Summary of ONE LIBERTY PROPERTIES INC

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

Forward-Looking Statements

With the exception of historical information, this quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provision for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "could," "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions or variations thereof. Forward-looking statements should not be relied on since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect actual results, performance or achievements. Investors are cautioned not to place undue reliance on any forward-looking statements.

Overview

We are a self-administered and self-managed real estate investment trust, or REIT, and we primarily own real estate that we net lease to tenants. As of March 31, 2009 we own 78 properties, including a 50% tenancy in common interest in one property and participate in five joint ventures which own a total of five properties. These 83 properties are located in 29 states.

Our growth strategy relies, to a large extent, on the acquisition of additional properties that are subject to long-term net leases and that have locations, demographics and other investment attributes that we believe to be attractive. In order to fund these acquisitions, we typically use funds borrowed under our credit facility and then seek mortgage indebtedness for the purchased properties on a non-recourse basis, repaying any funds borrowed under the credit facility. Institutions have significantly curtailed their lending activities and it has been challenging to secure mortgage indebtedness. In addition, we are monitoring our cash needs, our liquidity and the status of our portfolio to preserve cash. As a result of this and until the economy stabilizes, we have adopted a conservative property acquisition strategy.

Results of Operations

Comparison of Three Months Ended March 31, 2009 and 2008

Revenues

Rental income increased by $1 million, or 10.6%, to $10.7 million for the three months ended March 31, 2009 from $9.7 million for the three months ended March 31, 2008. The increase in rental income is primarily due to rental revenues of $1.2 million earned on twelve properties acquired by us during 2008. The increase in rental income was offset primarily by a decrease of $260,000 in rental income from Circuit City, which formerly leased five of our properties. Circuit City, which filed for protection under the federal bankruptcy laws in November 2008, rejected two of its leases on our properties in December 2008 and three of its leases on our properties in March 2009.

Operating Expenses

Depreciation and amortization expense increased by $319,000, or 15.7%, to $2.4 million for the three months ended March 31, 2009. The increase was primarily due to depreciation and amortization of $238,000 taken on eleven properties acquired during 2008. The increase was also due to a $59,000 increase in depreciation in the three months ended March 31, 2009 on a property which had been classified as "held for sale" with no depreciation taken during the three months ended March 31, 2008.

General and administrative expenses increased by $53,000, or 3.3%, to $1.6 million for the three months ended March 31, 2009, substantially due to an increase in accounting and legal fees in connection with our year end audit and filings with the Securities and Exchange Commission.

Real estate expenses increased by $225,000, or 375%, to $285,000 for the three months ended March 31, 2009, resulting primarily from real estate taxes and utilities for the five properties formerly leased by Circuit City and another vacant property.

Other Income and Expenses

We recognized a net gain of $297,000 on the sale by a joint venture of a vacant property in the three months ended March 31, 2008. There was no comparable gain in the three months ended March 31, 2009.

Interest and other income decreased by $181,000, or 86.6%, to $28,000 for the three months ended March 31, 2009. Since we applied available cash to the purchase of nine properties in September 2008, we had less cash available for investment in short-term cash equivalents. To a lesser extent, the decrease results from declining interest rates over the past several quarters.

Interest expense increased by $178,000, or 4.9%, to $3.8 million for the three months ended March 31, 2009. The increase results primarily from an increase of $180,000 of interest expense related to our line of credit as we drew down funds for the purchase of eight properties in September 2008. Additionally, the increase was due to interest expense on fixed rate mortgages placed on three properties between September 2008 and November 2008. These increases were offset in part from the payoff in full of a loan payable, as well as from the monthly principal amortization of mortgages.

Amortization of deferred financing costs increased by $123,000 or 77.8%, to $281,000 for the three months ended March 31, 2009 resulting primarily from $118,000 of accelerated amortization of deferred financing costs relating to a mortgage loan that was refinanced during the current quarter.

Discontinued Operations

Income from discontinued operations was $472,000 for the three months ended March 31, 2009 resulting substantially from a $400,000 lease termination payment by a retail tenant of a Texas property that had been paying its rent on a current basis, but had vacated the property in 2006. On March 5, 2009, we sold this property to an unrelated party and recorded an impairment charge of $229,000 to recognize the loss. This is in addition to an impairment charge of $752,000 taken during the quarter ended June 30, 2008. For the three months ended March 31, 2008, income from operations of this property amounted to $43,000.

Liquidity and Capital Resources

We require capital to fund our operations. Our capital sources include income from operating activities, borrowings under our revolving credit facility and mortgage loans secured by our properties. Our available liquidity at March 31, 2009 includes approximately $15.9 million of cash and cash equivalents and $35.5 million under our revolving credit facility, which can be used to pay off existing mortgages, to fund the acquisition of additional properties or to invest in joint ventures. With the tightening of liquidity by lending institutions, it has been difficult to secure mortgage indebtedness and as a result, our ability to make new property acquisitions or increase liquidity will continue to be limited until mortgage loans become more readily available.

We expect to meet our short-term liquidity requirements generally through our cash and cash equivalents and cash provided by operating activities. The most significant source available to us for a new property acquisition is our revolving credit facility. All of our requests for draw downs under our credit facility have been satisfied to date. However, in view of the current uncertainties in the economy and our limited ability to secure mortgage indebtedness, we have adopted a conservative acquisition strategy and will likely make few, if any, acquisitions in the near term.

We expect to meet our long term liquidity requirements through existing cash resources, proceeds from debt, including under a credit facility, and mortgage financings on our properties (including refinances), and if required, the liquidation of properties. We believe that the value of our real estate portfolio is, and will continue to be, sufficient to allow us to refinance the existing mortgage debt at maturity and repay all indebtedness we owe under our credit facility. In addition, in order to increase our cash position, we have reduced our quarterly dividend by 38.8% and in connection with our most recent quarterly dividend paid in April 2009, took advantage of a recently adopted IRS revenue ruling which allows us to satisfy our REIT dividend requirement by paying our quarterly dividend in cash and shares of our common stock, providing the cash portion of the dividend is at least 10% of the aggregate amount.

Our current credit facility matures on March 31, 2010. The growth of our business through acquisitions is dependent on securing an extension of our credit facility or securing a new credit facility. Any decision by our lenders (or potential lenders) to provide us with financing will depend upon a number of factors, such as the continuation of the current economic recession, our compliance with the terms of our existing credit facility, our financial performance, industry and market trends, the general availability of and rates applicable to financing transactions, such lenders' resources and policies concerning the terms under which they make capital commitments and the relative attractiveness of alternative investment or lending opportunities. Given the current environment, we expect that the terms of a new facility will be less favorable than our existing facility.

At March 31, 2009, excluding mortgages payable of our unconsolidated joint ventures, we had 40 outstanding mortgages payable covering 61 properties, aggregating approximately $226.5 million in principal amount, all of which are secured by first liens on individual real estate investments with an aggregate carrying value of approximately $359 million, before accumulated depreciation. The mortgages bear interest at fixed rates ranging from 5.44% to 8.8%, and mature between 2009 and 2037. During the period April 1, 2009 through December 31, 2009, $3.2 million of our mortgage debt will mature. We believe we will be able to refinance the mortgage indebtedness which becomes due in 2009 but in the event that we are unable to do so, our present and anticipated cash position is sufficient to repay this mortgage debt.

We have not made any payments since December 1, 2008 on an $8.7 million non-recourse mortgage secured by our five properties formerly leased to Circuit City and received a letter of default on March 16, 2009. We are currently in discussions with representatives of the mortgagee.

Credit Facility

We are a party to a credit agreement, as amended, with VNB New York Corp., Bank Leumi, USA, Manufacturers and Traders Trust Company and Israel Discount Bank of New York which provides for a $62.5 million revolving credit facility. The credit facility is available to us to pay off existing mortgages, to fund the acquisition of additional properties or to invest in joint ventures. The facility matures on March 31, 2010. Borrowings under the facility bear interest at the lower of LIBOR plus 2.15% or the bank's prime rate and there is an unused facility fee of �% per annum. Net proceeds received from the sale or refinancing of properties are required to be used to repay amounts outstanding under the facility if proceeds from the facility were used to purchase or refinance the property. The facility is guaranteed by our subsidiaries that own unencumbered properties and is secured by the outstanding stock of subsidiary entities. In September 2008, we borrowed $34 million under our line of credit to facilitate the purchase of eight properties, of which $7 million was repaid in November 2008 with a portion of the proceeds from a mortgage financing of one of our properties. As of March 31, 2009, there was $27 million outstanding under the facility.

At March 31, 2009, we had no outstanding contingent commitments, such as guarantees of indebtedness, or any other contractual cash obligations, other than mortgage payable debt, interest rate swaps and the amount outstanding under our line of credit.

Distribution Policy

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute currently at least 90% of our ordinary taxable income to our stockholders. It is our current intention to comply with these requirements and maintain our REIT status. As a REIT, we generally will not be subject to corporate federal, state or local income taxes on taxable income we distribute currently (in accordance with the Internal Revenue Code and applicable regulations) to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal, state and local income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent tax years. Even if we qualify as a REIT for federal taxation purposes, we may be subject to certain state and local taxes on our income and to federal income and/or excise taxes on our undistributed taxable income (i.e., taxable income not distributed in the amounts and in the time frames prescribed by the Internal Revenue Code and applicable regulations thereunder).

With respect to the quarterly dividend we have historically paid in April, we took advantage of a recently adopted IRS revenue ruling which allows us to satisfy the distribution requirement by paying the dividend in cash and our common stock, provided the cash component represents at least 10% of the aggregate distribution. Accordingly, the dividend paid on April 27, 2009, aggregating $2,229,000, consisted of $223,000 in cash and 529,000 shares of our common stock.