Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provision for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "could," "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions or variations thereof. Forward-looking statements should not be relied on since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect actual results, performance or achievements. Investors are encouraged to review the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2011 under the caption "Item 1A. Risk Factors" for a discussion of certain factors which may cause actual results to differ materially from current expectations and are cautioned not to place undue reliance on any forward-looking statements.

Overview

We are a self-administered and self-managed real estate investment trust, organized in Maryland in 1982. We acquire, own and manage a geographically diversified portfolio of retail (including furniture and office supply stores), industrial, office, flex, health and fitness and other properties, a substantial portion of which are under long-term net leases. As of September 30, 2012, we owned 91 properties, one of which is a 50% tenancy in common interest. Our joint ventures owned a total of six properties. The 97 properties are located in 29 states. Our occupancy rate at September 30, 2012, based on square footage, is approximately 98.8%.

We face a variety of risks and challenges in our business. We, among other things, face the possibility we will not be able to lease our properties on terms favorable to us or at all and that our tenants may not be able to pay their rental and other obligations owing under their leases.

We seek to manage the risk of our real property portfolio by diversifying among types of properties and industries, tenant identity, geography and lease expiration dates. We monitor the risk of tenant non-payments through a variety of approaches tailored to the applicable situation. Generally, based on our assessment of the credit risk posed by our tenants, we monitor a tenant's financial condition through one or more of the following actions: reviewing tenant financial statements, obtaining other tenant related financial information, regular contact with tenant representatives, tenant credit checks and regular management reviews of our tenants.

In acquiring properties, we balance an evaluation of the terms of the leases and the credit of the existing tenants with a fundamental analysis of the real estate to be acquired, which analysis takes into account, among other things, the estimated value of the property, local demographics and the ability to re-rent or dispose of the property on favorable terms upon lease expiration or early termination.

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

During the three months ended September 30, 2012, we:

† Amended our line of credit, which amendment, among other things, reduced the interest rate floor to 4.75% from 5.5%, increased permitted borrowings to $75 million from $55 million, subject to compliance with the borrowing base, and extended the facility's expiration date by two years to March 31, 2015.

† Sold our property located at 119 Madison Avenue, New York, NY for a net gain of $15 million.

† Entered into an at the market offering program and through September 30, 2012, sold 120,844 shares and received net proceeds of $2,296,000.

† Refinanced approximately $22.85 million of mortgage debt which matured September 1, 2012, bearing interest at the rate of 6.87% per year and secured by the eleven properties leased to Haverty Furniture Companies, Inc. with new mortgage debt in the aggregate principal amount of $25 million, maturing September 1, 2032 (subject to the lender's option to call the debt after September 1, 2022) and bearing interest at the rate of 5.125% per year.

Results of Operations



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



                                  Three Months Ended                                   Nine Months Ended
                                     September 30,         Increase                      September 30,        Increase
(Dollars in thousands)             2012          2011     (Decrease)    % Change        2012        2011     (Decrease)    % Change
Revenues:
Rental income                   $    11,792    $ 10,755   $     1,037        9.6 %   $   34,570   $ 32,309   $     2,261        7.0 %

Operating expenses:
Depreciation and amortization         2,503       2,334           169        7.2 %        7,410      6,803           607        8.9 %
General and administrative            1,911       1,804           107        5.9 %        5,598      5,307           291        5.5 %
Real estate acquisition costs            93         131           (38 )    (29.0 )%         259        176            83       47.2 %
Real estate expenses                    644         553            91       16.5 %        1,949      1,711           238       13.9 %
Leasehold rent                           77          77             -          -            231        231             -          -
Total operating expenses              5,228       4,899           329        6.7 %       15,447     14,228         1,219        8.6 %

Operating income                $     6,564    $  5,856   $       708       12.1 %   $   19,123   $ 18,081   $     1,042        5.8 %

Revenues

Rental income. The increases are attributable primarily to rental revenues of $878,000 and $2.4 million earned during the three and nine months ended September 30, 2012, respectively, from eleven properties we acquired since July 2011, and $72,000 and $111,000, respectively, of real estate tax and expense reimbursements from tenants (primarily from four

properties we acquired since July 2011). The increases in the three and nine months ended September 30, 2012 are also attributable to $100,000 of percentage rent income from one tenant. Partially offsetting the increase during the nine months ended September 30, 2012 was a net decrease of approximately $461,000, resulting from the contribution, on February 6, 2012, of our Plano, Texas property to an unconsolidated joint venture. Rental income for the nine months ended September 30, 2012 only includes January 2012 rent from this property.

Operating Expenses

Depreciation and amortization. The increases are substantially due to depreciation expense on the 12 properties we acquired beginning March 2011, partially offset by the decrease in depreciation resulting from the contribution of our Plano, Texas property to a joint venture.

General and administrative expenses. Contributing to the increase in the three and nine months ended September 30, 2012 were increases of (i) $53,000 and $141,000 in payroll and payroll related expenses due to higher levels of compensation and to a lesser extent, additional employees and (ii) $73,000 and $139,000 in non-cash compensation expense related to restricted stock awards due to the increase in the number of awards granted, the higher fair value of such awards at the time of grant and changes in forfeiture assumptions relating to restricted stock units.

Real estate acquisition costs. These expenses increased in the nine months ended September 30, 2012 due to the inclusion of costs incurred for a potential acquisition not yet completed.

Real estate expenses. The increases in the three and nine months ended September 30, 2012 are attributable to the following factors: (i) approximately $148,000 and $407,000 for such three and nine months, respectively, are due to the net increase in expenses (including approximately $88,000 and $260,000 of real estate taxes) relating to properties we acquired since July 2011 and
(ii) increases in various components of real estate expenses, none of which was individually material. The nine months ended September 30, 2012 also included approximately $49,000 due to legal fees incurred for the organization of the Plano, Texas unconsolidated joint venture. Partially offsetting the increase was the inclusion in the three and nine months ended September 30, 2011 of $72,000 and $256,000 of real estate taxes compared to $0 and $22,000 in the three and nine months ended September 30, 2012 related to the Plano, Texas property that was contributed to an unconsolidated joint venture in February 2012.

Other Income and Expenses



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



                              Three Months                                       Nine Months
                                 Ended                                              Ended
                             September 30,        Increase                      September 30,         Increase
(Dollars in thousands)      2012        2011     (Decrease)    % Change       2012        2011       (Decrease)    % Change
Other income and
expenses:
Equity in earnings of
unconsolidated joint
ventures                  $    121    $    105   $        16       15.2 %   $    575    $     241   $        334        139 %
Gain on settlement of
debt                             -           -             -          -            -        1,240         (1,240 )     (100 )%
Other income                     6           9            (3 )    (33.3 )%       230           61            169        277 %
Interest:
Expense                     (3,383 )    (3,150 )        (233 )     (7.4 )%   (10,121 )     (9,906 )         (215 )     (2.2 )%
Amortization of
deferred financing
costs                         (202 )      (177 )         (25 )    (14.1 )%      (583 )       (656 )           73       11.1 %
Gain on sale of real
estate                           -           -             -          -          319            -            319        n/a

Equity in earnings of unconsolidated joint ventures. The increase for the nine months ended September 30, 2012 is attributable to: (i) our approximate 36% share (i.e., $233,000) of the net proceeds from a settlement entered into in May 2012 with a former tenant; (ii) the inclusion during the nine months ended September 30, 2011 of our 50% share (i.e., $62,000) of real estate acquisition costs incurred in connection with the purchase of a property by a joint venture in March 2011; and (iii) our 90% share (i.e., $52,000 for the nine months ended September 30, 2012) of the net operating income from our Plano, Texas joint venture. Partially offsetting the increase was the inclusion during the nine months ended September 30, 2012 of our share (i.e., $68,000) of real estate acquisition costs related to this joint venture.

Gain on settlement of debt. The gain in the nine months ended September 30, 2011 represents the satisfaction, at less than face value, of the $8.9 million mortgage payable related to the property previously leased by Robb & Stucky, a former tenant at our Plano, Texas property that filed for bankruptcy in February 2011. The $1.24 million gain is net of a $19,000 write off of the balance of related deferred mortgage costs.

Other income. The nine months ended September 30, 2012 includes a $199,000 settlement with the carrier of a commercial crime insurance policy relating to our claim against our former president.

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

                           Three Months                                  Nine Months
                               Ended                                        Ended
                           September 30,      Increase                  September 30,        Increase
(Dollars in thousands)    2012      2011     (Decrease)    % Change     2012      2011      (Decrease)    % Change
Interest expense:
Credit line interest     $   224   $   187   $        37       19.8 % $    795   $   646   $        149       23.1 %
Mortgage interest          3,159     2,963           196        6.6 %    9,326     9,260             66         .7 %
Total                    $ 3,383   $ 3,150   $       233        7.4 % $ 10,121   $ 9,906   $        215        2.2 %

Credit line interest

The increases are due to the $3.3 million (29%) and $4.9 million (37%) increase in the weighted average balances outstanding under our line of credit in the three and nine months ended September 30, 2012, respectively. The weighted average balances increased due to borrowings for property acquisitions, partially offset by repayments with financing proceeds from properties purchased in 2011 and with a portion of the proceeds from the sale of two properties in June and September 2012. The increases in credit line interest were partially offset by the (i) decrease from 6% to 5.5%, effective August 5, 2011, and the decrease from 5.5% to 4.75%, effective July 31, 2012, in the annual interest rate charged on the credit line; and (ii) capitalization of $35,000 of interest expense incurred in connection with improving our Cherry Hill, New Jersey property during the nine months ended September 30, 2012.

Mortgage interest

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

                           Three Months Ended                                  Nine Months Ended
                             September 30,          Increase        %            September 30,        Increase        %
(Dollars in thousands)      2012        2011       (Decrease)     Change       2012        2011      (Decrease)     Change
Interest rate on
mortgage debt                  6.00 %      6.20 %         (.20 )%   (3.2 )%       6.02 %      6.24 %        (.22 )%   (3.5 )%
Principal amount of
mortgage debt            $  210,163   $ 191,248   $     18,915       9.9 %   $ 206,383   $ 197,814   $     8,569       4.3 %

The increases of $196,000 and $66,000 in mortgage interest expense for the three and nine months ended September 30, 2012 are due to the increases in the weighted average amount of mortgage debt outstanding, partially offset by a decrease in the weighted average interest rate on outstanding mortgage debt. The decrease in the weighted average interest rate is due to the payoffs and settlement in 2011 of $19.6 million of mortgage debt with a weighted average interest rate of approximately 7.3% and the financing in 2011 and 2012 of $58.8 million of mortgage debt with a weighted average interest rate of approximately 4.9%.

Amortization of deferred financing costs. The decrease in the nine months ended September 30, 2012 is primarily due to accelerated amortization of deferred financing costs of approximately $129,000 relating to two mortgage loans that were paid in full in February 2011. These decreases were partially offset by the amortization of deferred financing costs that were incurred in connection with (i) financings on several properties we acquired in 2011 and 2012 and
(ii) the amendment to our line of credit effective July 31, 2012.

Gain on sale of real estate. In February 2012, we contributed our Plano, Texas property to an unconsolidated joint venture in exchange for a 90% interest therein and our joint venture partner contributed $1.5 million for a 10% interest therein and we realized a gain of $319,000.

Discontinued Operations



                            Three Months                                    Nine Months
                                Ended                                          Ended
                            September 30,       Increase                   September 30,       Increase
(Dollars in thousands)     2012       2011     (Decrease)    % Change      2012      2011     (Decrease)    % Change
Income from operations   $     264   $   122   $       142        116 %  $    602   $   646   $       (44 )     (6.8 )%
Net gain on sales           15,050         -        15,050        n/a      17,254       932        16,322      1,751 %
Income from
discontinued
operations               $  15,314   $   122   $    15,192     12,452 %  $ 17,856   $ 1,578   $    16,278      1,032 %

Discontinued operations for the three and nine months ended September 30, 2012 includes the income from operations and gain on sale of two properties sold in June 2012 and one property sold in September 2012 and one property deemed held for sale at September 30, 2012. Discontinued operations for the three and nine months ended September 30, 2011 includes the income from operations of these four properties, as well as the operations and gain on sale of one property sold in May 2011.

Liquidity and Capital Resources

Our sources of liquidity and capital include cash flow from our operations, cash and cash equivalents, borrowings under our revolving credit facility, refinancing existing mortgage loans, obtaining mortgage loans secured by our unencumbered properties, sales of properties and sales of our common stock pursuant to the "at the market" equity offering plan we commenced in August 2012. Our available liquidity at October 31, 2012, including the balances of $6 million we are required to maintain pursuant to the credit facility, was approximately $83.3 million, including $11.1 million of cash and cash equivalents and $72.2 million available under the credit facility.

Liquidity and Financing

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

At September 30, 2012, excluding mortgage indebtedness of our unconsolidated joint ventures, we had 40 outstanding mortgages payable and one loan payable secured by 57 properties, in aggregate principal amount of approximately $210.5 million. These mortgages and loan represent first liens on individual real estate investments with an aggregate carrying value of approximately $357.2 million, before accumulated depreciation of $50.5 million. The mortgages and loan bear interest at fixed rates ranging from 3.2% to 8.8% (a 5.34% weighted average interest rate) and mature between 2013 and 2037.

Mortgage debt, excluding mortgages indebtedness of our unconsolidated joint ventures, in principal amount of $49.3 million is payable from October 2012 through December 31, 2014 (i.e., $1.3 million in 2012, $10.8 million in 2013 and $37.2 million in 2014). Such debt includes principal balances due at maturity of $4.5 million and $30.9 million in 2013 and 2014,

respectively. We anticipate that the debt amortization payments will be paid primarily from cash and cash equivalents and cash flow from operations, and that principal balances due at maturity will generally be satisfied through mortgage financings and refinancings. If we are unsuccessful in refinancing our existing indebtedness or financing our unencumbered properties, our cash flow, funds available under our credit facility and available cash, if any, may not be sufficient to repay all debt obligations when payments become due, and we may need to issue additional equity, obtain long or short term debt, or dispose of properties on unfavorable terms.

We continually seek to refinance existing mortgage loans on terms we deem acceptable, in order to generate additional liquidity. Also, in the normal course of our business, we sell properties when we determine that it is in our best interests, which generates additional liquidity. Our encumbered properties are subject to non-recourse mortgages, with standard carve outs for, among other things, environmental liabilities, the sale, financing or encumbrance of the property in violation of loan documents, damage to property as a result of intentional misconduct or gross negligence, failure to pay valid taxes and other claims which could create liens on property.

Credit Facility

We can borrow, subject to compliance with our borrowing base, up to $75 million pursuant to our revolving credit facility which is available for the acquisition of commercial real estate, repayment of mortgage debt, and for any other purpose, provided, to the extent used for general working capital purposes, such use will not exceed $10 million. The facility bears interest at the greater of
(i) 90 day LIBOR plus 3% and (ii) 4.75%. There is an unused facility fee of 0.25% per annum on the difference between the outstanding loan balance and $75 million. We are required to maintain at least $6 million average outstanding collected deposit balances with the lenders. The facility is guaranteed by our subsidiaries that own unencumbered properties and is secured by our equity interest in each subsidiary. Net proceeds received from the sale, financing or refinancing of properties are generally required to be used to repay amounts outstanding under the facility.

This facility includes certain restrictions and covenants which limit, among other things, the incurrence of liens, and which require compliance with financial ratios relating to, among other things, the minimum amount of tangible net worth, the minimum amount of debt service coverage, the minimum amount of fixed charge coverage, the maximum amount of debt to value, the minimum level of net income, certain investment limitations and the minimum value of unencumbered properties and the number of such properties. As of September 30, 2012, we were in compliance with applicable covenants.

Off-Balance Sheet Arrangements

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