail to renew expiring leases, or we take impairment charges against our properties, a breach of our revolving credit facility could occur.properties. revolving credit facility includes covenants that require us to maintain certain financial ratios and comply with other requirements. If our tenants default under their leases with us or fail to renew expiring leases, generally accepted accounting principleswe may require us to recognize impairment charges against our properties, and our financial position could be adversely affected causing us to be in breach of the financial covenants contained in our credit facility.wouldcould place us in default under our credit facility. In such event, if no amounts were outstanding under the facility, and, ifwe would not be entitled to draw on the banks called a default and requiredfacility which could impede our ability, among other things, to acquire properties or fund working capital requirements. If we defaulted on the facility while amounts were outstanding, the lenders could require us to repay the full amount outstanding, under the credit facility,and we might be required to rapidly dispose of our properties, which could have an adverse impact on the amounts we receive on such disposition.dispositions. If we are unable to dispose of our properties in a timely fashion to the satisfaction of the banks, the banks could foreclose on that portion of our collateral pledged to the banks, which could result in the disposition of our properties at below marketbelow-market values. The disposition of our properties at below our carrying value would adversely affect our net income, reduce our stockholders'stockholders’ equity and adversely affect our ability to pay dividends. net leases and our ground leases require us to pay property related expenses that are not the obligations of our tenants. Under the terms of substantially all of our net leases, inIn addition to satisfying their rent obligations, our tenants are generally responsible for the payment of real estate taxes, insurance and ordinary maintenance and repairs. However, under the provisions of certain net and ground leases, we are required to pay some expenses, such as the costs of environmental liabilities, roof and structural repairs, insurance premiums, certain non-structural repairs and maintenance. If our properties incur significant expenses that must be paid by us under the terms of our leases, our business, financial condition and results of operations will be adversely affected and the amount of cash available to meet expenses and pay dividends may be reduced.UninsuredOur failure to comply with our obligations under our mortgages may reduce our stockholders’ equity, and underinsured losses mayadversely affect the revenues generated by, the value of,our net income and the return from a property affected by a casualty or other claim.ability to pay dividends. Most allSeveral of our tenants obtain, for our benefit, comprehensive insurance covering our properties in amountsmortgages include covenants that are intendedrequire us to be sufficientmaintain certain financial ratios, including various coverage ratios, and comply with other requirements. Failure to provide for the replacementmeet interest and other payment obligations under these mortgages or a breach by us of the improvements at each property. However, the amount of insurance coverage maintained for any property may be insufficient (i)covenants to paycomply with certain financial ratios would place us in non-compliance under such mortgages. If a mortgagee called a default and required us to repay the full replacement cost of the improvements at the property following a casualty event or (ii) if coverage is provided pursuant to a blanket policy and the tenant's other properties are subject to insurance claims. In addition, the rent loss coverageamount outstanding under the policy may not extend for the full periodof time that a tenant may be entitled to a rent abatement as a result of, or that maysuch mortgage, we might be required to complete restoration following, a casualty event In addition, there are certain typesrapidly dispose of losses, such as those arising from earthquakes, floods, hurricanes and terrorist attacks, that may be uninsurable or that may not be economically insurable. Changes in zoning, building codes and ordinances, environmental considerations and other factors also may make it impossible or impracticable for us to use insurance proceeds to replace damaged or destroyed improvements at a property. If restoration is not or cannot be completed to the extent, or within the period of time, specified in certain of our leases, the tenant may have the right to terminate the lease. If any of these or similar events occur, it may reduce our revenues, the value of, or our return from, an affected property.Our revenues and the value of our portfolio are affected by a number of factors that affect investments in real estate generally. We areproperty subject to the general risks of investing in real estate. These include adverse changes in economic conditions and local conditions such as changing demographics, retailing trends and traffic patterns, declines in the rental rates, changes in the supply and price of quality properties and the market supply and demand of competing properties, the impact of environmental laws, security concerns, prepayment penalties applicable under mortgage financings, changes in tax, zoning, building code, fire safety and other laws and regulations, the type of insurance coverage available in the market, and changes in the type, capacity and sophistication of building systems. Approximately 40.2% and 37.1% of our 2018 contractual rental income is from retail and industrial tenants, respectively, and we are vulnerable to economic declines that negatively impact these sectors of the economy, which could have an adverse effectimpact on the amounts we receive on such disposition. If we are unable to satisfy the covenants of a mortgage, the mortgagee could exercise remedies available to it under theresultsassets could result in the disposition of operations, liquiditysuch assets at below such assets’ carrying values. The disposition of our properties or assets at below their carrying values may adversely affect our net income, reduce our stockholders’ equity and financial condition.adversely affect our ability to pay dividends.of termination ofto terminate leases due to co-tenancy provisions, events of casualty or condemnation affecting the leased space or the property or due to interruption of the tenant'stenant’s quiet enjoyment of the leased premises, and obligations of a landlord to restore the leased premises or the property following events of casualty or condemnation.condemnation, adverse changes in economic conditions and local conditions (e.g., changing demographics, retailing trends and traffic patterns), declines in rental rates, changes in the supply and price of quality properties and the market supply and demand of competing properties, the impact of environmental laws, security concerns, prepayment penalties applicable under mortgage financings, changes in tax, zoning, building code, fire safety and other laws and regulations, the type of insurance coverage available, and changes in the type, capacity and sophistication of building systems. The occurrence of any of these events could adversely impact our results of operations, liquidity and financial condition.in the future will continue to be, subject to significant competition and we may not be able to compete successfully for investments.in the future will continue to be, subject to significant competition for attractive investment opportunities, from other real estate investors,and in particular, opportunities for industrial properties which are the primary focus of our and many of which have greater financial resources than us, includingour competitors acquisition efforts. Our competitors include publicly-traded REITs, non-traded REITs, insurance companies, commercial and investment banking firms, private institutional funds, hedge funds, private equity funds and other investors.investors, many of whom have greater financial and other resources than we have. We may not be able to compete successfully for investments. If we pay higher prices for investments, our returns may be lower and the value of our assets may not increase or may decrease significantly below the amount we paid for such assets. If such events occur, we may experience lower returns on our investments.We cannot assure you of our ability to pay dividends in the future. We intend to pay quarterly dividends and to make distributions to our stockholders in amounts such that all or substantially all of our taxable income in each year is distributed. This, along with other factors, will enable us to qualify for the tax benefits accorded to a REIT under the Internal Revenue Code of 1986, as amended, which we refer to as the "Code". We have not established a minimum dividend payment level and our ability to pay dividends may be adversely affected by the risk factors described in this Annual Report on Form 10-K. All distributions will be made at the discretion of our board of directors and will depend on our earnings (including taxable income), our financial condition, maintenance of our REIT status and such other factors as our board of directors may deem relevant from time to time.If we reduce our dividend, the market value of our common stock may decline. The level of our common stock dividend is established by our board of directors from time to time based on a variety of factors, including our cash available for distribution, funds from operations, adjusted funds from operations and maintenance of our REIT status. Various factors could cause our board of directors to decrease our dividend level, including insufficient income to cover our dividends, tenant defaults or bankruptcies resulting in a material reduction in our funds from operations or a material loss resulting from an adverse change in the value of one or more of our properties. If our board of directors determines to reduce our common stock dividend, the market value of our common stock could be adversely affected.partners'partners’ financial condition or insurance coverage, disputes that may arise between our joint venture partners and us and our reliance on one significant joint venture partner. A number ofFive properties in which we have an interest are owned through consolidated joint ventures (three properties) and unconsolidated joint ventures.ventures (two properties). We may continue to acquire properties through joint ventures and/or contribute some of our properties to joint ventures. Investments in joint ventures may, under certain circumstances, involve risks not present when a third party is not involved, including the possibility that joint venture partners might file for bankruptcy protection, fail to fund their share of required capital contributions or obtain insurance coverage pursuant to a blanket policy as a result of which claims with respect to other properties covered by such policy and in which we have no interest could reduce or eliminate the coverage available with respect to the joint venture properties. Further, joint venture partners may have conflicting business interests or goals, and as a result there is the potential risk of impasses on decisions, such as a sale and the timing thereof. Any disputes that may arise between joint venture partners and us may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by or disputes with joint venture partners might result in subjecting properties owned by the joint venture to additional risk. With respect to our (i) consolidated joint ventures, we own, with twofive properties that account for 5.1%4.3% of 20182024 contractual rental income, (and we own one property, of which our share of the annual base rent in 2018 is $1.4 million, with one of these joint venture partners through an unconsolidated joint venture), and (ii) unconsolidated joint ventures, we own, with one joint venture partner and itstheir affiliates, three properties which account for our $326,000$235,000 share of 20182024 base rent payable. We may be adversely affected if we are unable to maintain a satisfactory working relationship with these joint venture partners or if any of these partners becomes financially distressed.Our senior management and other key personnelLegislative or regulatory tax changes could have an adverse effect on us.criticala number of issues associated with an investment in a REIT that are related to our business and our future success depends on our abilitythe Federal income tax laws, including, but not limited to, retain them. We depend on the services of Matthew J. Gould, chairmanconsequences of our boardfailing to continue to qualify as a REIT. At any time, the Federal income tax laws governing REITs or the administrative interpretations of directors, Fredric H. Gould, vice chairman of our board of directors, Patrick J. Callan, Jr., our presidentthose laws may be amended or modified. Any new laws or interpretations may take effect retroactively and chief executive officer, Lawrence G. Ricketts, Jr., our executive vice president and chief operating officer, David W. Kalish, our senior vice president and chief financial officer and Karen Dunleavy, our vice president—financial, and other members of our senior management to carry out our business and investment strategies. Only three of our senior officers, Messrs. Callan and Ricketts, and Ms. Dunleavy, devote all of their business time to us. The remainder of our senior management provides services tocould adversely affect us on a part-time, as-needed basis. The loss of the services of any of our senior management or other keypersonnel, the inability or failure of the members of senior management providing services to us on a part-time basis to devote sufficient time or attention to our activities or our inabilitystockholders.recruitOLP’s Organization, Structure and retain qualified personnel in the future, could impair our ability to carry out our business and investment strategies.Ownership of StockOur policy for transactions with affiliates isWe are a party to have these transactions approved by our audit committee. We entered into a compensation and services agreement with Majestic Property effective as of January 1, 2007.2007, as amended. Majestic Property is wholly-ownedwholly owned by the vice chairman of our board of directors and it provides compensation to certain of our part-time senior executive officers and other individuals performing services on our behalf. Pursuant to the compensation and services agreement, we pay an annual fee to Majestic Property which provides us with the services of all affiliated executive, administrative, legal, accounting and clerical personnel that we use on a part time basis, as well as property management services, property acquisition, sales and leasing and mortgage brokerage services.Services. See “Item 1. Business—Human Capital Resources”. In 2017, pursuant to the compensation and services agreement,2023 we paid, and in 2024 we anticipate paying, Majestic Property, (i) a fee of $2.7$3.3 million and an additional $216,000$3.3 million, respectively, and (ii) $317,000 and $336,000, respectively, for our share of all direct office expenses, including rent, telephone, postage, computer services, supplies, and internet usage. We also obtain our property insurance in conjunction with Gould Investors, L.P., our affiliate, and in 2017,2023, reimbursed Gould Investors $790,000$1.1 million for our share of the insurance premiums paid by Gould Investors. At December 31, 2023, Gould Investors beneficially owns approximately 9.5%10.4% of our outstanding common stock and certain of our senior executive officers are also executive officers of the managing general partner of Gould Investors. See Note 12 of our consolidated financial statements for information regarding equity awards to individualsbehalf pursuant to the compensationbusiness and services agreement.The failure of any bank in which we deposit our funds could have an adverse impactfuture success depends on our ability to retain them.condition. We have diversifiedofficer and senior vice president and David W. Kalish, our cashsenior vice president- financial, and cash equivalents between several banking institutions in an attemptother members of senior management to minimize exposurecarry out our business and investment strategies. Of the foregoing executive officers, only Messrs. Callan and Ricketts, devote all of their business time to any oneus. Other members of these entities. However, the Federal Deposit Insurance Corporation only insures accounts in amounts upsenior management provide services to $250,000 per depositor per insured bank. We currently have cash and cash equivalents deposited in certain financial institutions significantly in excess of federally insured levels. If any of the banking institutions in which we have deposited funds ultimately fails, we may lose our deposits over $250,000.us either on a full-time or part-time, as-needed basis. The loss of the services of any of our deposits may have an adverse effectsenior management or other key personnel, the inability or failure of the members of senior management providing services to us on a part-time basis to devote sufficient time or attention to our financial condition.Breaches of information technology systemsactivities or our inability to recruit and retain qualified personnel in the future, could materially harmimpair our ability to carry out our business and reputation.investment strategies. We collect and retain on information technology systems, certain financial, personal and other sensitive information provided by third parties, including tenants, vendors and employees. We also rely on information technology systems for the collection and distribution of funds. There can be no assurance that we will be able to prevent unauthorized access to sensitive information or the unauthorized distribution of funds. Any loss of this information or unauthorized distribution of funds as a result of a breach of information technology systems may result in loss of funds to which we are entitled, legal liability and costs (including damages and penalties), as well as damage to our reputation, that could materially and adversely affect our business.18We are dependent onCertain provisions of our charter (the “Charter”), our Bylaws and Maryland law may impede, or prevent, a third party software forfrom acquiring control of us without the approval of our billing and financial reporting processes.board of directors. These provisions:● provide for a staggered board of directors consisting of three classes, with one class of directors being elected each year and each class being elected for three-year terms and until their successors are duly elected and qualify; ● impose restrictions on ownership and transfer of our stock (such provisions being intended to, among other purposes, facilitate our compliance with certain requirements under the Code, relating to our qualification as a REIT under the Code); and ● provide that directors may be removed only for cause and only by the vote of at least a majority of all outstanding shares entitled to vote. We are dependent onCertain provisions of the Maryland General Corporation Law (the “MGCL”) may impede a third party software, and in particular Yardi's property management software, for generating tenant invoices and financial reports. If the software fails (includingfrom making a failure resulting from such parties unwillingnessproposal to acquire us or inability to maintain or upgrade the functionalityinhibit a change of the software), our ability to bill tenants and prepare financial reportscontrol under circumstances that otherwise could be impaired which would adversely affect our business.Risks Related to the REIT IndustryLegislative, regulatory or administrative changes could adversely affect us or our stockholders. The tax laws or regulations governing REITs or the administrative interpretations thereof may be amended at any time. We cannot predict if or when any new or amended law, regulation or administrative interpretation will be adopted, promulgated or become effective, and any such change may apply retroactively. We and our stockholders may be adversely affected by any new or amended law, regulation or administrative interpretation. On December 22, 2017, the Tax Cuts and Jobs Act, which we refer to as the "Tax Act", was enacted. The Tax Act enacted significant changes to the U.S. federal income tax rules for taxation of individuals and corporations, generally effective for taxable years beginning after December 31, 2017. Most of the changes applicable to individuals are temporary and apply only to taxable years beginning after December 31, 2017 and before January 1, 2026. The Tax Act makes numerous large and small changes to the tax rules that do not affect REITs directly but may affect our stockholders and may indirectly affect us. While the changes in the Tax Act generally appear to be favorable with respect to REITs, the extensive changes to non-REIT provisions in the Code may have unanticipated effects on us orbest interest of holders of shares of our stockholders. Investors are urged to consult with their tax advisors with respect to the status of the Tax Act and any other regulatory or administrative developments and proposals and their potential effect on investment in our capital stock.common stock, including:● “control share” provisions that provide that, subject to certain exceptions, holders of “control shares” of our company (defined as voting shares which, when aggregated with other shares controlled by the stockholder, entitle the holder to exercise voting power in the election of directors within one of three increasing ranges) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares,” subject to certain exceptions) have no voting rights with respect to the control shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares; and ● additionally, Title 3, Subtitle 8 of the MGCL permits our board of directors, without stockholder approval and regardless of what is currently provided in the Charter or the Bylaws, to implement certain corporate governance provisions. (subject (subject to certain adjustments) each year. To the extent that we satisfy these distribution requirements but distribute less than 100% of our taxable income we will be subject to Federal and state corporate tax on our undistributed taxable income. the creation of reserves and the timing of required debt service (including amortization) payments, we may need to borrow funds in order to make the distributions necessary to retain the tax benefits associated with qualifying as a REIT, even if we believe that then prevailing market conditions are not generally favorable for such borrowings. Such borrowings could reduce our net income and the cash available to pay dividends.may hinderhinders our ability to operate solely on the basis of maximizing profits.• the financial condition of our tenants may be adversely affected, which may result in lower rents or tenant defaults; • current or potential tenants may delay or postpone entering into long-term net leases with us; • the ability to borrow on acceptable terms and conditions may be limited or unavailable, which could reduce our ability to pursue acquisitions, dispositions and refinance existing debt, reduce our returns from acquisition and disposition activities, increase our future interest expense and reduce our ability to make cash distributions to our stockholders; • our ability to access the capital markets may be restricted at a time when we would like, or need, to access those markets, which could have an impact on our flexibility to react to changing economic and business conditions; • the recognition of impairment charges on or reduced values of our properties, which may adversely affect our results of operations or limit our ability to dispose of assets at attractive prices and may reduce the availability of financing; • reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties; • our line of credit lenders could refuse to fund their financing commitment to us or could fail and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all; and • one or more counterparties to our derivative financial instruments could default on their obligations to us, or could fail, increasing the risk that we may not realize the benefits of these instruments. 2017,2023, we own 113108 properties with an aggregate net book value of $660.0$682.0 million. Our occupancy rate, based on square footage, was 99.6%98.8%, 99.8%, and 97.3%99.2% as of December 31, 20172023, 2022 and 2016,2021, respectively. We also participateAt December 31, 2023, we participated in joint ventures that own fiveowned two properties and at December 31, 2017,such date, our investment in these unconsolidated joint ventures is $10.7$2.1 million. The occupancy rate of our joint venture properties, based on square footage, was 97.6%100%, 58.7%, and 97.9%59.1% as of December 31, 20172023, 2022 and 2016,2021, respectively.2017,2023, certain information about our properties:properties (except as otherwise indicated, each property is tenanted by a single tenant): Type of Property Percentage
of 2018
Contractual
Rental Income Approximate
Square Footage
of Building 2018
Contractual
Rental Income
per Square Foot Industrial 4.2 701,595 $ 4.02 Industrial 3.5 367,000 6.39 Retail 3.2 194,600 11.48 Assisted Living Facility 3.0 87,560 23.27 Industrial 3.0 540,200 3.73 Industrial 2.6 149,870 11.87 Industrial 2.6 419,821 4.21 Apartments 2.4 349,999 4.68 Theater 2.3 61,213 25.92 Retail—Supermarket 2.3 47,174 32.97 Retail 2.1 101,596 14.45 Industrial 2.1 339,094 4.17 Health & Fitness 2.0 44,863 30.40 Retail 1.9 110,179 12.22 Industrial 1.8 294,000 4.18 Retail 1.8 112,260 10.75 Office 1.8 66,000 18.15 Apartments 1.7 300,104 3.88 Retail 1.7 35,330 32.84 Retail 1.7 131,710 8.50 Industrial 1.7 303,188 3.69 Industrial 1.6 258,710 4.08 Industrial 1.5 208,234 4.96 Health & Fitness 1.4 58,800 16.67 Industrial 1.4 249,600 3.73 Apartments 1.2 480,684 1.70 Industrial 1.2 131,400 6.12 Retail—Furniture 1.1 50,810 14.71 Health & Fitness 1.1 38,000 19.38 Retail—Furniture 1.1 96,924 7.40 Theater 1.0 57,688 12.25 Industrial 1.0 125,622 5.43 Retail 1.0 54,229 12.23 Industrial 0.9 142,200 4.39 Retail 0.9 29,993 20.17 Industrial 0.9 90,599 6.61 Industrial 0.9 78,319 7.50 Retail 0.8 32,138 17.90 Industrial 0.8 224,749 2.56 Retail—Furniture 0.8 88,108 6.35 Industrial 0.8 128,000 4.35 Retail 0.8 50,530 10.78 Retail—Office Supply 0.8 23,939 22.16 Industrial 0.8 122,461 4.33 Type of Property Percentage
of 2018
Contractual
Rental Income Approximate
Square Footage
of Building 2018
Contractual
Rental Income
per Square Foot Retail 0.8 96,725 5.40 Industrial 0.8 51,351 10.06 Retail—Furniture 0.7 72,000 6.75 Retail 0.7 41,280 11.63 Retail—Furniture 0.7 65,951 6.97 Industrial 0.7 125,370 3.60 Retail 0.7 63,919 7.00 Retail—Office Supply 0.7 33,490 13.29 Retail 0.6 43,480 10.12 Industrial 0.6 38,000 10.99 Retail 0.6 25,005 16.70 Retail—Furniture 0.6 38,788 10.53 Retail—Furniture 0.6 72,027 5.64 Retail 0.6 25,358 15.90 Retail—Furniture 0.6 58,937 6.82 Retail—Furniture 0.6 30,173 12.48 Retail—Office Supply 0.5 24,978 14.88 Retail—Furniture 0.5 50,260 7.29 Retail 0.5 23,547 15.40 Retail—Furniture 0.5 49,865 7.09 Retail 0.5 49,406 7.00 Retail—Office Supply 0.5 25,000 13.81 Industrial 0.5 105,191 3.25 Retail 0.5 20,087 16.00 Industrial 0.5 46,181 6.95 Retail 0.4 12,950 23.00 Retail 0.4 9,750 30.07 Retail 0.4 14,555 20.00 Retail—Furniture 0.4 22,768 12.21 Retail—Furniture 0.4 35,011 7.92 Retail—Furniture 0.4 15,912 17.00 Industrial 0.4 53,064 5.03 Restaurant 0.4 6,012 43.87 Retail—Office Supply 0.4 23,483 11.09 Retail—Supermarket 0.4 57,653 4.51 Restaurant 0.4 7,000 36.65 Restaurant 0.4 5,635 44.16 Restaurant 0.3 9,367 25.07 Restaurant 0.3 6,655 35.13 Retail 0.3 — — Restaurant 0.3 6,734 31.83 Retail 0.3 12,054 17.42 Restaurant 0.3 4,051 50.43 Retail 0.3 33,111 6.10 Restaurant 0.3 4,749 42.23 Retail 0.3 13,502 14.71 Restaurant 0.3 4,025 48.64 Retail 0.3 18,572 10.39 (1) This property, a community shopping center, is leased to 12 tenants. Contractual rental income per square foot excludes 1,650 square feet of vacant space. (2) This property, a community shopping center, is leased to 20 tenants. Contractual rental income per square foot excludes 14,670 square feet of vacant space. (3) This property has four tenants. Contractual rental income per square foot excludes 2,395 square feet of vacant space. (4) This property has two tenants. (5) This property has three tenants. (6) This property has five tenants. (7) Contractual rental income per square foot excludes 74,500 square feet of vacant space. (8) The tenant’s lease expired January 31, 2024 and we are pursuing the re-lease and/or sale of such property. (9) This property is vacant and was formerly leased to Bed Bath and Beyond which filed for bankruptcy protection and rejected our lease in April 2023. (10) This property is ground leased to a multi-unit apartment complex owner/operator. 2024 contractual rental income excludes $1.3 million of variable rent as there is uncertainty as to whether and when the tenant will resume paying rent. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Challenges and Uncertainties Facing The Vue – Beachwood, Ohio” and Note 6 of our consolidated financial statements. Type of Property Percentage
of 2018
Contractual
Rental Income Approximate
Square Footage
of Building 2018
Contractual
Rental Income
per Square Foot Retail 0.3 8,775 20.75 Industrial 0.2 35,707 4.57 Retail 0.2 6,051 25.30 Restaurant 0.2 2,754 52.00 Restaurant 0.2 2,551 54.79 Industrial 0.2 10,361 13.17 Restaurant 0.2 2,944 43.42 Restaurant 0.2 2,702 46.74 Retail 0.2 12,000 10.50 Restaurant 0.2 2,798 44.43 Restaurant 0.2 3,004 40.55 Retail 0.2 6,796 17.21 Retail 0.2 11,672 9.94 Retail 0.2 6,751 15.55 Retail 0.2 8,600 12.21 Retail 0.1 6,749 15.19 Restaurant 0.1 12,820 6.43 Retail 0.1 8,000 8.79 Retail 0.1 3,053 16.00 Industrial 0.1 9,642 4.02 Vacant — 32,446 — 100.0 9,428,251 (1)This property, a community shopping center, is leased to eleven tenants. Contractual rental income per square foot excludes 3,850 vacant square feet. Approximately 27.9% of the square footage is leased to a supermarket.(2)This property is ground leased to a multi-unit apartment complex owner/operator. Reflects contingent rent that may be received subject to the satisfaction of performance requirements. See Notes 4 and 7 of our consolidated financial statements.(3)This property, a community shopping center, is leased to 27 tenants. Contractual rental income per square foot excludes 2,570 vacant square feet.(4)This property has two tenants.(5)This property has four tenants. Contractual rental income per square foot excludes 2,395 vacant square feet.(6)This property has three tenants. Approximately 43.4% of the square footage is leased to a retail office supply operator.(7)This property has three tenants.(8)This property has two tenants. Approximately 48.4% of the square footage is leased to a retail office supply operator.(9)This property provides additional parking for the W. Hartford, CT, retail supermarket.(10)This property was operated as a hhgregg. The tenant filed for Chapter 11 bankruptcy protection, rejected the lease and in late May 2017, vacated the property. At December 31, 2017, the property is vacant.2017,2023, information about the properties owned by these joint ventures in which we are a venture partner:ventures:(1) Represents our share of the base rent payable in 2024 with respect to such joint venture property, expressed as a percentage of the aggregate base rent payable in 2024 by all of our joint venture properties. (2) This property is a parking lot which is ground leased to a restaurant. Type of
Property Percentage of
Base Rent Payable
in 2018
Contributed by
the Applicable
Joint Venture(1) Approximate
Square Footage
of Building 2018
Base Rent
per Square Foot Retail 59.4 319,349 $ 9.92 Industrial 27.1 750,300 1.75 Retail 7.4 45,973 7.77 Retail 5.1 101,550 2.44 Retail 1.0 7,959 5.93 100.0 1,225,131 (1)Represents the base rent payable in 2018 with respect to such joint venture property, expressed as a percentage of the aggregate base rent payable in 2018 with respect to all of our joint venture properties.(2)This property, a community shopping center, is leased to 25 tenants. Base rent per square foot excludes 29,068 vacant square feet.2017,2023, the 113108 properties owned by us are located in 3031 states. The following table sets forth information, presented by state, related to our properties as of December 31, 2017:2023:(1) These properties are located in four states. Number of
Properties 2018
Contractual
Rental
Income Percentage of
2018
Contractual
Rental
Income Approximate
Building
Square Feet 11 $ 8,043,732 11.9 902,489 6 5,610,987 8.3 1,316,728 8 5,317,586 7.9 440,858 10 4,316,651 6.4 524,657 8 4,193,700 6.2 340,282 9 4,037,748 6.0 657,789 9 3,774,291 5.6 268,152 3 3,750,286 5.5 800,279 7 3,538,228 5.2 943,582 2 3,402,779 5.0 625,710 3 1,994,870 2.9 303,577 2 1,871,008 2.8 145,076 2 1,779,365 2.6 47,174 2 1,766,818 2.6 70,221 2 1,611,325 2.4 352,596 3 1,471,540 2.2 196,130 4 1,398,944 2.1 156,957 4 1,278,657 1.9 109,330 1 1,228,353 1.8 294,000 1 1,207,188 1.8 112,260 1 1,033,122 1.5 208,234 4 878,252 1.3 49,151 3 866,722 1.3 165,185 1 803,670 1.1 131,400 2 664,617 1.0 96,708 1 663,125 1.0 54,229 4 1,230,593 1.7 115,497 113 $ 67,734,157 100.0 9,428,251 2017:2023: Number of
Properties Our Share
of the
Base Rent
Payable in 2018
to these
Joint Ventures Approximate
Building
Square Feet 1 $ 1,439,770 319,349 1 657,844 750,300 3 325,958 155,482 5 $ 2,423,572 1,225,131 2017,2023, we had:•69 first mortgages secured by 86 of our 113 properties; and•$392.5 million of mortgage debt outstanding with a weighted average interest rate of 4.22% and a weighted average remaining term to maturity of approximately 8.8 years. Substantially all of such mortgage debt bears fixed interest at rates ranging from 3.02% to 6.59% and contains prepayment penalties.● 68 first mortgages secured by 69 of our 108 properties; and ● $422.6 million of mortgage debt outstanding with a weighted average interest rate of 4.31% and a weighted average remaining term to maturity of approximately 5.9 years. Substantially all of such mortgage debt bears fixed interest at rates ranging from 3.05% to 8.40% and contains prepayment penalties. 20172023 (dollars in thousands): PRINCIPAL
PAYMENTS DUE $ 20,448 14,610 11,901 20,742 43,771 281,051 $ 392,523 At December 31, 2017, our joint ventures had first mortgages on four properties with outstanding balances aggregating approximately $35.0 million, bearing interest at rates ranging from 3.49% to 5.81% with a weighted average interest rate of 4.07% and a weighted average remaining term to maturity of 6.1 years. Substantially all of these mortgages contain prepayment penalties. The following table sets forth the scheduled principal mortgage payments due for properties owned by our joint ventures as of December 31, 2017 (dollars in thousands): PRINCIPAL
PAYMENTS DUE $ 4,272 877 911 948 7,189 20,850 $ 35,047 The term "standard carve-outs" refers to recourse items to an otherwise non-recourse mortgage and are customary to mortgage financing. While carve-outs vary from lender to lender and transaction to transaction, the carve-outs may include, among other things, voluntary bankruptcy filings, environmental liabilities, the sale, financing or encumbrance of the property in violation of loan documents, damage to property as a result of intentional misconduct or gross negligence, failure to pay valid taxes and other claims which could create liens on property and the conversion of security deposits, insurance proceeds or condemnation awards.Registrant'sRegistrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities."OLP." The following table sets forth for the periods indicated, the high and low prices for our common stock as reported by the New York Stock Exchange and the per share distributions declared on our common stock. 2017 2016 High Low Dividend
Declared
Per Share(1) High Low Dividend
Per Share(1) $ 25.45 $ 21.96 $ .43 $ 22.96 $ 18.80 $ .41 25.24 22.21 .43 24.90 21.65 .41 24.81 22.67 .43 25.85 23.50 .41 27.70 23.61 .45 25.89 22.43 .43 (1)The dividends in the fourth quarter of 2017 and 2016 were distributed on January 5, 2018 and January 5, 2017, respectively.7, 2018,1, 2024, there were approximately 294241 holders of record of our common stock.Stock Performance Graph The following graph compares the five year cumulative return of our common stock with the Standard and Poor's 500 index (the "S&P Index") and the FTSE-NAREIT Equity REITs, a peer group index (the "Peer Group Index"). The graph assumes $100 was invested on December 31, 2012 in our common stock, the S&P Index and the Peer Group Index and assumes the reinvestment of dividends. December 31, 2012 2013 2014 2015 2016 2017 $ 100.00 $ 105.80 $ 133.05 $ 129.41 $ 162.39 $ 180.11 100.00 132.39 150.51 152.59 170.84 208.14 100.00 102.47 133.35 137.61 149.33 157.14 We did notAs of March 1, 2024, we are authorized to repurchase anyup to $8.1 million of shares of our outstanding common stock through, among other things, open market or privately negotiated transactions. There is no stated expiration date for our stock repurchase program. Set forth below is a table describing the purchases we made in 2017.the quarter ended December 31, 2023:6. Selected Financial Data. The following table sets forth on a historical basis our selected financial data. This information should be read in conjunction with our consolidated financial statements and"Item 7. Management'sManagement’s Discussion and Analysis of Financial ConditionsCondition and Results of Operations" appearing elsewhereOperations.Annual Reportuncertainty, we were especially cautious in pursuing acquisition opportunities in 2023 and may continue to be cautious in pursuing such opportunities in the near future. As a result, our ability, in the near term, to grow revenue and net income through acquisitions may be adversely affected.Form 10-K.terms favorable to us or at all; collect amounts owed to us by our tenants; renew or re-let, on acceptable terms, leases that are expiring or otherwise terminating; acquire or dispose of properties on acceptable terms; or grow, through acquisitions or otherwise, our property portfolio so as to generate additional rental and net income. If we are unable to address these challenges successfully, we may be unable to sustain our current level of dividend payments.● our 2024 contractual rental income is derived from the following property types: 66.1% from industrial, 24.2% from retail, 3.7% from health and fitness, 1.7% from restaurant, 1.6% from theaters, and 2.7% from other properties, ● there are six states with properties that account for 5% or more of 2024 contractual rental income, and one state that accounts for more than 10.0% of 2024 contractual rental income (i.e., South Carolina at 12.0%), ● there is one tenant that accounts for more than 5% of 2024 contractual rental income (i.e., FedEx at 5.5%), ● through 2033, there are four years in which the percentage of our 2024 contractual rental income represented by expiring leases equals or exceeds 10% (i.e., 20.4% in 2027, 13.8% in 2028, 10.1% in 2029 and 10.5% in 2033) — approximately 5.1 % of our 2024 contractual rental income is represented by leases expiring in 2034 and thereafter, ● after giving effect to interest rate swap agreements, substantially all of our mortgage debt bears interest at fixed rates, ● in 2024, 2025 and 2026, 14.6%, 9.8% and 7.0%, respectively, of our total scheduled principal mortgage payments (i.e., amortization and balances due at maturity) is due, and As of and for the Year Ended December 31,
(Dollars in thousands, except per share data) 2017 2016 2015 2014 2013 $ 75,916 $ 70,588 $ 65,711 (1) $ 60,477 (1) $ 50,979 9,837 10,087 5,392 10,180 4,705 826 1,005 412 533 651 24,249 24,481 21,907 22,197 17,409 — — — 13 515 24,147 24,422 20,517 22,116 17,875 17,944 16,768 15,971 15,563 14,948 18,047 16,882 16,079 15,663 15,048 $ 1.29 $ 1.40 $ 1.23 $ 1.37 $ 1.15 $ 1.28 $ 1.39 $ 1.22 $ 1.37 $ 1.14 $ 1.74 $ 1.66 $ 1.58 $ 1.50 $ 1.42
$ 666,374 $ 651,213 $ 562,257 $ 504,850 $ 496,187 30,525 32,645 28,978 27,387 26,035 10,723 10,833 11,350 4,907 4,906 13,766 17,420 12,736 20,344 16,631 742,586 733,445 646,499 587,162 568,693 393,157 394,898 331,055 288,868 275,319 8,776 9,064 17,744 13,154 22,772 17,551 19,280 14,521 10,463 6,917 444,084 441,518 384,073 331,258 318,603 298,502 291,927 262,426 255,904 250,090
$ 36,193 $ 33,256 $ 32,717 $ 28,248 $ 25,740 $ 1.95 $ 1.91 $ 1.98 $ 1.76 $ 1.67 $ 1.94 $ 1.90 $ 1.97 $ 1.75 $ 1.66 $ 39,065 $ 34,848 $ 31,997 $ 29,703 $ 27,094 $ 2.10 $ 2.01 $ 1.94 $ 1.85 $ 1.76 $ 2.09 $ 1.99 $ 1.92 $ 1.84 $ 1.75 (1)Includes● there are three different counterparties to our portfolio of interest rate swaps: two counterparties, rated A3 or better by a national rating agency (i.e., Moody’s Long-Term Debt Ratings), account for 88.6%, or $26.3 million, of the notional value of our swaps; and one counterparty, rated A- by another rating provider (i.e., Kroll), accounts for 11.4%, or $3.3 million, of the notional value of such swaps. termination feesexpiration to determine their interest in renewing their leases. During the three years ending December 31, 2026, 49 leases for 42 tenants at 35 properties representing $14.3 million, or 20.0%, of $2.92024 contractual rental income expire.$1.3is subordinate to $63.6 million of mortgage debt incurred by the owner/operator. Our cash flow will be adversely impacted by our funding of additional capital expenditures and operating expense shortfalls at the property (including our payment of the tenant’s debt service obligations) and the tenant’s continuing non-payment of rent. If we determine that under GAAP the property has been impaired, we may incur a substantial impairment charge and if we sell the property, we may recognize a substantial loss. See Note 6 to our consolidated financial statements.2015(i) $893,000 of rental income and 2014,(ii) $198,000, $188,000 and $206,000 of interest expense, real estate operating expense and depreciation and amortization expense, respectively, and during 2022, this property accounted for (iii) $915,000 of rental income and (iv) $197,000, $170,000 and $210,000 of interest expense, real estate operating expense and depreciation and amortization expense, respectively.(2)● sold 10 properties (i.e., seven restaurants and three retail properties) and an out-parcel at a multi-tenant retail property, for an aggregate net gain on sale of real estate of $17.0 million. The properties sold accounted for $2.5 million, or 2.7%, and $3.0 million, or 3.3 %, of 2023 and 2022 rental income, net, respectively. We estimate that, excluding any acquisitions, dispositions or lease amendments in 2024, rental income in 2024 will decrease by approximately $2.5 million from 2023 due to these sales. ● paid down our credit facility by approximately $21.8 million primarily through the use of net proceeds from property sales – as of December 31, 2023 and March 1, 2024, no amounts were outstanding on the facility. ● acquired a multi-tenant industrial property for an aggregate purchase price of $13.4 million. This property accounts for $806,000, or 1.1%, of our 2024 contractual rental income. ● through an unconsolidated joint venture in which we had a 50% equity interest, sold a multi-tenant shopping center located in Manahawkin, NJ for $36.5 million, of which our share was $18.3 million. In 2023, we recognized a $108,000 loss from the sale of this property. Our share of the net proceeds from this sale was $7.1 million. We generated, in 2023, $1.1 million (including our $850,000 share of an impairment charge) of equity in loss and in 2022 and 2021, $210,000 and $11,000, respectively, of equity in earnings from this unconsolidated joint venture. ● entered into, amended or extended 28 leases with respect to approximately 988,000 square feet. ● repurchased approximately 499,000 shares of our common stock for an aggregate purchase price of approximately $9.6 million (i.e., an average price of $19.24 per share). We anticipate that we will continue to repurchase our stock subject to, among other things, the availability of funds and attractiveness of alternative investments. ● entered into a contract to sell a pad site at a multi-tenant retail shopping center in Lakewood, Colorado, which we own through a consolidated joint venture in which we hold a 90% interest, for $2.9 million. The buyer’s right to terminate the contract expired in February 2024 and the sale is anticipated to close during the quarter ending March 31, 2024. We anticipate recognizing a gain of approximately $1.8 million on this sale during the three months ending March 31, 2024, of which the non-controlling interest’s share will be approximately $180,000. ● identifying opportunistic and strategic property acquisitions consistent with our portfolio and our acquisition strategies; ● monitoring and maintaining our portfolio, and as appropriate, working with tenants to facilitate the continuation or expansion of their tenancies; ● managing our portfolio effectively, including opportunistic and strategic property sales; ● obtaining mortgage indebtedness (including refinancings) on favorable terms, ensuring that the cash flow generated by a property exceeds the debt service thereon and maintaining access to capital to finance property acquisitions; and ● maintaining and, over time, increasing our dividend. (1) The 2023 column represents rental income from properties acquired since January 1, 2022; the 2022 column represents rental income from properties acquired during the year ended December 31, 2022. (2) The 2023 column represents rental income from properties sold during the year ended December 31, 2023; the 2022 column represents rental income from properties sold since January 1, 2022. (3) Represents rental income from 101 properties that were owned for the entirety of the periods presented. - $689,000 of rental income from our wholly-owned Regal Cinemas properties due to lease amendments effectuated in connection with its bankruptcy reorganization (see “—Challenges and Uncertainties Facing Certain Tenants and Properties” for further information regarding Regal Cinemas), - $654,000 of rental income from leases that expired in 2022 and 2023 at several properties, - $461,000 from Bed Bath & Beyond - Kennesaw, Georgia which filed for bankruptcy protection (including the write-off, during 2023, of its $133,000 unbilled rent receivable balance), - $1.7 million of rental income from various lease amendments and extensions, - $892,000 of rental income due to new tenants at various properties, and - $497,000 in tenant reimbursements, of which $443,000 relates to operating expenses generally incurred in the same year. - $1.5 million of such expense from properties acquired in 2023 and 2022 (including $1.1 million from properties acquired in 2022), - $434,000 of depreciation from improvements at several same store properties, and - $186,000 of leasing commissions at several same store properties. - a decrease, in 2023, of $854,000 related to improvements and tenant origination costs at several properties that prior to December 31, 2023 were fully amortized, and - the inclusion, in 2022, of $332,000 of such expense from the properties sold since January 1, 2022. - $574,000 from properties acquired in 2023 and 2022 (including $407,000 from properties acquired in 2022), - an aggregate increase of $224,000 relating to real estate tax expense for several properties, none of which were individually significant, and - aggregate increases of $368,000 of other real estate expenses for several properties (primarily related to our Brooklyn, New York property). "Note 7 to our consolidated financial statements.—Equity in loss from sale of unconsolidated joint venture property. The 2023 results represent a loss of $108,000 from the sale of our joint venture property in Manahawkin, New Jersey on December 15, 2023." for a discussion of the limitations on such data and a reconciliation of such data to our financial information presented in accordance with GAAP.Funds from Operations and Adjusted Funds from Operations"White“White Paper on Funds From Operations"Operations” issued by the National Association of Real Estate Investment Trusts ("NAREIT"(“NAREIT”) and NAREIT'sNAREIT’s related guidance. FFO is defined in the White Paper as net income (computed(calculated in accordance with generally accepting accounting principles)GAAP), excluding gains (or losses) from sales of property, plus real estate depreciation and amortization (including amortizationrelated to real estate, gains and losses from the sale of deferred leasing costs), pluscertain real estate assets, gains and losses from change in control, impairment write-downs of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate and after adjustments for unconsolidated partnerships and joint ventures.held by the entity. Adjustments for unconsolidated partnerships and joint ventures will beare calculated to reflect funds from operationsFFO on the same basis. In computing FFO, we do not add back to net income the amortization of costs in connection with our financing activities or depreciation of non-real estate assets.by,by adjusting from FFO for our straight-line rent accruals and amortization of lease intangibles, deducting from income, additional rent from ground lease tenant, income on settlement of litigation, income on insurance recoveries from casualties, lease termination fees and gain on extinguishment of debtassignment fees, and adding back amortization of restricted stock and restricted stock unit compensation expense, amortization of costs in connection with ourits financing activities (including ourits share of ourits unconsolidated joint ventures) and, debt prepayment costs.costs and amortization of lease incentives and mortgage intangible assets. Since the NAREIT White Paper does not provide guidelines for computing AFFO, the computation of AFFO may varyvaries from one REIT to another.predictabilitypredictably over time. In fact, real estate values have historically risen and fallen with market conditions. As a result, we believe that FFO and AFFO provide a performance measure that when compared year over year, should reflect the impact to operations from trends in occupancy rates, rental rates, operating costs, interest costs and other matters without the inclusion of depreciation and amortization, providing a perspective that may not be necessarily apparent from net income. We also consider FFO and AFFO to be useful to us in evaluating potential property acquisitions.operationsoperating, investing or financing activities as defined by GAAP. FFO and AFFO and should not be considered to be an alternative to net income as a reliable measure of our operating performance; nor should FFO and AFFO be considered an alternative to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity. FFO and AFFO do not measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization, capital improvements and distributions to stockholders.table below providesfollowing tables provide a reconciliation of net income in accordance with GAAP to FFO and AFFO for each of the indicated years (dollars in thousands): 2017 2016 2015 2014 2013 $ 24,147 $ 24,422 $ 20,517 $ 22,116 $ 17,875 20,674 17,865 16,150 14,494 11,891 872 893 634 374 517 153 — — 1,093 62 319 299 234 168 152 — — — — 8 — 6 174 302 45 (9,837 ) (10,087 ) (5,392 ) (10,180 ) — — — (960 ) — — — — — — (4,705 ) (135 ) (142 ) 1,360 (119 ) (105 ) 36,193 33,256 32,717 28,248 25,740 (1,329 ) (2,991 ) (1,605 ) (1,756 ) (1,274 ) 36 49 7 (1 ) 91 — — (2,886 ) (1,269 ) — 3,133 2,983 2,334 1,833 1,440 — 577 568 1,581 171 977 904 1,023 1,038 891 25 25 23 17 25 30 45 (184 ) 12 10 $ 39,065 $ 34,848 $ 31,997 $ 29,703 $ 27,094 The table below provides a reconciliation of net income per common share (on a diluted basis) in accordance with GAAP to FFO and AFFO:AFFO for the years indicated (dollars in thousands, except per share amounts): 2017 2016 2015 2014 2013 $ 1.28 $ 1.39 $ 1.22 $ 1.37 $ 1.14 1.12 1.02 .98 .90 .78 .05 .05 .04 .02 .03 .01 — — .07 .01 .02 .02 .02 .01 .01 — — — — — — — .01 .02 — (.53 ) (.57 ) (.32 ) (.63 ) — — — (.06 ) — — — — — — (.30 ) (.01 ) (.01 ) .08 (.01 ) (.01 ) 1.94 1.90 1.97 1.75 1.66 (.07 ) (.16 ) (.10 ) (.10 ) (.07 ) — — — — — — — (.17 ) (.08 ) — .17 .17 .14 .11 .09 — .03 .03 .10 .01 .05 .05 .06 .06 .06 — — — — — — — (.01 ) — — $ 2.09 $ 1.99 $ 1.92 $ 1.84 $ 1.75 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.Overview We are a self-administered and self-managed real estate investment trust. We are focused on acquiring, owning and managing a geographically diversified portfolio of industrial, retail (including furniture stores and supermarkets)The $10.7 million, or 21.5%, restaurant, health and fitness and theater properties, many of which are subject to long-term leases. Most of our leases are "net leases" under which the tenant, directly or indirectly, is responsible for paying the real estate taxes, insurance and ordinary maintenance and repairs of the property. As of December 31, 2017, we own 113 properties and our joint ventures own five properties. These 118 properties are locateddecrease in 30 states. We face a variety of risks and challenges in our business. As more fully described under "Item 1A. Risk Factors", we, among other things, face the possibility we will not be able to acquire accretive properties on acceptable terms, lease our properties on terms favorable to us or at all, our tenants may not be able to pay their rental and other obligations and we may not be able to renew or relet, on acceptable terms, leases that are expiring or otherwise terminating. We seek to manage the risk of our real property portfolio and the related financing arrangements by diversifying among types of properties, industries, locations, tenants, scheduled lease expirations, mortgage maturities and lenders, and by seeking to minimize our exposure to interest rate fluctuations. As a result, as of December 31, 2017:•our 2018 contractual rental income is derived from the following property types: 40.2% from retail, 37.1% from industrial, 4.7% from restaurant, 4.5% from health and fitness, 3.4% from theater and 10.1% from other properties,•properties in only one state (i.e., Texas, 11.9%) account for 10% or more of 2018 contractual rental income,•no tenant accounts for more than 7.1% of our 2018 contractual rental income,•through 2026, there is only one year in which the percentage of our contractual rental income represented by expiring leases exceeds 10% of our 2018 contractual rental income (i.e., 21.3% in 2022)—approximately 36.4% of our 2018 contractual rental income is represented by leases expiring in 2027 and thereafter,•after giving effect to interest rate swap agreements, substantially all of our mortgage debt bears interest at fixed rates,•until 2022, not more than 6% of our total scheduled principal mortgage paymentsFFO is due in any year,•there are seven different counterparties to our portfolio of interest rate swaps: three counterparties, rated A- or better byprimarily to:● the inclusion, in the corresponding 2022 period, of (i) $5.4 million from the Round Rock Settlement, (ii) $4.6 million from the litigation settlement proceeds from The Vue (included in rental income), and (iii) $918,000 of income on insurance recovery from casualty loss, ● a $1.2 million increase in interest expense, ● a $936,000 increase in real estate operating expenses, and ● a $564,000 increase in general and administrative expense. national rating agency, account for 72.3%, or $103.7 million, of the notional value of our swaps; and two counterparties, rated BB or better by a national rating agency, account for 21.7%, or $31.1 million, of the notional value of such swaps, and•we have 18 different mortgage lenders (including with respect to the mortgage debt of our unconsolidated joint ventures): four different lenders account for 30.0%, 15.9%, 14.8% and 10.3% of such debt. We monitor the risk of tenant non-payments through a variety of approaches tailored to the applicable situation. Generally, based on our assessment of the credit risk posed by our tenants, we monitor a tenant's financial condition through one or more of the following actions: reviewing tenant financial statements or other financial information, obtaining other tenant related information, regularcontact with tenant's representatives, tenant credit checks and regular management reviews of our tenants. We may sell a property if the tenant's financial condition is unsatisfactory. In acquiring properties, we balance an evaluation of the terms of the leases and the credit of the existing tenants with a fundamental analysis of the real estate to be acquired, which analysis takes into account, among other things, the estimated value of the property, local demographics and the ability to re-rent or dispose of the property on favorable terms upon lease expiration or early termination. We are sensitive to the risks facing the retail industry as a result of the growth of e-commerce. We are addressing our exposure to the retail industry by seeking to acquire industrial properties that we believe capitalize on e-commerce activities, such as e-commerce distribution and warehousing facilities, and by being especially selective in acquiring retail properties. As a result, retail properties generated 43.3%, 46.1% and 49.5%, of rental income, net, in 2017, 2016 and 2015 respectively, and industrial properties generated 34.1%, 30.8% and 27.3% of rental income, net, in 2017, 2016, 2015, respectively .2017 Highlights In 2017:•our rental income, net, increased by $4.1 million, or 6.4%, from 2016.•we acquired four properties for an aggregate purchase price of $43.2 million. The acquired properties account for $3.1 million or 4.6%, of our 2018 contractualnet increase in rental income.•we sold four properties, three of which were vacant (i.e. properties formerly tenanted by hhgregg—Niles, Illinois, Sports Authority and Joe's Crab Shack) for a net gain on sale of real estate of $9.8 million. The properties sold accounted for 0.5% and 2.6% of 2017 and 2016 rental income net, respectively.•we obtained proceeds of $21.2 million from mortgage financings, all of which relate to properties acquired in 2017.•we increased our quarterly dividend by 4.7% to $0.45 per share, commencing with the dividend declared in December 2017 and paid in January 2018.•we raised net proceeds of approximately $5.6 million from the issuance of 231,000 shares of common stock pursuant to our at-the-market equity offering program.•we re-leased four vacant properties or portions thereof (i.e., properties formerly tenanted by Pathmark, Philadelphia, PA; Quality Bakery, Columbus, OH; Payless Shoe Source, Seattle, WA; and a portion of a property located in Ronkonkoma, NY) . In 2017, we incurred an aggregate of approximately $739,000 of real estate operating expenses in carrying such properties. In 2018, we will generate an aggregate of $1.2 million of rental income from such properties and in the future, will not be responsible for the related operating expenses.Challenges Facing Certain Retail Tenants Four tenants at four retail properties have ceased operations (or have advised they intend to cease operations prior to the expiration of their lease) and continue to pay rent. At December 31, 2017, the unbilled rent receivable balance, tenant origination costs and unamortized intangible lease liabilities associated with these properties were $195,000, $972,000, and $4.5 million, respectively. These properties account for $2.3 million, or 3.4%, of our contractual rental income and the weighted average remaining lease term for these tenants at these properties is 3.1 years. We own interests in three properties tenanted by Kmart Holdings Corp. and its subsidiaries. Kmart and its parent, Sears Holding Corporation, have experienced financial difficulties for several years. During 2017, Kmart closed two stores owned by our unconsolidated joint ventures at properties locatedin Savannah, Georgia and Manahawkin, New Jersey. Our share of the aggregate annual base rent at those two properties is $510,000 and the leases expire in November 2018 and July 2019. The 2018 contractual rental income associated with our third Kmart property is $522,000, and the lease at this property, which Kmart recently extended, expires in 2023. In light of the difficulties these retail tenants are experiencing, it is possible that they may cease paying rent and/or we may not be able to re-lease the property on a timely basis. Though a tenant may close a store prior to lease expiration, such closure, without a bankruptcy or similar filing, does not relieve it of its obligation to pay rent. If these tenants stop paying rent, and we are unable to re-lease these properties on an as favorable and a timely basis, we may be adversely effected.New Accounting Standards We (i) have determined that the adoption of the New Revenue Recognition Standards, as such term is used in Note 2 of our consolidated financial statements, will not have a material impact on our consolidated financial statements and (ii) are evaluating the impact on our consolidated financial statements, if any, resulting from the guidance issued by the Financial Accounting Standards Board in February 2016 with the respect to the treatment of leases. See Note 2 of our consolidated financial statements.Transaction Subsequent to December 31, 2017 On January 30, 2018, we sold a multi-tenant retail property located in Fort Bend, Texas, in which we held an 85% interest, with an aggregate of 42,446 square feet for gross proceeds of $9.2 million and paid off the $4.4 million mortgage. In the quarter ending March 31, 2018, we anticipate recognizing a gain on this sale of approximately $2.4 million. The non-controlling interest's share of the gain from the transaction will be approximately $800,000. In 2017, this property accounted for $732,000 of rental income and an aggregate of $448,000 of real estate operating expenses (net of tenant reimbursements), depreciation and amortization and interest expense.Changes to Federal Tax Laws On December 22, 2017, the Tax Act was enacted. The Tax Act makes significant changes to the U.S. federal income tax rules for taxation of individuals and corporations, generally effective for taxable years beginning after December 31, 2017. While the changes in the Tax Act generally appear to be favorable with respect to REITs, the extensive changes to non-REIT provisions in the Code may have unanticipated effects on us or our stockholders.Results of Operations20172023 and 20162022” for further information regarding these changes.Revenuesfollowing table compares total revenues for the periods indicated: Year Ended
December 31, Increase
(Decrease) (Dollars in thousands) 2017 2016 % Change $ 68,244 $ 64,164 $ 4,080 6.4 7,672 6,424 1,248 19.4 $ 75,916 $ 70,588 $ 5,328 7.5 Rental income, net. The$466,000, or 1.1%, increase is due to:•$5.2 million from properties acquired in 2016,•$1.6 million from properties acquired in 2017,•$267,000 of rental income from a tenant whose lease commenced April 1, 2016 at our Joppa, Maryland property, and•$201,000 of annual percentage rent income received from three tenants. Offsetting the increases are decreases of:•$1.2 million representing the 2016 rental income from properties sold during 2016,•$1.3 million representing the 2016 rental income from properties sold during 2017,•$496,000 representing the 2016 rental income from a property formerly tenanted by Quality Bakery, which lease expired November 2016, and is now re-tenanted, and•$277,000 relating to a property formerly tenanted by hhgregg (that is vacant) and a property formerly tenanted by Payless ShoeSource (that has re-leased). Tenant reimbursements. Real estate tax and operating expense reimbursements increased due primarily to reimbursements of approximately $855,000 and $377,000 from properties acquired in 2016 and 2017, respectively. Tenant reimbursements generally relate to real estate expenses incurred in the same period.Operating Expenses The following table compares operating expenses for the periods indicated: Year Ended
December 31, Increase
(Decrease) (Dollars in thousands) 2017 2016 % Change $ 20,993 $ 18,164 $ 2,829 15.6 11,279 10,693 586 5.5 10,736 8,931 1,805 20.2 — 596 (596 ) (100.0 ) 481 203 278 136.9 308 308 — — 153 — 153 n/a 43,950 38,895 5,055 13.0 $ 31,966 $ 31,693 $ 273 0.9 Depreciation and amortization. The increase is due primarily to increases of: (i) $1.6 million and $761,000 of depreciation and amortization expense on the properties acquired in 2016 and 2017, respectively, and (ii) an aggregate $884,000 of write-offs of tenant origination costs related to the hhgregg and Joe's Crab Shack properties. The increase was offset by $433,000 due to the sales of properties in 2016 and 2017. We estimate that depreciation and amortization in 2018 related to the properties acquired in 2017 will be approximately $1.5 million. General and administrative. The increase is due primarily to increases of: (i) $278,000 in compensation expense primarily due to higher compensation levels; (ii) $166,000 in non-cashcompensation expense related to the accelerated vesting of restricted stock due to the retirement of a non-management director; and (iii) $142,000 for other miscellaneous expenses. Real estate expenses. The increase is due primarily to an increase of $1.3 million from properties acquired in 2016 and 2017; substantially all these expenses are rebilled to tenants and are included in Tenant reimbursements. Also contributing to the increase are: (i) $435,000 related to properties formerly tenanted by Quality Bakery and hhgregg-Crystal Lake, Illinois; and (ii) $245,000 related to the hhgregg-Niles, Illinois property that we sold. The increase was offset by a decrease of $197,000 of expenses related to the vacant property formerly tenanted by Sports Authority, which was sold in May 2017. Real estate acquisition costs. The expense in 2016 primarily relates to properties purchased that year. As a result of the adoption of ASU 2017-01 in January 2017, asset acquisition costs of $387,000 in 2017 were capitalized to the related real estate assets. Federal excise and state taxes. The increase primarily relates to an annual state franchise tax resulting from the 2016 and 2017 purchase of two properties located in Tennessee. Impairment loss. In 2017, we recorded an impairment loss of $153,000 with respect to our property formerly tenanted by Joe's Crab Shack, which was sold in November 2017. There was no similar loss in the prior year.Other Income and Expenses The following table compares other income and expenses for the periods indicated: Year Ended
December 31, Increase
(Decrease) (Dollars in thousands) 2017 2016 % Change $ 826 $ 1,005 $ (179 ) (17.8 ) — (577 ) (577 ) (100.0 ) 407 435 (28 ) (6.4 ) (17,810 ) (17,258 ) 552 3.2 (977 ) (904 ) 73 8.1 14,412 14,394 18 0.1 Equity in earnings of unconsolidated joint ventures. The 2016 income includes our 50% share, or $146,000, of income obtained for permanent utility easements granted at two properties. There was no such income during 2017. Prepayment costs on debt. These costs were incurred in connection with the property sales and the payoff, prior to the stated maturity, of the related mortgage debt in 2016, primarily relating to the sales of several properties. Other income. Other income in 2017 includes $243,000 paid to us by a former tenant in connection with the resolution of a dispute, and $74,000 that we received for easements on a property sold in 2017. Other income in 2016 includes $356,000 that we received for such easements. Interest expense. The following table summarizes interest expense for the periods indicated: Year Ended
December 31, �� Increase
(Decrease) (Dollars in thousands) 2017 2016 % Change $ 478 $ 590 $ (112 ) (19.0 ) 17,332 16,668 664 4.0 $ 17,810 $ 17,258 $ 552 3.2 Credit facility interest The decrease in 2017AFFO is due to the $11.2factors impacting FFO as described immediately above, excluding the (i) $5.4 million decrease in the weighted average balance outstanding under our line of credit. The decrease was offset by an increase of 64 basis points in the average interest rate due to the increase in the one month LIBOR rate and an increase of $81,000 in the unused facility fee primarily resulting from the $25.0Round Rock Settlement, (ii) $4.6 million increase in our borrowing capacity under the facility.Mortgage interest The following table reflects the average interest rate on the average principal amount of outstanding mortgage debt during the applicable year: Year Ended
December 31, Increase
(Decrease) (Dollars in thousands) 2017 2016 % Change 4.31 % 4.61 % (.30 )% (6.5 ) $ 399,086 $ 361,645 $ 37,441 10.4 The increase is due primarily to the increase in the average principal amount of mortgage debt outstanding, offset by a decrease in the average interest rate on outstanding mortgage debt. The increase in the average balance outstanding is due substantially to mortgage debt of $72.9 million incurred in connection with properties acquired in 2016 and 2017 and the financing or refinancing of $51.5 million of mortgage debt, net of refinanced amounts, in connection with properties acquired prior to 2016. The decrease in the average interest rate is due to the financing (including financings effectuated in connection with acquisitions) or refinancing in 2017 and 2016 of $158.8 million of gross mortgage debt (including $34.4 million of refinanced amounts) with an average interest rate of approximately 3.7%. We estimate that in 2018, the mortgage interest expense associated with the properties acquired in 2017 will be approximately $973,000. Interest expense for these properties in 2017 was $374,000.Gain on sale of real estate, net. The following table compares gain on sale of real estate, net: Year Ended
December 31, Increase
(Decrease) (Dollars in thousands) 2017 2016 % Change $ 9,837 $ 10,087 $ (250 ) (2.5 ) The gain in 2017 was realized from the saleslitigation settlement proceeds from The Vue (included in rental income), and (iii) $918,000 of the Greenwood Village, Colorado property, the Kohl's property in Kansas City, Missouri, and the former hhgregg property in Niles, Illinois. income on insurance recovery from casualty loss."—“—Comparison of Years Ended December 31, 20162023 and 2015—Other Income and Expenses2022"” for further information regarding these changes.gain on saleyear ended December 31, 2023 by an average increase from December 31, 2022 of approximately 114,000 in 2016.Tablethe weighted average number of Contentsshares of common stock outstanding as a result of stock issuances pursuant to the equity incentive and dividend reinvestment, offset by the Company’s repurchase of shares during 2023.20162022 and 20152021RevenuesAs we qualify as a smaller reporting company, this comparison is omitted in accordance with Instruction 1 to Item 303(a) of Regulation S-K. The following table compares total revenues for the periods indicated:41 Year Ended
December 31, Increase
(Decrease) (Dollars in thousands) 2016 2015 % Change $ 64,164 $ 58,973 $ 5,191 8.8 6,424 3,852 2,572 66.8 — 2,886 (2,886 ) (100.0 ) $ 70,588 $ 65,711 $ 4,877 7.4 Rental income, net. The increase is due primarily to (i) $4.4 million earned from 11 properties acquired in 2016 and $2.7 million from seven properties acquired in 2015; (ii) the $530,000 write-off against rental income in 2015 of the entire balance of unbilled rent receivable and the intangible lease asset related to the 2015 lease termination fees described below; and (iii) $383,000 from three replacement tenants that leased vacant space at one of our El Paso, Texas properties. Offsetting the increase are decreases of (i) $2.1 million due to the 2016 sale of 12 properties (the "2016 Sold Properties"), including a portfolio of eight convenience stores (the "Pantry Portfolio"); and (ii) $909,000 from three vacant properties which were leased to Pathmark, Sports Authority and Quality Bakery (the "Vacant Properties"). During 2016, Pathmark did not generate rental income and Sports Authority and Quality Bakery generated an aggregate of $751,000 of rental income. Tenant reimbursements. Real estate tax and operating expense reimbursements in 2016 increased by (i) $781,000 and $644,000 from the properties acquired in 2016 and 2015, respectively, and (ii) $1.1 million from other properties in our portfolio. We recognized an equivalent amount of real estate expense for these tenant reimbursements. Lease termination fees. In 2015, we received lease termination fees of $2.9 million in lease buy-out transactions and re-leased substantially all of such premises simultaneously with the lease terminations. There were no such fees in 2016.Operating Expenses The following table compares operating expenses for the periods indicated: Year Ended
December 31, Increase
(Decrease) (Dollars in thousands) 2016 2015 % Change $ 18,164 $ 16,384 $ 1,780 10.9 10,693 9,527 1,166 12.2 8,931 6,047 2,884 47.7 596 449 147 32.7 203 343 (140 ) (40.8 ) 308 308 — — 38,895 33,058 5,837 17.7 $ 31,693 $ 32,653 $ (960 ) (2.9 ) Depreciation and amortization. Approximately $1.5 million and $932,000 of the increase is due to depreciation expense on the properties acquired in 2016 and 2015, respectively, approximately $365,000 of the increase is due to depreciation on property improvements and approximately $94,000 is due to amortization of leasing commissions. Offsetting these increases are decreases in 2016 of (i) $440,000 of expenses related to the 2016 Sold Properties and (ii) $657,000 of amortization and write-offs of intangibles and lease commissions. The $657,000 includes a $380,000 write-off of tenant origination costs in 2015 related to the Pathmark property and the balance relates primarily to the write-off of intangibles and lease commissions with respect to leases that expired or terminated in 2015 and 2016. General and administrative. Contributing to the increase were increases of: (i) $649,000 in non-cash compensation expense primarily related to the increase in the number of shares of restricted stock granted in 2016 and the higher fair value of the awards granted in 2016 in comparison to the awards granted in 2011 that vested in 2016; (ii) $286,000 for third party audit and audit related services; and (iii) $97,000 in compensation expense payable to our full and part time personnel, primarily due to higher levels of compensation. Real estate expenses. The increase in 2016 is due primarily to increases of $1.4 million from properties acquired in 2015 and 2016 and $719,000 from other properties in our portfolio. Most of these increases are rebilled to tenants and are included in Tenant reimbursement revenues. Also contributing to the increase in 2016 are $587,000 of expenses related to taxes and maintenance of the Vacant Properties and $165,000 due to the change in which property management fees are determined pursuant to the Compensation and Services Agreement. Real estate acquisition costs. The increase is due to increased acquisition activity in 2016. Federal excise and state taxes. We incurred Federal excise tax of $174,000 in 2015 and $6,000 in 2016 because profitable property sales resulted in calendar year distributions to stockholders being less than the amount required to be distributed during such year. In 2016, we deferred a $6.8 million taxable gain on a property sale through an IRC Section 1031 exchange.Other Income and Expenses The following table compares other income and expenses for the periods indicated: Year Ended
December 31, Increase
(Decrease) (Dollars in thousands) 2016 2015 % Change $ 1,005 $ 412 $ 593 143.9 — 960 (960 ) (100.0 ) (577 ) (568 ) 9 1.6 435 108 327 302.8 (17,258 ) (16,027 ) 1,231 7.7 (904 ) (1,023 ) (119 ) (11.6 ) 14,394 16,515 (2,121 ) (12.8 ) Equity in earnings of unconsolidated joint ventures. The increase in 2016 is due primarily to an increase of $633,000 in our share of income from the Manahawkin, New Jersey retail center which was acquired in June 2015. The year ended December 31, 2015 included our $400,000 share of acquisition expenses associated with the purchase of this center. Purchase price fair value adjustment. In connection with the acquisition of our joint venture partner's 50% interest in a property located in Lincoln, Nebraska, we recorded this adjustment,representing the difference between the book value of the preexisting equity investment on the purchase date of March 31, 2015 and the fair value of the investment. Prepayment costs on debt. These costs were incurred primarily in connection with property sales and the payoff, prior to the stated maturity, of the related mortgage debt. In 2016, these costs related primarily to the sales of the Tomlinson, Pennsylvania property and the Pantry Portfolio. In 2015, these costs related primarily to the sale of the Cherry Hill, New Jersey property. Other income. As a result of a partial condemnation of land and easements obtained by the Colorado Department of Transportation ("CDOT") at our Greenwood Village, Colorado property, we received $509,000 from CDOT, of which $356,000 is attributable to easements and is included in Other income in 2016. See "—Gain on sale of real estate, net" below for the gain resulting from the balance. Interest expense. The following table summarizes interest expense for the periods indicated: Year Ended
December 31, Increase
(Decrease) (Dollars in thousands) 2016 2015 % Change $ 590 $ 594 $ (4 ) (.7 ) 16,668 15,433 1,235 8.0 $ 17,258 $ 16,027 $ 1,231 7.7 Credit facility interest The decrease in 2016 is due to the $3.8 million decrease in the weighted average balance outstanding under our line of credit, offset by an increase of 28 basis points in the average interest rate from 1.95% to 2.23%, as well as an increase in the unused fee resulting from a $25.0 million increase in our borrowing capacity in connection with the November 2016 amendment and restatement of the credit facility.Mortgage interest The following table reflects the average interest rate on the average principal amount of outstanding mortgage debt during the applicable year: Year Ended
December 31, Increase
(Decrease) (Dollars in thousands) 2016 2015 % Change 4.61 % 4.96 % (.35 )% (7.1 ) $ 361,645 $ 310,991 $ 50,654 16.3 The increase in mortgage interest expense is due to the increase in the average principal amount of mortgage debt outstanding, offset by a decrease in the average interest rate on outstanding mortgage debt. The increase in the average balance outstanding is substantially due to the incurrence of mortgage debt of $89.5 million in connection with properties acquired in 2015 and 2016 and the financing or refinancing of $85.2 million of mortgage debt, net of refinanced amounts, in connection with properties acquired prior to 2015. The decrease in the average interest rate is due to the financing (including financings effectuated in connection with acquisitions) or refinancing in 2016 and 2015 of $217.2 million of gross mortgage debt (including $42.6 million of refinanced amounts) with an average interest rate of approximately 3.8%. Amortization and write-off of deferred financing costs. The decrease in 2016 is primarily due to the write-off in 2015 of $249,000 relating to the sale of the Cherry Hill, New Jersey property. This decrease was offset by the write-off and increased amortization in 2016 of $66,000 relating to the new line of credit and other write-offs of $57,000 relating to property sales.Gain on sale of real estate, net. The following table compares gain on sale of real estate, net,: Year Ended
December 31, Increase
(Decrease) (Dollars in thousands) 2016 2015 % Change $ 10,087 $ 5,392 $ 4,695 87.1 The gain for 2016 was realized from (i) the sales of 12 properties, including the Pantry Portfolio and (ii) a $116,000 gain on the partial condemnation of land at our former Sports Authority property in Greenwood Village, Colorado. The 2015 gain was realized from the January 2015 sale of the Cherry Hill, New Jersey property. The minority partner's share of the gain on the Cherry Hill, New Jersey property was $1.3 million, which is the primary reason for the decrease in net income attributable to non-controlling interests for 2016 as compared to 2015. revolving credit facility, refinancing existing mortgage loans, obtaining mortgage loans secured by our unencumbered properties, issuance of our equity securities and property sales. In 2017,2023, we obtained $21.2approximately (i) $46.6 million of net proceeds from property sales (after giving effect to our share of $11.3 million of mortgage debt repayments and $1.8 million of seller-financing), (ii) $22.6 million of proceeds from mortgage financings $5.6(after giving effect to $13.8 million of netrefinanced amounts) and (iii) $4.6 million from the litigation settlement proceeds from the sale of our common stock pursuant to our at-the-market equity offering program and $5.9 million from a fixed rent payment, which is deferred over the lease term, received from a ground lease tenant in connection with its obtaining supplemental mortgage financing. See Note 7 to our consolidated financial statements.The Vue. Our available liquidity at March 5, 20181, 2024 was approximately $102.8$123.9 million, including approximately $6.7$23.9 million of cash and cash equivalents (net of(including the credit facility'sfacility’s required $3.0 million average deposit maintenance balance) and, subject to borrowing base requirements, up to $96.1$100.0 million available under our revolving credit facility.dividends)anticipated dividend payments) principally from cash flow from operations and (ii) capital requirements of $4.2 million of building expansion and improvements at our property tenanted by L-3 located in Hauppauge, NY, from cash flow from operations, our available cash and cash equivalents, proceeds from the sale of our common stock and, to the extent permitted and needed, our credit facility. Wefacility and our joint venture partner are also contemplating a significant redevelopment(ii) investing and financing cash requirements (including an estimated aggregate of our multi-tenant shopping center in Manahawkin, New Jersey—we anticipate that$2.7 million of capital expenditures) from the capital expenditures that may be incurred if such property is redeveloped will be funded by the foregoing, sources as well as equity contributions from usproperty financings, property sales and sales of our joint venture partner.Table of Contentscommon stock.2017,2023, information with respect to our mortgage debt that is payable from January 20182024 through December 31, 2020 (excluding our unconsolidated joint ventures):(Dollars in thousands) 2018 2019 2020 Total $ 10,188 $ 11,125 $ 11,901 $ 33,214 10,260 3,485 — 13,745 $ 20,448 $ 14,610 $ 11,901 $ 46,959 At December 31, 2017, our unconsolidated joint ventures had first mortgages on four properties with outstanding balances aggregating approximately $35.0 million, bearing interest at rates ranging from 3.49% to 5.81% (i.e., a 4.07% weighted average interest rate) and maturing between 2018 and 2025 (i.e., a weighted average remaining term to maturity of 6.1 years).2026:20182024 through 2020.2026. We intend to repay the amounts not refinanced or extended from our existing funds and sources of funds, including our available cash, proceeds from the sale of our common stock and our credit facility (to the extent available).since eachalthough we have done so infrequently and primarily in the context of our encumbered properties isa tenant default at a property for which we have not found a replacement tenant, if we believe we have negative equity in a property subject to a non-recourse mortgage (with standard carve-outs), if our in-house evaluation of the market value of such property is less than the principal balance outstanding on the mortgage loan, we may determine to convey in certain circumstances, such property to the mortgagee in order to terminate our mortgage obligations, including payment of interest, principal and real estate taxes, with respect to such property.Credit Facility42 Subject to borrowing base requirements, we can borrow up to $100.0 million pursuant to our revolving credit facility which is available to us for the acquisition of commercial real estate, repayment of mortgage debt, property improvements and general working capital purposes; provided, that if used for property improvements and working capital purposes, the amount outstanding for such purposes will not exceed the lesser of $15.0 million and 15% of the borrowing base and if used for working capital purposes, will not exceed $10.0 million. The facility matures December 31, 2019 and bears interest equal to the one month LIBOR rate plus the applicable margin. The applicable margin ranges from 175 basis points if our ratio of total debt to total value (as calculated pursuant to the facility) is equal to or less than 50%, increasing to a maximum of 300 basis points if such ratio is greater than 65%. The applicable margin was 175 basis points for 2016 and 2017. There is an unused facility fee of 0.25% per annum on the difference between the outstanding loan balance and $100.0 million. The credit facility requires the maintenance of $3.0 million in average deposit balances. For 2017, the average interest rate on the facility was approximately 2.87% and as of March 6, 2018, the rate on the facility was 3.33%. The terms of our revolving credit facility include certain restrictions and covenants which limit, among other things, the incurrence of liens, and which require compliance with financial ratios relatingto, among other things, the minimum amount of tangible net worth, the minimum amount of debt service coverage, the minimum amount of fixed charge coverage, the maximum amount of debt to value, the minimum level of net income, certain investment limitations and the minimum value of unencumbered properties and the number of such properties. Net proceeds received from the sale, financing or refinancing of properties are generally required to be used to repay amounts outstanding under our credit facility. At December 31, 2017, we were in compliance in all material respects with the covenants under this facility.2017:2023:(1) At December 31, 2023 there was no balance outstanding on the credit facility. We may borrow up to $100.0 million pursuant to such facility, subject to compliance with borrowing base requirements. At December 31, 2023, after giving effect to such borrowing base requirements, $100.0 million was available to be borrowed. The facility expires December 31, 2026. See “—Credit Facility”. (2) Assumes that $3.6 million will be payable annually during the next five years pursuant to the compensation and services agreement. Excludes (i) approximately $2.7 million of capital expenditures to be incurred in the ordinary course of business in connection with tenant improvements (including $1.2 million in connection with the Havertys Furniture lease extensions), (ii) amounts required to acquire properties, and (iii) the potential funding in 2024 for capital expenditures and operating cash flow shortfalls at The Vue, which amount, if any, has not been definitively determined. See “—General Challenges and Uncertainties,” and “—Challenges and Uncertainties Facing Certain Properties and Tenants—The Vue”. Payment due by period (Dollars in thousands) Less than
1 Year 1 - 3 Years 4 - 5 Years More than
5 Years Total $ 26,833 $ 53,376 $ 52,190 $ 110,928 $ 243,327 10,260 3,485 40,002 214,048 267,795 — 9,400 — — 9,400 7,520 6,425 5,895 — 19,840 $ 44,613 $ 72,686 $ 98,087 $ 324,976 $ 540,362 (1)Represents the amount outstanding at December 31, 2017. We may borrow up to $100.0 million under such facility.(2)Assumes that (i) $2.9 million will be payable annually during the next five years pursuant to the compensation and services agreement and (ii) $4.2 million will be spent in contractually required building expansion and tenant improvements at the L-3, Hauppauge, New York property in 2018. Excludes $3.0 million for tenant improvements at our Greensboro, North Carolina property, which obligation was satisfied in January 2018.2017,2023, we had $392.5$422.6 million of mortgage debt outstanding, (excluding mortgage indebtedness of our unconsolidated joint ventures), all of which is non-recourse (subject to standard carve-outs). We expect that mortgage interest and amortization payments (excluding repayments of principal at maturity) of approximately $80.2$77.1 million due through 20202026 will be paid primarily from cash generated from our operations. We anticipate that principal balances due at maturity through 20202026 of $13.7$99.9 million will be paid primarily from cash and cash equivalents and mortgage financings and refinancings. If we are unsuccessful in refinancing our existing indebtedness or financing our unencumbered properties, our cash flow, funds available under our credit facility and available cash, if any, may not be sufficient to repay all debt obligations when payments become due, and we may need to issue additional equity, obtain long or short-termshort- term debt, or dispose of properties on unfavorable terms.StatementNet proceeds received from the sale, financing or refinancing of Cash Flowsproperties are generally required to be used to repay amounts outstanding under our credit facility. The following discussionis basedfrom operations. Approximately 69% of our leases contain provisions intended to mitigate the impact of inflation. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the consolidated statementsConsumer Price Index or other measures). In addition, many of cash flows and is not meantour leases require the tenant to bepay, or reimburse us for our payment of, all or a comprehensive discussionmajority of the changes inproperty’s operating expenses, including real estate taxes, utilities, insurance and building repairs, which may also mitigate our cash flows forrisks associated with rising costs. However, these rent escalation provisions may not adequately offset the years presented. For the Years ended December 31, (Dollars in thousands) 2017 2016 2015 $ 44,557 $ 31,405 $ 34,484 (23,444 ) (80,911 ) (73,498 ) (24,767 ) 54,190 31,406 (3,654 ) 4,684 (7,608 ) 17,420 12,736 20,344 $ 13,766 $ 17,420 $ 12,736 Our principal sourceeffects of operating cash flow isinflation.net funds generated from the operationoverall cost of our properties. Our properties provide a relatively consistent stream of cash flow that provides usunhedged debt (i.e., primarily debt incurred pursuant to our credit facility) and mortgage debt we may incur in the future. (The interest rate risk associated with resources to pay operating expenses, debt service and fund quarterly dividend requirements. The decrease in cash used in investing activities during 2017 compared to 2016 is due primarily to the decrease in purchases of real estate in 2017, offset by the decrease in net proceeds from sales of real estate in 2017. The increase in cash flow used in financing activities during 2017 compared to 2016 is due primarily to the net decrease of $65.6 million in financings/repayments of mortgages payable and to a lesser extent, the net increase of $7.7 million in repayments (net of proceeds from drawdowns) on the credit facility in 2017. The increase in cash flow used in financing activities also resulted from a $20.2 million decrease in net proceeds from the salesubstantially all of our common stock in 2017.current mortgage debt is either mitigated through long-term fixed interest rate loans and interest rate hedges). Increasing interest rates on acquisition mortgage debt limits the acquisition opportunities we can pursue and reduces the prices at which we sell our properties.Cash Even ifAlthough we qualify for federal taxation as a REIT, we may beare subject to certain state and local taxes on our income and to federal income taxes on our undistributed taxable income (i.e.(i.e., taxable income not distributed in the amounts and in the time frames prescribed by the Internal Revenue Code and applicable regulations thereunder) and are subject to Federal excise taxes on our undistributed taxable income.reviewswill continue to evaluate, on a quarterly basis, the amount and nature (i.e., cash, stock or a combination of the foregoing) of dividend policy regularly to determine if any changes topayments based on its assessment of, among other things, our dividend should be made.short and long-term cash and liquidity requirements, prospects, debt maturities, projections of our REIT taxable income, net income, funds from operations, and adjusted funds from operations.Off-Balance Sheet ArrangementsCritical Accounting Estimates Wenot a party to any off-balance sheet arrangements other than with respect to land parcels owned by us and located in Lakemoor, Illinois, Wheaton, Illinois and Beachwood, Ohio. These parcels are improved by multi-family complexes and we ground leased the parcels to the owner/operators of such complexes. These ground leases generated $3.7 million of rental income, net, during 2017. At December 31, 2017, our maximum exposure to loss with respect to these properties is $34.0 million, representing the carrying value of the land; our leasehold positions are subordinate to an aggregate of $158.2 million of mortgage debt incurred by our tenants, the owner/operators of the multi-family complexes. These owner/operators are affiliated with one another. We do not believe that this type of off-balance sheet arrangement has been or will be material to our liquidity and capital resource positions. See Notes 4 and 7 tobased upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we reconsider and evaluate our estimates and assumptions.additional information regarding these arrangements.Critical Accounting Policiesmore fully describeddiscussed in Note 2 toof our consolidated financial statements included in this Annual Report on Form 10-K. Certainreport. We believe the accounting estimates listed below are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of our accounting policiesmatters that are particularly important to an understandinginherently uncertain.our financial position and results of operations and require the application of significant judgment by our management; as a result they are subject to a degree of uncertainty. These critical accounting policies include the following, discussed below.Purchase Accounting for Acquisition of Real Estate The fair value of real estate acquiredrevenue is allocated to acquired tangible assets, consisting of land and building, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases and other value of in-place leases based in each case on their fair values. The fair value of the tangible assets of an acquired property (which includes land, building and building improvements) is determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land, building and building improvements based on our determination of relative fair values of these assets. We assess fair value of the lease intangibles based on estimated cash flow projections that utilize appropriate discount rates and available market information. The fair values associated with below-market rental renewal options are determined based on our experience and the relevant facts and circumstances that existed at the time of the acquisitions. The portion of the values of the leases associated with below-market renewal options that we deem likely to be exercised are amortized to rental income over the respective renewal periods. The allocation made by us may have a positive or negative effect on netfrom our tenants. Rental income and may have an effect on the assets and liabilities on the balance sheet.Revenues Our revenues, which are substantially derived from rental income, include rental incomeprimarily includes: (i) base rents that our tenants pay in accordance with the terms of their respective leases reported on a straight-line basis over the non-cancellable term of each lease.lease and (ii) reimbursements by tenants of certain real estate operating expenses. Since many of our leases provide for rental increases at specified intervals, straight-line basis accounting requires us to record as an asset and include in revenues, unbilled rent receivables which we will only receive if the tenant makes all rent payments required through the expiration of the term of the lease. Accordingly, our management must determine, in its judgment, that the unbilled rent receivable applicable to each specific tenant is collectible.collectable. We review unbilled rent receivables on a quarterly basis and take into consideration the tenant'stenant’s payment history and the financial condition of the tenant. In the event that the collectability of an unbilled rent receivable is in doubt,unlikely, we are required to take a reserve against the receivable or a direct write-off of the receivable, which has an adverse effect on net income for the year in which the reserve or direct write-off is taken, and will decrease total assets and stockholders'stockholders’ equity.asset'sasset’s carrying amount, an impairment loss is recorded to the extent that the estimated fair value is less than the asset'sasset’s carrying amount. The estimated fair value is determined using a discounted cash flow model of the expected future cash flows through the useful life of the property. Real estate assets that are expected to be disposed of are valued at the lower of carrying amount or fair value less costs to sell on an individual asset basis. We generally do not obtain any independent appraisals in determining value but rely on our own analysis and valuations. Any impairment charge taken with respect to any part of our real estate portfolio will reduce our net income and reduce assets and stockholders'stockholders’ equity to the extent of the amount of any impairment charge, but it will not affect our cash flow or our distributions until such time as we dispose of the property.2017, our aggregate2023, we had no liability in the event of the early termination of our swaps was $1.6 million.swaps.2017,2023, we had 3013 interest rate swap agreements outstanding (including two held by three of our unconsolidated joint ventures).with an aggregate $29.6 million notional amount. The fair market value of the interest rate swaps is dependent upon existing market interest rates and swap spreads, which change over time. As of December 31, 2017,2023, if there had been an increase of 100 basis points in forward interest rates, the fair market value of the interest rate swaps would have increased by approximately $7.5 million and the net unrealized gain on derivative instruments would have increased by $7.5 million.$309,000. If there were a decrease of 100 basis points in forward interest rates, the fair market value of the interest rate swaps would have decreased by approximately $8.1 million and the net unrealized gain on derivative instruments would have decreased by $8.1 million.$316,000. These changes would not have any impact on our net income or cash. Our mortgage debt, after giving effect to the interest rate swap agreements, bears interest at fixed rates and accordingly, the effect of changes in interest rates would not impact the amount of interest expense that we incur under these mortgages. Our variable rate credit facility is sensitive to interest rate changes. At December 31, 2017, a 100 basis point increase of the interest rate on this facility would increase our related interest costs by approximately $94,000 per year and a 100 basis point decrease of the interest rate would decrease our related interest costs by approximately $94,000 per year.long termlong-term debt of similar risk and duration.2017:2023: For the Year Ended December 31, (Dollars in thousands) 2018 2019 2020 2021 2022 Thereafter Total Fair
Market
Value $ 20,448 $ 14,610 $ 11,901 $ 20,742 $ 43,771 $ 281,051 $ 392,523 $ 397,103 4.32 % 4.24 % 4.35 % 4.27 % 4.05 % 4.23 % 4.22 % 4.25 % — $ 9,400 — — — — $ 9,400 — (1)Our credit facility matures on December 31, 2019 and bears interest at the 30 day LIBOR rate plus the applicable margin. The applicable margin varies based on the ratio of total debt to total value. See "Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations—Liquidity and Capital Resources—Credit Facility."(1) As of December 31, 2023, there was no balance outstanding on our credit facility. Our credit facility matures on December 31, 2026 and bears interest equal to 30-day SOFR plus the applicable margin. The applicable margin varies based on the ratio of total debt to total value. See “Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Liquidity and Capital Resources—Credit Facility.” (2) Excludes $16.0 million of variable rate mortgage debt of which $4.0 million with respect to a property tenanted by LA Fitness (Hamilton, Ohio) matures in 2024. For further information about our variable rate mortgage debt, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—General Challenges and Uncertainties.” "Exchange Act"“Exchange Act”) as of the end of the period covered by this Annual Report on Form 10-K. Based on that review and evaluation, theour CEO and CFO have concluded that our disclosure controls and procedures, as designed and implemented as of December 31, 2017,2023, were effective.Changes in Internal Controls over Financial Reporting There have been no changes in our internal controls over financial reporting, as defined in in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, that occurred during the three months ended December 31, 2017 that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.Management'sManagement’s Report on Internal Control Over Financial Reportingcompany'scompany’s principal executive and principal financial officers and effected by a company'scompany’s board,•pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of a company;•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of a company are being made only in accordance with authorizations of management and directors of a company; and•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company's assets that could have a material effect on the financial transactions.● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of a company; ● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of a company are being made only in accordance with authorizations of management and the board of directors of a company; and ● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’s assets that could have a material effect on the financial transactions. 2017.2023. In making this assessment, our management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013).2017,2023, our internal control over financial reporting was effective based on those criteria. Our independent registered public accounting firm, Ernst & Young LLP,Changes in Internal Controls over Financial Reportingissued a report on management's assessment of the effectiveness ofbeen no changes in our internal controlcontrols over financial reporting, as defined in in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, that occurred during the three months ended December 31, 2023 that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. This report appears on page F-2 of this Annual Report on Form 10-K.Information.
Information. The following discussion supplements and updatesdiscussion (the "Prior Discussion") contained inpurchase or sale of our prospectus dated May 10, 2017 under the heading "Federal Income Tax Considerations" and supersedes the Prior Discussion to the extent the discussion below is inconsistent with the Prior Discussion. The Prior Discussion and the discussion below (collectively referred to as the "Tax Discussion") are subject to the qualifications set forth therein and below. The tax treatment of security holders will vary depending upon the holder's particular situation, and the Tax Discussion addresses only holders that hold securities as a capital asset and does not deal with all aspects of taxation that may be relevant to particular holders in light of their personal investment or tax circumstances. The Tax Discussion also does not deal with all aspects of taxation that may be relevant to certain types of holders, to which special provisions of the federal income tax laws apply, including:•dealers in securities or currencies;•traders in securities that electwas intended to use a mark-to-market methodsatisfy the affirmative defense conditions of accounting for their securities holdings;•banks and other financial institutions;•tax-exempt organizations;•certain insurance companies;•persons liable for the alternative minimum tax;•persons that hold securities as a hedge against interest rateRule 10b5-1(c) or currency risks or as part of a straddle or conversion transaction;•non-U.S. individuals and foreign corporations; and•holders whose functional currency is not the U.S. dollar. The statementsany “non-Rule 10b5-1 trading arrangement” in the Tax Discussion are based on the Code, its legislative history, current and proposed regulations under the Code, published rulings and court decisions. This summary describes the provisions of these sources of law only as they are currently in effect. All of these sources of law may changeeffect at any time and any change induring the law may apply retroactively. We cannot assure youthree months ended December 31, 2023.new laws, interpretations of law or court decisions, any of which may take effect retroactively, will not cause any statement in this discussion to be inaccurate.Prevent Inspections. As supplemented and updated by this summary, and by the discussion in any applicable prospectus supplement, investors should review the discussion in the prospectus under the heading "Federal Income Tax Considerations" for a more detailed summary of the federal income tax consequences of the purchase, ownership, and disposition of our securities and our election to be subject to federal income tax as a REIT. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE U.S. FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP, AND DISPOSITION OF OUR SECURITIES.Not applicable.Enactment of Tax Act48 On December 22, 2017, the Tax Cuts and Jobs Act, which we refer to as the "Tax Act", was enacted. The Tax Act makes major changes to the Code, including a number of provisions of the Code that may affect the taxation of REITs and the holders of their securities. The most significant of these provisions are described below. The individual and collective impact of these changes on REITs and their security holders is uncertain and may not become evident for some period of time. Prospective investors should consult their tax advisors regarding the implications of the Tax Act on their investment.Revised Individual Tax Rates and Deductions The Tax Act adjusted the tax brackets and reduced the top federal income tax rate for individuals from 39.6% to 37%. In addition, numerous deductions were eliminated or limited, including the deduction for state and local taxes being limited to $10,000 per year. These individual income tax changes are generally effective beginning in 2018, but without further legislation, they will sunset after 2025.Pass-Through Business Income Tax Rate Lowered through Deduction Under the Tax Act, individuals, trusts, and estates generally may deduct 20% of "qualified business income" (generally, domestic trade or business income other than certain investment items) of a partnership, S corporation, or sole proprietorship. In addition, "qualified REIT dividends" (i.e., REIT dividends other than capital gain dividends and portions of REIT dividends designated as qualified dividend income eligible for capital gain tax rates) and certain other income items are eligible for the deduction. The deduction, however, is subject to complex limitations to its availability. As with the other individual income tax changes, the provisions related to the deduction are effective beginning in 2018, but without further legislation, they will sunset after 2025.Graduated Corporate Tax Rates Replaced With Single Rate; Elimination of Corporate Alternative Minimum Tax The Tax Act eliminated graduated corporate income tax rates with a maximum rate of 35% and replaced them with a single corporate income tax rate of 21%, and reduced the dividends received deduction for certain corporate subsidiaries. The 21% rate may also apply to (i) our net income for any taxable period in which we fail to qualify as a REIT, or (ii) our net income from nonqualifying assets during a period in which we fail to satisfy the REIT asset test but otherwise qualify as a REIT. The Tax Act also permanently eliminated the corporate alternative minimum tax. These provisions are effective beginning in 2018.Net Operating Loss Modifications The Tax Act limited the net operating loss ("NOL") deduction to 80% of taxable income (before the deduction). The Tax Act also generally eliminated NOL carrybacks for individuals and non-REIT corporations (NOL carrybacks did not apply to REITs under prior law) but allows indefinite NOL carryforwards. The new NOL rules apply beginning in 2018.Limitations on Interest Deductibility The Tax Act limits the net interest expense deduction of a business to 30% of the sum of adjusted taxable income, business interest, and certain other amounts. The Tax Act allows a real property trade or business to elect out of such limitation so long as it uses the alternative depreciation system which lengthens the depreciation recovery period with respect to certain property. The limitation with respect to the net interest expense deduction applies beginning in 2018.Withholding Rate Reduced The Tax Act reduced the highest rate of withholding with respect to distributions to non-U.S. holders that are treated as attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%. These provisions are effective beginning in 2018.20182024 annual meeting of stockholders, to be filed with the SEC not later than April 30, 2018,29, 2024, and is incorporated herein by reference.EXECUTIVE OFFICERS Set forth below is a list of our executive officers whose terms expire at our 2018 annual board of directors' meeting. The business history of our officers, who are also directors, will be provided in our proxy statement to be filed pursuant to Regulation 14A not later than April 30, 2018.NAMEAGEPOSITION WITH THE COMPANYMatthew J. Gould*58Chairman of the BoardFredric H. Gould*82Vice Chairman of the BoardPatrick J. Callan, Jr. 55President, Chief Executive Officer and DirectorLawrence G. Ricketts, Jr. 41Executive Vice President and Chief Operating OfficerJeffrey A. Gould*52Senior Vice President and DirectorDavid W. Kalish**70Senior Vice President and Chief Financial OfficerMark H. Lundy55Senior Vice President and SecretaryIsrael Rosenzweig70Senior Vice PresidentKaren Dunleavy59Vice President, FinancialAlysa Block57TreasurerRichard M. Figueroa50Vice President and Assistant SecretaryIsaac Kalish**42Vice President and Assistant TreasurerJustin Clair35Vice President*Matthew J. Gould and Jeffrey A. Gould are Fredric H. Gould's sons.**Isaac Kalish is David W. Kalish's son. Lawrence G. Ricketts, Jr. Mr. Ricketts has been our Chief Operating Officer since 2008, Vice President from 1999 through 2006 and Executive Vice President since 2006. David W. Kalish. Mr. Kalish has served as our Senior Vice President and Chief Financial Officer since 1990 and as Senior Vice President, Finance of BRT Apartments Corp. since 1998. Since 1990, he has served as Vice President and Chief Financial Officer of the managing general partner of Gould Investors L.P., a master limited partnership involved primarily in the ownership and operation of a diversified portfolio of real estate assets. Mr. Kalish is a certified public accountant. Mark H. Lundy. Mr. Lundy has served as our Secretary since 1993, as our Vice President since 2000 and as our Senior Vice President since 2006. Mr. Lundy has been a Vice President of BRT Apartments Corp. from 1993 to 2006, its Senior Vice President since 2006, a Vice President of the managing general partner of Gould Investors from 1990 through 2012 and its President and Chief Operating Officer since 2013. He is an attorney admitted to practice in New York and the District of Columbia. Israel Rosenzweig. Mr. Rosenzweig has served as our Senior Vice President since 1997, as Chairman of the Board of Directors of BRT Apartments Corp. since 2013, as Vice Chairman of its Board of Directors from 2012 through 2013, and as its Senior Vice President from 1998 through 2012. He has been a Vice President of the managing general partner of Gould Investors since 1997. Karen Dunleavy. Ms. Dunleavy has been our Vice President, Financial since 1994. She served as Treasurer of the managing general partner of Gould Investors from 1986 through 2013. Ms. Dunleavy is a certified public accountant. Alysa Block. Ms. Block has been our Treasurer since 2007, and served as Assistant Treasurer from 1997 to 2007. Ms. Block has also served as the Treasurer of BRT Apartments Corp. from 2008 through 2013, and served as its Assistant Treasurer from 1997 to 2008. Richard M. Figueroa. Mr. Figueroa has served as our Vice President and Assistant Secretary since 2001, as Vice President and Assistant Secretary of BRT Apartments Corp. since 2002 and as Vice President of the managing general partner of Gould Investors since 1999. Mr. Figueroa is an attorney admitted to practice in New York. Isaac Kalish. Mr. Kalish has served as our Vice President since 2013, Assistant Treasurer since 2007, as Assistant Treasurer of the managing general partner of Gould Investors from 2012 through 2013, as Treasurer from 2013, as Vice President and Treasurer of BRT Apartments Corp. since 2013, and as its Assistant Treasurer from 2009 through 2013. Mr. Kalish is a certified public accountant. Justin Clair. Mr. Clair has been employed by us since 2006, served as Assistant Vice President from 2010 through 2014 and as Vice President since 2014. concerning our executive compensation required by this Item 11 shallwill be included in our proxy statement for our 20182024 annual meeting of stockholders, to be filed with the SEC not later than April 30, 2018,29, 2024, and is incorporated herein by reference. Theconcerning our beneficial owners and managementrequired by Item 201(d) of Regulation S-K which is set forth below, the information required by this Item 12 shallwill be included in our proxy statement for our 20182024 annual meeting of stockholders, to be filed with the SEC not later than April 30, 201829, 2024 and is incorporated herein by reference. As of December 31, 2017, the only equity compensation plan under which equity compensation may be awarded is our 2016 Incentive Plan, which was approved by our stockholders in June 2016. This plan permits us to grant stock options, restricted stock, restricted stock units and performance based awards to our employees, officers, directors, consultants and other eligible participants. 20172023 about shares of our common stock that may be issued upon the exercise of options, warrants and rights under our 2016 Incentive Plan:Plan (the “2016 Plan”), our 2019 Incentive Plan (the “2019 Plan”; and together with the 2016 Plan, the “Prior Plans”) and our 2022 Incentive Plan (the “2022 Plan”; and together with the Prior Plans, the “Incentive Plans”). No further awards may be granted under the Prior Plans.(1) Includes up to 79,622 shares, 83,240 shares and 85,250 shares of common stock issuable pursuant to restricted stock units (“RSUs”) that vest as of June 30, 2024, 2025 and 2026, respectively, if and to the extent specified performance (i.e., average annual return on capital) and/or market (i.e., average annual total stockholder return) conditions are satisfied by such vesting dates. RSUs granted pursuant to the 2019 Plan and the 2022 Plan account for 79,622 shares and 168,490 shares, respectively. Excludes shares of restricted stock issued pursuant to the Incentive Plans as such shares, although subject to forfeiture, are outstanding. See Note 11 to our consolidated financial statements. (2) Gives effect to the outstanding restricted stock other than the 151,180 shares of restricted stock granted January 12, 2024 pursuant to the 2022 Plan. Number of
securities
to be issued
upon exercise
of outstanding
options, warrants
and rights(1) Weighted-average
exercise price
of outstanding
options,
warrants
and rights Number of
securities
remaining available
for future issuance
under equity
compensation
plans (excluding
securities
reflected in
column(a))(2) (a) (b) (c) 76,250 — 533,750 — — — 76,250 — 533,750 (1)Represents an aggregate of up to 76,250 shares of common stock issuable pursuant to restricted stock units. Assuming a continuing relationship with us, the shares underlying these units vest on June 30, 2020 if and to the extent specified performance (i.e., average annual return on capital) and/or market (i.e., average annual total stockholder return) conditions are satisfied by June 30, 2020.(2)Does not give effect to 144,750 restricted stock awards granted January 18, 2018 pursuant to our 2016 Incentive Plan. concerning certain relationships, related transactions and director independence required by this Item 13 shallwill be included in our proxy statement for our 20182024 annual meeting of stockholders, to be filed with the SEC not later than April 30, 201829, 2024 and is incorporated herein by reference.
The information concerning our principal accounting fees required by this Item 14 shallwill be included in our proxy statement for our 20182024 annual meeting of stockholders, to be filed with the SEC not later than April 30, 201829, 2024 and is incorporated herein by reference.
50
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) | Documents filed as part of this Report: |
(1) | The following financial statements of the Company are included in this Annual Report on Form 10-K: |
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