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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
 

        
  [ X ]               ANNUAL REPORT PURSUANT TO SECTION L3 OR L5(D)
                  OF THE SECURITIES EXCHANGE ACT OF L934 [FEE REQUIRED]
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
 [     ]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                 OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

 
                         COMMISSION FILE NUMBER 0-11083
 
                          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)

 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (5L6)466-3L00
 
          Securities registered pursuant to Section l2(b) of the Act:
 


                                                                    NAME OF EACH EXCHANGE
TITLE OF EACH CLASS                                                  ON WHICH REGISTERED
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Common Stock, par value $1.00................................      American Stock Exchange
$16.50 Cumulative Convertible Preferred Stock, par value
 $1.00.......................................................      American Stock Exchange

 
          Securities registered pursuant to Section l2(g) of the Act:
 
                                      NONE
 
    Indicate  by check  mark whether  the registrant  (l) has  filed all reports
required to be filed by  Section l3 or l5(d) of  the Securities Exchange Act  of
l934  during  the preceding  l2  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
           ---------             ---------

 
    Indicate  by check mark if disclosure  of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge, in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
 
    As  of March l, 1996 the aggregate  market value of all voting stock (Common
Stock and  Preferred  Stock)  held  by  non-affiliates  of  the  Registrant  was
approximately $19,000,000.
 
    As of March l, 1996, the Registrant had 1,416,119 shares of Common Stock and
808,776 shares of $16.50 Cumulative Convertible Preferred Stock outstanding.
 
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                      DOCUMENTS INCORPORATED BY REFERENCE
 
    The  proxy statement  for the  Registrant's Annual  Meeting of Stockholders,
scheduled for  June 7,  1996, will  be filed  with the  Securities and  Exchange
Commission within 120 days after the end of the Registrant's fiscal year covered
by  this Form 10-K. The information required  by Part III (Item 10-Directors and
Executive Officers of the Registrant, Item 11 -Executive Compensation, Item 12 -
Security Ownership  of Certain  Beneficial Owners  and Management,  and Item  13
- -Certain  Relationships  and  Related  Transactions)  will  be  incorporated  by
reference from the  definitive proxy  statement to  be filed  by the  Registrant
pursuant to Regulation 14A under the Securities Exchange Act of 1934.

                                     PART I
 
ITEM 1. -- BUSINESS
 
GENERAL
 
    One  Liberty  Properties,  Inc. (with  its  wholly-owned  subsidiaries being
referred to herein as  the "Company" or  "One Liberty") is  a self managed  real
estate  investment trust  ("REIT") incorporated  under the  laws of  Maryland on
December 20,  1982.  The  policy  of  the Company  is  to  invest  in  improved,
commercial  real estate under long-term net  lease. Under the typical net lease,
rental and  other  payments  to  be  made by  the  lessee  are  payable  without
diminution  for any reason. The  lessee, in addition to  its rent obligation, is
generally responsible for payment of  all charges attributable to the  property,
such  as taxes,  assessments, water  and sewer  rents and  charges, governmental
charges, and all  utility and  other charges incurred  in the  operation of  the
property.  The  lessee,  is  also  generally  responsible  for  maintaining  the
property, including ordinary maintenance and repair and restoration following  a
casualty  or  partial  condemnation.  The  rental  provisions  in  a  net  lease
transaction may include, but may  not be limited to,  rent payable on a  stepped
basis  (rentals  increase at  specified  intervals), an  indexed  basis (rentals
increase pursuant to a formula such as cost-of-living index), a percentage basis
(minimum rental payments plus additional rentals in the form of participation in
the sales derived from the business conducted at the property), or a combination
of the foregoing.
 
INVESTMENT POLICY
 
    The Company's investment policies, as presently in effect, are set forth  in
Section  17 of Article 3 of the By-Laws  of the Company (the By-Laws, as amended
were filed as an exhibit to the  Company's Form 10-Q for the quarter ended  June
30,  1989 and an amendment thereto was filed as an exhibit to the Company's Form
10-Q for the quarter ended June 30, 1990). The current policy of the Company  is
to purchase improved commercial real property which is net leased on a long term
basis.  The Company's investment policies, as articulated in its by-laws, are as
follows:
 
    Types of  Investments --  The By-Laws,  as amended,  permit the  Company  to
invest  in  any type  of real  property, mortgage  loans (and  in both  cases in
interests therein)  and other  investments of  any nature,  without  limitation,
provided  such investment  does not  adversely affect  the Company's  ability to
qualify as a REIT under the Internal  Revenue Code. No limitation is set on  the
number  of properties  or mortgage  loans in which  the Company  may invest, the
amount or  percentage of  the Company's  assets  which may  be invested  in  any
specific  property or on the concentration of investments in any geographic area
in the United States. The Company will consider investments in any type of  real
property  and  in mortgage  loans secured  by real  property; however  as stated
above, the current policy  of the Company is  to invest in improved,  commercial
real  estate under  long term  net lease.  The Company  does not  intend to make
construction loans or loans secured by mortgages on undeveloped land.
 
    Incurrence of Debt -- The By-Laws,  as amended, permit the directors of  the
Company,  in the exercise of their business  judgment, to determine the level of
debt and the terms and conditions of any financing or refinancing.
 
    The investment objectives of the Company are (i) to provide current  income;
(ii)   to  provide  the   opportunity  for  increases   in  income  and  capital
appreciation;  and  (iii)  to  protect  the  Company's  capital.  In  evaluating
potential  net lease investments, the Company considers, among other factors (i)
the current  and anticipated  cash flow  of  the proposed  net lease,  (ii)  the
intrinsic  value of the property, given its location, use and the property's and
the lessee's adequacy to meet operational needs and lease obligations, (iii) the
return on equity to the Company, and (iv) potential for capital appreciation.
 
    From time to time, the  Company may invest in shares  of another REIT or  in
the  shares of an entity not involved  in real estate investments, provided that
any such investment does not adversely  affect the Company's ability to  qualify
as a REIT under the Internal Revenue Code.
 
                                       1

    Pursuant  to current policy, after termination  of any lease relating to any
of the  Company's  properties, the  Company  will seek  to  relet or  sell  such
property  in a manner which will maximize the return to the Company, considering
the income  and  residual potential  of  such  property. The  Company  may  also
consider  the  sale or  other  disposition of  any  of the  properties  prior to
termination of the relevant leases if such sale or other disposition appears  to
be advantageous. The Company may take purchase money obligations as part payment
in  lieu of cash  in connection with any  sales and may  take into account local
custom and prevailing market conditions  in negotiating the terms of  repayment.
It  will be the Company's policy to reinvest  any cash realized from the sale or
other disposition of properties, net of required distributions to  shareholders,
to maintain its REIT status.
 
CREDIT AGREEMENT
 
    On  March  1, 1996  the Company  entered into  a revolving  credit agreement
("Credit Agreement") with Bank Leumi Trust  Company of New York ("Bank  Leumi").
Borrowings  under the Credit Agreement will be  used to provide the Company with
funds to acquire properties. The Credit Agreement will mature February 28,  1999
with  a right for the Company to  extend the Credit Agreement until February 29,
2000. Bank Leumi has agreed to advance up to $5,000,000 on a revolving basis and
has agreed to a total $15,000,000  facility (including the $5,000,000) on a  pro
rata  participating basis. At this  date no other institution  has joined in the
Credit Agreement. The Company will pay interest  at the rate of prime plus  1/2%
on  funds borrowed under the Credit Agreement  on an interest only basis, except
that the net  proceeds of certain  events (e.g. sale  of property, financing  of
properties) must be applied to reduce the loan.
 
    As  collateral  for  any advances  taken  by  the Company  under  the Credit
Agreement, the Company  has pledged the  stock of each  of its subsidiaries  and
certain  mortgages receivable, including the wrap around mortgage receivable the
Company holds on a property  located on East 16th Street  in New York City  (see
"Mortgages  Receivable" below). In order to obtain the senior mortgagees consent
to the assignment of the Company's wrap around mortgage receivable as collateral
security for  the loan,  the Company  agreed  to guarantee  six months  of  debt
service  on the  senior mortgage.  In addition  the Company's  subsidiaries have
guaranteed all  loans under  the Credit  Agreement. The  Company has  agreed  to
maintain at least $250,000 on deposit with Bank Leumi.
 
    The Credit Agreement contains affirmative and negative covenants including a
covenant  that (i) through February 28, 1999 the Company's net worth will not be
less than the  greater of $28,000,000  and two times  (2x) the revolving  credit
loans  outstanding and thereafter the $28,000,000 increases to $30,000,000; (ii)
that cash flow for  each fiscal year  through the 1998 fiscal  year shall be  at
least  $3,000,000,  increasing  to  $3,400,000  for  the  1997  fiscal  year and
thereafter, and (iii) at  least two of  Fredric H. Gould,  Matthew J. Gould  and
Jeffrey A. Gould shall be involved in the day to day management of the Company.
 
    The Company has not drawn down any funds under the Credit Agreement.
 
MORTGAGES RECEIVABLE
 
    In  1992 and 1993 the Company, in order to improve its return on investment,
invested in  mortgages  and  a  senior secured  note  receivable.  The  material
receivables at December 31, 1995 were as follows:
 
    -In  January,  1992 the  Company made  a  first mortgage  loan to  an entity
     substantially owned by Gould Investors L.P. ("Gould"), an affiliated entity
     (see below), in the amount of $1,200,000. The mortgage had a maturity  date
     of  January 31, 1995, carried  an interest rate of  11% through January 31,
     1994 and  thereafter  at 10%  per  annum  through the  maturity  date,  and
     provided  for minimum  amortization of $5,000  per month.  The mortgage was
     extended to January 31, 1997 and the  interest rate fixed at 11% per  annum
     for the extended term. The $5,000 monthly amortization continues during the
     extended    term.    The   mortgage    is    secured   by    a   wraparound
 
                                       2

     mortgage on  the  residential portion  and  a commercial  condominium  unit
     containing  approximately 3,600 square  feet of retail  space in a building
     located on East 86th Street in  Manhattan, New York. The principal  balance
     outstanding on this mortgage at December 31, 1995 was $860,000.
 
    -On  July 30, 1993, the Federal Deposit Insurance Corporation ("FDIC") sold,
     to an entity related to the  Company, a $23,000,000 first mortgage  secured
     by  an office building located on East  16th Street in Manhattan, New York.
     The sale was made  by the FDIC pursuant  to public auction. The  successful
     bidder paid $19,000,300 for the mortgage, which carries an interest rate of
     8% per annum. The office building which secures this mortgage is owned by a
     partnership  in which Gould  is general partner  and owns substantially all
     partnership interests. Simultaneously with  the closing an unrelated  party
     advanced  $13,181,000 (balance  at December  31, 1995  of $11,527,000), the
     Company advanced $6,080,000 (including closing costs), and the mortgage was
     severed into a first mortgage of $13,181,000 paying interest at 9 1/2%  per
     annum  held  by such  unrelated party  and a  subordinate wrap  mortgage of
     $9,819,000 held by the Company. Both  the first mortgage and wrap  mortgage
     mature  in  2005 at  which time  the  first mortgage  will have  been fully
     amortized  and  the  wrap  mortgage  will  have  a  principal  balance   of
     approximately  $4,000,000. The principal balance  of the wrap mortgage held
     by the Company was $8,816,652 and the net principal balance was  $5,834,234
     at December 31, 1995.
 
         The  building which secures the first mortgage and the wrap mortgage is
     net leased to  the City of  New York. The  lease expires in  2005 with  one
     renewal option of five years. The City has a limited right to terminate the
     lease. The first mortgage and the wrap mortgage are nonrecourse.
 
    -In February, 1993 the Company purchased from an unrelated entity 28.9% of a
     16.67% portion of an indebtedness due to various institutions by BRT Realty
     Trust  ("BRT"), an  affiliated entity.  Fredric H.  Gould, Chairman  of the
     Board of the Company, and Marshall Rose, Vice Chairman, are Chairman of the
     Board (and Chief  Executive Officer)  and Vice  Chairman, respectively,  of
     BRT,  and Matthew  Gould, Israel  Rosenzweig, Jeffrey  Gould, Nathan Kupin,
     Simeon Brinberg and David W. Kalish are officers of the Company and BRT. In
     addition, Arthur Hurand is a trustee of BRT and a director of the  Company.
     The  Company paid $3,215,142 for a $4,626,720 share of the principal amount
     of such indebtedness.  The principal earns  interest at prime  plus 1%  and
     requires  certain annual  minimum principal  payments. The  indebtedness is
     senior indebtedness  and  is  collateralized  by  all  of  BRT's  mortgages
     receivable  and up-stream guaranties by BRT's subsidiaries. At December 31,
     1995 the amount  due to the  Company on  its share of  this receivable  was
     $760,638, and the book value thereof was $528,575.
 
         Gould  owns 715,227 shares of  the Company's Common Stock, representing
     39.3% of the voting stock and 50.5% of the outstanding common stock of  the
     Company.  The individual  general partners of  Gould, Fredric  H. Gould and
     Marshall Rose, are Chairman  of the Board and  Vice Chairman of the  Board,
     respectively,  of the Company, Matthew Gould,  President of the Company, is
     an officer of the corporate Managing General Partner of Gould, and David W.
     Kalish, Simeon Brinberg, Israel Rosenzweig, Jeffrey Gould, Nathan Kupin and
     Mark Lundy, officers of the Company,  are officers of the Managing  General
     Partner of Gould.
 
                                       3

                       EXECUTIVE OFFICERS OF THE COMPANY
 
    The  following sets forth information with respect to the executive officers
of the Company:
 


        NAME               AGE                        POSITION WITH THE COMPANY
- ---------------------      ---      -------------------------------------------------------------
                              
Fredric H. Gould               60   Chairman of the Board of the Company since June, 1989
Marshall Rose                  59   Vice Chairman of the Board of the Company since June, 1989
Matthew J. Gould               36   President and Chief Executive Officer of the Company since
                                     June, 1989
Simeon Brinberg                62   Vice President of the Company since June, 1989
Israel Rosenzweig              48   Senior Vice President of the Company since June, 1989
David W. Kalish                48   Vice President and Chief Financial Officer of the Company
                                     since June, 1990
Nathan Kupin                   81   Senior Vice President of the Company since June, 1989
Jeffrey A. Gould               30   Vice President of the Company since June, 1989
Mark H. Lundy                  33   Secretary of the Company since June, 1993
Seth D. Kobay                  41   Vice President and Treasurer of the Company since August,
                                     1994
Karen Dunleavy                 37   Vice President, Financial of the Company since August, 1994

 
    Each of the above listed executive officers will hold office until the  next
annual  meeting of the Board of Directors,  scheduled for June 7, 1996, or until
their respective successors shall be elected and shall qualify. The  information
below  sets forth the business experience of  the officers of the Company for at
least the past five years.
 
    Fredric H. Gould -- In addition to  serving as Chairman of the Board of  the
Company, Mr. Gould has served as Chairman of the Board of Trustees of BRT Realty
Trust, a real estate investment trust, since 1984 and as Chief Executive Officer
of  BRT since March  1995. Since 1985  Mr. Gould has  been a principal executive
officer of  the managing  general partner  of Gould  Investors L.P.,  a  limited
partnership  primarily engaged in the ownership and operation of real properties
and he also serves as an individual  general partner of Gould Investors L.P.  He
is  President  of REIT  Management Corp.,  the  Advisor to  BRT Realty  Trust, a
director of BFS  Bankorp, Inc. and  its subsidiary Bankers  Federal Savings  and
Loan  Association FSB and a  director of Sunstone Hotel  Investors, Inc., a real
estate investment trust.
 
    Marshall Rose -- In  addition to serving  as Vice Chairman  of the Board  of
Directors  of the Company, Mr. Rose has served  as Vice Chairman of the Board of
Trustees of  BRT Realty  Trust since  1986.  He is  also a  principal  executive
officer  of the managing general partner of  Gould Investors L.P. since 1985 and
an individual general partner of Gould Investors L.P. Mr. Rose is also President
and Chief  Executive  Officer  of  Georgetown  Equities,  Inc.,  a  real  estate
consulting firm.
 
    Matthew  J. Gould -- In addition to serving as President and Chief Executive
Officer of the Company, Mr. Gould serves as a Vice President of REIT  Management
Corp. since 1986.
 
    Simeon  Brinberg -- In addition to serving as Vice President of the Company,
Mr. Brinberg has been Secretary  of BRT Realty Trust  since 1983, a Senior  Vice
President  of BRT Realty Trust  since 1988 and a  Vice President of the managing
general partner of Gould Investors  L.P. since 1988. He  is a director of  Witco
Corporation.
 
                                       4

    Israel  Rosenzweig --  Mr. Rosenzweig has  been Executive  Vice President of
Bankers Federal Savings & Loan Association FSB since November 1994. He has  been
President  of BRT Realty since 1984 and served as Chief Executive Officer of BRT
from 1984 until March  1995. Mr. Rosenzweig  is a Senior  Vice President of  the
Company. Mr. Rosenzweig is a director of Nautica Enterprises, Inc.
 
    David  W.  Kalish --  Mr.  Kalish has  served  as Vice  President  and Chief
Financial Officer of One Liberty Properties,  Inc. since June, 1990. Mr.  Kalish
is  also a Vice  President and Chief  Financial Officer of  BRT Realty Trust and
REIT Management Corp.  and Vice  President and  Chief Financial  Officer of  the
managing general partner of Gould Investors L.P. since June, 1990. Mr. Kalish is
a certified public accountant.
 
    Nathan  Kupin -- In  addition to serving  as a Senior  Vice President of the
Company, Mr. Kupin has  been a Trustee  and Vice President  of BRT Realty  Trust
since 1983.
 
    Jeffrey  A. Gould -- In  addition to being a  Vice President of the Company,
Mr. Gould has been a Vice President  of BRT Realty Trust since January 1988  and
Executive Vice President and Chief Operating Officer of BRT since March 1993.
 
    Mark  H. Lundy -- In addition to  being Secretary of the Company since June,
1993, Mr. Lundy has  been a Vice President  of BRT since April  1993 and a  Vice
President  of the  managing general partner  of Gould Investors  L.P. since July
1990.
 
    Seth D. Kobay -- In addition to  serving as Vice President and Treasurer  of
the Company, Mr. Kobay has been Vice President and Treasurer of BRT Realty Trust
since  March  1994 and  Vice  President of  Operations  of the  managing general
partner of Gould  Investors L.P.  since 1986. Mr.  Kobay is  a certified  public
accountant.
 
    Karen Dunleavy -- In addition to serving as Vice President, Financial of the
Company,  Ms. Dunleavy  has been  Treasurer of  the managing  general partner of
Gould Investors L.P. since 1986. Ms. Dunleavy is a certified public accountant.
 
    Fredric H. Gould is Matthew and Jeffrey Gould's father.
 
ITEM 2. -- PROPERTIES
 
    The Company, at December 31, 1995, owned fee title to thirty-two  properties
and a "sandwich" lease position with respect to one property. All properties are
"net  leased" to unrelated  third parties. The  Company obtained title insurance
with respect to all properties owned by it in amounts equal to their  respective
purchase  prices,  insuring that  the  Company holds  fee  simple title  to each
property owned in fee and the leasehold  position to the one lease position  the
Company  holds,  free and  clear  of all  liens  and encumbrances,  except those
approved by the Company  and those which have  been created since the  Company's
acquisition of the properties, none of which materially impairs the value of the
properties.
 
    The  following sets forth  information relating to  the materially important
properties owned by the Company.
 
THE MAY PROPERTIES
 
    DESCRIPTION OF MAY PROPERTIES
 
    The  eleven  May  Properties,  which  are  located  in  eight  states,   are
freestanding retail stores operated under the trade name Payless Shoe Source, as
discount family shoe stores.
 
    The  typical May  Property is a  freestanding one  story building containing
approximately 3,100  square  feet  of  space on  a  parcel  of  land  containing
approximately 15,000 square feet and located on a major commercial thoroughfare.
Each building contains both storage and retail space.
 
    DESCRIPTION OF MAY LEASES
 
    LEASE  TERM.  The May Properties have 11 separate but identical leases ("May
Leases"). The primary lease term for the  May Properties is ten years ending  on
December 31, 1996. May has the
 
                                       5

right  to extend each lease for up to  four additional terms of five years each.
May has exercised its option  to renew with respect  to three locations and  has
otherwise  extended a lease  with respect to  one location. As  to the remaining
locations the Company  will seek  to extend  the lease with  May or  seek a  new
tenant or a buyer for each such property.
 
    AMOUNTS PAYABLE UNDER THE MAY LEASES.  From January 1, 1995 through December
31,  1996 the aggregate annual guaranteed minimum rental under the May leases is
$540,201. Other than rentals, the provisions of each May Lease is  substantially
the same.
 
    The  May Leases are "net leases" and May  is required to pay, in addition to
the minimum  rent, as  additional  rent, when  due,  together with  every  fine,
penalty,  interest and cost  which may be  added for nonpayment  or late payment
thereof, all taxes, assessments, levies,  fees, water and sewer rents,  charges,
licenses,  permit  fees and  all governmental  charges with  respect to  the May
Properties, and all utility and other charges incurred in the operation of  each
of the May Properties.
 
    MAINTENANCE  AND MODIFICATIONS.  May is required, at its expense to maintain
the May  Properties, structural  or  otherwise, in  a  neat, clean  and  orderly
condition, reasonable wear and tear excepted.
 
    May, at its expense, is permitted to make interior nonstructural alterations
and  remodelings  as  it deems  necessary  or  desirable for  its  purposes. Any
exterior or  structural alterations  may be  made only  with the  prior  written
consent of the Company.
 
    INSURANCE.   So long as May has a net worth of $100,000,000 or more, May may
self-insure the May Properties.  If its consolidated net  worth falls below  the
above  amount, May will maintain  insurance on each May  Property at its expense
providing  for  fire,  with  extended  coverage,  comprehensive  general  public
liability, workman's compensation and other insurance appropriate for properties
similar  to the  May Properties in  the states  in which the  May Properties are
located.
 
    DAMAGE TO, OR CONDEMNATION OF, A PROPERTY.  In the event of a casualty,  May
is  required at  its expense  to rebuild,  replace or  repair the  damage to the
Property so  as  to restore  the  Property to  the  condition and  market  value
immediately  prior to the occurrence. The cost  thereof is first paid by May and
the Company is  then required to  pay over  to May the  insurance proceeds.  If,
however,  the Property shall  be substantially damaged or  destroyed so that the
improvements are unsuitable or uneconomic for restoration for continued use  and
occupancy  in the business of May, then May within time periods set forth in the
leases, may  terminate  the lease  on  not less  than  90 days  notice  and  the
insurance  proceeds shall belong to the Company and the lease shall terminate on
the  specified  termination  date,  except  with  respect  to  obligations   and
liabilities  which  arose  prior  to  the  termination  date.  The  condemnation
provisions of the leases  provide in the event  of a condemnation which  affects
all  or  a  substantial portion  of  a  Property and  renders  it  unsuitable or
uneconomical for restoration for continued  use and occupancy in May's  business
then May within time periods set forth in the lease may terminate the lease upon
not  less than 90 days notice. If May is not entitled to or does not give notice
of termination,  then May  is required  at its  expense to  rebuild, replace  or
repair  any damage to the Property, the restoration cost is to be paid initially
by May out of  its own funds  with the condemnation proceeds  then paid over  to
May.
 
    MORTGAGE
 
    The Company owns these properties on a free and clear basis.
 
KROGER PROPERTY
 
    DESCRIPTION OF KROGER PROPERTY
 
    The  Kroger Property, located in Houston, Texas,  is operated by Kroger as a
supermarket. The Kroger Property is a one story freestanding building containing
38,448 square feet, located  on an approximately 116,000  square foot parcel  of
land  situated  on  a major  commercial  thoroughfare. The  parcel  contains 175
parking spaces.
 
                                       6

    DESCRIPTION OF KROGER LEASE
 
    LEASE TERM.  The term for the  Kroger lease ("Kroger Lease") will expire  on
March  31, 2000. Kroger has the right to  extend the Kroger Lease for up to five
additional five-year renewal terms.
 
    AMOUNTS PAYABLE UNDER THE KROGER LEASE.   The fixed annual rental under  the
Kroger  Lease is $149,947. During each year  of the Kroger Lease, Kroger is also
obligated to pay the  Company an amount  equal to 1% of  Kroger's sales in  such
year  in  excess  of $12,000,000.  Expenses  for taxes,  insurance,  common area
maintenance and roof and  structural repairs are to  be credited to Kroger,  for
the year in which such expenses are paid, against the additional rent that might
otherwise be due during such year.
 
    Under  the  Kroger Lease,  Kroger is  required  to pay,  in addition  to the
minimum rent, all  real estate  taxes, assessments,  water and  sewer and  other
charges  imposed  by governmental  authorities now  or in  the future  which are
applicable to the Kroger Property.
 
    MAINTENANCE AND  MODIFICATIONS.   Kroger  is required,  at its  expense,  to
maintain and keep in good repair the structure and the exterior of the building,
including  all equipment  therein and to  make all  structural and nonstructural
repairs and replacements. The Company is  not required to repair or rebuild  the
Kroger Property or maintain it.
 
    All  remodeling, alterations and additions to  the Property which Kroger may
deem necessary are to be made at Kroger's expense. Major structural changes  may
only be made with the Company's written consent, which is not to be unreasonably
withheld.
 
    INSURANCE.    Kroger  is  required  to  maintain  insurance  at  its expense
providing for fire, with extended coverage, in an amount not less than the  full
replacement value of the Kroger Property, and public liability insurance. Kroger
may self insure if it has a net worth in excess of $300,000,000.
 
    DAMAGE TO OR CONDEMNATION OF, THE KROGER PROPERTY.  Subject to the rights of
any mortgagee, all proceeds of casualty insurance shall be made available to pay
for  the cost  of restoration and  repair if  the Kroger Property  is damaged or
destroyed in whole or  in part by  fire or other casualty.  The proceeds of  any
insurance  policy  shall  be used  for  the  purpose of  defraying  the  cost of
repairing, reconstructing  or replacing  the damaged  or destroyed  building  or
improvements  thereof or  the construction of  a new  building substantially the
same as  the  damaged or  destroyed  building and  in  the event  the  insurance
proceeds  are  insufficient to  completely  repair, reconstruct  or  replace the
damaged  or  destroyed  improvement  substantially  to  the  condition  of  such
improvement  prior to the casualty, and all of the insurance proceeds shall have
been used for such  purpose and none  of such proceeds shall  have been paid  or
applied  against any mortgage indebtedness, then Kroger is to pay the difference
between  the  total  insurance  collected  and  the  total  cost  of  repairing,
reconstructing or replacing the damaged or destroyed building and improvements.
 
    If the Kroger Property is taken in condemnation proceedings, or if a part of
the property is taken in condemnation so that the property is unsatisfactory for
Kroger's  business  operation, Kroger  may cancel  the lease,  or at  its option
remain, in which event the Company is required to restore the property to proper
rentable condition.
 
    MORTGAGE
 
    The Company owns this property on a free and clear basis.
 
MADISON AVENUE PROPERTY
 
    DESCRIPTION OF MADISON AVENUE PROPERTY
 
    The Madison Avenue Property, located on East 30th Street and Madison  Avenue
in  New  York, New  York,  is improved  with  two multi-family  properties  -- a
thirteen story penthouse elevator building and a seven story elevator  building,
containing  an aggregate of  126 apartments and ground  floor retail stores. The
property is located in mid-Manhattan, in primarily a commercial area, with  some
residential  and hotels. The two  buildings are located on  a 13,000 square foot
plot of land, have
 
                                       7

frontage on  both Madison  Avenue and  East 30th  Street, and  were  constructed
separately  and subsequently  joined. The  properties were  constructed in about
1910 and substantially renovated in approximately 1988.
 
    DESCRIPTION OF MADISON AVENUE LEASE
 
    LEASE TERM.  The Madison Avenue Property is leased to an unaffiliated entity
for a term expiring February 28, 2038. If tenant exercises its right to  convert
the property to cooperative ownerships then effective with the assignment of the
lease  the lease can be extended for  150 years. To the Company's knowledge, the
tenant is not contemplating a cooperative conversion at the present time.
 
    AMOUNTS PAYABLE UNDER THE MADISON AVENUE  PROPERTY LEASE.  The basic  annual
rental is $550,000 increasing to $600,000 in 1999 and by $50,000 each five years
thereafter.  If the  conversion option  is exercised,  the basic  annual rent is
fixed for ten years from the date of conversion at the basic annual rental  then
being  paid, increasing by $75,000 each  ten years thereafter. If the conversion
option is exercised, the  Company is to receive  a conversion premium which  the
Company has agreed to divide 50-50 with BRT, provided the conversion takes place
on  or before  June 14, 2004.  The Company  acquired this property  from BRT, an
affiliated entity in  June 1994  (see Form  8-K of  the Company  dated June  27,
1994).
 
    The  lease is a net  lease and requires tenant to  pay, in addition to basic
annual rent, all real estate taxes and all utility and other charges  applicable
to the property during the term.
 
    MAINTENANCE  AND MODIFICATIONS.  Tenant, at its expense, is required to make
all structural  and  non-structural repairs  and  is required  to  maintain  the
property in good repair and condition, reasonable wear and tear excepted.
 
    Tenant  is permitted, under the lease, to make structural and non-structural
alterations, improvements  and  additions  provided  (i)  any  such  alteration,
improvement  or  addition does  not materially  adversely affect  the structural
integrity or strength  of the buildings  or the  value of the  property, or  any
interest of Landlord and does not include structural demolition, and (ii) if the
anticipated  cost  exceeds a  specified  amount (currently  $150,000, increasing
$50,000 each ten years  commencing with 1999) Tenant  is to give Landlord  prior
notice  and furnish  Landlord with such  information as  Landlord may reasonably
request. In  any event  Tenant can't  demolish any  structural portions  of  the
buildings  without  consent  of  Landlord.  The  lease  specifies  other  Tenant
obligations prior to Tenant commencing alterations, improvements or additions.
 
    INSURANCE.  Tenant  is required  to maintain fire  insurance, with  extended
coverage, in an amount equal to 100% of replacement value, exclusive of footings
and foundations with the deductible not to exceed $25,000, increasing every five
years  by the increase in  the consumer price index.  Tenant is also required to
maintain rent  insurance,  comprehensive  general  public  liability  insurance,
elevator  and boiler  insurance, and such  other insurance, in  such amounts, as
reasonably required by Landlord.
 
    DAMAGE TO OR CONDEMNATION  OF MADISON AVENUE  PROPERTY.  In  the event of  a
casualty,  Tenant  at its  expense, whether  or not  the insurance  proceeds are
sufficient, is required to  repair the damage and  restore, replace and  rebuild
the premises, at least to the extent of the value and as near as possible to the
character prior to the casualty.
 
    If  there is a condemnation of all or substantially all the premises, Tenant
may elect to terminate the lease, and in such event the lease shall terminate on
the date the condemning authority takes title to the property. In the event of a
condemnation of  all or  substantially all  the  property, the  award is  to  be
divided  between Landlord and Tenant in  the proportion each party's interest in
the premises  bears to  the aggregate  value  of both  party's interest  in  the
property, as determined by arbitration, provided the Landlord is to receive as a
priority  payment an amount equal to the fixed annual rent then being paid under
the lease multiplied  by 10,  with interest  from the  date of  taking and  then
Tenant is to
 
                                       8

receive  the greater of  (i) the sum of  all amounts paid  by Tenant for capital
improvements, not  to  exceed  $3,000,000  and (ii)  all  unpaid  principal  and
interest and other sums due on any leasehold mortgage.
 
    If  there is a partial taking Tenant, at  its sole expense, is to repair and
reconstruct the  premises.  Any  award is  to  be  applied to  such  repair  and
reconstruction,  and if the award exceeds the cost of repair and reconstruction,
the excess is divided between Landlord and Tenant as provided in the Lease.
 
    MORTGAGE
 
    Simultaneously with  its  purchase of  the  property  in June,  1994  for  a
consideration  of  $5,525,000  (plus  closing  costs)  the  Company  obtained  a
$4,250,000 non-recourse first mortgage loan from East New York Savings Bank. The
mortgage bears interest at 8.75% per annum  during the initial 5 year term.  The
Company  has an option  to renew the  mortgage for an  additional five year term
upon payment  of a  1% extension  fee. The  interest rate  during the  extension
period will be the greater of 8.75% or 275 basis points above U.S. Treasuries as
defined in the mortgage agreement. The mortgage is being amortized based on a 25
year amortization schedule.
 
    The  Tenant has the right  to mortgage the lease  under terms and conditions
set forth in  the lease. Any  fee mortgage on  the premises is  superior to  any
leasehold mortgage.
 
                             * * * * * * * * * * *
 
1995 TRANSACTION
 
    On  January 19, 1995 the Company  acquired sixteen net lease investments and
one mortgage receivable from  Gould Investors L.P.,  an affiliated entity,  i.e.
the  Kroger  Freezer  Warehouse -  Columbus,  Ohio, 13  Total  Petroleum service
stations-all located in  the State  of Michigan,  the United  Artists Theater  -
Seattle,  Washington (and  a second mortgage  secured by this  property) and the
Zero  City  Frozen  Food  Warehouse  -  Miami,  Florida.  For  a  more  detailed
description  of materially important properties acquired in the 1995 Transaction
see  the  discussion  below.  In  consideration  of  the  acquisition  of  these
properties,  the Company transferred to Gould  1,030,000 shares of BRT Preferred
Stock and 173,719 shares of beneficial  interest of BRT, the Company took  title
to the 13 Total Petroleum service stations subject to a $6,850,000 blanket first
mortgage  (held  by  the  Company  and  cancelled as  a  matter  of  law  in the
transaction) and the Company paid Gould $3.29 in cash. The Company recorded  the
assets acquired at the carrying amount of the assets exchanged, plus transaction
costs.
 
DESCRIPTION OF MATERIAL PROPERTIES ACQUIRED IN 1995 TRANSACTION
 
ZERO CITY FROZEN FOOD WAREHOUSE
 
    DESCRIPTION OF ZERO CITY FROZEN FOOD WAREHOUSE
 
    This  property,  located in  Miami, Florida,  is improved  with a  one story
industrial  building,  with  a  partial  mezzanine,  cold  rooms,  freezers  and
processing  area constructed on  a 12 1/2  acre site. The  Company is the tenant
under a ground  lease and  landlord under an  operating lease  (holding what  is
commonly referred to in the real estate industry as a "sandwich position").
 
    GROUND LEASE
 
    An  unrelated third  party owns  the fee  title to  this property,  which is
leased to  the Company  for a  term which  expires April  30, 2010,  with  three
remaining  15 year renewal options and one 14 year renewal option. Through April
30, 1995 the Company paid  rent at the annual rate  of $322,300 and from May  1,
1995 to April 30, 2010 the Company will pay annual rent at the rate of $288,833.
If  the Company exercises the  remaining renewal options the  rental will be the
greater of $288,833 and 7.5% of the  value of the land and its improvements.  If
the fee owner refinances the mortgage on this property the Company is to receive
1/3 of the net proceeds thereof and/or 1/3 of any reduction in debt service, and
will  be obligated for 1/3 of the debt service obligation. The Company, pursuant
to this  ground lease,  is  obligated to  pay all  taxes  and insurance  and  is
responsible for structural repairs.
 
                                       9

    OPERATING LEASE
 
    LEASE  TERM.   The  Company is  lessee of  the ground  lease which  it holds
subject to  an  operating  lease  with United  States  Cold  Storage,  Inc.  The
operating lease is for a term expiring April 30, 2010 with one remaining 15 year
renewal option.
 
    AMOUNT  PAYABLE UNDER THE  OPERATING LEASE.  The  tenant under the operating
lease paid to the Company  annual fixed rent of $475,200  to April 30, 1995  and
will pay $425,000 thereafter through April 30, 2010 and the renewal term, if the
option  to renew is exercised. The operating lease is net to Landlord and Tenant
is required to pay all taxes, insurance premiums and utility costs.
 
    MAINTENANCE AND MODIFICATIONS.  Tenant is to take good care of the  premises
and at its expense, make all repairs, structural and non-structural.
 
    Tenant  has the right during the lease  to make alterations to the premises,
but it requires  the consent of  Landlord if it  substantially alters the  basic
structure  or value  of the  improvements and  any repair  in excess  of $50,000
requires Landlord's approval.  Tenant cannot  demolish any  improvements to  the
premises  without Landlord's  consent. Tenant can  construct an  addition to any
building or construct a new building on the property, but it requires Landlord's
consent if the cost  exceeds $50,000 and such  addition or new construction,  in
any event, cannot detract from the existing improvements.
 
    INSURANCE.   Tenant,  at its cost,  is required to  maintain fire insurance,
with extended  coverage in  an  amount not  less than  80%  of full  repair  and
replacement  value,  boiler insurance  and liability  insurance. Tenant  is also
required to maintain insurance,  in such amounts,  as Landlord shall  reasonably
require against other insurable hazards.
 
    DAMAGE  TO OR CONDEMNATION OF ZERO CITY FROZEN FOOD WAREHOUSE.  In the event
of damage or destruction of the premises as a result of fire or other  casualty,
Tenant can not terminate the lease and at its cost and expense, is to repair and
restore  the improvements to at least as good a condition as existed immediately
prior to the casualty.
 
    If there is a total condemnation of the property, the lease terminates as of
the date of taking and any award  is allocated as follows: (i) to Landlord  such
portion  as is necessary to discharge  all mortgages, provided such mortgages do
not  exceed  $6,700,000,  (ii)  to  Landlord  the  difference,  if  any  between
$6,700,000  and the amount received by Landlord to discharge mortgages, (iii) to
Tenant an amount  equal to the  book value  of Tenant's property,  and (iv)  the
balance 50-50 to Landlord and Tenant.
 
    MORTGAGE
 
    The Company holds its leasehold position on a free and clear basis.
 
TOTAL PETROLEUM PROPERTIES
 
    DESCRIPTION OF TOTAL PETROLEUM PROPERTIES
 
    The  Total Petroleum Properties, which are located in the State of Michigan,
are all service stations  and include gasoline pumping  islands, a service  area
and  a  retail  building  used  as  a  convenience  store.  The  Total Petroleum
Properties are on  parcels of land  ranging from 45,000  square feet to  183,000
square  feet and the buildings on the properties range from 6,000 square feet to
13,000 square feet.
 
    DESCRIPTION OF TOTAL PETROLEUM LEASES
 
    LEASE TERM.  The Total Petroleum  Properties have 13 separate but  identical
leases dated as of May 15, 1991 (Total Petroleum Leases). The primary lease term
for  the Total Petroleum  Properties is 20  years ending on  May 31, 2011. Total
Petroleum has the right to extend the leases for two 10 year renewal terms,  but
the  renewal option  can only be  exercised on an  all or none  basis. The Total
Petroleum Leases contain  a cross  default provision  which provides  that on  a
monetary  default resulting in  the termination of  a lease, the  Landlord has a
right to terminate any or all of the other leases.
 
                                       10

    AMOUNTS PAYABLE UNDER THE TOTAL PETROLEUM LEASES.  The combined annual  rent
for  all 13 properties is  $860,075 through May 14,  1996, increasing by 3% each
May 15th throughout  the term of  the lease.  The leases are  net leases,  which
requires  Total  to pay  all  real estate  taxes,  assessments, and  all utility
charges.
 
    MAINTENANCE AND MODIFICATIONS.  Total Petroleum is required, at its expense,
to maintain the Total Petroleum Properties in good repair and is responsible  to
keep each property in reasonably clean condition. The Tenant at its sole expense
may make any non-structural alterations, additions, replacements or improvements
to the property without the Landlord's consent. The lessee is required to obtain
the  Landlord's  prior written  consent  for structural  alterations, additions,
replacements or improvements which consent will not be unreasonably withheld.
 
    INSURANCE.  Total Petroleum is required to maintain insurance at its expense
providing for fire  with standard extended  risk coverage to  the extent of  the
full  replacement cost. So  long as the Tenant's  net worth exceeds $100,000,000
the deductible  may  be that  which  is  provided in  Total  Petroleum's  master
corporate  insurance policy, and if its  net worth falls below $100,000,000 then
the deductible shall not exceed $250,000 without Landlord's consent.
 
    DAMAGE TO  OR CONDEMNATION  OF PROPERTY.   If  the premises  are damaged  or
destroyed  by fire or other casualty there is  to be no rent abatement and Total
Petroleum is  required  to repair  and  restore  the premises  in  a  reasonable
diligent  manner.  If, however,  the  premises are  rendered  untenantable Total
Petroleum may terminate the lease in which event it shall pay to the Company  an
amount  sufficient to restore the  premises to the condition  existing as of the
date the lease was executed, reasonable wear and tear excepted.
 
    If all or any part of any of  the properties is taken by condemnation so  as
to  render  the  remaining  portion  of  the  property  unsuitable  for lessee's
business, then the rent  due under the lease  shall be equitably adjusted  until
such  time  as the  Tenant  provides Landlord  with  written notice  that  it is
electing to terminate  the lease.  If however, the  Tenant does  not vacate  the
property within ninety days of such taking then it is conclusively presumed that
such  taking is not extensive enough to render the premises unsuitable for Total
Petroleum business. In  the event of  a taking, damages  awarded are payable  as
follows:   (i)  Total  Petroleum  is  entitled  to  the  portion  of  the  award
attributable to the value of its leasehold and (ii) Landlord is entitled to  the
value of its reversion. In allocating between the value of the leasehold and the
reversion, the value of improvements and betterments made by the lessee is to be
equitably  divided between  leasehold and reversion.  Each party  is entitled to
file a claim in any condemnation proceeding.
 
    OPTION TO PURCHASE.  Total Petroleum has been granted an option to  purchase
all locations at fair market value, excluding the value of the improvements made
by  it. This option may be  exercised during the last six  months of the term of
the lease. Fair market value is to be determined by an appraisal process.
 
    RIGHT OF FIRST REFUSAL.  Total Petroleum  has been granted a right of  first
refusal  to purchase a Total  Petroleum Property from the  Landlord for the same
purchase price and  on the  same terms  and conditions  as a  bonafide offer  to
purchase  received by the Landlord from an  unrelated party which is engaged in,
or plans to engage  in the business of  selling petroleum products, which  offer
the Landlord intends to accept.
 
    MORTGAGE
 
    The Total Petroleum Properties are owned free and clear of mortgages.
 
                             * * * * * * * * * * *
 
                                       11

    ADDITIONAL 1995 ACQUISITIONS
 
    In  fiscal 1995 the Company acquired fee title to three additional net lease
investments, described more particularly below.
 
KILLEEN, TEXAS PROPERTY
 
    DESCRIPTION OF KILLEEN, TEXAS PROPERTY
 
    The Killeen,  Texas property  is one  of two  front out-parcels  of a  newly
developed shopping center anchored by an Albertson's supermarket, located at 900
West  Central Texas Expressway, Killeen, Texas.  The property is improved with a
one story,  free standing  building having  approximately 8,000  square feet  of
space  and 39 parking spaces located on  a parcel of land of approximately 1.106
acres. The building, a prototypical Hollywood Video Store, was built in 1995.
 
    DESCRIPTION OF HOLLYWOOD VIDEO LEASE
 
    LEASE TERM.  The property  is leased to Hollywood Entertainment  Corporation
d/b/a/  Hollywood Video pursuant to  a "net lease" which  has an initial term of
approximately fifteen years ending  June 30, 2010. The  tenant has the right  to
extend the lease for two additional five year terms.
 
    AMOUNTS  PAYABLE UNDER THE LEASE.   The annual basic  rent payable under the
lease is $141,200, increasing to $162,380  in July, 2000. Tenant is required  to
pay  all  real estate  taxes,  assessments, water  and  sewer charges  and other
governmental charges.
 
    MAINTENANCE AND  MODIFICATIONS.    Tenant  at its  expense  is  required  to
maintain  (and where necessary  replace) the premises,  including all structural
systems, load bearing  walls, floor slabs  and HVAC systems  and equipment.  The
Landlord  warranted and guaranteed that the  building was constructed in a first
class manner for a period of 12  months from the commencement date of the  lease
and  after the expiration of  said 12 month period Landlord  is to assign to the
Tenant any  and all  warranties and  guaranties  of third  parties held  by  the
Landlord, except in the event such warranties and guaranties are not assignable,
the  Landlord is to enforce the warranties and guaranties for the benefit of the
Tenant.
 
    The Tenant is  not to  make any exterior  or structural  alterations to  the
premises  without the  prior written  consent of  the Landlord  which is  not to
unreasonably withheld.  Tenant  is permitted  to  make interior  non  structural
alterations,  additions and improvements  costing less than  $50,000 without the
Landlord's prior written consent.
 
    INSURANCE.  Landlord is to obtain general liability insurance with  coverage
of  not  less than  $3,000,000, all  risk property  insurance covering  fire and
extended coverage  for the  replacement value  thereof and  rental  interruption
insurance  covering a period not to exceed  one year. The Tenant is to reimburse
the Landlord for Landlord's  annual costs for premiums  for such insurance.  The
Tenant  has the right to elect  to carry some or all  of such insurance upon ten
days prior  written notice  to Landlord  and if  Tenant gives  such notice,  the
Landlord is relieved of its obligations to obtain and maintain the insurance.
 
    DAMAGE  TO OR  CONDEMNATION OF  PROPERTY.   If the  premises are  damaged or
destroyed by  fire or  other casualty  the  Landlord is  to repair,  restore  or
rebuild  as is necessary  to substantially return the  premises to the condition
existing immediately prior to such damage  or destruction and the lease  remains
in  full force and effect. If however, any repair, restoration or reconstruction
may not  commence within  90 days  from the  date of  the casualty  and are  not
repaired,  restored  or reconstructed  within eight  months of  the date  of the
casualty, the Tenant may terminate the lease on 30 days prior written notice  to
the  Landlord. The  Landlord is not  required to  expend funds in  excess of the
insurance proceeds for such repairing, restoring, and rebuilding.
 
    If the premises or any portion thereof are taken by condemnation, the  lease
terminates as to the portion taken as of the date the condemning authority takes
title  or possession. If more than 5% of the floor area of the building, or more
than 20%  of the  common area  designated as  parking is  taken by  condemnation
Tenant  at its option may terminate the  lease. If the tenant does not terminate
the lease,
 
                                       12

the lease remains in  full force and  effect as to the  portion of the  premises
remaining except that the rent shall be reduced in the proportion that the floor
area of the premises so taken bears to the total floor area of the premises. Any
condemnation award shall be the property of the Landlord, but Tenant is entitled
to any award for loss or damage to Tenant's property and relocation expenses.
 
    MORTGAGE
 
    The property is encumbered by a first mortgage held by Bank One, Texas, N.A.
in  the original principal amount  of $731,250. The loan  bears interest at 9.1%
per annum, is amortizing over a 25 year period and is due on August 14, 2002. At
December 31, 1995 $729,311 was due and owing on this mortgage.
 
ROSENBERG, TEXAS PROPERTY
 
    DESCRIPTION OF ROSENBERG, TEXAS PROPERTY
 
    The Rosenberg, Texas  property, constructed in  1995, is located  on an  out
parcel  of a recently developed free standing Super Kmart in Rosenberg, Texas (a
suburb  of  Houston,  Texas).  There  are  other  out  parcels  occupied  by   a
Jack-in-the-Box,    Payless    Shoe    Source,    Peppermill    Restaurant   and
Texaco/McDonalds. The property  is improved  with a  free standing  prototypical
Hollywood  Video store, having  approximately 8,000 square feet  of space and 44
parking spaces.
 
    DESCRIPTION OF HOLLYWOOD VIDEO LEASE
 
    The property  is leased  to Hollywood  Entertainment Corp.  d/b/a  Hollywood
Video  pursuant to  a "net  lease" which  has an  initial term  of approximately
fifteen years ending January 31,  2010. The Tenant has  the right to extend  the
lease for two additional five year terms.
 
    AMOUNTS  PAYABLE UNDER THE LEASE.  The  annual basic rent under the lease is
$111,800, increasing to $128,750 in January 2000. The lease requires the  Tenant
to  pay all real  estate taxes, assessments,  water and sewer  charges and other
governmental charges.
 
    MAINTENANCE AND  MODIFICATIONS.    Tenant  at its  expense  is  required  to
maintain  (and where necessary  replace) the premises,  including all structural
systems, load bearing  walls, floor slabs  and HVAC systems  and equipment.  The
Landlord  warranted and guaranteed that the  building was constructed in a first
class manner for a period of 12  months from the commencement date of the  lease
and  after the expiration of  said 12 month period Landlord  is to assign to the
Tenant any  and all  warranties and  guaranties  of third  parties held  by  the
Landlord  except in the event such warranties and guaranties are not assignable,
the Landlord is to enforce the warranties and guaranties for the benefit of  the
Tenant.
 
    The  Tenant is  not to  make any exterior  or structural  alterations to the
premises without  the prior  written consent  of the  Landlord which  is not  to
unreasonably  withheld.  Tenant is  permitted  to make  interior  non structural
alterations, additions and  improvements costing less  than $50,000 without  the
Landlord's prior written consent.
 
    INSURANCE.   Landlord is to obtain general liability insurance with coverage
of not  less than  $3,000,000, all  risk property  insurance covering  fire  and
extended  coverage  for the  replacement value  thereof and  rental interruption
insurance covering  a  period not  to  exceed one  year  and the  Tenant  is  to
reimburse  the  Landlord  for  Landlord's annual  costs  for  premiums  for such
insurance. The  Tenant has  the right  to elect  to carry  some or  all of  such
insurance  upon ten days  prior written notice  to Landlord and  if Tenant gives
such notice, the Landlord is relieved of its obligations to obtain and  maintain
the insurance.
 
    DAMAGE  TO OR  CONDEMNATION OF  PROPERTY.   If the  premises are  damaged or
destroyed by  fire or  other casualty  the  Landlord is  to repair,  restore  or
rebuild  as is necessary  to substantially return the  premises to the condition
existing immediately prior to such damage  or destruction and the lease  remains
in  full force and effect. If however, any repair, restoration or reconstruction
may not  commence within  90 days  from the  date of  the casualty  and are  not
repaired, restored or reconstructed
 
                                       13

within  eight months of the  date of the casualty,  the Tenant may terminate the
lease on 30  days prior  written notice  to the  Landlord. The  Landlord is  not
required to expend funds in excess of the insurance proceeds for such repairing,
restoring, rebuilding.
 
    If  the premises or any portion thereof are taken by condemnation, the lease
terminates as to the parcel taken as of the date the condemning authority  takes
title  or possession. If more than 5% of the floor area of the building, or more
than 20% of  the common  area designated as  parking is  taken by  condemnation,
Tenant,  at its option may terminate the lease. If the tenant does not terminate
the lease, the lease remains in full force  and effect as to the portion of  the
premises  remaining except that the rent shall be reduced in the proportion that
the floor area of  the premises so taken  bears to the total  floor area of  the
premises.  Any condemnation  award shall  be the  property of  the Landlord, but
Tenant is entitled  to any award  for loss  or damage to  Tenant's property  and
relocation expenses.
 
    MORTGAGE
 
    The property is encumbered by a first mortgage held by Bank One, Texas, N.A.
in  the original principal amount of $692,100.  The loan bears interest of 8.55%
per annum, is  amortizing over  25 years  and is due  on December  5, 2002.  The
entire original principal amount was outstanding on December 31, 1995.
 
CEDAR RAPIDS, IOWA PROPERTY
 
    DESCRIPTION OF CEDAR RAPIDS, IOWA PROPERTY
 
    The  Cedar Rapids property  is located at  4701 First Avenue,  S.E., a major
commercial  thoroughfare  in   Cedar  Rapids,  Iowa.   The  property,   contains
approximately  1.52 acres,  is improved with  a 15,400 square  foot single story
retail store completed in 1995, and has 77 parking spaces.
 
    DESCRIPTION OF AUDIO KING LEASE
 
    LEASE TERM.  The property is leased to Audio King Corporation pursuant to  a
net  lease which has an initial term of approximately twenty years expiring June
30, 2015. The Tenant  has the right  to extend the lease  for four additional  5
year terms.
 
    AMOUNTS  PAYABLE UNDER THE LEASE.  The  annual basic rent under the lease is
$157,850, increasing  to  $180,950 in  July  2000,  $204,050 in  July  2005  and
$227,150  in July 2010. The lease requires  Tenant to pay all real estate taxes,
assessments and other government charges.
 
    MAINTENANCE AND MODIFICATION.  The Tenant is required to keep the  premises,
including  the foundation, exterior walls, roof  and heating and ventilating and
air conditioning systems and any equipment  serving the premises in good  order,
condition and repair and in a clean and safe condition; provided however, during
the  last 5 years of the initial term and during any extension term the Landlord
is responsible for replacement of the foundation, exterior walls, roof and  HVAC
systems.
 
    The  Tenant is not to  make any alterations or  additions to the premises in
excess of $25,000 without first obtaining the Landlord's consent.
 
    INSURANCE.  The Tenant is  required to maintain general liability  insurance
in  the  initial amount  of $1,000,000  per  occurrence and  the Landlord  is to
maintain casualty insurance covering  loss of or damage  to the property in  the
full  amount of  its replacement value.  With respect to  the casualty insurance
maintained by the Landlord, the Tenant is to pay to the Landlord, as  additional
rent,  the premiums for  such policy within  15 days of  receiving the statement
therefor. The casualty insurance provides protection against all risks including
fire, vandalism, malicious mischief, special extended perils, sprinkler leakage,
etc.
 
    DAMAGE TO OR CONDEMNATION PROPERTY.  If  the premises or any portion of  the
building is damaged by fire or other casualty the Landlord is to promptly repair
the  damage if  the repair,  in Landlord's opinion,  can be  completed within 90
days. The Landlord does not have any obligation to repair in the event that  the
insurance  proceeds it receives  are insufficient to cover  the expected cost of
the repairs. If in Landlord's opinion the repairs cannot be completed within  90
days, the Landlord may elect to
 
                                       14

repair  the damage in which event the  lease continues in full force and effect,
but the rent is partially abated to  the extent Tenant's use of the premises  is
impaired.  If Landlord does not elect to  make the repairs, the lease terminates
as of the date of the casualty.
 
    If the  whole  of the  building  is taken  by  condemnation the  lease  will
terminate  as of the date  of taking. If less than  the whole building is taken,
the lease shall be unaffected  by the taking, provided  that the Tenant has  the
right  to terminate the  lease if 20% or  more of the premises  is taken and the
remaining area  of the  premises  is not  reasonably  sufficient for  Tenant  to
continue  to operate its business.  In the event of  a partial taking which does
not result  in a  termination  of the  lease, the  Landlord  is to  restore  the
remaining  portion of  the premises  as nearly  as practicable  to its condition
prior to the condemnation. All damages  awarded for any taking and  condemnation
shall  be the property of the Landlord except for value allocated to alterations
and additions made by Tenant  after the lease was  entered into. Tenant is  also
entitled  to a separate award for loss of business, depreciation, and removal of
stock and fixtures.
 
    MORTGAGE
 
    The property is encumbered  by a first mortgage  held by Firstar Bank  Cedar
Rapids,  N.A.  in the  original  principal amount  of  $990,000. The  loan bears
interest at 8 1/2% per  annum and matures December  21, 2000. The loan  provides
for  amortization over 20 years. The entire principal balance was outstanding on
December 31, 1995.
 
ITEM 3. -- LEGAL PROCEEDINGS
 
    There are no pending  material legal proceedings to  which the Company is  a
party.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    There  were no matters  submitted to a  vote of security  holders during the
fourth quarter of the fiscal year covered by this Form 10-K.
 
                                    PART II
 
ITEM 5. -- MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
 
    The following table sets forth the high and low prices for the Common  Stock
of  the Company as  reported by the  American Stock Exchange,  and the per share
cash distributions paid by the Company  on the Common Stock during each  quarter
of the years ended December 31, 1994 and 1995:
 


                                                                        HIGH        LOW      DIVIDEND
                                                                       -------    -------   -----------
                                                                                   
L994
First Quarter.......................................................    10 7/8     10 1/8    $     .10
Second Quarter......................................................    10 3/8      9 1/8    $    .125
Third Quarter.......................................................    11 1/4     10 3/8    $    .505
Fourth Quarter......................................................    11 1/4     10 1/2    $    .125*
 
L995
First Quarter.......................................................    10 7/8     10 1/4    $    .125
Second Quarter......................................................    12 3/4     10 1/4    $     .30
Third Quarter.......................................................    13 3/4     12 1/4    $     .30
Fourth Quarter......................................................    14 1/8     12 3/4    $     .30*

 
                                       15

    The  following  table sets  forth the  high  and low  prices for  the $16.50
Cumulative Convertible  Preferred  Stock  of  the Company  as  reported  by  the
American Stock Exchange and the per share cash distributions paid by the Company
on  the Preferred Stock during each quarter of the years ended December 31, 1994
and 1995:
 


                                                                        HIGH        LOW       DIVIDEND
                                                                       -------    -------   ------------
                                                                                   
L994
First Quarter.......................................................    17 1/8     16 1/2    $     .40
Second Quarter......................................................    17 1/2     16 1/2    $     .40
Third Quarter.......................................................    17         16 1/2    $     .40
Fourth Quarter......................................................    16 7/8     15 7/8    $     .40**
 
1995
First Quarter.......................................................    16 7/8     15 3/4    $     .40
Second Quarter......................................................    17 1/8     15 3/4    $     .40
Third Quarter.......................................................    16 7/8     16 1/8    $     .40
Fourth Quarter......................................................    16 7/8     16 1/4    $     .40**

 
- ------------------------
 *  Cash distributions of $.30 and  $.12 1/2 per share  were paid on the  Common
    Stock  on January 3, 1996  and January 2, 1995.  These two distributions are
    reflected as being paid in the 1995 and 1994 fourth quarters, respectively.
 
**  A cash distribution of  $.40 per share  was paid on  the Preferred Stock  on
    January  3, 1996 and January 2,  1995. These two distributions are reflected
    as being paid in the fourth quarter of 1995 and 1994, respectively.
 
    The Common Stock and  Preferred Stock of the  Company trade on the  American
Stock  Exchange, under the symbols OLP and  OLP Pr, respectively. As of March 1,
1996 there were  350 common  and 200 preferred  stockholders of  record and  the
Company  estimates  that at  such date  there were  approximately 1,600  and 725
beneficial owners of the Company's Common and Preferred Stock, respectively.
 
                                       16

ITEM 6. -- SELECTED FINANCIAL DATA
 
    The following are highlights of  the Company's operations which are  derived
from  the  audited  financial statements  of  the  Company for  the  years ended
December 31, 1995, 1994, 1993, 1992 and 1991.
 


                                               1995            1994            1993            1992            1991
                                          --------------  --------------  --------------  --------------  --------------
                                                                                           
INCOME STATEMENT DATA
Revenues................................  $    4,890,962  $    4,041,378  $    3,348,419  $    2,967,919  $    2,475,952
Gain on sales of real estate............        --              --              --                             8,528,684(a)
Gain on sale of investments.............        --              --               168,631         303,130        --
Provision for valuation adjustment and
 impairment.............................        --              --              (258,744)       --            (4,090,000)
Net income..............................       3,096,302       2,861,137       2,435,269       2,436,315       5,782,678
Calculation of net income applicable to
 common stockholders:
  Net income............................       3,096,302       2,861,137       2,435,269       2,436,315       5,782,678
Less: dividends and accretion on
 preferred stock........................       1,446,519       1,444,703       1,442,907       1,442,372       1,538,935
Net income applicable to common
 stockholders...........................  $    1,649,783  $    1,416,434  $      992,362  $      993,943  $    4,243,743
Weighted average number of common shares
 outstanding............................       1,409,371       1,356,989       1,338,619       1,338,619       1,338,619
Net income per common share.............  $         1.17  $         1.04  $          .74  $          .74  $         3.17
Cash distributions per share of:
  Common Stock..........................  $         1.03  $          .86  $          .94  $          .70  $         2.25
  Preferred Stock.......................            1.60            1.60            1.60            1.60            1.60
 
BALANCE SHEET DATA
Total real estate investments, net......  $   24,253,765  $   10,996,534  $    5,627,909  $    6,271,828  $    6,375,043
Investments in U.S. Government
 obligations and securities.............       1,274,747       3,972,256       4,856,453      13,954,329      19,888,950
Mortgages and note receivables..........       7,564,716      16,096,224      17,274,039      10,614,040       7,180,387
Total assets............................      38,040,246      37,652,773      32,383,674      32,339,558      36,019,492
Total liabilities.......................       7,532,267       7,680,937       3,360,236       3,199,045       6,377,989
Redeemable convertible preferred
 stock..................................      12,796,475      12,643,998      12,493,337      12,344,472      13,041,045
Total stockholders' equity..............      17,711,504      17,327,838      16,530,101      16,796,041      16,600,458

 
- ------------------------
Notes:
 
(a) Represents primarily a gain  on sale of properties  net leased to  Firestone
    Tire & Rubber Company.
 
ITEM 7. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
LIQUIDITY AND CAPITAL RESOURCES
 
    At  December  31,  1995,  the  Company's  primary  source  of  liquidity was
approximately  $3,844,000  in  cash  and  $1,275,000  in  investments  in   U.S.
Government  obligations  and securities.  Long term  debt  at December  31, 1995
consisted of $6,590,154 of  mortgages payable which is  secured by certain  real
estate investments.
 
    The  Company is currently in discussions concerning the acquisition of other
net leased properties. In management's judgement, cash provided from operations,
the Company's cash  position and  holdings in  marketable government  securities
will  provide adequate funds  for cash distributions  to shareholders, operating
expenses and funds  for a few  investment opportunities. On  March 1, 1996,  the
 
                                       17

Company  entered into a revolving credit agreement with Bank Leumi Trust Company
of New  York,  which  makes  available  to the  Company  up  to  $5,000,000  for
additional  property acquisitions. The Credit  Agreement provides for additional
institutions to  become  parties  to  a total  credit  facility  of  $15,000,000
(including  the $5,000,000 commitment of Bank Leumi). There is no assurance that
additional institutions will  become parties  to the Credit  Agreement. It  will
continue  to be  the Company's policy  to make sufficient  cash distributions to
shareholders in order  for the Company  to maintain its  real estate  investment
trust status under the Internal Revenue Code.
 
    In  connection with the lease agreements  with Total Petroleum, Inc. ("Total
Petroleum") consummated in 1991, the Company  agreed to expend certain funds  to
remediate  environmental problems discovered at  certain locations that were net
leased to Total Petroleum. It was agreed that the net cost to the Company  would
not  exceed $350,000 per location, with any excess cost being the responsibility
of Total  Petroleum. At  that  time the  Company  deposited $2,000,000  with  an
independent   escrow  agent  to  insure  compliance  by  the  Company  with  its
obligations with respect to  the environmental clean up.  The escrow agent  held
approximately  $1,345,000  as  of  December 31,  1995  which  the  Company deems
adequate to cover any additional environmental costs.
 
    The Michigan  Underground Storage  Tank Fund  Administration ("MUSTFA")  has
been  reimbursing qualified companies for environmental costs incurred in "clean
up" associated with underground storage tanks. In 1995, the Company received  or
accrued  approximately $66,000 regarding this  fund. The Company cannot estimate
the amount, if any, which will be reimbursed  by MUSTFA in the future due to  an
announced termination of the program.
 
RESULTS OF OPERATIONS
 
    COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
 
    Total  revenues increased to $4,890,962 for the year ended December 31, 1995
from  $4,041,378  for  the  year  ended  December  31,  1994.  The  increase  of
approximately $850,000 is the result of a substantial increase in rental income,
offset  in part by decreases in  interest, dividends and other income, resulting
from Management's decision during 1994 to concentrate on investments in improved
real estate  net  leased  on a  long  term  basis. Rental  income  increased  by
$1,682,084,  from $983,373 in 1994 to $2,665,457 in 1995, primarily due to rents
earned on sixteen  properties acquired  from Gould Investors  L.P. ("Gould")  in
January  1995 ("January  1995 Transaction")  and four  other properties acquired
during 1995  and  1994. Interest  income  from related  parties  decreased  from
$2,361,013  in 1994 to $1,878,262 in 1995, principally due to the extinguishment
of a mortgage receivable as part  of the January 1995 Transaction. The  decrease
was  partly offset by an increase in  the discount amortization of a senior note
receivable resulting  from an  increase in  principal collections  on such  note
during 1995.
 
    Dividends  from related party decreased to  $13,940 in 1995 from $270,000 in
1994 due to the transfer of preferred shares of BRT Realty Trust as part of  the
January  1995 Transaction.  Interest and other  income decreased  to $333,303 in
1995 from $426,992 in 1994 primarily due to a decrease in the amount received or
accrued from MUSTFA.
 
    The $266,280 increase in depreciation from  $180,557 in 1994 to $446,837  in
1995  results from depreciation on properties acquired during 1995 and 1994. The
decrease in interest -- mortgages payable  from $484,440 in 1994 to $453,684  in
1995  is the  net result  of the  elimination of  interest paid  on a $2,753,700
mortgage loan which was fully repaid in  March 1995, offset by interest paid  on
new  mortgages obtained in connection with property acquisitions during 1995 and
1994.
 
    Effective  January  1,  1995,  the  Company  became  self-managed,   thereby
eliminating the management fee. In connection with the January 1995 Transaction,
the  Company must pay  annual fixed leasehold  rent on one  property of $289,000
through April 2010. There was no such expense in 1994.
 
                                       18

    General and administrative costs increased in 1995 to $609,745 from $412,158
in 1994 substantially due to salary and related payroll costs for the  Company's
President,  as the Company converted  to self-management effective January 1995.
To a lesser extent, the increase results from additional payroll charges, as the
Company's level of activity increased.
 
    COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND 1993
 
    Total revenues increased to $4,041,378 for the year ended December 31,  1994
from  $3,348,419 for the year ended December  31, 1993. The $257,037 increase in
rental income results from the acquisition of a long term net leased property in
June 1994, offset to a limited extent by the sale of a parcel of real estate  in
November  1993. Interest income from related  parties increased to $2,361,013 in
1994 from  $1,907,286 in  1993. The  increase of  $453,727 is  due primarily  to
interest  earned  in  1994 on  a  mortgage loan  purchased  from the  FDIC  at a
substantial discount on July  30, 1993 and interest  earned on a senior  secured
note  receivable acquired in February 1993, offset  in part by the exchange of a
mortgage receivable  for  preferred  shares  in  September  1993.  Dividends  of
$270,000  and $79,500 were  paid on the  preferred shares during  1994 and 1993,
respectively.
 
    Interest and  other  income  decreased  from $635,297  for  the  year  ended
December 31, 1993 to $426,992 for the year ended December 31, 1994. The $208,305
decrease  is  substantially  due  to  a  decrease  of  interest  earned  on U.S.
Government securities resulting from the  sale of such investments during  1993,
the  proceeds of which were  used to invest in  the mortgage loan purchased from
the FDIC and the senior secured note receivable. The decrease was partly  offset
during  1994  due  to an  increase  in  other income  of  approximately $50,000,
representing a partial return of unexpended escrow funds.
 
    The $78,604 increase  in depreciation  expense to $180,557  in 1994  results
substantially  from the purchase of a property  in June 1994. In connection with
this purchase, the  Company obtained  a $4,250,000 mortgage  loan, resulting  in
interest on mortgages payable increasing in 1994 by $202,186.
 
    The  increases in management fees of $19,376 is due to the increase in gross
revenues on which the  management fee was based.  Effective January 1, 1995  the
management  fee was  eliminated as the  Company became a  self administered real
estate investment trust.
 
    General and administrative costs of $412,158 in 1994 reflect an increase  of
$57,038  from the prior year expense of  $355,120 and is substantially due to an
increase in expenses allocated by Gould Investors L.P. caused by an increase  in
the usage of staff, as the Company's level of activity increased.
 
    Gain  on  sale  of  investments  in 1993  resulted  from  the  sale  of U.S.
Government obligations and securities.
 
    In August, 1993, the Company  entered into a contract  for the sale of  real
estate  at a sales price lower than  the carrying amount. The Company recorded a
provision for valuation  adjustment for  this difference of  $258,744. The  sale
closed during November 1993. There was no comparable provision in 1994.
 
ITEM 8. -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
    The financial statements and supplementary data listed in Items 14(a)(1) and
14(a)(2) hereof are incorporated herein by reference.
 
ITEM 9. -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
    None
 
                                    PART III
 
    Information  required  by  Part III  (Item  10 --  "Directors  and Executive
Officers of the  Registrant", Item 11  -- "Executive Compensation",  Item 12  --
"Security  Ownership of Certain Beneficial Owners and Management" and Item 13 --
"Certain Relationships  and  Related Transactions")  will  be contained  in  the
definitive  proxy  statement to  be  filed within  120 days  of  the end  of the
Company's fiscal year.
 
                                       19

                                    PART IV
 
ITEM 14. -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
    (a)Documents filed as part of this Report:
 
       1. The following financial statements of the Company are included in this
          Report on Form 10-K:
 


                                                                                   PAGE
                                                                                -----------
                                                                          
   --      Report of independent auditors (Ernst & Young LLP, successor to          F-1
            Kenneth Leventhal & Company, Independent Certified Public
            Accountants)......................................................
   --      Statements:
                                                                                    F-2
           Consolidated Balance Sheets........................................
                                                                                    F-3
           Consolidated Statements of Income..................................
                                                                                    F-4
           Consolidated Statements of Stockholders' Equity....................
                                                                                  F-5-F-6
           Consolidated Statements of Cash Flows..............................
                                                                                 F-7-F-16
           Notes to Consolidated Financial Statements.........................

 
       2.  Financial Statement Schedules:
 

                                                            
   --      Schedule III -- Real Estate and Accumulated            F-17-F-18
            Depreciation........................................
   --      Schedule IV -- Mortgage Loans on Real Estate.........  F-19-F-20

 
    All other  schedules are  omitted because  they are  not applicable  or  the
required  information is shown  in the consolidated  financial statements or the
notes thereto.
 

                
           3.  EXHIBITS
      3.1  Articles of  Incorporation,  as amended,  of  the Company,  filed  as Exhibit  3.1  to  the
           Company's Form 10-Q for the quarter ended September 30, 1985, which Exhibit is incorporated
           herein by reference.
      3.2  Amendment to Articles of Incorporation, filed as Exhibit to the Company's Form 10-Q for the
           quarter ended June 30, 1989, which Exhibit is incorporated herein by reference.
      3.3  Amendment  to Articles of Incorporation, filed as an Exhibit to the Company's Form 10-Q for
           the quarter ended June 30, 1990, which Exhibit is incorporated herein by reference.
      3.4  By-Laws of the Company, as amended, filed as an Exhibit to the Company's Form 10-Q for  the
           quarter ended June 30, 1989, which Exhibit is incorporated herein by reference.
      3.5  Amendment  to By-Laws filed as an Exhibit to  the Company's Form 10-Q for the quarter ended
           June 30, 1990, which Exhibit is incorporated herein by reference.
     10.1  Lease, dated July 24, 1975, between Harvest  of Texas, Inc., landlord, and The Kroger  Co.,
           tenant,  as amended, filed  as Exhibit 10.5 to  the Company's Form 10-K  for the year ended
           December 31, 1987, which Exhibit is incorporated herein by reference.
     10.2        (i)  Lease dated  December  2,  1986  between  Golden  Plaza  (1513)  Associates,  as
                      landlord,  and  The May  Department Store  Company ("May"),  as tenant,  for the
                      Chicago (Ashland  Avenue),  Illinois Property,  filed  as Exhibit  b(i)  to  the
                      Company's Form 8-K dated September 1, 1987, which Exhibit is incorporated herein
                      by reference.

 
                                       20


                
                (ii)  Lease dated December 2, 1986 between Golden Plaza (812) Associates, as landlord,
                      and  May, as  tenant, for  the Nashville,  Tennessee property,  filed as Exhibit
                      b(ii) to  the Company's  Form 8-K  dated  September 1,  1987, which  Exhibit  is
                      incorporated herein by reference.
               (iii)  Lease dated December 2, 1986 between Golden Plaza (717) Associates, as landlord,
                      and  May, as tenant, for the Ottumwa,  Iowa Property, filed as Exhibit b(iii) to
                      the Company's Form 8-K  dated September 1, 1987,  which Exhibit is  incorporated
                      herein by reference.
                (iv)  Lease  dated  December  2,  1986  between  Golden  Plaza  (1466)  Associates, as
                      landlord, and May, as tenant, for the Chicago Heights, Illinois Property,  filed
                      as  Exhibit  b(iv) to  the Company's  Form  8-K dated  September 1,  1987, which
                      Exhibit is incorporated herein by reference.
                 (v)  Lease dated  December  2,  1986  between  Golden  Plaza  (1485)  Associates,  as
                      landlord,  and May, as tenant, for the West Valley City, Utah Property, filed as
                      Exhibit b(v) to the Company's Form 8-K dated September 1, 1987, which Exhibit is
                      incorporated herein by reference.
                (vi)  Lease dated  December  2,  1986  between  Golden  Plaza  (2652)  Associates,  as
                      landlord,  and May,  as tenant, for  the Baltimore, Maryland  Property, filed as
                      Exhibit b(vi) to the Company's Form  8-K dated September 1, 1987, which  Exhibit
                      is incorporated herein by reference.
               (vii)  Lease  dated December 2, 1986 between Golden Plaza (94) Associates, as landlord,
                      and May,  as tenant,  for the  Kansas City,  Kansas Property,  filed as  Exhibit
                      b(vii)  to the  Company's Form  8-K dated  September 1,  1987, which  Exhibit is
                      incorporated herein by reference.
              (viii)  Lease dated  December  2,  1986  between  Golden  Plaza  (1530)  Associates,  as
                      landlord,  and May,  as tenant, for  the Seattle, Washington  Property, filed as
                      Exhibit b(viii) to the Company's Form 8-K dated September 1, 1987, which Exhibit
                      is incorporated herein by reference.
                (ix)  Lease dated  December  2,  1986  between  Golden  Plaza  (1508)  Associates,  as
                      landlord,  and May, as tenant, for the Chicago (E. 47th St.), Illinois Property,
                      filed as Exhibit b(ix) to the Company's Form 8-K dated September 1, 1987,  which
                      Exhibit is incorporated herein by reference.
                 (x)  Lease dated December 2, 1986 between Golden Plaza (822) Associates, as landlord,
                      and May, as tenant, for the Decatur, Illinois Property, filed as Exhibit b(x) to
                      the  Company's Form 8-K  dated September 1, 1987,  which Exhibit is incorporated
                      herein by reference.
                (xi)  Lease dated  December  2,  1986  between  Golden  Plaza  (2633)  Associates,  as
                      landlord,  and May, as tenant, for the  Dallas, Texas Property, filed as Exhibit
                      b(xi) to  the Company's  Form 8-K  dated  September 1,  1987, which  Exhibit  is
                      incorporated herein by reference.
                      On  September  1, 1987  the  leases referred  to in  10.3  were assigned  to the
                      Company, as landlord.
     10.3  Lease dated January 17, 1989 and modification thereof dated as of February 15, 1989 between
           Crystal Management, Inc., as Landlord and  Stamford Realty Associates, Inc. as tenant  with
           respect  to Madison Avenue, New York,  New York, filed as an  exhibit to the Company's Form
           8-K dated June 27, 1994 and incorporated herein by reference.
     10.4  Purchase and Sale Agreement dated  as of December 28, 1994  with Gould Investors L.P.  with
           respect  to the acquisition  of sixteen net leased  properties, filed as  an exhibit to the
           Company's Form 8-K dated February 2, 1995 and incorporated herein by reference.

 
                                       21


                
     10.5  Lease dated April  30, 1970  between Arthur  L. Feinstein,  et. ano  and Prudent  Resources
           Trust,  as Tenant (Ground  Lease) with respect  to Zero City  Frozen Food Warehouse, Miami,
           Florida filed  as  an  exhibit  to  the  Company's Form  10-K  dated  March  23,  1995  and
           incorporated herein by reference.
     10.6  Lease  dated April  30, 1970 between  Prudent Resources  Trust, as Landlord,  and Zero Food
           Storage, Inc. as Tenant (Operating Lease) with respect to Zero City Frozen Food  Warehouse,
           Miami,  Florida filed as  an exhibit to  the Company's Form  10-K dated March  23, 1995 and
           incorporated herein by reference.
     10.7  Form of  lease  entered into  with  Total Petroleum  with  respect to  13  Total  Petroleum
           properties  filed  as an  exhibit  to the  Company's  Form 10-K  dated  March 23,  1995 and
           incorporated herein by reference.
     10.8  Lease dated March 1, 1995 between Hollywood Video Partners LLC, as Landlord, and  Hollywood
           Entertainment Corporation, as Tenant, with respect to Killeen, Texas property. This exhibit
           is  filed herewith. The lease was assigned to OLP Texas, Inc., a wholly owned subsidiary of
           the Company.
     10.9  Lease dated September 20, 1994 between HWD Video Partners, Inc., as Landlord and  Hollywood
           Entertainment  Corporation,  as  Tenant, with  respect  to Rosenberg,  Texas  property. The
           exhibit is filed  herewith. This  lease was  assigned to OLP  Texas, Inc.,  a wholly  owned
           subsidiary of the Company.
    10.10  Lease  dated  June 28,  1995  between OLP  Iowa,  Inc. (a  wholly  owned subsidiary  of the
           Company), as Landlord, and Audio King Corporation, as Tenant, with respect to Cedar Rapids,
           Iowa property. This exhibit is filed herewith.
    10.11  Credit Agreement dated March 1,  1996 between the Company and  Bank Leumi Trust Company  of
           New York. This exhibit is filed herewith.
     21.1  Subsidiaries of registrant (filed herewith)
       27  Financial Data Statements
                 (b)  No  reports on Form 8-K were filed by  the Registrant during the last quarter of
                      the period covered by this report.

 
                                       22

                                   SIGNATURES
 
    Pursuant  to  the requirements  of  Section 13  or  15(d) of  the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf of the undersigned, thereunto duly authorized.
                                          ONE LIBERTY PROPERTIES, INC.
 
Dated: March , 1996
                                          By:          /s/ MATTHEW GOULD
 
                                             -----------------------------------
                                                         Matthew Gould
                                                           PRESIDENT
 
    Pursuant to the requirements  of the Securities Exchange  Act of 1934,  this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant in the capacities indicated on the dates indicated.
 

                                                                                    
                      SIGNATURE                         TITLE                                      DATE
- ------------------------------------------------------  --------------------------------  -----------------------
 
                 /s/ FREDRIC H. GOULD
     -------------------------------------------        Chairman of the Board of              March 12, 1996
                   Fredric H. Gould                      Directors
 
                  /s/ MATTHEW GOULD
     -------------------------------------------        President and Chief Executive         March 12, 1996
                    Matthew Gould                        Officer
 
                  /s/ MARSHALL ROSE
     -------------------------------------------        Director                              March 12, 1996
                    Marshall Rose
 
                 /s/ JOSEPH A. AMATO
     -------------------------------------------        Director                              March 12, 1996
                   Joseph A. Amato
 
                /s/ CHARLES BIEDERMAN
     -------------------------------------------        Director                              March 12, 1996
                  Charles Biederman
 
                  /s/ ARTHUR HURAND
     -------------------------------------------        Director                              March 12, 1996
                    Arthur Hurand
 
                 /s/ DAVID W. KALISH
     -------------------------------------------        Vice President and Chief              March 12, 1996
                   David W. Kalish                       Financial Officer


                         REPORT OF INDEPENDENT AUDITORS
 
To the Board of Directors and Stockholders of
One Liberty Properties, Inc. and Subsidiaries
 
    We  have audited the accompanying consolidated balance sheets of One Liberty
Properties, Inc. and subsidiaries  (the "Company") as of  December 31, 1995  and
1994,  and the related  consolidated statements of  income, stockholders' equity
and cash flows  for each of  the three years  in the period  ended December  31,
1995.  Our audits also included the  financial statement schedules listed in the
Index  at  Item  14(a).  These  financial  statements  and  schedules  are   the
responsibility  of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
 
    We conducted  our  audits in  accordance  with generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence  supporting
the  amounts and disclosures in the financial statements. An audit also includes
assessing the  accounting  principles used  and  significant estimates  made  by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our  opinion, the  consolidated financial  statements referred  to  above
present fairly, in all material respects, the consolidated financial position of
One Liberty Properties, Inc. and subsidiaries at December 31, 1995 and 1994, and
the  consolidated results of their  operations and their cash  flows for each of
the three  years in  the period  ended  December 31,  1995, in  conformity  with
generally  accepted  accounting principles.  Also, in  our opinion,  the related
financial  statement  schedules,  when  considered  in  relation  to  the  basic
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.
 
                                          ERNST & YOUNG LLP
 
New York, New York
February 9, 1996
except for Note 10, as to which the date is
March 1, 1996
 
                                      F-1

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                     ASSETS
 


                                                                                            DECEMBER 31,
                                                                                   ------------------------------
                                                                                        1995            1994
                                                                                   --------------  --------------
                                                                                             
Real estate investments, at cost (Notes 3 and 4)
  Land...........................................................................  $    7,299,417  $    3,586,317
  Buildings......................................................................      18,154,919       8,163,951
                                                                                   --------------  --------------
                                                                                       25,454,336      11,750,268
    Less accumulated depreciation................................................       1,200,571         753,734
                                                                                   --------------  --------------
                                                                                       24,253,765      10,996,534
Mortgages receivable -- less unamortized discount -- (substantially all from
 related parties) -- (Note 3)....................................................       7,036,141      13,988,031
Senior secured note receivable -- less unamortized discount -- (related party) --
 (Note 3)........................................................................         528,575       2,108,193
Cash and cash equivalents........................................................       3,844,409       2,701,456
Unbilled rent receivable.........................................................          86,767         173,547
Rent, interest, deposits and other receivables...................................         696,790         360,599
Investments in U.S. Government obligations and securities -- (Note 2)............       1,274,747       3,972,256
Investments in BRT Realty Trust -- (related party) -- (Notes 2 and 3)............         127,704       3,219,481
Other............................................................................         191,348         132,676
                                                                                   --------------  --------------
                                                                                   $   38,040,246  $   37,652,773
                                                                                   --------------  --------------
                                                                                   --------------  --------------
 
                                      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Mortgages payable (Note 4).....................................................  $    6,590,154  $    6,983,647
  Accounts payable and accrued expenses..........................................         193,767         198,890
  Dividends payable..............................................................         748,346         498,400
                                                                                   --------------  --------------
                                                                                        7,532,267       7,680,937
                                                                                   --------------  --------------
Commitments and contingencies (Notes 5, 6 and 7).................................        --              --
Redeemable Convertible Preferred Stock, $1 par value; $1.60 cumulative annual
 dividend; 2,300,000 shares authorized; 808,776 shares issued; liquidation and
 redemption values of $16.50 (Note 5)............................................      12,796,475      12,643,998
                                                                                   --------------  --------------
Stockholders' equity:
  Common Stock, $1 par value; 25,000,000 shares authorized; 1,416,119 and
   1,399,119 shares issued and outstanding.......................................       1,416,119       1,399,119
  Paid-in capital................................................................      13,218,757      13,233,109
  Net unrealized loss on available-for-sale securities (Note 2)..................          (6,758)        (34,913)
  Accumulated undistributed net income...........................................       3,083,386       2,730,523
                                                                                   --------------  --------------
                                                                                       17,711,504      17,327,838
                                                                                   --------------  --------------
                                                                                   $   38,040,246  $   37,652,773
                                                                                   --------------  --------------
                                                                                   --------------  --------------

 
          See accompanying notes to consolidated financial statements.
 
                                      F-2

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
 


                                                                                 YEAR ENDED DECEMBER 31,
                                                                       -------------------------------------------
                                                                           1995           1994           1993
                                                                       -------------  -------------  -------------
                                                                                            
Revenues:
  Rental income (Note 6).............................................  $   2,665,457  $     983,373  $     726,336
  Interest from related parties (Note 3).............................      1,878,262      2,361,013      1,907,286
  Dividends from related party (Note 3)..............................         13,940        270,000         79,500
  Interest and other income..........................................        333,303        426,992        635,297
                                                                       -------------  -------------  -------------
                                                                           4,890,962      4,041,378      3,348,419
                                                                       -------------  -------------  -------------
Expenses:
  Depreciation.......................................................        446,837        180,557        101,953
  Interest -- mortgages payable......................................        453,684        484,440        282,254
  Management fee (Note 7)............................................       --              103,086         83,710
  Leasehold rent.....................................................        284,394       --             --
  General and administrative (Note 7)................................        609,745        412,158        355,120
                                                                       -------------  -------------  -------------
                                                                           1,794,660      1,180,241        823,037
                                                                       -------------  -------------  -------------
Operating income.....................................................      3,096,302      2,861,137      2,525,382
                                                                       -------------  -------------  -------------
Gain on sale of investments..........................................       --             --              168,631
Provision for valuation adjustment of real estate realized upon sale
 of real estate......................................................       --             --             (258,744)
                                                                       -------------  -------------  -------------
Loss on sale of real estate and investments..........................       --             --              (90,113)
                                                                       -------------  -------------  -------------
Net income...........................................................  $   3,096,302  $   2,861,137  $   2,435,269
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
Calculation of net income applicable to common stockholders:
  Net income.........................................................  $   3,096,302  $   2,861,137  $   2,435,269
  Less dividends and accretion on preferred stock....................      1,446,519      1,444,703      1,442,907
                                                                       -------------  -------------  -------------
Net income applicable to common stockholders.........................  $   1,649,783  $   1,416,434  $     992,362
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
Weighted average number of common shares outstanding.................      1,409,371      1,356,989      1,338,619
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
Net income per common share (Note 2):
  Operating income...................................................  $        1.17  $        1.04  $         .81
  Loss on sale of real estate and investments........................       --             --                 (.07)
                                                                       -------------  -------------  -------------
  Net income.........................................................  $        1.17  $        1.04  $         .74
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
Cash distributions per share:
  Common Stock.......................................................  $        1.03  $         .86  $         .94
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
  Preferred Stock....................................................  $        1.60  $        1.60  $        1.60
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------

 
          See accompanying notes to consolidated financial statements.
 
                                      F-3

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1995
 


                                                                               NET
                                                                            UNREALIZED
                                                                          GAIN (LOSS) ON
                                                                          AVAILABLE-FOR-   ACCUMULATED
                                              COMMON         PAID-IN           SALE       UNDISTRIBUTED
                                               STOCK         CAPITAL        SECURITIES      NET INCOME        TOTAL
                                           -------------  --------------  --------------  --------------  --------------
 
                                                                                           
Balances, January 1, 1993................  $   1,338,619  $   13,003,572   $    --        $    2,453,850  $   16,796,041
Net income...............................       --              --              --             2,435,269       2,435,269
Distributions -- Common Stock
  ($.94 per share).......................       --              --              --            (1,258,302)     (1,258,302)
Distributions -- Preferred Stock
  ($1.60 per share)......................       --              --              --            (1,294,042)     (1,294,042)
Accretion on Preferred Stock.............       --              (148,865)       --              --              (148,865)
                                           -------------  --------------  --------------  --------------  --------------
Balances, December 31, 1993..............      1,338,619      12,854,707        --             2,336,775      16,530,101
Net income...............................       --              --              --             2,861,137       2,861,137
Distributions -- Common Stock
  ($.86 per share).......................       --              --              --            (1,173,347)     (1,173,347)
Distributions -- Preferred Stock
  ($1.60 per share)......................       --              --              --            (1,294,042)     (1,294,042)
Accretion on Preferred Stock.............       --              (150,661)       --              --              (150,661)
Exercise of options......................         60,500         529,063        --              --               589,563
Net unrealized loss on available-for-sale
 securities (Note 2).....................       --              --              (34,913)        --               (34,913)
                                           -------------  --------------  --------------  --------------  --------------
Balances, December 31, 1994..............      1,399,119      13,233,109        (34,913)       2,730,523      17,327,838
Net income...............................                                                      3,096,302       3,096,302
Distributions -- Common stock
  ($1.03 per share)......................                                                     (1,449,397)     (1,449,397)
Distributions -- Preferred stock
  ($1.60 per share)......................                                                     (1,294,042)     (1,294,042)
Accretion on preferred stock.............                       (152,477)                                       (152,477)
Exercise of options......................         17,000         138,125                                         155,125
Net unrealized gain on available-for-sale
 securities (Note 2).....................                                        28,155                           28,155
                                           -------------  --------------  --------------  --------------  --------------
Balances, December 31, 1995..............  $   1,416,119  $   13,218,757   $     (6,758)  $    3,083,386  $   17,711,504
                                           -------------  --------------  --------------  --------------  --------------
                                           -------------  --------------  --------------  --------------  --------------

 
          See accompanying notes to consolidated financial statements.
 
                                      F-4

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 


                                                                                YEAR ENDED DECEMBER 31,
                                                                      -------------------------------------------
                                                                          1995           1994           1993
                                                                      -------------  -------------  -------------
                                                                                           
Cash flows from operating activities:
  Net income........................................................  $   3,096,302  $   2,861,137  $   2,435,269
  Adjustments to reconcile net income to net cash provided by
   operating activities:
    (Gain) on sale of investments...................................       --             --             (168,631)
    Provision for valuation adjustment..............................       --             --              258,744
    Depreciation and amortization...................................        479,645        236,841        148,200
    Amortization of discount on mortgage receivable -- related
     party..........................................................       --             --             (151,784)
  Changes in assets and liabilities:
      (Increase) decrease in rent, interest, deposits and other
       receivables..................................................       (241,681)       (54,660)       141,358
      (Decrease) increase in accounts payable and accrued
       expenses.....................................................         (5,123)        49,726         27,329
                                                                      -------------  -------------  -------------
        Net cash provided by operating activities...................      3,329,143      3,093,044      2,690,485
                                                                      -------------  -------------  -------------
Cash flows from investing activities:
  Additions to real estate..........................................     (3,819,323)    (5,549,182)      --
  Costs of acquisition of real estate and mortgage receivable from
   Gould Investors L.P. -- related party............................        (90,514)      --             --
  Collection of mortgages receivable -- (including $148,291,
   $236,625 and $141,432 from related parties in 1995, 1994 and
   1993)............................................................        169,388        249,712        153,308
  Collection of senior secured note receivable -- BRT Realty Trust
   -- related party.................................................      1,579,618        928,103        178,846
  Investment in mortgages receivable -- related parties, net of
   discount.........................................................       --             --           (6,080,582)
  Investment in senior secured note receivable -- BRT Realty Trust
   -- related party, net of discount................................       --             --           (3,215,142)
  Sale of real estate, net..........................................       --             --              283,222
  Investment in BRT Realty Trust shares of beneficial interest......       --             --             (583,142)
  Sale of U.S. Government obligations and securities, net...........      2,806,713        739,188      9,266,507
  Other.............................................................        (14,986)      --             --
                                                                      -------------  -------------  -------------
        Net cash provided by (used in) investing activities.........        630,896     (3,632,179)         3,017
                                                                      -------------  -------------  -------------
Cash flows from financing activities:
  Proceeds from mortgages payable...................................      2,413,350      4,250,000       --
  Satisfaction of mortgage payable..................................     (2,753,700)      --             --
  Payment of financing costs........................................        (85,225)      (100,355)      --
  Repayment of mortgages payable....................................        (53,143)       (20,053)      --
  Exercise of stock options.........................................        155,125        589,563       --
  Cash distributions -- Common Stock................................     (1,199,451)    (1,132,319)    (1,124,440)
  Cash distributions -- Preferred Stock.............................     (1,294,042)    (1,294,042)    (1,294,042)
                                                                      -------------  -------------  -------------
        Net cash (used in) provided by financing activities.........     (2,817,086)     2,292,794     (2,418,482)
                                                                      -------------  -------------  -------------
Net increase in cash and cash equivalents...........................      1,142,953      1,753,659        275,020
Cash and cash equivalents at beginning of year......................      2,701,456        947,797        672,777
                                                                      -------------  -------------  -------------
Cash and cash equivalents at end of year............................  $   3,844,409  $   2,701,456  $     947,797
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------

 
          See accompanying notes to consolidated financial statements.
 
                                      F-5

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 


                                                                                 YEAR ENDED DECEMBER 31,
                                                                        ------------------------------------------
                                                                             1995          1994          1993
                                                                        --------------  -----------  -------------
                                                                                            
Supplemental disclosures of cash flow information:
  Cash paid during the year for interest expense......................  $      467,116  $   430,076  $     282,254
  Cash paid during the year for income taxes..........................          43,784       10,981         13,849
Supplemental schedule of noncash investing and financing activities:
  Acquisition of real estate and mortgage receivable from Gould
   Investors L.P., a related party....................................      (9,861,729)     --            --
  Consideration for acquisition from Gould Investors L.P.:
    Extinguishment of mortgage receivable.............................       6,850,000      --            --
    Transfer of BRT preferred stock...................................       2,455,355      --            --
    Transfer of BRT common stock......................................         556,374      --            --
  Cancellation of secured note receivable from BRT Realty Trust, a
   related party, in exchange for 1,030,000 of newly issued,
   convertible redeemable preferred shares............................        --            --           2,455,355
  Accretion on Preferred Stock........................................         152,477      150,661        148,865

 
          See accompanying notes to consolidated financial statements.
 
                                      F-6

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1995
 
NOTE 1 -- ORGANIZATION AND BACKGROUND
    One Liberty Properties, Inc. (the "Company") was incorporated in 1982 in the
state  of Maryland. The  Company is a self-managed  Real Estate Investment Trust
("REIT") which  currently  participates  in net  leasing  transactions  and  has
engaged in other real property transactions and in real property mortgages.
 
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
    PRINCIPLES OF CONSOLIDATION
 
    The  consolidated financial statements  include the accounts  of One Liberty
Properties, Inc. and its wholly-owned subsidiaries. Material intercompany  items
and  transactions have  been eliminated.  The Company  and its  subsidiaries are
hereinafter referred to as the Company.
 
    RECLASSIFICATION OF FINANCIAL STATEMENTS
 
    Certain amounts reported in previous consolidated financial statements  have
been  reclassified  in  the accompanying  consolidated  financial  statements to
conform to the current year's presentation.
 
    USE OF ESTIMATES
 
    The preparation of  the financial  statements in  conformity with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect  the amounts  reported in the  financial statements  and
accompanying notes. Actual results could differ from those estimates.
 
    INCOME RECOGNITION
 
    Rental  income includes the base rent that each tenant is required to pay in
accordance with the terms of their respective leases reported on a straight-line
basis over  the initial  term  of the  lease.  Mortgage receivable  discount  is
amortized  over the remaining life, utilizing  the interest method, based on the
Company's evaluation  of  the  collectibility  of the  carrying  amount  of  the
mortgage.  Note receivable discount is amortized  over the remaining life, based
on principal collections.
 
    MEASUREMENT OF LOAN IMPAIRMENT
 
    During the year  ended December 31,  1995 the Company  adopted Statement  of
Financial  Accounting Standards No.  114 ("SFAS #114"),  Accounting by Creditors
for Impairment of a Loan. SFAS  #114 defines impairment as the probability  that
all  amounts due under a  loan agreement will not  be collected according to the
contractual terms. SFAS #114  requires measurement of  loan impairment based  on
either  the present value of expected future cash flows discounted at the loan's
effective interest  rate  or as  an  expedient, the  fair  value of  the  loan's
collateral.  If  the measure  of the  impaired  loan is  less than  the recorded
investment in the loan, the Company shall recognize an impairment.
 
    The Company  did  not have  any  impaired loans  at  December 31,  1995  and
December 31, 1994.
 
    DEPRECIATION
 
    Depreciation  of buildings is  computed on the  straight-line method over an
estimated useful life of 40 years for commercial properties and 27 and one  half
years for residential properties.
 
    DEFERRED FINANCING COSTS
 
    Mortgage  costs are deferred and amortized on a straight-line basis over the
terms of the respective debt obligations.
 
                                      F-7

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                               DECEMBER 31, 1995
 
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    FEDERAL INCOME TAXES
 
    The Company  has qualified  as  a real  estate  investment trust  under  the
applicable  provisions of the Internal Revenue Code. Under these provisions, the
Company will not be  subject to federal income  taxes on amounts distributed  to
stockholders  providing it distributes  substantially all of  its taxable income
and meets certain other conditions.
 
    Distributions made during 1995  and 1994 included  approximately 8% and  2%,
respectively, of capital gains, with the balance ordinary income.
 
    INVESTMENTS IN DEBT AND EQUITY SECURITIES
 
    Effective  January  1,  1994,  the Company  adopted  Statement  of Financial
Accounting Standards #115, Accounting for Certain Investments in Debt and Equity
Securities. The SFAS addresses accounting  and reporting for (1) investments  in
equity  securities  that  have  readily determinable  fair  values  and  (2) all
investments in debt securities.  The Company has  determined in accordance  with
SFAS  #115 that its investment  in common shares of  BRT Realty Trust ("BRT"), a
related party of the  Company (see Note  3 as to  the Company's relationship  to
BRT),  and  its investment  in U.S.  Government  obligations and  securities are
"available-for-sale" securities.
 
    The accounting treatment of such securities at December 31, 1995 and 1994 is
fair value, with unrealized holding gains and losses excluded from earnings  and
reported as a separate component of stockholders' equity.
 
    The  Company's investment in 30,048 beneficial shares of BRT, purchased at a
cost of  $97,656 has  a  fair market  value at  December  31, 1995  of  $127,704
resulting  in  an unrealized  holding gain  of  $30,048. The  cost basis  of the
Company's investment in U.S. Government  obligations and securities, which  have
an  average maturity of two to three years,  is $1,310,552 and the fair value is
$1,274,747, resulting in an unrealized holding loss of $35,805. In addition, the
Company has invested $16,600 in equity securities which have a fair market value
of $15,599 at December  31, 1995. The aggregate  net unrealized holding loss  of
$6,758 is included as a separate component of stockholders' equity.
 
    FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    The  following methods and assumptions were  used to estimate the fair value
of each class of financial instruments:
 
    Mortgages receivable:  Three  mortgage  loans  of  the  Company  aggregating
$1,201,907  are  currently fixed  at  interest rates  which  approximate market.
Accordingly, the carrying amounts of  the mortgage loans approximate their  fair
values.  The remaining mortgage loan was purchased by the Company at a discount,
which is being  amortized by  the Company  over the  life of  the mortgage.  The
Company  expects  to receive  a yield  to maturity  of approximately  14.5%. The
Company estimates the fair value of the  loan to approximate its face amount  of
$8,816,652  at December 31, 1995. The loan is being carried on the balance sheet
at $5,834,234, the difference representing the remaining unamortized discount of
$2,982,418.
 
    Senior secured note receivable: Due to the high paydown rate the Company has
experienced on this note and which the Company anticipates will continue on  the
remaining  balance (which matures June  1997) and due to  the note providing for
interest at the  prime rate  plus one percent,  the Company  estimates the  fair
value  of the note  to approximate its  face amount of  $760,638 at December 31,
1995. The note is being carried on the balance sheet at $528,575, the difference
representing the remaining unamortized discount of $232,063.
 
                                      F-8

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                               DECEMBER 31, 1995
 
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Cash and  short  term investments:  The  carrying amounts  reported  in  the
balance sheet for these instruments approximate their fair values.
 
    Investments in U.S. Government obligations and securities and investments in
BRT  Realty Trust: Since these  investments are considered "available-for-sale",
they are reported in the balance sheet based upon quoted market prices.
 
    Mortgages payable: The Company  determined the estimated  fair value of  its
debt  by discounting future cash payments  at their effective rates of interest,
which  approximate  current  market  rates   of  interest  for  similar   loans.
Accordingly,  there is no material difference  between their carrying amount and
fair value.
 
    Redeemable convertible  preferred  stock: Based  on  the December  31,  1995
quoted  market  price per  share  of $16.50,  the  fair value  of  the Company's
redeemable convertible preferred stock is $13,344,804.
 
    ACCRETION ON PREFERRED STOCK
 
    The Company has  Preferred Stock  outstanding which is  both redeemable  and
convertible. The stock was initially recorded in the financial statements at its
fair value based upon the initial average trades on the American Stock Exchange.
The  amount by which  the redemption value  exceeds the carrying  value is being
accreted using the interest method over the life of the redemption period.
 
    STOCK BASED COMPENSATION
 
    The Company grants stock  options for a fixed  number of shares to  officers
and  employees with an exercise  price equal to the fair  value of the shares at
the date of grant.  The Company accounts for  stock option grants in  accordance
with  Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and, accordingly,  recognizes no compensation  expense for the  stock
option grants.
 
    EARNINGS PER COMMON SHARE
 
    Primary  earnings per common  share data is based  upon the weighted average
number of common  shares and  assumed equivalent shares  outstanding during  the
year,  after  giving  effect to  the  dividends  and accretion  relating  to the
Company's Preferred Stock. The Preferred Stock is not considered a common  stock
equivalent for the purpose of computing earnings per share because their assumed
conversion  is anti-dilutive. The assumed exercise of outstanding share options,
using the treasury  stock method,  is not  materially dilutive  for the  primary
earnings per common share computation.
 
    Fully  diluted earnings  per common  share are based  on an  increase in the
number of  common shares  that would  be outstanding  assuming the  exercise  of
common  share options.  Since fully diluted  earnings per share  amounts are not
materially dilutive, such amounts are not presented.
 
    CASH EQUIVALENTS
 
    Cash equivalents consist  of highly  liquid investments  with maturities  of
three months or less when purchased.
 
    IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
    In  March  1995,  the FASB  issued  Statement  No. 121,  ACCOUNTING  FOR THE
IMPAIRMENT OF LONG-LIVED  ASSETS AND FOR  LONG-LIVED ASSETS TO  BE DISPOSED  OF,
which  requires the Company  make a review  of each real  estate asset owned for
which indicators of impairment  are present, to  determine whether the  carrying
amount  of  the asset  will  be recovered.  Recognition  of impairment  would be
required if  the undiscounted  cash flows  estimated to  be generated  by  those
assets are less than the assets' carrying
 
                                      F-9

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                               DECEMBER 31, 1995
 
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
amount.  Measurement would  be based  upon the fair  market value  of the asset.
Statement 121  also addresses  the  accounting for  long-lived assets  that  are
expected  to be disposed of.  The Company will adopt  Statement 121 in the first
quarter of 1996 and, based on current circumstances, does not believe the effect
of adoption will be material.
 
NOTE 3 -- REAL ESTATE PURCHASES, MORTGAGES AND SENIOR SECURED NOTE RECEIVABLE
          AND PRINCIPAL RELATED PARTY TRANSACTIONS
 
    REAL ESTATE PURCHASES
 
    On January  19,  1995,  the  Company  acquired  from  Gould  Investors  L.P.
("Gould")  in a  single transaction, sixteen  net leased  real estate properties
(including the reacquisition of  thirteen retail locations  net leased to  Total
Petroleum  and sold to Gould in December  1991 for an aggregate consideration of
$8,107,020) and one mortgage receivable. The properties are all net leased on  a
long  term basis to third parties with  current expirations ranging from 2004 to
2051, and have  certain tenant renewal  rights. The consideration  paid for  the
properties  was comprised of 1) the extinguishment of a $6,850,000 mortgage loan
which the Company held on thirteen  of the acquired properties and 2)  1,030,000
restricted  convertible preferred shares of BRT and 173,719 Beneficial Shares of
BRT owned by the Company. The closing price of the BRT Beneficial Shares on  the
New  York Stock Exchange on  January 19, 1995 (the  date of the transaction) was
$3 5/8.  The preferred  shares do  not trade  publicly. The  Company's Board  of
Directors  received,  prior  to  and  as  a  condition  to  consummation  of the
transaction, valuation  analyses  on  the sixteen  properties  acquired  and  an
opinion  from an independent  investment banker relating to  the fairness of the
transaction. The Company recorded the assets acquired at the carrying amount  of
the  assets exchanged (plus transaction  costs), resulting in a reclassification
from investments in BRT and mortgages receivable to real estate investments,  at
cost.
 
    In  connection  with  the  Total  Petroleum  lease  agreement,  the  Company
deposited $2,000,000  with an  independent escrow  agent, which  represents  the
estimated  maximum  amount  to remediate  environmental  problems  discovered at
certain locations. The  agreement limits  the maximum  payment to  approximately
$350,000 per location. The escrow agent currently holds approximately $1,345,000
in  escrow as of December 1995, which  the Company believes is adequate to cover
any additional environmental costs.
 
    On January 19, 1995 Gould  owned 917,400 shares of  the common stock of  the
Company  or 65.6%  of the  equity interest  and 50.9%  of the  voting rights. At
December 31, 1995 Gould owned 715,227 shares of the common stock of the  Company
or 50.5% of the equity interest and 39.3% of the voting rights.
 
    On  June 14,  1994, the Company  acquired from a  wholly-owned subsidiary of
BRT, the  fee  interest  of a  property  located  in midtown  Manhattan,  for  a
consideration of $5,525,000, plus closing costs of $124,537. The transaction and
the purchase price were unanimously approved by the independent directors of the
Company,  subject to the receipt of  an independent real estate appraisal. After
receipt of  an  independent appraisal  substantiating  the purchase  price,  the
acquisition  was  consummated.  Simultaneously with  the  purchase,  the Company
obtained a $4,250,000 nonrecourse  mortgage loan from  a local institution.  The
fee position was acquired subject to a long term net lease with a current annual
rent of $550,000, with increases in the net rent every five years. The next rent
increase will be in 1999.
 
    At  December  31,  1994,  the Company  owned  203,767  shares  of Beneficial
Interest of BRT and 1,030,000 shares  of BRT preferred stock, (representing  all
outstanding  shares of preferred stock) accounting for 14.7% of the total voting
power of BRT. At December 31, 1995, the Company's
 
                                      F-10

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                               DECEMBER 31, 1995
 
NOTE 3 -- REAL ESTATE PURCHASES, MORTGAGES AND SENIOR SECURED NOTE RECEIVABLE
          AND PRINCIPAL RELATED PARTY TRANSACTIONS (CONTINUED)
investment in BRT was reduced to 30,048 shares of Beneficial Interest accounting
for less than 1% of the total voting power of BRT. For the years ended  December
31,  1995,  1994 and  1993, the  Company earned  $13,940, $270,000  and $79,500,
respectively, on its shares of BRT preferred stock.
 
    MORTGAGES RECEIVABLE
 
    Mortgages  receivable  at  December  31,  1995  and  1994  consists  of  the
following:
 


AFFILIATES                                                                         1995            1994
- -----------------------------------------------------------------------------  -------------  --------------
                                                                                     
   (i)     Gould Investors L.P...............................................  $    --        $    6,850,000
  (ii)     Entity substantially owned by Gould Investors L.P. (net of
           unamortized discount of $2,982,418 and $3,301,918)................      5,834,234       5,922,524
  (iii)    Entity substantially owned by Gould Investors L.P.................        860,000         920,000
 
NON-AFFILIATES
- -----------------------------------------------------------------------------
           Other.............................................................        341,907         295,507
                                                                               -------------  --------------
                                                                               $   7,036,141  $   13,988,031
                                                                               -------------  --------------
                                                                               -------------  --------------

 
       i)
    This mortgage loan arose from the sale to Gould in 1991 described above, and
    provided for interest only payments until maturity, with an initial interest
    rate  of ten percent for  the first five years and  ten and one half percent
    for the last  five years. The  interest income amounted  to $33,145 for  the
    year  ended December 31, 1995 and $685,000 each for the years ended December
    31, 1994 and 1993. The mortgage loan was extinguished as part of the January
    19, 1995 transaction. See "Real Estate Purchases" above.
 
      ii)
   On July  30, 1993,  as a  result of  a public  auction, the  Federal  Deposit
   Insurance  Corporation  sold  to an  entity  related  to the  Company,  for a
   consideration of $19,000,300, a $23,000,000 first mortgage, providing for  an
   interest  rate of  8% per  annum, secured  by an  office building  located in
   Manhattan, New York. The office building which secures this mortgage is owned
   by a partnership in which  Gould is General Partner  and in which Gould  owns
   substantially  all  of  the partnership  interests.  Simultaneously  with the
   purchase, $13,181,000 was advanced by  an unrelated party, $6,080,000  (which
   includes  closing costs)  was advanced by  the Company, and  the mortgage was
   severed into a first  mortgage of $13,181,000 paying  interest at 9 1/2%  per
   annum  held  by  the  unrelated  party and  a  subordinate  wrap  mortgage of
   $9,819,000 held by the Company. Both the first mortgage and the wrap mortgage
   mature in 2005 at which time the  first mortgage will be fully amortized  and
   the  wrap mortgage will have a principal balance of approximately $4,000,000.
   The Company receives monthly principal  and interest payments of $79,318  and
   at  December 31,  1995 and  1994 its  principal balance  had been  reduced to
   approximately  $8,817,000  and  $9,224,000,  respectively.  The  discount  of
   $3,738,400  is being amortized by the Company  over the life of the mortgage.
   The Company expects to  receive a yield to  maturity of approximately  14.5%.
   Interest income, including amortization of the discount of $319,500, $310,200
   and $126,300, amounted to $861,750, $873,459 and $386,748 for the years ended
   1995, 1994 and 1993, respectively.
 
   The building which secures the first mortgage and the wrap mortgage is leased
   to  the City of New York.  The lease expires in 2005  with an option to renew
   for an additional five years  and provides the City  with a limited right  of
   termination.  The first mortgage and the wrap mortgage are nonrecourse to the
   owner of the building.
 
                                      F-11

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                               DECEMBER 31, 1995
 
NOTE 3 -- REAL ESTATE PURCHASES, MORTGAGES AND SENIOR SECURED NOTE RECEIVABLE
          AND PRINCIPAL RELATED PARTY TRANSACTIONS (CONTINUED)
     iii)
    In January 1992, the Company made a first mortgage loan to a partnership  in
    which  Gould is General Partner and in which Gould owns substantially all of
    the partnership  interests, in  the amount  of $1,200,000.  The mortgage  is
    secured  by an apartment building in  Manhattan, New York. The maturity date
    of the loan was extended  to January 31, 1997 from  its due date of  January
    31,  1995 and the interest rate was increased to 11% per annum, effective as
    of February  1, 1995.  The mortgage  note bore  interest at  11% per  annum,
    through  January  31, 1994  and 10%  through January  31, 1995  with minimum
    amortization of $5,000 per month. The unpaid balance at December 31, 1995 is
    $860,000. The interest income amounted to $96,863, $99,859 and $121,275  for
    the years ended 1995, 1994 and 1993, respectively.
 
    The  transactions listed above in items i) through iii) were approved by the
independent directors of the Company. The directors who are affiliated with  the
Company and Gould abstained from the voting on these transactions.
 
    Annual  maturities  of real  estate  loans during  the  next five  years and
thereafter are summarized as follows:
 


YEAR ENDING DECEMBER 31,
- ------------------------------------------------------------------------------
                                                                             
1996..........................................................................  $      778,508
1997..........................................................................       1,260,461
1998..........................................................................         484,097
1999..........................................................................         508,251
2000..........................................................................         532,820
2001 and thereafter...........................................................       6,454,422
                                                                                --------------
      Total...................................................................      10,018,559
Less: Unamortized discount....................................................       2,982,418
                                                                                --------------
Net carrying amount -- mortgages receivable...................................  $    7,036,141
                                                                                --------------
                                                                                --------------

 
    SENIOR SECURED NOTE RECEIVABLE
 
    On February 26, 1993 the Company purchased from an unrelated entity 28.9% of
a 16.67% portion  of an  indebtedness due to  various institutions  by BRT.  The
Company  paid $3,215,142 for a $4,626,720 share  of the principal amount of such
indebtedness. The discount of  $1,411,578 is being amortized  by the Company  as
principal  payments are received. The principal earns interest at prime plus one
percent (9.5%  as of  December 31,  1995). At  December 31,  1995 and  1994  the
Company's  portion  of  the  indebtedness  has  been  reduced  to  $760,638  and
$3,033,774, respectively, and  the carrying amount  net of unamortized  discount
amounted  to  $528,575  and $2,108,193.  The  purchase  of the  portion  of this
indebtedness was  approved by  the  independent directors  of the  Company.  The
directors  who are affiliated with the Company and BRT abstained from the voting
on this transaction.
 
                                      F-12

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                               December 31, 1995
 
NOTE 4 -- MORTGAGES PAYABLE
    At  December 31, 1995  there are four outstanding  mortgages payable, all of
which are  secured  by individual  real  estate investments  with  an  aggregate
carrying value of $9,368,505 before accumulated depreciation. The mortgages bear
interest at rates ranging from 8.5% to 9.1%, and mature between 1999 and 2002.
 
    Scheduled principal repayments during the next five years and thereafter are
as follows:
 


YEAR ENDING DECEMBER 31,
- -------------------------------------------------------------------------------
                                                                              
1996...........................................................................  $      90,477
1997...........................................................................        100,397
1998...........................................................................        109,501
1999...........................................................................      4,042,260
2000...........................................................................        925,307
2001 and thereafter............................................................      1,322,212
                                                                                 -------------
    Total......................................................................  $   6,590,154
                                                                                 -------------
                                                                                 -------------

 
NOTE 5 -- REDEEMABLE CONVERTIBLE PREFERRED STOCK
    The Preferred Stock has the following rights, qualifications and conditions:
(i)  a  cumulative dividend  preference of  $1.60  per share  per annum;  (ii) a
liquidation preference of $16.50 per share; (iii) a right to convert each  share
of  Preferred Stock  at any  time into  .825 of  a share  of Common  Stock; (iv)
redeemable by the Company after July 1, 1994 at $17.30 per share and at premiums
declining to  $16.50 on  July 1,  1998 and  thereafter; (v)  an option  by  each
preferred  holder to put the Preferred Stock  to the Company at $16.50 per share
for the period commencing  July 1, 1999  and ending on  September 28, 1999;  and
(vi) one-half vote per share.
 
NOTE 6 -- REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS
    The   rental  properties  owned  at  December  31,  1995  are  leased  under
noncancellable operating leases  to corporate tenants  with current  expirations
ranging  from  1996  to 2051,  with  certain  tenant renewal  rights.  All lease
agreements are net lease arrangements which  require the tenant to pay not  only
rent  but all the expenses of  the leased property including maintenance, taxes,
utilities and insurance.  Certain lease agreements  provide for periodic  rental
increases and others provide for increases based on the consumer price index.
 
    The  minimum future rentals to be received on the operating leases in effect
at December 31, 1995 over the next five years are as follows:
 


YEAR ENDING DECEMBER 31,
- -------------------------------------------------------------------------------
                                                                              
1996...........................................................................  $   3,087,270
1997...........................................................................      2,724,696
1998...........................................................................      2,751,804
1999...........................................................................      2,821,392
2000...........................................................................      2,785,113

 
    Included in the minimum future rentals is a property that an unrelated third
party owns the fee  title to. The  Company pays annual  fixed leasehold rent  of
$288,833  through April 2010 and has a right to extend the lease for up to three
15 year and one 14 year renewal options.
 
    The Company leases  eleven of its  properties to a  retail chain of  stores,
with  the  primary  lease term  ending  on  December 31,  1996.  The  tenant has
exercised   its   option   to   renew    with   respect   to   three   of    the
 
                                      F-13

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                               DECEMBER 31, 1995
 
NOTE 6 -- REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (CONTINUED)
locations and has otherwise extended a lease with respect to one location. It is
uncertain  whether the remaining seven  leases, which represent approximately 6%
of the Company's total revenues for 1995, will be renewed.
 
    At December 31, 1995, the Company  has recorded an unbilled rent  receivable
aggregating  $86,767,  representing rent  reported on  a straight-line  basis in
excess of rental  payments required  under the initial  term of  the lease.  The
minimum  future  rentals  presented  above  include  amounts  applicable  to the
repayment of these unbilled rent receivables.
 
    For the  year  ended  December  31, 1995,  the  following  assets  generated
revenues  for  the  Company in  amounts  exceeding  10% of  the  Company's total
revenues:
 


                                                                                 FOR THE YEAR ENDED
                                                                                 DECEMBER 31, 1995
                                                                              ------------------------
                                                                                           % OF TOTAL
DESCRIPTION                                                                     REVENUE     REVENUES
- ----------------------------------------------------------------------------  -----------  -----------
                                                                                     
Senior Secured Note Receivable (a)..........................................  $   886,503       18.13%
Mortgage receivable - related party (b).....................................      861,750       17.62
Total Petroleum properties (c)..............................................      810,379       16.57
Residential and retail apartment building...................................      550,000       11.25

 
- ------------------------
(a) See note 3 -- Senior Secured Note Receivable for other information.
 
(b) See note 3 -- Mortgages Receivable (ii) for other information.
 
(c) Total  Petroleum,  an  operator  of  combination  gas  station  and   retail
    convenience stores, is a tenant in thirteen of the Company's properties, all
    located in the State of Michigan.
 
NOTE 7 -- MANAGEMENT AGREEMENT AND OTHER RELATED PARTY TRANSACTIONS
    On  December 31,  1994, the  management agreement  which had  been in effect
since July  1989 was  terminated and  on  January 1,  1995, the  Company  became
self-managed  incurring  payroll and  payroll  related costs  for  the Company's
President of $137,460. Prior to January 1,  1995, the Company was managed by  an
entity ("Manager") controlled by the Chairman and Vice Chairman of the Company's
Board  of Directors, and its President, all of whom are officers of the managing
general partner  of  Gould.  The  Manager was  responsible  for  the  day-to-day
operations  of the Company, served as a  consultant to the Company in connection
with certain  policy decisions  made by  the Company's  Board of  Directors  and
performed  various services in connection with  property and asset management on
behalf of  the Company.  The Manager  was  entitled to  an annual  fee,  payable
quarterly, equal to 2.5% of the Company's gross revenues, subject to limitations
(as  defined in  the management  agreement). Such  fees amounted  to $83,710 and
$103,086 during the  years ended  December 31,  1993 and  1994 respectively.  In
addition,  during the year ended December 31,  1994, the Company paid $42,500 to
the  Manager  for  services  rendered  in  connection  with  obtaining  mortgage
financing on a property the Company purchased in June 1994.
 
    Gould  charged the Company $127,806, $167,727  and $210,357 during the years
ended December 31, 1993, 1994, and 1995, respectively, for allocated general and
administrative expenses and payroll based on time incurred by various employees.
 
    A company controlled  by certain trustees  and officers of  the Company  was
paid mortgage brokerage fees of $24,134 during the year ended December 31, 1995.
 
    See Note 3 for other related party transaction information.
 
                                      F-14

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                               DECEMBER 31, 1995
 
NOTE 8 -- STOCK OPTIONS
    On  November 17, 1989, the directors of  the Company granted, under the 1989
Stock Option Plan, options to purchase a total of 110,000 shares of Common Stock
at $11 per share to a number  of the Company's officers and employees. In  1994,
one  officer exercised 20,000 of these options  and the balance expired. On June
6, 1991, the directors of the Company  granted to each of the three  independent
directors  of the Company an option to  purchase 5,000 shares of Common Stock at
$9.125 per share. On March 4, 1993,  the Board of Directors granted, also  under
the 1989 Stock Option Plan, options to purchase a total of 100,000 common shares
at $9.125 per share to a number of officers and employees of the Company.
 
    Stock  options are granted at per share amounts at least equal to their fair
market value at the date of grant. The options are cumulatively exercisable at a
rate of 25% per annum and expire five years after the date of grant.
 
    A maximum of 225,000 common shares were reserved for issuance under the 1989
Stock Option Plan, of which 90,000 are available for grant at December 31, 1995.
 
    Changes in the  number of common  shares under all  option arrangements  are
summarized as follows:
 


                                                                        YEAR ENDED DECEMBER 31,
                                                               -----------------------------------------
                                                                  1995         1994           1993
                                                               -----------  -----------  ---------------
                                                                                
Outstanding at beginning of period...........................       74,500      225,000          125,000
Granted......................................................      --           --               100,000
Option prices per share granted..............................      --           --       $         9.125
Exercisable at end of period.................................       32,500       20,750          142,500
Exercised....................................................       17,000       60,500        --
Expired......................................................      --            90,000        --
Outstanding at end of period.................................       57,500       74,500          225,000
Option prices per share outstanding..........................  $     9.125  $     9.125  $   9.125 - $11

 
                                      F-15

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                               DECEMBER 31, 1995
 
NOTE 9 -- QUARTERLY FINANCIAL DATA (UNAUDITED):
 


                                                                                    QUARTER ENDED
                                                                 ---------------------------------------------------
                                                                  MARCH 31     JUNE 30   SEPTEMBER 30   DECEMBER 31
                                                                 -----------  ---------  -------------  ------------
                                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                            
1995
  Revenues.....................................................   $   1,217   $   1,178   $   1,367(a)   $    1,129
  Net income...................................................         742         740         907(a)          707
  Net income applicable to common stockholders.................         380         378         545(a)          347
  Net income per common share..................................         .27         .27         .39(a)          .24

 
- ------------------------
(a) Includes  an additional  amount of  approximately $200,000  ($.14 per common
    share) of income from accelerated  principal payments on the Senior  Secured
    Note Receivable (see Note 3).
 


                                                                                      QUARTER ENDED
                                                                  ------------------------------------------------------
                                                                   MARCH 31      JUNE 30    SEPTEMBER 30    DECEMBER 31
                                                                  -----------  -----------  -------------  -------------
                                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                               
1994
  Revenues......................................................   $     946    $     952     $   1,168      $     975
  Net income....................................................         736          656           742            727
  Net income applicable to common stockholders..................         375          295           381            365
  Net income per common share...................................         .28          .22           .28            .26

 
NOTE 10 -- SUBSEQUENT EVENT
    On  March 1,  1996 the  Company entered  into a  $5,000,000 revolving credit
agreement ("Credit Agreement") with Bank Leumi Trust Company of New York  ("Bank
Leumi").  Borrowings  under the  Credit Agreement  will be  used to  provide the
Company with  funds to  acquire  properties. The  Credit Agreement  will  mature
February  28, 1999 with a  right for the Company  to extend the Credit Agreement
until February 29, 2000. As collateral for any advances to be made by Bank Leumi
under the Credit Agreement,  the Company has  pledged the stock  of each of  its
subsidiaries and certain mortgages receivable.
 
    The Company has not drawn down any funds under the Credit Agreement.
 
                                      F-16

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
     SCHEDULE III -- CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
 
                               DECEMBER 31, 1995


                                                                   GROSS AMOUNT AT WHICH CARRIED AT
                                INITIAL COST TO COMPANY                   DECEMBER 31, 1995
                         --------------------------------------  ------------------------------------  ACCUMULATED     DATE OF
                         ENCUMBRANCES      LAND      BUILDINGS      LAND      BUILDINGS      TOTAL     DEPRECIATION  CONSTRUCTION
                         -------------  ----------  -----------  ----------  -----------  -----------  ------------  ------------
                                                                                             
FREE STANDING
RETAIL LOCATIONS:
Houston, TX............   $   --        $  700,000  $   774,850  $  700,000  $   774,850  $ 1,474,850   $  169,498       1980
Killeen, TX............       729,311      267,942    1,071,768     267,942    1,071,768    1,339,710       10,048       1995
Cedar Rapids, IA.......       990,000      280,292    1,121,164     280,292    1,121,164    1,401,456       15,182       1995
Miscellaneous..........       692,100    4,941,347   10,747,791   4,941,347   10,747,791   15,689,138      756,970     Various
 
APARTMENT
BUILDING:
New York, NY...........     4,178,743    1,109,836    4,439,346   1,109,836    4,439,346    5,549,182      248,873       1910
                         -------------  ----------  -----------  ----------  -----------  -----------  ------------
                          $ 6,590,154   $7,299,417  $18,154,919  $7,299,417  $18,154,919  $25,454,336   $1,200,571
                         -------------  ----------  -----------  ----------  -----------  -----------  ------------
                         -------------  ----------  -----------  ----------  -----------  -----------  ------------
 

                                             LIFE ON WHICH
                                            DEPRECIATION IN
                                             LATEST INCOME
                                             STATEMENT IS
                          DATE ACQUIRED    COMPUTED (YEARS)
                         ----------------  -----------------
                                     
FREE STANDING
RETAIL LOCATIONS:
Houston, TX............   April 1, 1987             40
Killeen, TX............  August 18, 1995            40
Cedar Rapids, IA.......   June 29, 1995             40
Miscellaneous..........      Various                40
APARTMENT
BUILDING:
New York, NY...........   June 14, 1994             27.5

 
                                      F-17

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
 
             NOTES TO SCHEDULE III -- CONSOLIDATED REAL ESTATE AND
                            ACCUMULATED DEPRECIATION
 
Reconciliation of "Real Estate and Accumulated Depreciation"
 


                                                                               YEAR ENDED DECEMBER 31,
                                                                    ---------------------------------------------
                                                                         1995            1994           1993
                                                                    --------------  --------------  -------------
                                                                                           
Investment in real estate:
Balance, beginning of year........................................  $   11,750,268  $    6,201,086  $   6,780,086
Addition -- land and buildings....................................      13,704,068       5,549,182       --
Deduction -- cost of property sold................................        --              --             (579,000)
                                                                    --------------  --------------  -------------
Balance, end of year..............................................  $   25,454,336  $   11,750,268  $   6,201,086
                                                                    --------------  --------------  -------------
                                                                    --------------  --------------  -------------
 
Accumulated depreciation:
Balance, beginning of year........................................  $      753,734  $      573,177  $     508,258
Addition -- depreciation..........................................         446,837         180,557        101,953
Deduction -- accumulated depreciation related to property sold....        --              --              (37,034)
                                                                    --------------  --------------  -------------
Balance, end of year..............................................  $    1,200,571  $      753,734  $     573,177
                                                                    --------------  --------------  -------------
                                                                    --------------  --------------  -------------

 
    The  aggregate cost  of the  properties is the  same for  federal income tax
purposes.
 
                                      F-18

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
 
                  SCHEDULE IV -- MORTGAGE LOANS ON REAL ESTATE
 
                               DECEMBER 31, 1995


                                 NUMBER OF                          MATURITY                                   FACE AMOUNT OF
         DESCRIPTION               LOANS         INTEREST RATE        DATE        PERIODIC PAYMENT TERMS          MORTGAGE
- -----------------------------  -------------  --------------------  ---------  -----------------------------  -----------------
                                                                                               
First mortgage loans:
  Land and building/ retail              1            9.75%          Jul-96    $3,550 monthly allocated to    $      281,086
   -- Bad Axe, MI                                                              interest and principal,
                                                                               balance of $274,213 due at
                                                                               maturity
  Building/commercial,                   1    10% through January    Jan-97    Interest plus minimum                 860,000
   residential -- NY, NY                      31, 1995 11%                     amortization of $5,000
                                              thereafter                       monthly, balance of principal
                                                                               at maturity
  Land and building/ office              1           14.5 %(b)       Feb-05    $79,318 monthly allocated to        8,816,652(c)
   -- NY, NY                                                                   interest and principal,
                                                                               balance of $4,073,525 due at
                                                                               maturity
Second mortgage loan:
  Land and building/                     1           10.25%          Oct-01    $1,158 monthly allocated to            60,821
   commercial -- Seattle, WA                                                   interest and principal,
                                                                               self-liquidates by maturity
                                         -                                                                    -----------------
      Total..................            4                                                                    $   10,018,559
                                         -                                                                    -----------------
                                         -                                                                    -----------------
 

                                 CARRYING
                                 AMOUNT OF
         DESCRIPTION             MORTGAGE
- -----------------------------  -------------
                            
First mortgage loans:
  Land and building/ retail    $     281,086
   -- Bad Axe, MI
 
  Building/commercial,               860,000
   residential -- NY, NY
 
  Land and building/ office        5,834,234
   -- NY, NY
 
Second mortgage loan:
  Land and building/                  60,821
   commercial -- Seattle, WA
 
                               -------------
      Total..................  $   7,036,141
                               -------------
                               -------------

 
                                      F-19

                 ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
 
                  SCHEDULE IV -- MORTGAGE LOANS ON REAL ESTATE
 
                               DECEMBER 31, 1995
 
Notes to the Schedule:
 
(a) The following  summary reconciles  mortgages  receivable at  their  carrying
    values:
 


                                                                           1995            1994
                                                                      --------------  --------------
                                                                                
Balance at beginning of year........................................  $   13,988,031  $   14,237,743
Additions:
  New mortgage loan (d).............................................          67,498        --
  Amortization of discount..........................................         319,500         310,200
Deductions:
  Cancellation of mortgage receivable from Gould Investors L.P.,
   when the the Company acquired fee title to the properties. See
   Note 3 to consolidated financial statements for other
   information......................................................       6,850,000        --
Collections of principal............................................         488,888         559,912
                                                                      --------------  --------------
                                                                      $    7,036,141  $   13,988,031
                                                                      --------------  --------------
                                                                      --------------  --------------

 
(b) Represents  the expected  yield to  maturity which  includes amortization of
    discount and interest collections.
 
(c) The face amount of mortgage is before an unamortized discount of $2,982,418.
 
(d) Acquired mortgage when Company acquired fee title to the land. See Note 3 to
    consolidated financial statements for other information.
 
                                      F-20