UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

x ~~Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~

For the quarterly period ended ~~September 30, 2011~~March 31, 2012

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

o ~~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		13-3147497
(State or other jurisdiction of		(I.R.S. employer
incorporation or organization)		identification number)

60 Cutter Mill Road, Great Neck, New York		11021
(Address of principal executive offices)		(Zip code)

(516) 466-3100

(Registrant’s telephone number, including area code)

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer x

Non-accelerated filer o		Smaller reporting company o
~~(Do not check if a smaller reporting company)~~

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of ~~November 1, 2011,~~May 3, 2012, the registrant had ~~14,561,778~~14,787,152 shares of common stock outstanding.

Table of Contents

One Liberty Properties, Inc. and Subsidiaries

Table of Contents

		Page No.

Part I - Financial Information

Item 1.	Financial Statements

	Consolidated Balance Sheets — ~~September 30, 2011~~ March 31, 2012 and December 31, ~~2010~~2011	1

	Consolidated Statements of Income — Three ~~and nine~~ months ended ~~September 30,~~March 31, 2012 and 2011 ~~and 2010~~	2

	Consolidated ~~Statement~~Statements of ~~Stockholders’ Equity and~~ Comprehensive Income — ~~Nine~~ Three months ended ~~September 30,~~March 31, 2012 and 2011	3

	Consolidated Statement of Changes in Equity — Three months ended March 31, 2012 and year ended December 31, ~~2010~~2011	4

	Consolidated Statements of Cash Flows — ~~Nine~~ Three months ended ~~September 30,~~March 31, 2012 and 2011 ~~and 2010~~	5

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2019

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2724

Item 4.	Controls and Procedures	2825


Part II — Other Information

Item 6.	Exhibits	28

	~~Signatures~~	29
	~~Ex 31.1~~
	~~Ex 31.2~~
	~~Ex 32.1~~
	~~Ex 32.2~~
	~~Ex 101~~	25

Table of Contents

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements

ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands, Except Par Value)

	September 30, 2011			December 31, 2010			March 31, 2012			December 31, 2011
	(Unaudited)						(Unaudited)
Assets
Real estate investments, at cost
Land	$	132,378		$	126,697		$	134,815		$	132,398
Buildings and improvements	337,149			319,203			334,767			328,918
Total real estate investments, at cost	469,527			445,900			469,582			461,316
Less accumulated depreciation	60,566			54,137			62,685			60,463
Real estate investments, net	408,961			391,763			406,897			400,853

Property held for sale (including related assets of $808)	—			10,678
Property contributed to joint venture							—			11,842
Investment in unconsolidated joint ventures	5,139			4,777			17,137			5,093
Cash and cash equivalents	8,430			7,732			17,197			12,668
Available-for-sale securities	353			422
Unbilled rent receivable	12,151			11,149			12,860			12,483
Unamortized intangible lease assets	11,571			10,887			14,383			11,996
Escrow, deposits and other assets and receivables	2,601			4,684			3,084			3,252
Investment in BRT Realty Trust at market (related party)	231			266			259			235
Unamortized deferred financing costs	2,465			2,265			2,384			2,314

Total assets	$	451,902		$	444,623		$	474,201		$	460,736

Liabilities and Stockholders’ Equity
Liabilities and Equity
Liabilities:
Mortgages payable	$	197,796		$	215,308
Mortgages and loan payable							$	213,252		$	205,849
Line of credit	20,000			36,200			27,100			20,000
Dividends payable	4,783			3,806			4,862			4,805
Accrued expenses and other liabilities	5,373			5,144			5,593			5,969
Unamortized intangible lease liabilities	5,274			4,982			5,065			5,166

Total liabilities	233,226			265,440			255,872			241,789

Commitments and contingencies	—			—			—			—

Stockholders’ equity:
Equity:
One Liberty Properties, Inc. stockholders’ equity:
Preferred stock, $1 par value; 12,500 shares authorized; none issued	—			—			—			—
Common stock, $1 par value; 25,000 shares authorized; 14,146 and 11,212 shares issued and outstanding	14,146			11,212
Common stock, $1 par value; 25,000 shares authorized; 14,322 and 14,213 shares issued and outstanding							14,322			14,213
Paid-in capital	188,370			147,158			190,630			189,486
Accumulated other comprehensive loss	(1,165		)	(156		)	(989		)	(1,019		)
Accumulated undistributed net income	17,325			20,969			13,966			15,605
Total stockholders’ equity	218,676			179,183
Total liabilities and stockholders’ equity	$	451,902		$	444,623
Total One Liberty Properties, Inc. stockholders’ equity							217,929			218,285
Non-controlling interest in joint venture							400			662

Total equity							218,329			218,947

Total liabilities and equity							$	474,201		$	460,736

See accompanying notes to consolidated financial statements.

Table of Contents

ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in Thousands, Except Per Share Data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2011			2010			2011			2010			2012			2011
Revenues:
Rental income, net	$	11,151		$	10,466		$	33,494		$	30,546		$	11,641		$	11,103

Operating expenses:
Depreciation and amortization	2,424			2,155			7,072			6,314			2,509			2,325
General and administrative (including $572, $447, $1,716 and $1,341, respectively, to related party)	1,804			1,545			5,306			4,811
General and administrative (including $572 and $447, respectively, to related party)													1,890			1,600
Real estate acquisition costs	131			224			176			738			43			27
Real estate expenses (including $150, $150, $450 and $450, respectively, to related party)	620			396			1,908			1,362
Real estate expenses (including $150 in both periods to related party)													686			611
Leasehold rent	77			77			231			231			77			77
Total operating expenses	5,056			4,397			14,693			13,456			5,205			4,640

Operating income	6,095			6,069			18,801			17,090			6,436			6,463

Other income and expenses:
Equity in earnings of unconsolidated joint ventures	105			101			241			354
Gain on disposition of real estate held by unconsolidated joint venture	—			—			—			107
Gain on settlement of debt	—			—			1,240			—
Other income, including realized gain on sale of available-for-sale securities and interest income	9			40			62			265
Equity in net earnings of unconsolidated joint ventures													69			31
Other income													15			12
Interest:
Expense	(3,259		)	(3,658		)	(10,233		)	(10,639		)	(3,416		)	(3,641		)
Amortization of deferred financing costs	(185		)	(160		)	(681		)	(452		)	(197		)	(313		)
Gain on sale of real estate													319			—
Income from continuing operations	2,765			2,392			9,430			6,725			3,226			2,552

Discontinued operations:
Income from operations	—			219			277			705
Net gain on sale	—			235			932			235
Income from discontinued operations	—			454			1,209			940			—			180

Net income	$	2,765		$	2,846		$	10,639		$	7,665		3,226			2,732
Less net income attributable to non-controlling interest													(3		)	—
Net income attributable to One Liberty Properties, Inc.													$	3,223		$	2,732

Weighted average number of common shares outstanding:
Basic	14,143			11,160			13,663			11,108			14,289			13,117
Diluted	14,143			11,197			13,663			11,140			14,389			13,117

Per common share attributable to common stockholders - basic:
Income from continuing operations													$	.22		$	.20
Income from discontinued operations													—			.01
													$	.22		$	.21

Per common share attributable to common stockholders - diluted:
Income from continuing operations													$	.21		$	.20
Income from discontinued operations													—			.01
													$	.21		$	.21

Cash distribution declared per share of common stock													$	.33		$	.33

~~Continued on next page~~See accompanying notes to consolidated financial statements.

Table of Contents

ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in ~~Thousands, Except Per Share Data)~~Thousands)

(Unaudited) ~~(Continued)~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2011

2010

2011

2010

Net income per common share — basic:

Income from continuing operations

$
.19

$
.21

$
.66

$
.59

Income from discontinued operations

—

.04

.09

.08

Net income per common share — basic

$
.19

$
.25

$
.75

$
.67

Net income per common share — diluted:

Income from continuing operations

$
.19

$
.21

$
.66

$
.59

Income from discontinued operations

—

.04

.09

.08

Net income per common share — diluted

$
.19

$
.25

$
.75

$
.67

Cash distribution declared per share of common stock

$
.33

$
.30

$
.99

$
.90

	Three Months Ended March 31,
	2012		2011
Net income	$	3,226	$	2,732
Other comprehensive income
Net unrealized gain (loss) on available-for-sale securities	30		(79		)
Net unrealized gain on derivative instruments	—		131
One Liberty Properties, Inc.’s share of joint venture net unrealized loss on derivative instruments	—		(23		)
Other comprehensive income	30		29

Comprehensive income	3,256		2,761
Less: comprehensive income attributable to non-controlling interest	—		—

Comprehensive income attributable to One Liberty Properties, Inc.	$	3,256	$	2,761

See accompanying notes to consolidated financial statements.

Table of Contents

ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’~~CHANGES IN EQUITY

~~AND COMPREHENSIVE INCOME~~

For the ~~nine~~three month period ended ~~September 30, 2011~~March 31, 2012 (Unaudited)

and the year ended December 31, ~~2010~~2011

(Amounts in Thousands, Except Per Share Data)

Common
Stock

Paid-in
Capital

Accumulated
Other
Comprehensive
Income (Loss)

Accumulated
Undistributed
Net Income

Total

Balances, January 1, 2010

$
10,879

$
143,272

$
191

$
25,786

$
180,128

Distributions - common stock

Cash - $1.23 per share

—

—

—

(14,123
)
(14,123
)
Issuance of stock for stock dividend obligation at December 31, 2009

216

1,888

—

—

2,104

Restricted stock vesting

36

(36
)
—

—

—

Shares issued through dividend reinvestment plan

81

1,119

—

—

1,200

Compensation expense - restricted stock

—

915

—

—

915

Net income

—

—

—

9,306

9,306

Other comprehensive income -

Net unrealized loss on available-for-sale securities

—

—

(60
)
—

(60
)
Net unrealized loss on derivative instruments

—

—

(287
)
—

(287
)
Comprehensive income

—

—

—

—

8,959

Balances, December 31, 2010

11,212

147,158

(156
)
20,969

179,183

Distributions - common stock

Cash - $.99 per share

—

—

—

(14,283
)
(14,283
)
Restricted stock vesting

46

(46
)
—

—

—

Shares issued in stock offering - net of offering costs of $282

2,700

37,869

—

—

40,569

Shares issued through dividend reinvestment plan

188

2,619

—

—

2,807

Compensation expense - restricted stock

—

770

—

—

770

Net income

—

—

—

10,639

10,639

Other comprehensive income -

Net unrealized loss on available-for-sale securities

—

—

(108
)
—

(108
)
Net unrealized loss on derivative instruments

—

—

(724
)
—

(724
)
OLP’s share of joint venture net unrealized loss on derivative instruments

—

—

(177
)
—

(177
)
Comprehensive income

—

—

—

—

9,630

Balances, September 30, 2011

$
14,146

$
188,370

$
(1,165
)
$
17,325

$
218,676

	Common Stock		Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Undistributed Net Income			Non- Controlling Interest in Joint Venture			Total
Balances, January 1, 2011	$	11,212	$	147,158		$	(156	)	$	20,969		$	—		$	179,183

Distributions - common stock Cash - $1.32 per share	—		—			—			(19,088		)	—			(19,088		)
Shares issued in public offering - net of offering costs of $282	2,700		37,869			—			—			—			40,569
Shares issued through dividend reinvestment plan	255		3,496			—			—			—			3,751
Contribution from non-controlling interest	—		—			—			—			666			666
Restricted stock vesting	46		(46		)	—			—			—			—
Compensation expense - restricted stock	—		1,009			—			—			—			1,009
Net income	—		—			—			13,724			(4		)	13,720
Other comprehensive income	—		—			(863		)	—			—			(863		)

Balances, December 31, 2011	14,213		189,486			(1,019		)	15,605			662			218,947

Distribution - common stock Cash - $.33 per share									(4,862		)				(4,862		)
Shares issued through dividend reinvestment plan	60		891			—			—			—			951
Contribution from non-controlling interest	—		—			—			—			25			25
Distribution to non-controlling interest	—		—			—			—			(290		)	(290		)
Restricted stock vesting	49		(49		)	—			—			—			—
Compensation expense - restricted stock	—		302			—			—			—			302
Net income	—		—			—			3,223			3			3,226
Other comprehensive income	—		—			30			—			—			30

Balances, March 31, 2012	$	14,322	$	190,630		$	(989	)	$	13,966		$	400		$	218,329

See accompanying notes to consolidated financial statements.

Table of Contents

ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

(Unaudited)

	Nine Months Ended September 30,						Three Months Ended March 31,
	2011			2010			2012			2011
Cash flows from operating activities:
Net income	$	10,639		$	7,665		$	3,226		$	2,732
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on settlement of debt	(1,240		)	—
Gain on sale of real estate	(932		)	(235		)
Gain on sale of available-for-sale securities	—			(149		)
Gain on sale of real estate and available-for-sale securities							(328		)	—
Increase in rental income from straight-lining of rent	(1,019		)	(1,292		)	(372		)	(339		)
Decrease in rental income resulting from bad debt expense	514			93			17			311
Decrease in rental income from amortization of intangibles relating to leases	50			17			(6		)	33
Amortization of restricted stock expense	770			673			302			271
Gain on disposition of real estate held by unconsolidated joint venture	—			(107		)
Equity in earnings of unconsolidated joint ventures	(241		)	(354		)
Equity in net earnings of unconsolidated joint ventures							(69		)	(31		)
Distributions of earnings from unconsolidated joint ventures	308			530			122			93
Depreciation and amortization	7,135			6,497			2,509			2,367
Amortization and write off of financing costs	681			452			197			313
Changes in assets and liabilities:
Increase in escrow, deposits, other assets and receivables	(362		)	(1,198		)	(230		)	(59		)
(Decrease) increase in accrued expenses and other liabilities	(368		)	397
Decrease in accrued expenses and other liabilities							(385		)	(433		)
Net cash provided by operating activities	15,935			12,989			4,983			5,258

Cash flows from investing activities:
Purchase of real estate and improvements	(22,887		)	(23,964		)	(10,989		)	(2,613		)
Net proceeds from sale of real estate	11,544			4,137
Investment in unconsolidated joint ventures	(669		)	(150		)	—			(669		)
Distributions of return of capital from unconsolidated joint ventures	58			953			49			10
Prepaid tenant improvement allowance	—			(1,750		)
Net proceeds from sale of available-for-sale securities	—			6,345			369			—
Net cash used in investing activities	(11,954		)	(14,429		)	(10,571		)	(3,272		)

Cash flows from financing activities:
Scheduled amortization payments of mortgages payable	(4,132		)	(4,090		)	(1,454		)	(1,370		)
Repayment of mortgages payable	(15,302		)	(10,687		)	—			(7,668		)
Proceeds from mortgage financings	3,004			3,000			8,857			—
Proceeds from common stock offering, net	40,569			—			—			40,569
Proceeds from bank line of credit	20,000			16,300			9,300			—
Repayment on bank line of credit	(36,200		)	(15,500		)	(2,200		)	(26,200		)
Issuance of shares through dividend reinvestment plan	2,807			426			951			846
Payment of financing costs	(723		)	(1,022		)	(267		)	(365		)
Capital contribution from non-controlling interest							25			—
Distributions to non-controlling interest							(290		)	—
Cash distributions to common stockholders	(13,306		)	(7,119		)	(4,805		)	(3,806		)
Expenses associated with stock issuance	—			(104		)
Net cash used in financing activities	(3,283		)	(18,796		)
Net cash provided by financing activities							10,117			2,006

Net increase (decrease) in cash and cash equivalents	698			(20,236		)
Net increase in cash and cash equivalents							4,529			3,992
Cash and cash equivalents at beginning of period	7,732			28,036			12,668			7,732
Cash and cash equivalents at end of period	$	8,430		$	7,800		$	17,197		$	11,724

Continued on next page

Table of Contents

ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

(Unaudited) (Continued)

Nine Months Ended
September 30,

2011

2010

Supplemental disclosures of cash flow information:

Cash paid during the period for interest expense

$
10,440

$
10,654

Supplemental schedule of non-cash investing and financing activities:

Common stock dividend — portion paid in shares of Company’s common stock

—

2,209

Assumption of mortgage payable in connection with purchase of real estate

—

17,654

Settlement of mortgage debt

1,259

—

Purchase accounting allocation — intangible lease assets

1,622

1,078

Purchase accounting allocation — intangible lease liabilities

612

357

Reclassification of 2010 prepaid tenant improvement allowance to building improvements

1,750

—

Reclassification of real estate owned to property held for sale

—

10,678

	Three Months Ended March 31,
	2012		2011

Supplemental disclosures of cash flow information:
Cash paid during the period for interest expense	$	3,425	$	3,186

Supplemental schedule of non-cash investing and financing activities:
Contribution of property to unconsolidated joint venture	11,734		—
Purchase accounting allocation - intangible lease assets	2,733		409
Purchase accounting allocation - intangible lease liabilities	11		2,031
Reclassification of 2010 prepaid tenant improvement allowance to building improvements	—		1,750

See accompanying notes to consolidated financial statements.

Table of Contents

One Liberty Properties, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~September 30, 2011~~March 31, 2012

Note 1 - Organization and Background

One Liberty Properties, Inc. (“OLP”) was incorporated in 1982 in Maryland. OLP is a self-administered and self-managed real estate investment trust (“REIT”). OLP acquires, owns and manages a geographically diversified portfolio of retail (including furniture and office supply stores), industrial, office, flex, health and fitness and other properties, a substantial portion of which are under long-term net leases. As of ~~September 30, 2011,~~March 31, 2012, OLP owned 8892 properties, ~~two~~one of which ~~are vacant~~is owned by a consolidated joint venture and one of which is a 50% tenancy in common interest. OLP’s unconsolidated joint ventures owned a total of ~~five~~six properties. The 9398 properties are located in 29 states.

Note 2 - Basis of Preparation

The accompanying interim unaudited consolidated financial statements as of ~~September 30, 2011~~March 31, 2012 and for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2012 and 2011 ~~and 2010~~ reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for such interim periods. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2011~~March 31, 2012 are not necessarily indicative of the results for the full year.

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

The consolidated financial statements include the accounts and operations of OLP, ~~and~~ its wholly-owned subsidiaries ~~(collectively,~~and a property owned by a joint venture in which the Company, as defined, has a controlling interest. OLP and its subsidiaries are hereinafter referred to as the “Company”). Material intercompany items and transactions have been ~~eliminated.~~ eliminated in consolidation.

With respect to its consolidated joint venture which owns a property located in Cherry Hill, New Jersey and in which the Company has a 90% interest, the Company has determined that (i) such venture is not a variable interest entity and (ii) the Company exercises substantial operating control and accordingly, such venture is consolidated for financial statement purposes.

In February 2012, the Company entered into a joint venture (see Note 4) and contributed its property located in Plano, Texas in exchange for a 90% equity interest therein. Current accounting guidance provides a framework for determining whether an entity is a variable interest entity (“VIE”) and if consolidation of an entity in which it owns an interest is appropriate. The Company has determined that this joint venture is a VIE; however, the Company is not the primary beneficiary since it does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance due to shared power of the parties to the VIE. Accordingly, the Company accounts for its investment in this joint venture under the equity method from the date of contribution.

Table of Contents

One Liberty Properties, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2012 (Continued)

Note 2 - Basis of Preparation (Continued)

The Company accounts for its investments in its five other unconsolidated joint ventures under the equity method of accounting. All investments in these five joint ventures have sufficient equity at risk to permit the entity to finance its activities without additional subordinated financial support and, as a group, the holders of the equity at risk have power through voting rights to direct the activities of ~~the venture.~~these ventures. As a result, none of ~~the Company’s~~these five joint ventures are variable interest entities. In addition, although the Company is the managing member, ~~of these joint ventures,~~ it does not exercise substantial operating control over these entities, and therefore the entities are not consolidated. These investments are recorded initially at cost, as investments in unconsolidated joint ventures, and subsequently adjusted for their share of equity in earnings, ~~(losses),~~ cash contributions and distributions. None of the joint venture debt is recourse to the ~~Company.~~Company, subject to standard carve-outs.

Certain amounts reported in previous consolidated financial statements have been reclassified in the accompanying consolidated financial statements to conform to the current ~~periods’~~period’s presentation, primarily to reclassify the ~~assets~~operations of ~~one~~a property which was sold in May 2011 to ~~property held for sale at December 31, 2010 and to reclassify the operations of this property to~~ discontinued operations for the ~~nine~~three months ended ~~September 30, 2011 and~~March 31, 2011. In addition, the ~~three and nine months ended September 30, 2010.~~net book value of the Plano, Texas property that was contributed to a joint venture in February 2012 was reclassified from real estate investments to property contributed to joint venture at December 31, 2011. The accounting treatment presentation on the accompanying consolidated statements of income is to reflect the results of the property’s operations prospectively following its transfer to the joint venture as “equity in income of unconsolidated joint ventures” with no reclassification adjustments for discontinued operations.

~~Table~~Property management costs of ~~Contents~~

~~One Liberty Properties, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~September 30, 2011 (Continued)~~

~~Note 2~~ ~~Basis of Preparation (Continued)~~

~~After considering a report of an independent compensation consultant,~~ $150,000 ~~per quarter ($600,000 per annum) for property management costs~~ incurred under the ~~Compensation~~compensation and ~~Services Agreement was~~services agreement were reclassified from general and administrative expenses to real estate operating expenses for the three months ended ~~June 30, 2011,~~March 31, 2011. Such amount had been included as a component of general and administrative expense in the three months ended March 31, ~~2011 and the three and nine months ended September 30, 2010. Such amounts have been included as a component of real estate operating expenses in the three and nine months ended September 30,~~ 2011.

These statements should be read in conjunction with the consolidated financial statements and related notes which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2010.~~2011.

Note 3 - Earnings Per Common Share

The following table presents the detail of net income attributable to One Liberty Properties, Inc. (dollars in thousands):

	Three Months Ended March 31,
	2012		2011

Income from continuing operations	$	3,223	$	2,552
Income from discontinued operations	—		180
Net income attributable to One Liberty Properties, Inc.	$	3,223	$	2,732

Table of Contents

One Liberty Properties, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2012 (Continued)

Note 3 - Earnings Per Common Share (Continued)

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2012 and 2011, ~~and 2010,~~ basic earnings per share was determined by dividing net income allocable to common stockholders for the applicable period by the weighted average number of shares of common stock outstanding during such period, including the effect of the 2,700,000 shares sold in February ~~2011 as described in Note 11.~~2011. Net income ~~during the applicable period~~ is also allocated to the unvested restricted stock, during the applicable period as the restricted stock is entitled to receive dividends and is therefore considered a participating security. Unvested restricted stock is not allocated net losses and/or any excess of dividends declared over net income; such amounts are allocated entirely to the common stockholders other than the holders of unvested restricted stock. The weighted average number of unvested shares of restricted stock outstanding was 348,000 and 354,000 during the three and nine months ended September 30, 2011, respectively, and 321,000 and 335,000 during the three and nine months ended September 30, 2010, respectively. The dividends declared payable to unvested restricted stockholders was $115,000 and $345,000 during the three and nine months ended September 30, 2011, respectively, and $96,000 and $300,000 during the three and nine months ended September 30, 2010, respectively. The restricted stock units awarded under the Pay-for-Performance program described in Note 1411 are excluded from the basic earnings per share calculation, as these units are not participating securities.

Diluted earnings per share reflects the potential dilution that could occur if securities or other rights exercisable for, or convertible into, common stock were exercised or converted or otherwise resulted in the issuance of common stock that shared in the earnings of the Company. ~~The weighted average number of common shares outstanding used for the diluted earnings per share calculation for~~For the three ~~and nine~~ months ended ~~September 30, 2010 includes~~March 31, 2012, the ~~full impact of common stock issued in connection with the dividend paid in January 2010, based on the December 11, 2009 dividend declaration date, as the shares were~~

~~Table of Contents~~

~~One Liberty Properties, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~September 30, 2011 (Continued)~~

~~Note 3 -~~ ~~Earnings Per Common Share (Continued)~~

~~contingently issuable as of December 11, 2009. This stock dividend was included in basic earnings per share as of the January 25, 2010 issuance date. The~~ diluted weighted average number of common shares ~~does not include 200,000~~also includes the 100,000 shares of common stock underlying the restricted stock units awarded on September 14, 2010 under the ~~Pay-for-Performance~~Pay-For-Performance Program. These 100,000 shares may vest upon satisfaction of the total stockholder return threshold based on the number of shares that would be issued based on the current market price and dividends paid at the end of the quarterly period assuming the end of the quarterly period was the end of the vesting period. The three months ended March 31, 2011 does not include such shares as they did not meet the defined total stockholder return as of March 31, 2011. The remaining 100,000 shares of common stock underlying the restricted stock units awarded under the Pay-For-Performance Program are not included, as they did not meet the defined performance metric ~~or total stockholder return as of September 30,~~during the three months ended March 31, 2012 and 2011.

There were no options outstanding to purchase shares of common stock or other rights exercisable for, or convertible into, common stock during the three ~~and nine~~ months ended ~~September 30, 2011~~March 31, 2012 and ~~2010.~~2011.

Note 4 - Investment in Unconsolidated Joint Ventures

In February 2012, the Company entered into a joint venture with an affiliate of Trammell Crow Company pursuant to which the venture contemplates re-developing the 6.2 acre site located in Plano, Texas into up to two Class A office buildings. The Company contributed this property to the joint venture in exchange for a 90% equity interest therein and Trammell Crow contributed $1,500,000 in exchange for a 10% equity interest therein which resulted in a $319,000 gain to the Company. At March 31, 2012, the Company’s investment in this VIE was $12,083,000 which represents its maximum exposure to loss.

Table of Contents

One Liberty Properties, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2012 (Continued)

Note 4 - Investment in Unconsolidated Joint Ventures (Continued)

The Company’s ~~five~~six unconsolidated joint ventures each own and operate one ~~property, including a 50% owned joint venture which acquired a retail property in~~property. At March ~~2011 for a total purchase price of $3,200,000. At September 30, 2011~~31, 2012 and December 31, ~~2010,~~2011, the Company’s equity investment in unconsolidated joint ventures totaled ~~$5,139,000~~$17,137,000 and ~~$4,777,000,~~$5,093,000, respectively. ~~In addition to the $107,000 gain on sale of property in the nine months ended September 30, 2010, the~~The Company recorded equity in net earnings of ~~$241,000~~$69,000 and ~~$354,000 for the nine months ended September 30, 2011 and 2010, respectively, and $105,000 and $101,000~~$31,000 for the three months ended ~~September 30,~~March 31, 2012 and 2011, ~~and 2010,~~ respectively.

Note 5 - Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its tenants to make required rent payments. If the financial condition of a specific tenant were to deteriorate, resulting in an impairment of its ability to make payments, additional allowances may be required. At ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010,~~2011, the balance in allowance for doubtful accounts was ~~$1,491,000~~$352,000 and ~~$977,000,~~$335,000, respectively, recorded as a reduction to accounts receivable. The Company records bad debt expense as a reduction of rental income. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2012 and 2011, the Company recorded bad debt expense of ~~$6,000~~$17,000 and ~~$514,000,~~$311,000, respectively. For the three and nine months ended September 30, 2010, the Company recorded bad debt expense of $14,000 and $93,000, respectively. For the nine months ended September 30, 2010, $2,000 of such bad debt expense was recorded in discontinued operations. The bad debt expense for the nine months ended September 30, 2011 results substantially from uncollected rental income and real estate taxes related to a property previously leased by Robb & Stucky. Robb & Stucky filed for bankruptcy protection in February 2011; thereafter, it rejected its lease and as of June 30, 2011, vacated the property.

~~Table of Contents~~

~~One Liberty Properties, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~September 30, 2011 (Continued)~~

Note 6 - Real Estate Acquisitions

The following chart details the Company’s real estate acquisitions during the ~~nine~~three months ended ~~September 30, 2011.~~March 31, 2012:

Description of Property

Date Acquired

Purchase Price

Third Party
Real Estate
Acquisition
Costs (a)

Big Lots store,
Bolingbrook, Illinois

March 4, 2011

$
2,325,000

$
21,300

FedEx Express distribution center,
Durham, North Carolina

July 29, 2011

3,975,000

29,900

L.A. Fitness health club,
Hamilton, Ohio

August 9, 2011

7,900,000

48,500

Two hhgregg stores,
Niles and Crystal Lake, Illinois

September 14, 2011

8,000,000

56,600

Other

—

19,800

$
22,200,000

$
176,100

Description of Property	Date Acquired	Purchase Price		Third Party Real Estate Acquisition Costs (a)

Urban Outfitters store, Lawrence, Kansas	February 7, 2012	$	1,230,000	$	9,000

Three Applebee’s restaurants, Carrollton, Kennesaw and Cartersville, Georgia	March 12, 2012	8,568,000		26,000

Other		—		8,000

		$	9,798,000	$	43,000

(a) Included in the accompanying consolidated statements of income.

All of the properties purchased by the Company ~~in 2011~~during the three months ended March 31, 2012 were purchased for cash (utilizing available cash and our line of ~~credit in certain circumstances)~~credit), are 100% occupied and are each leased to a single tenant pursuant to a long term net lease.

Table of Contents

One Liberty Properties, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2012 (Continued)

Note 6 - Real Estate Acquisitions (Continued)

As a result of ~~the 2011 purchases,~~these acquisitions, the Company recorded intangible lease assets of ~~$1,622,000~~$2,733,000 and intangible lease liabilities of ~~$612,000,~~$11,000, representing the value of the acquired leases and origination costs. As of ~~September 30, 2011,~~March 31, 2012, the weighted average amortization period for the ~~2011~~2012 acquisitions is ~~9.3~~18.9 years for the intangible lease assets and ~~24.3~~9.0 years for the intangible lease liabilities. The Company assessed the fair value of the lease intangibles based on estimated cash flow projections that utilize appropriate discount rates and available market information. Such inputs are Level 3 (as defined in Note ~~15)~~12) in the fair value hierarchy. The Company is currently in the process of finalizing the purchase price allocations for the properties purchased in the three months ended ~~September 30, 2011;~~March 31, 2012; therefore, these allocations are preliminary and subject to change.

Note 7 - Discontinued Operations ~~and Property Held for Sale~~

On May 20, 2011, the Company sold a property, leased to Office Depot and located in California, to an unrelated party for $11,544,000, net of closing costs, and realized a gain of approximately $932,000, which is included in net gain on sale in discontinued operations in the nine months ended September 30, 2011. The net book value of the property, including related

~~Table of Contents~~

~~One Liberty Properties, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~September 30, 2011 (Continued)~~

~~Note 7 -~~ ~~Discontinued Operations and Property Held for Sale (Continued)~~

~~assets of $808,000, was $10,678,000 at December 31, 2010 and is included in property held for sale on the accompanying balance sheet.~~

The following is a summary of income from discontinued operations applicable to ~~the~~a property sold in May 2011 ~~and the two properties sold in July 2010 and September 2010~~ (dollars in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2011

2010

2011

2010

Rental income

$
—

$
304

$
342

$
1,021

Depreciation and amortization

—

51

63

183

Real estate expenses

—

(4
)
2

8

Interest expense

—

38

—

125

Total expenses

—

85

65

316

Income from operations

—

219

277

705

Net gain on sale

—

235

932

235

��

Income from discontinued operations

$
—

$
454

$
1,209

$
940

	Three Months Ended March 31, 2011

Rental income	$	222

Depreciation and amortization	42

Income from discontinued operations	$	180

Note 8 — ~~Gain on Settlement of Debt~~

On June 27, 2011, the Company paid off the $8,893,000 principal balance of the mortgage secured by the property previously leased to Robb & Stucky with a payment of $7,634,000. The $1,240,000 gain on settlement of debt is net of a $19,000 write off of the remaining balance of related deferred mortgage costs.

~~The property was tested for impairment in June 2011 and it was determined that no charge was required. No additional indicators of impairment have been identified.~~

~~Note 9~~ - Line of Credit

~~On January 6, 2011, the~~The Company ~~entered into an amendment of its~~has a $55,000,000 revolving credit facility (“Facility”) with VNB New York Corp., Bank Leumi USA, Israel Discount Bank of New York and Manufacturer’s & Trader’s Trust ~~Company, which, among other things, increased the Company’s borrowing capacity by $15,000,000 to $55,000,000 and extended the maturity by one year to~~Company. The facility matures March 31, ~~2013. The~~2013 and provides that the Company pays interest ~~rate thereon is~~at the greater of (i) 90 day LIBOR plus 3% ~~(3.4%~~(3.48% at ~~September 30, 2011)~~March 31, 2012), and (ii) 5.5% per annum, ~~effective August 5, 2011, as a result of an additional amendment (was 6% per annum through August 5, 2011),~~ and there is an unused facility fee ~~of .25%~~of.25% per annum. ~~In connection with the January 2011 amendment, the Company incurred a~~

~~Table of Contents~~

~~One Liberty Properties, Inc.~~At March 31, 2012 and ~~Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~September 30, 2011 (Continued)~~

~~Note 9 -~~ ~~Line of Credit (Continued)~~

~~$350,000 commitment fee which is being amortized over the remaining term of the facility. At September 30, 2011, $20,000,000~~May 3, 2012, $27,100,000 and $19,600,000, respectively, was outstanding under the ~~facility and at November 2, 2011, $28,500,000 was outstanding.~~facility. The Company was in compliance with all covenants at ~~September 30, 2011.~~

~~Note 10 -~~ ~~Compensation and Services Agreement~~

On September 13, 2011, the independent members of the Company’s Board of Directors authorized a $500,000 increase (effective January 1, 2011) from $2,400,000 to $2,900,000 in the compensation and services agreement with Majestic Property Management Corp. In June 2011, a compensation consultant was engaged to prepare a “Compensation and Total Costs Analysis” report. The results of this report were utilized to evaluate the $500,000 increase.

~~Note 11 -~~ ~~Public Offering~~

On February 11, 2011, the Company sold 2,700,000 shares of its common stock and received net proceeds of approximately $40,569,000. The proceeds were used to repay two mortgages in aggregate amount of $7,700,000 having a weighted average interest rate of 7.9% and to reduce the amount outstanding under the line of credit by $26,200,000. The balance of the proceeds was used for general corporate purposes, including the purchase of a property in March ~~2011.~~31, 2012.

Note 129 - Common Stock Cash Dividend

On ~~September 13, 2011,~~March 5, 2012, the Board of Directors declared a quarterly cash dividend of $.33 per share on the Company’s common stock, totaling ~~$4,783,000.~~$4,862,000. The quarterly dividend was paid on ~~October 5, 2011~~April 2, 2012 to stockholders of record as of ~~September 27, 2011.~~March 20, 2012.

~~Note 13 -~~ ~~Comprehensive Income~~

~~Comprehensive income for the three and nine months ended September 30, 2011 and 2010 is as follows (dollars in thousands):~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2011

2010

2011

2010

Net income

$
2,765

$
2,846

$
10,639

$
7,665

Other comprehensive income (loss)-

Net unrealized (loss) gain on available-for-sale securities

(21
)
25

(108
)
(107
)
Net unrealized (loss) on derivative instruments

(701
)
(193
)
(901
)
(599
)
Comprehensive income

$
2,043

$
2,678

$
9,630

$
6,959

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Table of Contents

One Liberty Properties, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~September 30, 2011~~March 31, 2012 (Continued)

Note 1310 - Accumulated Other Comprehensive ~~Income (Continued)~~Loss

~~Accumulated~~ The following table presents the components of accumulated other comprehensive loss reported on the balance sheet ~~includes an accumulated net unrealized loss on available-for-sale securities of $56,000, an unrealized loss on available-for-sale securities~~(dollars in a joint venture of $33,000, a net unrealized loss on derivative instruments of $899,000, and our 50% share of a net unrealized loss on a joint venture derivative instrument of $177,000, resulting in a total cumulative net loss of $1,165,000 at September 30, 2011. At December 31, 2010, accumulated other comprehensive loss of $156,000 was comprised of a net accumulated unrealized gain on available-for-sale securities of $47,000, an unrealized loss on available-for-sale securities in a joint venture of $27,000 and a net unrealized loss on derivative instruments of $176,000.thousands):

	March 31, 2012			December 31, 2011
Net unrealized gain on available-for-sale securities	$	143		$	117
Unrealized loss on available-for-sale securities in a joint venture	(26		)	(31		)
Net unrealized loss on derivative instruments	(934		)	(923		)
50% share of net unrealized loss on derivative instrument in joint ventures	(172		)	(182		)

Accumulated other comprehensive loss	$	(989	)	$	(1,019	)

Note 1411 - Stock Based Compensation

The Company’s 2009 Incentive Plan, approved by the Company’s stockholders in June 2009, permits the Company to grant stock options, restricted stock and/or performance-based awards to its employees, officers, directors and consultants. A maximum of 600,000 shares of the Company’s common stock is authorized for issuance pursuant to the 2009 Incentive Plan.

The Company’s 2003 Incentive Plan, approved by the Company’s stockholders in June 2003, permitted the Company to grant stock options and restricted stock to its employees, officers, directors and consultants. A maximum of 275,000 shares of the Company’s common stock was authorized for issuance pursuant to the 2003 Incentive Plan.

The restricted stock grants are charged to general and administrative expense over the respective vesting periods based on the market value of the common stock on the grant date. Substantially all restricted stock awards made to date provide for vesting upon the fifth anniversary of the grant date and under certain circumstances may vest earlier. For accounting purposes, the restricted stock is not included in the shares shown as outstanding on the balance sheet until they vest; however dividends are paid on the unvested shares.

On September 14, 2010, the Board of Directors approved a Pay-For-Performance Program under the Company’s 2009 Incentive Plan, and awarded 200,000 performance share awards in the form of restricted stock units (the “Units”). The holders of Units are not entitled to dividends or to vote the underlying shares until the Units vest and shares are issued. Accordingly, for accounting purposes, the shares underlying the Units are not included in the shares shown as outstanding on the balance sheet. If the defined performance criteria are satisfied in full at June 30, 2017, one share of the Company’s common stock will vest and be issued for each Unit outstanding and a pro-rata portion of the Units will vest and be issued if the performance criteria fall between defined ranges. In the event that the performance criteria are not satisfied in whole or in part at June 30, 2017, the unvested Units will be forfeited and no shares of the Company’s common stock will be issued for those Units. No Units were granted, vested or forfeited in the ~~nine~~three months ended ~~September 30, 2011.~~March 31, 2012.

~~Through September 30, 2011, a total of 416,910 and 274,100 stock awards (~~~~i.e.~~ ~~restricted shares and restricted stock units) were issued pursuant to the Company’s 2009 and~~

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One Liberty Properties, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~September 30, 2011~~March 31, 2012 (Continued)

Note 1411 - Stock Based Compensation (Continued)

Through March 31, 2012, a total of 526,360 and 274,100 stock awards were issued pursuant to the Company’s 2009 and 2003 Incentive Plans, respectively. Under the 2009 Incentive Plan, ~~183,090~~73,640 shares remain available for grant. No additional shares may be granted under the 2003 Incentive Plan. As of ~~September 30, 2011,~~March 31, 2012, there were approximately ~~$2,636,000~~$3,922,000 of total compensation costs related to nonvested awards that have not yet been recognized, including ~~$469,000~~$428,000 related to the Pay-for-Performance Program (net of forfeiture and performance assumptions which are re-evaluated quarterly). These compensation costs will be charged to general and administrative expense over the remaining respective vesting periods. The weighted average vesting period is approximately ~~3.7~~3.8 years. ~~As of September 30, 2011, there were no options outstanding under the 2009 and 2003 Incentive Plans.~~

AThe following is a summary of the activity of the incentive ~~plans follows:~~plans:

	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended March 31,
	2011		2010			2011			2010			2012			2011
Restricted share grants	—		875			74,040			875			109,450			74,040
Average per share grant price	—		$	14.64		$	16.19		$	14.64		$	16.77		$	16.19
Recorded as deferred compensation	—		$	13,000		$	1,199,000		$	13,000		$	1,835,000		$	1,199,000

Non-vested shares:
Non-vested beginning of period	348,385		321,875			320,940			357,925			348,385			320,940
Grants	—		875			74,040			875			109,450			74,040
Vested during period	—		—			(46,450		)	(36,050		)	(49,325		)	(46,450		)
Forfeitures	—		(1,810		)	(145		)	(1,810		)	—			(145		)
Non-vested end of period	348,385		320,940			348,385			320,940			408,510			348,385

Average per share value of non-vested shares (based on grant price)	$	12.96	$	13.33		$	12.96		$	13.33		$	12.59		$	12.96

Value of shares vested during the period (based on grant price)	$	—	$	—		$	960,000		$	687,000		$	1,208,000		$	960,000

Total charge to operations:
Outstanding restricted stock grants	$	227,000	$	213,000		$	703,000		$	673,000		$	282,000		$	249,000
Outstanding restricted stock units	22,000		—			67,000			—			20,000			22,000
	$	249,000	$	213,000		$	770,000		$	673,000		$	302,000		$	271,000

Note 1512 - Fair Value of Financial Instruments

Financial Instruments Not Measured at Fair Value

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which adjustments to measure at fair value are not reported:

~~Cash and cash equivalents: The carrying amounts reported in the balance sheet for these instruments approximate their fair values.~~

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One Liberty Properties, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~September 30, 2011~~March 31, 2012 (Continued)

Note 1512 - Fair Value of Financial Instruments (Continued)

Cash and cash equivalents: The carrying amounts reported in the balance sheet for these instruments approximate their fair values.

Mortgages ~~payable:~~and loan payable: At ~~September 30, 2011,~~March 31, 2012, the ~~$204,018,000~~$223,083,000 estimated fair value of the Company’s mortgages and loan payable is more than their carrying value by approximately ~~$6,222,000,~~$9,831,000 assuming a blended market interest rate of ~~5.0%~~4.5% based on the ~~4.5~~4.8 year weighted average remaining term of the ~~mortgages.~~mortgages and loan.

Line of ~~credit:~~credit: The ~~$20,000,000~~$27,100,000 carrying amount of the Company’s line of credit approximates its fair value at ~~September 30, 2011.~~March 31, 2012.

��

The fair value of the Company’s mortgages and loan payable and line of credit were estimated using ~~observable inputs such as~~ available market information and discounted cash flow analysis based on borrowing rates the Company believes it could obtain with similar terms and maturities. These fair value measurements fall within Level 3 of the fair value hierarchy.

Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Financial Instruments Measured at Fair Value

The Company measures the fair value of financial instruments based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. In accordance with the fair value hierarchy, Level 1 assets/liabilities are valued based on quoted prices for identical instruments in active markets, Level 2 assets/liabilities are valued based on quoted prices in active markets for similar instruments, on quoted prices in less active or inactive markets, or on other “observable” market inputs and Level 3 assets/liabilities are valued based significantly on “unobservable” market inputs. The Company does not currently own any financial instruments that are classified as Level 3.

In January 2010, the FASB issued updated guidance on fair value measurements and disclosures which requires disclosures of details of significant asset or liability transfers between Level 1 and 2 of the fair value hierarchy, the reasons for transfers in or out of Level 3 of the fair value hierarchy and activity for recurring Level 3 measures. The guidance also clarifies certain existing disclosure requirements related to the level at which fair value disclosures should be disaggregated and the requirement to provide disclosures about the valuation techniques and inputs used in determining the fair value of assets or liabilities classified as Level 2 or 3. These required disclosures were effective January 1, 2010, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures were effective for the Company on January 1, 2011. There were no transfers between Level 1, 2 and no significant transfers into or out of Level 3 of the fair value hierarchy during the three and nine months ended September 30, 2011. The adoption did not have a material effect on the Company’s consolidated financial statements.

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One Liberty Properties, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~September 30, 2011~~March 31, 2012 (Continued)

Note 1512 - Fair Value of Financial Instruments (Continued)

The fair values of the Company’s financial instruments were determined using the following inputs as of ~~September 30, 2011~~March 31, 2012 (dollars in thousands):

	Carrying and		Fair Value Measurements Using Fair Value Hierarchy				Carrying and		Fair Value Measurements Using Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Fair Value		Level 1		Level 2
Financial assets:
Available-for-sale securities:
Equity securities	$	584	$	584	$	—	$	297	$	297	$	—

Financial liabilities:
Derivative financial instruments	899		—		899		934		—		934

Available-for-sale securities

The Company’s available-for-sale securities have a total cost of ~~$640,000.~~$153,000 and are included in other assets on the balance sheet. At ~~September 30, 2011,~~March 31, 2012, unrealized gains on such securities were ~~$112,000~~$145,000 and unrealized losses were ~~$168,000.~~$2,000. The aggregate net unrealized ~~loss~~gain of ~~$56,000~~$143,000 is included in accumulated other comprehensive loss on the balance sheet. Fair values are approximated based on current market quotes from financial sources that track such securities. All of the available-for-sale securities in an unrealized loss position are equity securities and amounts are not considered to be other than temporary impairment because the Company expects the value of these securities to recover and plans on holding them until at least such recovery occurs.

During the three months ended March 31, 2012, the Company sold certain available-for-sale securities for a net gain of $9,000, which is included in other income on the consolidated statement of income. At December 31, 2011, the Company recorded an impairment charge of $126,000 on such securities.

Derivative financial instruments

Fair values are approximated using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. At ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010,~~2011, these derivatives are included in other liabilities ~~and other assets~~ on the consolidated balance ~~sheet.~~sheets.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with it utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparty. However, as of ~~September 30, 2011,~~March 31, 2012, the

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One Liberty Properties, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2012 (Continued)

Note 12 - Fair Value of Financial Instruments (Continued)

Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuation is classified in Level 2 of the fair value hierarchy.

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~~One Liberty Properties, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~September 30, 2011 (Continued)~~

Note 1613 - Derivative Financial Instruments

As of ~~September 30, 2011,~~March 31, 2012, the Company had the following outstanding interest rate derivatives, all of which were designated as cash flow hedges of interest rate risk (dollars in thousands):

Interest Rate Derivative	Notional Amount		Fixed Interest Rate		Maturity Date	Notional Amount		Fixed Interest Rate		Maturity Date
Interest Rate Swap	$	9,500	6.50	%	December 2014	$	9,216	6.50	%	December 2014
Interest Rate Swap	$	4,500	5.75	%	November 2020	4,389		5.75		November 2020
Interest Rate Swap	$	4,000	4.75	%	August 2016	3,951		4.75		August 2016
Interest Rate Swap						5,850		4.63		February 2019
Interest Rate Swap						2,192		4.50		April 2016
Interest Rate Swap (a)						—		4.50		March 2017

(a) The Company closed on a $3,950 mortgage on March 29, 2012 and the interest rate swap with a notional amount of $3,950 was effective April 1, 2012.

The following table presents the fair value of the Company’s derivatives designated as hedging instruments as of ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010~~2011 (dollars in thousands):

Asset Derivatives

Liability Derivatives

As of
September 30, 2011

As of
December 31, 2010

As of
September 30, 2011

As of
December 31, 2010

Balance
Sheet
Location

Fair
Value

Balance
Sheet
Location

Fair
Value

Balance
Sheet
Location

Fair
Value

Balance
Sheet
Location

Fair
Value

Other Assets

$
—

Other Assets

$
126

Other Liabilities

$
899

Other Liabilities

$
302

Liability Derivatives as of
March 31, 2012			December 31, 2011
Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Other Liabilities	$	934	Other Liabilities	$	923

The following table presents the effect of the Company’s derivative financial instruments that were designated as cash flow hedges on the consolidated ~~statements~~statement of income for the ~~three and nine months ended September 30, 2011 and September 30, 2010~~periods presented (dollars in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2011

2010

2011

2010

Amount of loss recognized on derivative in Other Comprehensive Income

$
(687
)
$
(246
)
$
(977
)
$
(762
)
Amount of loss reclassified from Accumulated Other Comprehensive Income into Interest Expense

$
(92
)
$
(54
)
$
(253
)
$
(163
)

No gain or loss was recognized related to hedge ineffectiveness or to amounts excluded from effectiveness testing on the Company’s cash flow hedges during the three and nine months ended September 30, 2011 or September 30, 2010. During the twelve months ending September 30, 2012, the Company estimates an additional $342,000 will be reclassified from other comprehensive income as an increase to interest expense.

	March 31,
	2012			2011
Amount of (loss) gain recognized on derivative in Other Comprehensive Income	$	(117	)	$	52

Amount of (loss) gain reclassified from Accumulated Other Comprehensive Income into Interest Expense	$	(106	)	$	(80	)

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One Liberty Properties, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~September 30, 2011~~March 31, 2012 (Continued)

Note 1613 - Derivative Financial Instruments (Continued)

No gain or loss was recognized with respect to hedge ineffectiveness or to amounts excluded from effectiveness testing on the Company’s cash flow hedges for the quarters ended March 31, 2012 or 2011. During the twelve months ending March 31, 2013, the Company estimates an additional $505,000 will be reclassified from other comprehensive income as an increase to interest expense.

The derivative agreements in effect at ~~September 30, 2011~~March 31, 2012 provide that if the wholly-owned subsidiary of the Company which is a party to the agreement defaults or is capable of being declared in default on any of its indebtedness, then a default can be declared on such subsidiary’s derivative obligation. In addition, the Company is a party to one of the derivative agreements and if ~~there is a default by~~ the subsidiary defaults on the loan subject to the derivative agreement to which the Company is a party, ~~and if there are swap breakage losses on account of the derivative being terminated early,~~ then the Company could be held liable for such swap breakage ~~losses.~~losses, if any.

As of ~~September 30, 2011,~~March 31, 2012, the fair value of the derivatives ~~in a liability position~~ including accrued interest but excluding any adjustments for nonperformance risk was approximately ~~$971,000.~~$1,016,000. If the Company breaches any of the contractual provisions of the derivative contracts, it would be required to settle its obligations under the derivative agreements at their termination liability value of ~~$971,000.~~$1,016,000.

Two of the Company’s unconsolidated joint ventures, in which a wholly owned subsidiary of the Company is a 50% partner, ~~and each of the two joint ventures have the same venture partners,~~ had a ~~$4,000,000~~$3,934,000 interest rate ~~swap~~derivative outstanding at ~~September 30, 2011.~~March 31, 2012. The ~~swap~~interest rate derivative had an interest rate of 5.81% and matures in April 2018. The Company’s 50% share of the ~~swap~~interest rate derivative is ~~$2,000,000~~$1,967,000 and its 50% share of the value is ~~$(177,000)~~$(172,000) as of ~~September 30, 2011~~March 31, 2012 and ~~zero~~$(182,000) as of December 31, ~~2010~~2011 and is included in “Investment in Unconsolidated Joint Ventures” on the Company’s balance sheet. The Company’s 50% share of loss recognized in other comprehensive income was ~~$119,000~~$3,000 and ~~$206,000~~$23,000 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2012 and 2011, respectively, and the amount of loss reclassified from accumulated other comprehensive income into equity in net earnings of unconsolidated joint ventures was $14,000 and ~~$29,000~~zero for the three ~~and nine~~ months ended ~~September 30, 2011.~~March 31, 2012 and 2011, respectively.

Note 1714 - New Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) 2011-05, Presentation of Comprehensive ~~Income.~~Income. This standard eliminates the current option to report other comprehensive income and its components in the statement of stockholders’ equity and instead requires the components of other comprehensive income to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This standard is intended to enhance comparability between entities that report under GAAP and to provide a more consistent method of presenting other comprehensive income transactions that affect an entity’s equity. This standard iswas effective for the Company on January 1, 2012 and ~~is to be~~was applied retrospectively. The amendments in this update dodid not change the items ~~that must be~~ reported in other comprehensive income or ~~when an item of other comprehensive income must be reclassified to net income but will change the way the information is presented in the Company’s consolidated financial statements.~~

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One Liberty Properties, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~September 30, 2011~~March 31, 2012 (Continued)

Note 1714 - New Accounting Pronouncements (Continued)

the reclassification of an item of other comprehensive income to net income but changed the way the information is presented in the Company’s consolidated financial statements.

In May 2011, FASB issued ASU No. 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S GAAP and ~~IFRS.~~IFRS. This update defines fair value, clarifies a framework to measure fair value, and requires specific disclosures of fair value measurements. The guidance ~~will be~~was effective for the ~~Company’s interim and annual reporting periods beginning~~Company on January 1, ~~2012, and applied prospectively.~~2012. The ~~Company does not expect~~ adoption of this guidance todid not have a material impact on ~~its~~the Company’s financial condition, results of operations, or disclosures.

Note 1815 - Subsequent ~~Event~~Events

~~On October 27, 2011, a newly formed joint venture which will be~~Subsequent events have been evaluated and there were no significant events relative to the Company’s consolidated in which One Liberty holds a 90% interest, acquired a retail property located in Cherry Hill, New Jersey. The property consists of 115,500 square feet and is situated on approximately 12.4 acres. At closing, the venture entered into a new lease with a retail tenant for approximately 70,500 square feet. It is contemplatedfinancial statements that the venture will redevelop the entire property (including the leased portion) and lease the balance of the space over time. The all cash purchase price was $5,800,000. One Liberty, who is the manager of the venture, contributed 90% of the equity for the transaction.warrant additional disclosure.

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Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q 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. 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. Forward-looking statements should not be relied on 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. Investors are encouraged to review the risk factors included in our Annual Report on Form 10-K for the year ended December 31, ~~2010~~2011 under the caption “Item 1A. Risk Factors” for a discussion of certain factors which may cause actual results to differ materially from current expectations and are cautioned not to place undue reliance on any forward-looking statements.

Overview

We are a self-administered and self-managed real estate investment trust, organized in Maryland in 1982. We acquire, own and manage a geographically diversified portfolio of retail (including furniture and office supply stores), industrial, office, flex, health and fitness and other properties, a substantial portion of which are under long-term net leases. As of ~~September 30, 2011,~~March 31, 2012, we owned 8892 properties, ~~two~~one of which ~~are~~is vacant, and one of which is a 50% tenancy in common interest. Our joint ventures owned a total of ~~five~~six properties. The 9398 properties are located in 29 states.

We face a variety of risks and challenges in our business. ~~Among~~We, among other things, we face the possibility we will not be able to lease our properties on terms favorable to us or at all and that our tenants may not be able to pay their rental and other obligations owing under their leases. In particular, during the recent national economic recession, consumer confidence and retail spending declined, which negatively impacted certain of our retail tenants. As a result, from 2008 through March 2011, four of our retail tenants sought bankruptcy protection and several of our retail tenants obtained rent relief or negotiated lease renewals on financial terms more favorable to such tenants.

We seek to manage the risk of our real property portfolio by diversifying among types of properties and industries, tenant identity, geography and lease expiration dates. 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, obtaining other tenant related financial information, regular contact with tenant’s representatives, tenant credit checks and regular management reviews of our tenants.

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

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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.

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In ~~2010,~~the first quarter of 2012, we purchased 14four properties for an aggregate of ~~$72.3~~$9.8 million and contributed one property to ~~date in~~an unconsolidated joint venture. In 2011, we ~~have~~ purchased ~~five~~six properties for ~~$22.2~~an aggregate of $28 million and a joint venture purchased a property for $3.2 million. ~~We sold two properties in 2010 and recognized an aggregate net gain of $235,000 and one property in 2011, tenanted by Office Depot, and recognized a net gain of $932,000.~~ Our occupancy rate at ~~September 30, 2011~~March 31, 2012 was, based on square footage, approximately ~~98.4%~~97.6%.

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute currently at least 90% of ordinary taxable income to our stockholders. We intend to comply with these requirements and to maintain our REIT status.

Results of Operations

The following table compares revenues and operating expenses of continuing operations for the periods indicated:

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,				Increase
(Dollars in thousands)	2011		2010		Increase (Decrease)			Percent Change		2011		2010		Increase (Decrease)			Percent Change		2012		2011		(Decrease)			% Change
Revenues:
Rental income	$	11,151	$	10,466	$	685		6.5	%	$	33,494	$	30,546	$	2,948		9.7	%	$	11,641	$	11,103	$	538		4.8	%

Operating expenses:
Depreciation and amortization	2,424		2,155		269			12.5	%	7,072		6,314		758			12.0	%	2,509		2,325		184			7.9	%
General and administrative	1,804		1,545		259			16.8	%	5,306		4,811		495			10.3	%	1,890		1,600		290			18.1	%
Real estate acquisition costs	131		224		(93		)	(41.5	)%	176		738		(562		)	(76.2	)%	43		27		16			59.3	%
Real estate expenses	620		396		224			56.6	%	1,908		1,362		546			40.1	%	686		611		75			12.3	%
Leasehold rent	77		77		—			—		231		231		—			—		77		77		—			—
Total operating expenses	5,056		4,397		659			15.0	%	14,693		13,456		1,237			9.2	%	5,205		4,640		565			12.2	%

Operating income	$	6,095	$	6,069	$	26		.4	%	$	18,801	$	17,090	$	1,711		10.0	%	$	6,436	$	6,463	$	(27	)	(.4	)%

Revenues

Rental income. The ~~increases are attributable~~increase is substantially due to ~~$1.1 million and $3.8 million~~$617,000 earned during the three ~~and nine~~ months ended ~~September 30, 2011, respectively,~~March 31, 2012 from 19the ten properties we acquired since February 2010. Increases in real estate tax and expense reimbursements from tenants, principally due to the timing of acquisitions completed in 2010, accounts for $95,000 and $201,000, respectively, of these increases.January 2011. Partially offsetting ~~the increases were decreases~~this increase was a net decrease of approximately ~~$385,000 and $647,000 in rental income in the three and nine months ended September 30, 2011, respectively,~~$111,000 resulting from ~~Robb & Stucky’s bankruptcy filing in~~the contribution of our Plano, Texas property to a joint venture on February ~~2011. The nine months ended September 30, 2011 includes rental income from Robb & Stucky for the 4.5 months subsequent to its bankruptcy filing through June 30,~~

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~~2011, whereas the three and nine months ended September 30, 2010 includes~~6, 2012. Therefore, rental income for the ~~entire period. We have not received any rental payments~~three months ended March 31, 2012 only includes January 2012 rent from ~~the property since Robb & Stucky vacated at the end of June 2011.~~this property.

Operating Expenses

Depreciation and amortization. The ~~increases are~~increase is substantially due to depreciation expense on the 19ten properties we acquired since January 2011, partially offset by the decrease in depreciation resulting from the contribution of our Plano, Texas property to a joint venture in February ~~2010.~~2012.

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General and administrative expenses. The ~~increases~~increase in the three ~~and nine~~ months ended ~~September 30, 2011 are~~March 31, 2012 is attributable primarily to ~~several factors including (i)~~ a ~~$500,000 annual~~$125,000 increase ($~~125,000~~500,000 per ~~quarter)~~annum) in the amount payable pursuant to the compensation and services ~~agreement; (ii) a $25,000 quarterly fee paid to our vice-chairman effective January 1, 2011; (iii) increases of $38,000 and $103,000 in~~agreement. The $125,000 increase for the three ~~and nine~~ months ended ~~September~~March 31, 2011 was not recorded until the three months ended June 30, ~~2011, respectively,~~2011. Also contributing to the increase was (i) an increase of $44,000 in payroll and payroll related ~~expenses;~~expenses due to higher levels of compensation; (ii) a $38,000 increase in accounting fees and ~~(iv) the inclusion of $22,000 per quarter~~(iii) a $31,000 increase in non-cash compensation expense related to ~~pay-for-performance~~our restricted stock units awarded in September 2010. Partially offsetting the increases in the nine months ended September 30, 2011 was a $138,000 decrease in professional fees incurred in connection with a contemplated equity financing in 2010 that was not pursued.

~~Real estate acquisition costs.~~ ~~These expenses decreased in the three and nine months ended September 30, 2011 as compared to the corresponding prior year periods~~awards which increased due to the ~~inclusion~~increase in number of ~~expenses related to several more acquisitions in~~awards granted and a higher fair value of such ~~prior year periods.~~awards at the time of grant.

Real estate expenses. ~~The three and nine months ended September 30, 2011 includes approximately $72,000 and $256,000, respectively,~~Approximately $46,000 of ~~real estate taxes relating~~the increase is attributable to legal fees incurred for the ~~property previously leased by Robb & Stucky, whereas the corresponding periods in the prior year do not include real estate taxes as they were paid directly to the taxing authority by the tenant.~~organization of our Plano, Texas joint venture. The balance of the increase ~~in the current three and nine months~~ is ~~primarily~~ attributable to ~~the inclusion~~increases in various components of real estate ~~taxes and~~ expenses, ~~that due to the timing~~none of acquisitions in 2010, were either not included or not included in full in the nine months ended September 30, 2010. The tenants are contractually obligated to, and have reimbursed us, for a substantial portion of these expenses.

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Other Income and Expenses

The following table compares other income and expenses for the periods indicated:

	Three Months Ended September 30,											Nine Months Ended September 30,											Three Months Ended March 31,						Increase
(Dollars in thousands)	2011			2010			Increase (Decrease)			Percent Change		2011			2010			Increase (Decrease)			Percent Change		2012			2011			(Decrease)		% Change

Other income and expenses:
Equity in earnings of unconsolidated joint ventures	$	105		$	101		$	4		4.0	%	$	241		$	354		$	(113	)	(31.9	)%
Gain on disposition of real estate held by unconsolidated joint venture	—			—			—			—		—			107			(107		)	(100	)%
Gain on settlement of debt	—			—			—			—		1,240			—			1,240			n/a
Other income, including realized gain on sale of available-for-sale securities and interest income	9			40			(31		)	(77.5	)%	62			265			(203		)	(76.6	)%
Equity in net earnings of unconsolidated joint ventures																							$	69		$	31		$	38	123	%
Other income																							15			12			3		25.0	%
Interest:
Expense	(3,259		)	(3,658		)	399			10.9	%	(10,233		)	(10,639		)	406			3.8	%	(3,416		)	(3,641		)	225		(6.2	)%
Amortization of deferred financing costs	(185		)	(160		)	(25		)	(15.6	)%	(681		)	(452		)	(229		)	(50.7	)%	(197		)	(313		)	116		(37.1	)%
Gain on sale of real estate																							319			—			319		n/a

Equity in net earnings of unconsolidated joint ventures. ~~Approximately $65,000 of~~The increase is due to the ~~decrease in~~inclusion during the ~~nine~~three months ended ~~September 30,~~March 31, 2011 ~~results from a sale by a joint venture~~ of ~~a property in April 2010 at the same time the related lease expired. In addition, $50,000 of the decrease in the nine months ended September 30, 2011 is attributable to~~$62,000, representing our 50% share of real estate acquisition costs incurred ~~by one of our joint ventures~~ in connection with the purchase of a property ~~in March 2011.~~

~~Gain on disposition of real estate held by unconsolidated joint venture.~~ ~~In 2010, we recognized a net gain of $107,000 on the sale of a property owned~~ by a joint ~~venture. There~~venture in March 2011. The increase was ~~no comparable gain in 2011.~~

~~Gain on settlement~~partially offset by the inclusion during the three months ended March 31, 2012 of ~~debt.~~ ~~This gain represents the satisfaction~~a loss of ~~the $8.9 million mortgage payable~~$48,000, representing our 90% share of operating income of $20,000 less acquisition costs of $68,000 related to ~~the property previously leased by Robb & Stucky at less than its face value. The $1.24 million gain is net of a $19,000 write off of the balance of related deferred mortgage costs.~~

~~Other income, including realized gain on sale of available-for-sale securities and interest income.~~ ~~The 2010 three and nine month periods include a gain on the sale of corporate bonds of $19,000 and $149,000, respectively and related interest income. There was no such income in the 2011 periods.~~

~~Table of Contents~~our Plano, Texas joint venture.

Interest expense. The following table details interest expense for the periods indicated:

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,				Increase
(Dollars in thousands)	2011		2010		Increase (Decrease)			Percent Change		2011		2010		Increase (Decrease)			Percent Change		2012		2011		(Decrease)			% Change
Interest expense:
Credit line interest	$	187	$	408	$	(221	)	(54.2	)%	$	646	$	1,009	$	(363	)	(36.0	)%	$	271	$	349	$	(78	)	(22.3	)%
Mortgage interest	3,072		3,250		(178		)	(5.5	)%	9,587		9,630		(43		)	(.4	)%	3,145		3,292		(147		)	(4.5	)%
Total	$	3,259	$	3,658	$	(399	)	(10.9	)%	$	10,233	$	10,639	$	(406	)	(3.8	)%	$	3,416	$	3,641	$	(225	)	(6.2	)%

Credit line interest ~~- the decreases are~~

The decrease is due to the (i) $1.5 million, or 7%, reduction in the weighted average ~~balances~~

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balance outstanding under our line of ~~credit. For the three months ended September 30,~~credit; (ii) decrease from 6% to 5.5%, effective August 5, 2011, and 2010, such balances were approximately $11.5 million and $25.9 million, respectively, and for the nine months ended September 30, 2011 and 2010, such balances were approximately $12.5 million and $26.6 million, respectively. In February 2011, we applied $26.2 million of our public offering proceeds to reduce the outstanding credit line balance. The decrease in this expense for the current nine months was partially offset by an increase of approximately $235,000 from the increase, effective April 1, 2010, in the annual interest rate charged on the credit ~~line to 6% (reduced to 5.5% effective August 5, 2011). The Company had previously paid~~line; and (iii) capitalization of $35,000 of interest ~~at LIBOR plus 2.15% (2.44% at March 31, 2010).~~expense incurred in connection with improving our Cherry Hill, New Jersey property.

Mortgage interest -~~during~~

The following table reflects the ~~current three~~interest rate on our mortgage debt and ~~nine months, this~~principal amount of outstanding mortgage debt, in each case on a weighted average basis:

	Three Months Ended March 31,						Increase			%
(Dollars in thousands)	2012			2011			(Decrease)			Change
Interest rate on mortgage debt	6.06		%	6.24		%	(.18		)%	(2.9	)%
Principal amount of mortgage debt	$	207,473		$	210,978		$	(3,505	)	(1.7	)%

The $147,000 decrease in mortgage interest expense ~~decreased primarily~~is due to the decrease ~~from approximately 6.5% to approximately 6.2%~~ in the weighted average interest rate on outstanding mortgage ~~debt. During~~debt as well as the ~~current nine months, this~~ decrease ~~was partially offset by the approximately $7.2 million increase~~ in the weighted average amount of ~~outstanding mortgage debt. The weighted average amount of outstanding~~ mortgage debt (approximately $198.6 million and $205.1 million for the current three and nine months, respectively, and $199.9 million and $197.8 million for the corresponding periods in 2010) increased in the nine months ended September 30, 2011 primarilyoutstanding. These decreases are due to the ~~assumption~~payoffs and settlement in 2011 of $19.6 million of mortgage debt ~~in connection~~ with the acquisition of properties in 2010 and financing and refinancing of properties in 2010 and 2011 in the aggregate amount of $44 million. The increase in 2011 in the weighted amount of outstanding mortgage debt was partially offset by decreases due to the payoff in June 2011 and February 2011 of mortgage loans aggregating $16.6 million, the payoff and paydown in August 2010 of mortgage loans aggregating $8.3 million and regular monthly principal amortization of other mortgages of approximately $9.5 million since January 1, 2010. Thea weighted average interest rate of ~~the mortgages that were paid off was~~ approximately ~~7.9%~~7.5% and the financing of properties in 2011 of $15.5 million of mortgage debt with a weighted average interest rate of ~~the mortgages we assumed and on the properties we financed and refinanced was~~ approximately ~~5.8%~~5.3%. The weighted average interest rates in the current three and nine month periods decreased from the corresponding periods in the prior year due to financing, refinancing and paydown of debt as described above.

Amortization of deferred financing costs. The ~~increase~~decrease in the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012 is primarily due to accelerated amortization of deferred financing costs of approximately ~~$120,000~~$129,000 relating to two mortgage loans that were paid in full in February 2011. ~~The increases in the three and nine month periods were also due to~~This decrease was partially offset by the amortization of deferred financing costs that were incurred in connection with financings on ~~four~~several properties we acquired in ~~2010 and in connection with the amendment of our line of credit in January~~ 2011.

~~Table~~Gain on sale of ~~Contents~~real estate. We contributed our Plano, Texas property to a joint venture in exchange for a 90% interest therein and our joint venture partner contributed $1.5 million for a 10% interest therein. The gain is attributable to this transaction.

Discontinued Operations

~~The following table compares discontinued operations for the periods indicated:~~

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

2011

2010

Increase
(Decrease)

Percent
Change

2011

2010

Increase
(Decrease)

Percent
Change

Discontinued operations:

Income from operations

$
—

$
219

$
(219
)
(100
)%
$
277

$
705

$
(428
)
(60.7
)%
Net gain on sale

—

235

(235
)
(100
)%
932

235

697

297
%
Income from discontinued operations

$
—

$
454

$
(454
)
(100
)%
$
1,209

$
940

$
269

28.6
%

Discontinued operations for the ~~nine~~three months ended ~~September 30,~~March 31, 2011 includes the income from operations ~~and net gain on sale~~ of a property sold in May 2011. ~~For the three and nine months ended September 30, 2010, discontinued operations includes the~~There was no such income ~~from operations of the property sold in May 2011 and two properties sold in~~for the three months ended ~~September 2010.~~March 31, 2012.

Liquidity and Capital Resources

Our sources of liquidity and capital include cash flow from our operations, cash and cash equivalents, ~~available-for-sale securities,~~ borrowings under our revolving credit facility, refinancing existing mortgage loans and obtaining mortgage loans secured by our unencumbered properties. Our available liquidity at ~~September 30, 2011 was,~~March 31, 2012, without giving effect to the $6 million balance we are required to maintain pursuant to the credit facility, was approximately ~~$44~~$45.1 million, including ~~$8.4~~$17.2 million of cash and cash equivalents ~~$584,000 of available-for-sale securities~~ and ~~$35~~$27.9 million available under our revolving line of credit. Our available liquidity at ~~November 2, 2011 was,~~May 3, 2012, without giving effect to the $6 million balance, was approximately ~~$35.8~~$45.4 million, including ~~$8.7~~$10.1 million of cash and cash equivalents ~~$620,000 of available-for-sale securities~~ and ~~$26.5~~$35.4 million available under our revolving line of credit.

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Liquidity and Financing

We expect to meet substantially all of our operating cash requirements (including dividend payments) from cash flow from operations. To the extent that cash flow from operations is not adequate to cover all of our operating needs, we will be required to use our available cash and cash equivalents or draw on our credit line (to the extent permitted).

At ~~September 30, 2011,~~March 31, 2012, excluding ~~mortgages payable~~mortgage indebtedness of our unconsolidated joint ventures, we had 3439 outstanding mortgages payable and one loan payable secured by 5056 properties, in the aggregate principal amount of approximately ~~$197.8~~$213.3 million. These mortgages and loan represent first liens on individual real estate investments with an aggregate carrying value of approximately ~~$326.4~~$354.6 million, before accumulated depreciation. The mortgages and loan bear interest at fixed rates ranging from ~~4.75%~~3.2% to 8.8% (a 6%5.5% weighted average interest rate) and mature between 2012 and 2037.

Mortgage debt in principal amount of $73.3 million is payable from April 2012 through December 31, 2014 (i.e., $26.8 million in 2012, $10.1 million in 2013 and $36.4 million in 2014). Such debt includes principal balances due at maturity of $22.8 million, $4.5 million and $30.9 million in 2012, 2013 and 2014, respectively. We anticipate that ~~mortgage~~the debt ~~due through 2013 of approximately $44.3 million~~amortization payments will be paid primarily from cash and cash equivalents and cash flow from operations, and that principal balances due at maturity will generally be satisfied through 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

~~Table of Contents~~

become due, and we may need to issue additional equity, obtain long or short term debt, or dispose of properties on unfavorable terms.

We continually seek to refinance existing mortgage loans on terms we deem acceptable, in order to generate additional liquidity. Also, in the normal course of our business, we sell properties when we determine that it is in our best interests, which generates additional liquidity. Our encumbered properties are subject to non-recourse mortgages, with standard carve outs for, among other things, 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.

Credit Facility

We can borrow up to $55 million pursuant to our revolving credit facility which is available to us for the acquisition of commercial real estate, repayment of mortgage debt, and for any other purpose, provided, if used for a purpose other than a property acquisition or mortgage repayment, the amount borrowed for such other purpose will not exceed the lesser of $6 million and 15% of the permitted borrowing base. The facility matures on March 31, 2013 and bears interest at the greater of (i) 90 day LIBOR plus 3% and (ii) 5.5%. There is an unused facility fee of 0.25% per annum on the difference between the outstanding loan balance and $55 million. We are required to maintain at least $6 million average outstanding collected deposit balances. The facility is guaranteed by our subsidiaries that own unencumbered properties and is to be secured by the outstanding stock of any newly formed subsidiary. Net proceeds received from the sale, financing or refinancing of properties are generally required to be used to repay amounts outstanding under the ~~facility if proceeds from the facility were used to purchase or refinance the property.~~facility.

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This facility includes certain restrictions and covenants which 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. As of ~~September 30, 2011,~~March 31, 2012, we were in compliance with applicable covenants.

We are in discussions with our lenders to extend our credit facility on terms favorable to us. No assurance can be given that we will be successful in this regard.

Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet arrangements.

~~Table of Contents~~

Item 3. 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.

As of ~~September 30, 2011,~~March 31, 2012, we had ~~four~~seven interest rate swap agreements outstanding, including one held by two of our unconsolidated joint ventures. The fair value of our interest rate swaps is dependent upon existing market interest rates and swap spreads, which change over time. At ~~September 30, 2011,~~March 31, 2012, if there had been a 1% increase in forward interest rates, the fair market value of the interest rate swaps and net unrealized loss on derivative instruments would have decreased by approximately ~~$812,000.~~$1.5 million. If there had been a 1% decrease in forward interest rates, the fair market value of the interest rate swaps and net unrealized loss on derivative instruments would have increased by approximately ~~$979,000.~~$1.1 million. These changes would not have any impact on our net income or cash.

From time to time, we utilize interest rate swaps to limit interest rate risk. Derivatives are used for hedging purposes - not for speculation. We do not enter into interest rate swaps for trading purposes.

~~Our~~Except for $4.4 million debt we drew down on our Cherry Hill, New Jersey property on March 7, 2012, all of our mortgage debt (excluding our mortgages subject to the interest 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. For the period of March 7, 2012 through March 31, 2012, if there had been a 1% increase or decrease in interest rates on our Cherry Hill, New Jersey property variable rate outstanding debt, our interest expense would have increased (decreased) by $3,000 and $(1,000), respectively.

We assessed the market risk for our revolving variable rate credit facility and believe that there is no foreseeable market risk because interest is charged at the greater of (i) 90 day LIBOR plus 3% and (ii) 5.5% per annum. At ~~September 30, 2011,~~March 31, 2012, 90 day LIBOR plus 3% was approximately ~~3.4%~~3.48%; therefore, a 1% increase or decrease would not have any impact on our interest expense related to this facility.

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Item 4. Controls and Procedures

Based on their evaluation as of the end of the period covered by this report, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are effective.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act) during the three months ended ~~September 30, 2011~~March 31, 2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II — OTHER INFORMATION

Item 6. Exhibits

Exhibit No.		Title of Exhibit
10.1		First Amendment effective as of April 1, 2012 to Compensation and Services Agreement between One Liberty Properties, Inc. and Majestic Property Management Corp.
31.1		Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Senior Vice President and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~101~~101.INS		Financial statements from the Quarterly Report on Form 10-Q of One Liberty Properties, Inc. for the quarterly period ended September 30, 2011, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income,(iii) the Consolidated Statements of Stockholders’ Equity and Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements. *XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Definition Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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ONE LIBERTY PROPERTIES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	One Liberty Properties, Inc.
	(Registrant)


Date: ~~November 8, 2011~~May 9, 2012	/s/ Patrick J. Callan, Jr.
	Patrick J. Callan, Jr.
	President and Chief Executive Officer
	(principal executive officer)


Date: ~~November 8, 2011~~May 9, 2012	/s/ David W. Kalish
	David W. Kalish
	Senior Vice President and
	Chief Financial Officer
	(principal financial officer)

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Amount of loss recognized on derivative in Other Comprehensive Income	$	(687	)	$	(246	)	$	(977	)	$	(762	)
Amount of loss reclassified from Accumulated Other Comprehensive Income into Interest Expense	$	(92	)	$	(54	)	$	(253	)	$	(163	)