UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.   20549


FORM
10-Q


(Mark
One)





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR15(d)
      OF THE SECURITIES EXCHANGE ACT OF
1934





For the
quarterly period
ended                    March 31, 2009


OR




 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d)OF
      THE SECURITIES EXCHANGE ACT OF 1934





For the
transition period
from                                to





Commission
file number          1-8594




PRESIDENTIAL
REALTY CORPORATION


(Exact
name of registrant as specified in its charter)





Delaware
                
                13-1954619(State
      or other jurisdiction of
                
                (I.R.S.  Employerincorporation
      or organization)
                
                Identification
      No.)





180
South Broadway, White Plains, New York  10605


(Address
of principal executive offices)





Registrant’s
telephone number, including area code  914-948-1300





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.   Yes   x     No
 ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such
files).         Yes    ̈     No    ̈





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





Large
accelerated filer    ̈                                                                Accelerated
filer    ̈





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





Smaller
reporting company   x





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





The
number of shares outstanding of each of the registrant’s classes of common stock
as of May 8, 2009 was 442,533 shares of Class A common stock and 2,957,147
shares of Class B common stock.









PRESIDENTIAL
REALTY CORPORATION AND SUBSIDIARIES





Index to
Form 10-Q


For the
Quarterly Period Ended


March 31,
2009





PagePart
      I
                                      
                                      Financial
      Information (Unaudited)Item
      1.
                                      
                                      Financial
      StatementsConsolidated
      Balance Sheets (Unaudited)
                                      
                                      1Consolidated
      Statementsof
      Operations (Unaudited)
                                      
                                      2Consolidated
      Statementof
      Stockholders’ Equity (Unaudited)
                                      
                                      3Consolidated
      Statementsof
      Cash Flows (Unaudited)
                                      
                                      4Notes
      to ConsolidatedFinancial
      Statements (Unaudited)
                                      
                                      6Item
      2.
                                      
                                      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                      
                                      22Item
      3.
                                      
                                      Quantitative
      and Qualitative Disclosures about Market Risk
                                      
                                      36Item
      4.
                                      
                                      Controls
      and Procedures
                                      
                                      36Part
      II
                                      
                                      Other
      InformationItem
      6.
                                      
                                      Exhibits
                                      
                                      36










PRESIDENTIAL
REALTY CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS (Unaudited)


March
      31,
                                  
                                  
                                  December
      31,2009
                                  
                                  
                                  2008AssetsReal
      estate (Note 2)
                                  
                                  $
                                  17,743,215
                                  
                                  
                                  $
                                  17,686,971Less:
      accumulated depreciation
                                  
                                  
                                  2,331,459
                                  
                                  
                                  
                                  2,211,207Net
      real estate
                                  
                                  
                                  15,411,756
                                  
                                  
                                  
                                  15,475,764Net
      mortgage portfolio (of which $239,639 in 2009and
      $119,274 in 2008 are due within one year) (Note 3)
                                  
                                  
                                  2,365,791
                                  
                                  
                                  
                                  2,249,203Investments
      in and advances to joint ventures (Note 4)
                                  
                                  
                                  2,798,515
                                  
                                  
                                  
                                  1,511,887Assets
      related to discontinued operations (Note 5)
                                  
                                  
                                  416,073
                                  
                                  
                                  
                                  391,479Prepaid
      expenses and deposits in escrow
                                  
                                  
                                  1,225,970
                                  
                                  
                                  
                                  1,113,437Other
      receivables (net of valuation allowance of$121,970
      in 2009 and $106,183 in 2008)
                                  
                                  
                                  394,349
                                  
                                  
                                  
                                  462,479Cash
      and cash equivalents
                                  
                                  
                                  5,414,137
                                  
                                  
                                  
                                  5,984,550Other
      assets
                                  
                                  
                                  558,483
                                  
                                  
                                  
                                  702,810Total
      Assets
                                  
                                  $
                                  28,585,074
                                  
                                  
                                  $
                                  27,891,609Liabilities
      and Stockholders' EquityLiabilities:Mortgage
      debt (of which $1,423,713 in 2009 and$376,619
      in 2008 are due within one year)
                                  
                                  $
                                  16,298,326
                                  
                                  
                                  $
                                  16,392,285Liabilities
      related to discontinued operations (Note 5)
                                  
                                  
                                  2,053,964
                                  
                                  
                                  
                                  2,078,971Contractual
      pension and postretirement benefits liabilities
                                  
                                  
                                  1,778,129
                                  
                                  
                                  
                                  1,808,104Defined
      benefit plan liability
                                  
                                  
                                  2,391,430
                                  
                                  
                                  
                                  2,253,139Accrued
      liabilities
                                  
                                  
                                  2,143,575
                                  
                                  
                                  
                                  2,000,365Accounts
      payable
                                  
                                  
                                  494,403
                                  
                                  
                                  
                                  524,718Other
      liabilities
                                  
                                  
                                  527,670
                                  
                                  
                                  
                                  695,300Total
      Liabilities
                                  
                                  
                                  25,687,497
                                  
                                  
                                  
                                  25,752,882Stockholders'
      Equity:Common
      stock: par value $.10 per share




March
      31, 2009
                                    
                                    
                                    December
      31, 2008Class
      A
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    47,894
                                    
                                    
                                    
                                    47,894Authorized:
                                    
                                    
                                    700,000
                                    
                                    
                                    
                                    700,000Issued:
                                    
                                    
                                    478,940
                                    
                                    
                                    
                                    478,940Treasury:
                                    
                                    
                                    36,407
                                    
                                    
                                    
                                    36,407Class
      B
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    352,755
                                    
                                    
                                    
                                    352,455Authorized:
                                    
                                    
                                    10,000,000
                                    
                                    
                                    
                                    10,000,000Issued:
                                    
                                    
                                    3,527,547
                                    
                                    
                                    
                                    3,524,547Treasury:
                                    
                                    
                                    570,400
                                    
                                    
                                    
                                    570,400
  Additional
      paid-in capital
                      
                      
                      4,602,609
                      
                      
                      
                      4,586,738Retained
      earnings
                      
                      
                      4,660,368
                      
                      
                      
                      3,870,905Accumulated
      other comprehensive loss (Note 8)
                      
                      
                      (3,598,558
                      )
                      
                      
                      (3,589,877
                      )Treasury
      stock (at cost)
                      
                      
                      (3,129,388
                      )
                      
                      
                      (3,129,388
                      )Total
      Presidential Realty Corporation stockholders' equity
                      
                      
                      2,935,680
                      
                      
                      
                      2,138,727Noncontrolling
      interest (Note 6)
                      
                      
                      (38,103
                      )
                      
                      
                      -Total
      Stockholders' Equity
                      
                      
                      2,897,577
                      
                      
                      
                      2,138,727Total
      Liabilities and Stockholders' Equity
                      
                      $
                      28,585,074
                      
                      
                      $
                      27,891,609


See notes
to consolidated financial statements.
  1


PRESIDENTIAL REALTY CORPORATION AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)




THREE
      MONTHS ENDED MARCH 31,2009
                                  
                                  
                                  2008Revenues:Rental
                                  
                                  $
                                  1,391,200
                                  
                                  
                                  $
                                  1,356,528Interest
      on mortgages - notes receivable
                                  
                                  
                                  71,186
                                  
                                  
                                  
                                  286,056Interest
      on mortgages - notes receivable - related parties
                                  
                                  
                                  -
                                  
                                  
                                  
                                  35,500Other
      revenues
                                  
                                  
                                  11,512
                                  
                                  
                                  
                                  1,238Total
                                  
                                  
                                  1,473,898
                                  
                                  
                                  
                                  1,679,322Costs
      and Expenses:General
      and administrative
                                  
                                  
                                  907,418
                                  
                                  
                                  
                                  1,009,421Depreciation
      on non-rental property
                                  
                                  
                                  10,418
                                  
                                  
                                  
                                  8,565Rental
      property:Operating
      expenses
                                  
                                  
                                  717,457
                                  
                                  
                                  
                                  689,544Interest
      on mortgage debt
                                  
                                  
                                  377,446
                                  
                                  
                                  
                                  335,565Real
      estate taxes
                                  
                                  
                                  111,868
                                  
                                  
                                  
                                  109,656Depreciation
      on real estate
                                  
                                  
                                  123,995
                                  
                                  
                                  
                                  104,861Amortization
      of in-place lease values and mortgage costs
                                  
                                  
                                  18,726
                                  
                                  
                                  
                                  58,512Total
                                  
                                  
                                  2,267,328
                                  
                                  
                                  
                                  2,316,124Other
      Income (Loss):Investment
      income
                                  
                                  
                                  14,770
                                  
                                  
                                  
                                  20,190Equity
      in the loss from joint ventures (Note 4)
                                  
                                  
                                  (213,372
                                  )
                                  
                                  
                                  (360,796
                                  )Gain
      on settlement of joint venture loans (Notes 3 and 4)
                                  
                                  
                                  1,700,000
                                  
                                  
                                  
                                  -Income
      (loss) from continuing operations
                                  
                                  
                                  707,968
                                  
                                  
                                  
                                  (977,408
                                  )Income
      from discontinued operations (Note 5)
                                  
                                  
                                  43,392
                                  
                                  
                                  
                                  58,750Net
      income (loss)
                                  
                                  
                                  751,360
                                  
                                  
                                  
                                  (918,658
                                  )Add:
      Net loss from noncontrolling interest (Note 6)
                                  
                                  
                                  38,103
                                  
                                  
                                  
                                  -Net
      Income (Loss) attributable to Presidential Realty
    Corporation
                                  
                                  $
                                  789,463
                                  
                                  
                                  $
                                  (918,658
                                  )Earnings
      per Common Share (basic and diluted):Income
      (loss) from continuing operations attributable to Presidential Realty
      Corporation
                                  
                                  $
                                  0.22
                                  
                                  
                                  $
                                  (0.25
                                  )Income
      from discontinued operations attributable to Presidential Realty
      Corporation
                                  
                                  
                                  0.01
                                  
                                  
                                  
                                  0.02Net
      Income (Loss) attributable to Presidential Realty Corporation per Common
      Share - basic
                                  
                                  $
                                  0.23
                                  
                                  
                                  $
                                  (0.23
                                  )-
      diluted
                                  
                                  $
                                  0.23
                                  
                                  
                                  $
                                  (0.23
                                  )Cash
      Distributions per Common Share
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  0.16Weighted
      Average Number of Shares Outstanding - basic
                                  
                                  
                                  3,379,613
                                  
                                  
                                  
                                  3,934,987- diluted
                                  
                                  
                                  3,399,413
                                  
                                  
                                  
                                  3,934,987Amounts
      attributable to Presidential Realty Corporation Common
      Shareholders:Income
      (loss) from continuing operations
                                  
                                  $
                                  746,071
                                  
                                  
                                  $
                                  (977,408
                                  )Income
      from discontinued operations
                                  
                                  
                                  43,392
                                  
                                  
                                  
                                  58,750Net
      Income (Loss)
                                  
                                  $
                                  789,463
                                  
                                  
                                  $
                                  (918,658
                                  )





See notes
to consolidated financial statements.
  2





PRESIDENTIAL
REALTY CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)


Presidential
      Realty Corporation StockholdersAccumulatedAdditional
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    Other
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    TotalCommon
                                                                                    
                                                                                    
                                                                                    Paid-in
                                                                                    
                                                                                    
                                                                                    Retained
                                                                                    
                                                                                    
                                                                                    Comprehensive
                                                                                    
                                                                                    
                                                                                    Treasury
                                                                                    
                                                                                    
                                                                                    Noncontrolling
                                                                                    
                                                                                    
                                                                                    Comprehensive
                                                                                    
                                                                                    
                                                                                    Stockholders'Stock
                                                                                    
                                                                                    
                                                                                    Capital
                                                                                    
                                                                                    
                                                                                    Earnings
                                                                                    
                                                                                    
                                                                                    Loss
                                                                                    
                                                                                    
                                                                                    Stock
                                                                                    
                                                                                    
                                                                                    Interest
                                                                                    
                                                                                    
                                                                                    Income
                                                                                    
                                                                                    
                                                                                    EquityBalance
      at January 1, 2009
                                                                                    
                                                                                    $
                                                                                    400,349
                                                                                    
                                                                                    
                                                                                    $
                                                                                    4,586,738
                                                                                    
                                                                                    
                                                                                    $
                                                                                    3,870,905
                                                                                    
                                                                                    
                                                                                    $
                                                                                    (3,589,877
                                                                                    )
                                                                                    
                                                                                    $
                                                                                    (3,129,388
                                                                                    )
                                                                                    
                                                                                    $
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    $
                                                                                    2,138,727Issuance
      and vesting of restricted stock
                                                                                    
                                                                                    
                                                                                    300
                                                                                    
                                                                                    
                                                                                    
                                                                                    15,871
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    16,171Comprehensive
      income:Net
      income (loss)
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    789,463
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    (38,103
                                                                                    )
                                                                                    
                                                                                    $
                                                                                    751,360
                                                                                    
                                                                                    
                                                                                    
                                                                                    751,360Other
      comprehensive income (loss) -Net
      unrealized loss on securities available for
      sale
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    (2,517
                                                                                    )
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    (2,517
                                                                                    )
                                                                                    
                                                                                    
                                                                                    (2,517
                                                                                    )Adjustment
      for contractual postretirement benefits
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    (6,164
                                                                                    )
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    (6,164
                                                                                    )
                                                                                    
                                                                                    
                                                                                    (6,164
                                                                                    )Comprehensive
      income
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    742,679Comprehensive
      loss attributable to noncontrolling
    interest
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    38,103Comprehensive
      income attributable to Presidential
      Realty Corporation
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    $
                                                                                    780,782Balance
      at March 31, 2009
                                                                                    
                                                                                    $
                                                                                    400,649
                                                                                    
                                                                                    
                                                                                    $
                                                                                    4,602,609
                                                                                    
                                                                                    
                                                                                    $
                                                                                    4,660,368
                                                                                    
                                                                                    
                                                                                    $
                                                                                    (3,598,558
                                                                                    )
                                                                                    
                                                                                    $
                                                                                    (3,129,388
                                                                                    )
                                                                                    
                                                                                    $
                                                                                    (38,103
                                                                                    )
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    $
                                                                                    2,897,577











3




PRESIDENTIAL
REALTY CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)


THREE
      MONTHS ENDED MARCH 31,2009
                                                      
                                                      
                                                      2008Cash
      Flows from Operating Activities:Cash
      received from rental properties
                                                      
                                                      $
                                                      1,486,231
                                                      
                                                      
                                                      $
                                                      1,572,194Interest
      received
                                                      
                                                      
                                                      71,811
                                                      
                                                      
                                                      
                                                      289,939Distributions
      received from joint ventures
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      668,866Miscellaneous
      income
                                                      
                                                      
                                                      10,888
                                                      
                                                      
                                                      
                                                      2,715Interest
      paid on rental property mortgage debt
                                                      
                                                      
                                                      (332,430
                                                      )
                                                      
                                                      
                                                      (344,424
                                                      )Cash
      disbursed for rental property operations
                                                      
                                                      
                                                      (1,088,980
                                                      )
                                                      
                                                      
                                                      (1,055,478
                                                      )Cash
      disbursed for general and administrative costs
                                                      
                                                      
                                                      (509,177
                                                      )
                                                      
                                                      
                                                      (1,015,168
                                                      )Net
      cash (used in) provided by operating activities
                                                      
                                                      
                                                      (361,657
                                                      )
                                                      
                                                      
                                                      118,644Cash
      Flows from Investing Activities:Payments
      received on notes receivable
                                                      
                                                      
                                                      86,701
                                                      
                                                      
                                                      
                                                      1,625,225Payments
      disbursed for additions and improvements
                                                      
                                                      
                                                      (174,991
                                                      )
                                                      
                                                      
                                                      (120,594
                                                      )Net
      cash (used in) provided by investing activities
                                                      
                                                      
                                                      (88,290
                                                      )
                                                      
                                                      
                                                      1,504,631Cash
      Flows from Financing Activities:Principal
      payments on mortgage debt
                                                      
                                                      
                                                      (118,966
                                                      )
                                                      
                                                      
                                                      (109,818
                                                      )Payments
      disbursed for mortgage costs
                                                      
                                                      
                                                      (1,500
                                                      )
                                                      
                                                      
                                                      -Cash
      distributions on common stock
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (634,956
                                                      )Net
      cash used in financing activities
                                                      
                                                      
                                                      (120,466
                                                      )
                                                      
                                                      
                                                      (744,774
                                                      )Net
      (Decrease) Increase in Cash and Cash Equivalents
                                                      
                                                      
                                                      (570,413
                                                      )
                                                      
                                                      
                                                      878,501Cash
      and Cash Equivalents, Beginning of Period
                                                      
                                                      
                                                      5,984,550
                                                      
                                                      
                                                      
                                                      2,343,497Cash
      and Cash Equivalents, End of Period
                                                      
                                                      $
                                                      5,414,137
                                                      
                                                      
                                                      $
                                                      3,221,998


See notes
to consolidated financial statements.
 4


PRESIDENTIAL
REALTY CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)


THREE
      MONTHS ENDED MARCH 31,2009
                                                
                                                
                                                2008Reconciliation
      of Net Income (Loss) to Net Cash(Used
      in) Provided by Operating ActivitiesNet
      Income (Loss)
                                                
                                                $
                                                751,360
                                                
                                                
                                                $
                                                (918,658
                                                )Adjustments
      to reconcile net income (loss) to netcash
      (used in) provided by operating activities:Gain
      on settlement of joint venture loans
                                                
                                                
                                                (1,700,000
                                                )
                                                
                                                
                                                -Equity
      in the loss from joint ventures
                                                
                                                
                                                213,372
                                                
                                                
                                                
                                                360,796Depreciation
      and amortization
                                                
                                                
                                                153,227
                                                
                                                
                                                
                                                188,538Amortization
      of discount on mortgage payable
                                                
                                                
                                                -
                                                
                                                
                                                
                                                29,421Net
      change in revenue related to acquired lease
    rights/obligationsand
      deferred rent receivable
                                                
                                                
                                                (13,506
                                                )
                                                
                                                
                                                (11,569
                                                )Amortization
      of discounts on notes and fees
                                                
                                                
                                                (3,289
                                                )
                                                
                                                
                                                (70,848
                                                )Issuance
      of stock to directors and officers
                                                
                                                
                                                12,549
                                                
                                                
                                                
                                                25,080Distributions
      received from joint ventures
                                                
                                                
                                                -
                                                
                                                
                                                
                                                668,866Changes
      in assets and liabilities:Decrease
      in other receivables
                                                
                                                
                                                75,225
                                                
                                                
                                                
                                                22,378Increase
      (decrease) in accounts payable and accrued liabilities
                                                
                                                
                                                304,158
                                                
                                                
                                                
                                                (116,797
                                                )Decrease
      in other liabilities
                                                
                                                
                                                (165,695
                                                )
                                                
                                                
                                                (21,950
                                                )Decrease
      (increase) in prepaid expenses, deposits in escrowand
      deferred charges
                                                
                                                
                                                10,788
                                                
                                                
                                                
                                                (35,988
                                                )Other
                                                
                                                
                                                154
                                                
                                                
                                                
                                                (625
                                                )Total
      adjustments
                                                
                                                
                                                (1,113,017
                                                )
                                                
                                                
                                                1,037,302Net
      cash (used in) provided by operating activities
                                                
                                                $
                                                (361,657
                                                )
                                                
                                                $
                                                118,644SUPPLEMENTAL
      NONCASH DISCLOSURES:Estimated
      fair value of assets received in settlement of notesreceivable
      due from joint ventures:50%
      partnership interest in IATG Puerto Rico, LLC
                                                
                                                $
                                                1,500,000Note
      receivable
                                                
                                                
                                                200,000$
                                                1,700,000


See notes
to consolidated financial statements.
  5




PRESIDENTIAL
REALTY CORPORATION AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


FOR THE
THREE MONTHS ENDED MARCH 31, 2009 (UNAUDITED)





Presidential
Realty Corporation (“Presidential” or the “Company”), is operated as a
self-administrated, self-managed Real Estate Investment Trust (“REIT”). The
Company is engaged principally in the ownership of income producing real estate
and in the holding of notes and mortgages secured by real estate or interests in
real estate. Presidential operates in a single business segment, investments in
real estate related assets.





1.
         SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES





A.  Principles
of Consolidation – The consolidated financial statements include the accounts of
Presidential Realty Corporation and its wholly owned subsidiaries. Additionally,
the consolidated financial statements include 100% of the account balances of
PDL, Inc. and Associates Limited Co-Partnership (the “Hato Rey Partnership”).
PDL, Inc. (a wholly owned subsidiary of Presidential and the general partner of
the Hato Rey Partnership) and Presidential own an aggregate 60% general and
limited partnership interest in the Hato Rey Partnership (see Note 6). All
significant intercompany balances and transactions have been
eliminated.





B. Net
Income (Loss) Per Share – Basic net income (loss) per share data is computed by
dividing net income (loss) by the weighted average number of shares of Class A
and Class B common stock outstanding (excluding nonvested shares) during each
period. Diluted net income per share is computed by dividing net income by the
weighted average shares outstanding, including the dilutive effect, if any, of
nonvested shares. During the three months ended March 31, 2009, this calculation
included 28,800 of restricted shares to be vested, which, however, did not
change the basic net income per share amount. The diluted net loss per share
calculation for the three months ended March 31, 2008 does not include 32,800 of
restricted shares to be vested as their inclusion would be
antidilutive.





C. Basis
of Presentation – The accompanying unaudited consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information. The results
for such interim periods are not necessarily indicative of the results to be
expected for the year. In the opinion of management, all adjustments (consisting
of only normal recurring accruals) considered necessary for a fair presentation
of the results for the respective periods have been reflected. These
consolidated financial statements and accompanying notes should be read in
conjunction with the Company’s Form 10-K for the year ended December 31,
2008.





D.
Management Estimates – In preparing the consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the consolidated balance sheets and the
reported amounts of income and expense for the reporting period. Actual results
could differ from those estimates.





E.
Discontinued Operations – The Company complies with the provisions of Statement
of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets”. This statement requires that the
results of operations, including impairment, gains and losses related to the
properties that have been sold or properties that are intended to be sold, be
presented as discontinued operations in the statements of operations for all
periods presented and the assets and liabilities of properties intended to be
sold are to be separately classified on the balance sheet. Properties designated
as held for sale are carried at the lower of cost or fair value less costs to
sell and are not depreciated.




6




F. Equity
Method – The Company accounts for its investments in joint ventures using the
equity method of accounting.





G.
Accounting for Uncertainty in Income Taxes – On January 1, 2007, the Company
adopted the Financial Accounting Standards Board (“FASB”) Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement
No. 109” (“FIN 48”). If the Company’s tax positions in relation to certain
transactions were examined and were not ultimately upheld, the Company would be
required to pay an income tax assessment and related interest. Alternatively,
the Company could elect to pay a deficiency dividend in order to continue to
qualify as a REIT and the related interest assessment to the taxing
authorities.





H. Recent
Accounting Pronouncements - In December, 2007, the FASB issued No. 141, (revised
2007) “Business Combinations” (“SFAS No. 141R”). SFAS No. 141R replaces SFAS No.
141, which the Company previously adopted. SFAS No. 141R revises the standards
for accounting and reporting of business combinations. In summary, SFAS No. 141R
requires the acquirer of a business combination to measure, at fair value, the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, with limited exceptions. SFAS No. 141R applies
to all business combinations for which the acquisition date is on or after
January 1, 2009. The adoption of this statement on January 1, 2009 did not have
any effect on the Company’s consolidated financial statements.





In
December, 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which requires consolidated net income to be
reported at amounts that include the amounts attributable to both the parent and
noncontrolling interest. SFAS No. 160 became effective on January 1, 2009. The
adoption of this statement resulted in additional disclosures in the Company’s
consolidated financial statements, including the reporting of a net loss
attributable to a noncontrolling interest of $38,103.





In March,
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities”. SFAS No. 161 changes the reporting requirements for
derivative instruments and hedging activities under SFAS No. 133, “Accounting
for Derivatives and Hedging Activities”, by requiring enhanced disclosures about
(a) how and why an entity uses derivative instruments, (b) how derivative
instruments are accounted for under SFAS No. 133 and (c) the effect of
derivative instruments and hedging activities on an entity’s financial position,
financial performance and cash flows. SFAS No. 161 became effective on January
1, 2009. The adoption of this statement on January 1, 2009 did not have any
effect on the Company’s consolidated financial statements.




7





In April,
2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 142-3, “Determination
of the Useful Life of Intangible Assets”. FSP No. FAS 142-3 amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under SFAS No. 142,
“Goodwill and Other Intangible Assets”.  The objective of FSP No. FAS
142-3 is to improve the consistency between the useful life of a recognized
intangible asset under SFAS No. 142 and the period of expected cash flows used
to measure the fair value of the asset under SFAS No. 141R and
GAAP.  FSP FAS No. 142-3 became effective on January 1,
2009.  The adoption of FSP FAS No. 142-3 on January 1, 2009 did not
have a material effect on the Company’s consolidated financial
statements.





In June,
2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions are Participating
Securities”.  FSP No. EITF 03-6-1 affects entities which accrue
non-returnable cash dividends on share-based payment awards during the awards’
service period.  The FASB concluded unvested share-based payment
awards which are entitled to cash dividends, whether paid or unpaid, are
participating securities any time the common shareholders receive
dividends.  Because the awards are considered participating
securities, the issuing entity is required to apply the two-class method of
computing basic and diluted earnings per share.  FSP No. EITF 03-6-1
became effective on January 1, 2009.  The adoption of FSP No. EITF
03-6-1 on January 1, 2009 did not have a material effect on the Company’s
consolidated financial statements.





2.
            REAL
      ESTATE





Real
estate is comprised of the following:





March
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008Land
                  
                  $
                  2,058,583
                  
                  
                  $
                  2,059,856Buildings
                  
                  
                  15,604,043
                  
                  
                  
                  15,546,526Furniture
      and equipment
                  
                  
                  80,589
                  
                  
                  
                  80,589Total
      real estate
                  
                  $
                  17,743,215
                  
                  
                  $
                  17,686,971





3.
            MORTGAGE
      PORTFOLIO





The
components of the net mortgage portfolio are as follows:





March
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008Notes
      receivable
                  
                  $
                  2,403,669
                  
                  
                  $
                  2,290,370Less:
      Discounts
                  
                  
                  37,878
                  
                  
                  
                  41,167Net
      mortgage portfolio
                  
                  $
                  2,365,791
                  
                  
                  $
                  2,249,203





At March
31, 2009, all of the notes in the Company’s mortgage portfolio are current in
accordance with their terms, as modified.





On March
31, 2009, the Company received repayment of its $75,000 loan receivable related
to the sale of Cambridge Green in 2007.


8


On
February 27, 2009, the Company completed a Settlement Agreement with The
Lightstone Group (“Lightstone”) and David Lichtenstein regarding various claims
the Company had asserted against them.  Under the terms of the
Settlement Agreement, an affiliate of Lightstone, which is the debtor on an
existing loan from the Company in the outstanding principal amount of
$2,074,994, assumed $10,000,006 of indebtedness under the $9,500,000 mezzanine
loan and the $8,600,000 mezzanine loan due from Lightstone.  The total
indebtedness was consolidated into a nonrecourse loan in the outstanding
principal amount of $12,075,000 (the “Consolidated Note”).  The
Consolidated Note is secured by the ownership interests in entities owning nine
apartment properties (1,056 apartment units) located in Virginia (which had
previously secured the $2,074,994 indebtedness) and the ownership interests in
entities owning nine additional apartment properties (931 apartment units)
located in Virginia and North Carolina.





The
carrying value of the $12,075,000 Consolidated Note on the Company’s
consolidated balance sheet is $2,074,994.  This is the same carrying
value of the $2,074,994 note that was on the Company’s consolidated balance
sheet prior to the consolidation of that note with the additional $10,000,006
indebtedness assumed by the affiliate of Lightstone pursuant to the Settlement
Agreement.  The $10,000,006 additional portion of the Consolidated
Note was received in partial settlement of the $9,500,000 and $8,600,000
mezzanine loans held by the Company, which had a net carrying value of $0 on the
Company’s consolidated balance sheet at December 31,
2008.  Accordingly, in 2009, there was no adjustment on the Company’s
consolidated balance sheet and no gain or loss was recorded on the Company’s
consolidated financial statements as a result of the receipt of the Consolidated
Note.





The
Consolidated Note accrues interest at the rate of 13% per annum and is due on
February 1, 2012.  All net cash flow from the eighteen apartment
properties will be utilized to pay the interest accrued on the Consolidated Note
and to the extent that there is not sufficient cash flow to pay all accrued
interest, the unpaid interest will be deferred until the maturity of the
Consolidated Note.  The Company does not believe that there will be
sufficient cash flow from the security for the Consolidated Note to pay all of
the interest that is due on the note, the deferred interest that will be due at
maturity and the $12,075,000 principal amount due at
maturity.





However,
the Company believes that the monthly interest due on the $2,074,994 portion of
the note will be paid in accordance with the terms of the note and, as a result,
the Company will accrue the interest on this portion of the note.  For
the three months ended March 31, 2009, the Company received the interest due on
the $2,074,994 portion of the Note.





The
interest due on the $10,000,006 portion of the note will be recorded in income
on a cash basis as interest is received and the balance of the interest due on
the $10,000,006 will be deferred and due at maturity of the note.  For
the three months ended March 31, 2009, the Company received $20 of interest
payments and the unaccrued deferred interest was $119,147.





Under the
terms of the Settlement Agreement, the Company also received a $750,000
non-interest bearing, nonrecourse note due in March, 2010, which is secured by a
25% ownership interest in IATG Puerto Rico, LLC (“IATG”) (see Note
4).  The Company’s preliminary estimate of the fair value of the
$750,000 note was based on the Company’s preliminary estimate of the fair value
of the underlying security.  The Company has estimated that the fair
value of the $750,000 note is $200,000 and in March, 2009, the Company recorded
the $200,000 note receivable on its consolidated balance sheet and recognized a
gain on settlement of joint venture loans of $200,000 in its consolidated
financial statements.




9


4.
            INVESTMENTS
      IN AND ADVANCES TO JOINT VENTURES





At
December 31, 2008, the Company had investments in and advances to four joint
ventures which owned and operated nine shopping malls located in seven
states.  These investments in and advances to joint ventures were made
to entities controlled by David Lichtenstein and Lightstone as
follows:





Owning Entity
                        Properties OwnedPRC
      Member LLC
                        Martinsburg
      MallMartinsburg,
      WVLightstone
      I
                        Four MallsBradley
      Square Mall, Cleveland, TNMount
      Berry Square Mall, Rome, GAShenango
      Valley Mall, Hermitage, PAWest
      Manchester Mall, York, PALightstone
      II
                        Shawnee/Brazos MallsBrazos
      Mall, Lake Jackson, TXShawnee
      Mall, Shawnee, OKLightstone
      III
                        Macon/Burlington MallsBurlington
      Mall, Burlington, NCMacon
      Mall, Macon,
GA





As a
result of the February 27, 2009 Settlement Agreement, the Company assigned its
interests in PRC Member LLC, Lightstone I and Lightstone III, which the Company
believed had no value, to Lightstone and received, among other assets, a 50%
interest in IATG described below.  The Company now has investments in
and advances to joint ventures in two entities that are controlled by David
Lichtenstein and Lightstone. The Company accounts for these investments using
the equity method.





The first
investment is the Company’s mezzanine loan in the amount of $7,835,000 to
Lightstone II which is secured by ownership interests in the Shawnee Mall and
the Brazos Mall properties (“Shawnee/Brazos Malls”).  In connection
with this loan, the Company received a 29% ownership interest in Lightstone
II.





The loan
was in good standing at December 31, 2008.  However, the borrower
failed to make the interest payments due on January 1, 2009 and in subsequent
months and the Company’s loan receivable is now in default.  The first
mortgage loan secured by the properties was due to mature in January of 2009 but
was extended for one year until January of 2010.  In connection with
the extension, the holder of the first mortgage exercised its right (exercisable
because the cash flow from the properties did not satisfy a required debt
service coverage ratio) to retain all cash flow from the properties (after
payment of all operating expenses but before payment of interest on the
Company’s mezzanine loan) as additional security for the repayment of the first
mortgage loan.  Lightstone II is attempting to sell the properties
(which sale requires the consent of Presidential), but a sale will be difficult
to accomplish under current market conditions and with only short term financing
on the properties.




10


As part
of the Settlement Agreement, the Company received a personal guaranty from Mr.
Lichtenstein that the Company will receive all accrued interest on the Company’s
$7,835,000 mezzanine loan (relating to the Shawnee/Brazos Malls) through the
date of repayment and $500,000 of the principal amount of the loan, which
personal guaranty is limited to $500,000.  As part of the settlement,
the Company agreed to modify its right to receive repayment in full of the
$7,835,000 loan before Mr. Lichtenstein receives any return on his capital
contributions to the borrowing entity to the following extent: the Company will
receive the first net proceeds of any sale or refinancing of the Shawnee/Brazos
Malls in an amount equal to all accrued and unpaid interest and $2,000,000 of
principal; Mr. Lichtenstein will receive the next $1,000,000 of any such net
sale or refinancing proceeds; the Company will receive the next $1,000,000 of
any such net proceeds and any additional net proceeds shall be paid 50% to the
Company and 50% to Mr. Lichtenstein.  Mr. Lichtenstein’s guaranty is
secured by his remaining interest in IATG, the entity that owns The Las Piedras
Industrial Complex (see below).





The
Company has agreed with Lightstone that it will not foreclose on its $7,835,000
mezzanine loan so long as the first mortgage on the Shawnee/Brazos Malls is not
accelerated or due at maturity and the holder of the first mortgage is retaining
funds from operations of the properties in an amount sufficient to pay the
interest due on the mezzanine loan.





As part
of the Settlement Agreement, the Company received a 50% ownership interest in
IATG, the Lightstone affiliate that owns The Las Piedras Industrial Complex, an
industrial property located in Las Piedras, Puerto Rico and consisting of
approximately 68 acres of land and 380,800 square feet of rentable space
contained in several buildings in the complex.  The property is
substantially vacant and the owners may attempt to sell the
property.  Lightstone has agreed to advance funds to pay any negative
cash flow from the operations of the property until a sale can be accomplished
and has agreed that if it does not do so, it will transfer its remaining 49%
interest in the property to Presidential.





The
Company’s preliminary estimate of the fair value of its 50% ownership interest
in IATG is $1,500,000 and in March, 2009, the Company recorded a $1,500,000
investment in joint ventures on its consolidated balance sheet and recognized a
gain on settlement of joint venture loans of $1,500,000 in its consolidated
financial statements.





The
Company based the preliminary estimated fair value of the IATG property on the
current information available to the Company.  The Company is
currently in the process of obtaining an appraisal of the property owned by IATG
and anticipates that the appraisal will be completed by the quarter ended June
30, 2009. Based on the fair value of such appraisal, the preliminary estimates
made by the Company may be adjusted in the second quarter of 2009.





As a
result of the Settlement Agreement, in 2009, the Company recorded assets of
$1,700,000 on the Company’s consolidated balance sheet (a $200,000 note
receivable and a $1,500,000 investment in joint ventures) and recorded a
$1,700,000 gain on the settlement of joint venture loans in its consolidated
financial statements.




11


Activity
in investments in and advances to joint ventures for the period ended March 31,
2009 is as follows:





Equityin
      theLossBalance
      at
                    
                    
                    
                    
                    
                    from
                    
                    
                    Balance
      atDecember
      31,
                    
                    
                    
                    
                    
                    Joint
                    
                    
                    March
      31,2008
                    
                    
                    Investments
                    
                    
                    Ventures
                    
                    
                    2009Shawnee/BrazosMalls
      (1)
                    
                    $
                    1,511,887
                    
                    
                    $
                    -
                    
                    
                    $
                    (147,836
                    )
                    
                    $
                    1,364,051IATG
      (2)
                    
                    
                    -
                    
                    
                    
                    1,500,000
                    
                    
                    
                    (65,536
                    )
                    
                    
                    1,434,464$
                    1,511,887
                    
                    
                    $
                    1,500,000
                    
                    
                    $
                    (213,372
                    )
                    
                    $
                    2,798,515





Equity in
the income (loss) from joint ventures is as follows:





Three
      Months EndedMarch
      31,2009
                      
                      
                      2008Shawnee/Brazos
      Malls
                      
                      
                      (1
                      )
                      
                      $
                      (147,836
                      )
                      
                      $
                      (315,597
                      )IATG
                      
                      
                      (2
                      )
                      
                      
                      (65,536
                      )
                      
                      
                      -Martinsburg
      Mall
                      
                      
                      (3
                      )
                      
                      
                      -
                      
                      
                      
                      40,435Four
      Malls
                      
                      
                      (4
                      )
                      
                      
                      -
                      
                      
                      
                      (175,620
                      )Macon/Burlington
      Malls
                      
                      
                      (5
                      )
                      
                      
                      -
                      
                      
                      
                      89,986$
                      (213,372
                      )
                      
                      $
                      (360,796
                      )





(1)
Interest income earned by the Company at the rate of 11% per annum on the
outstanding $7,835,000 loan from the Company to Lightstone II is included in the
calculation of the Company’s share of the loss from joint ventures for the
Shawnee/Brazos Malls.





(2) The
fair value of the Company’s 50% ownership interest in IATG is estimated to be
$1,500,000.  The Company also recorded its 50% share of the loss from
IATG for the month ended March 31, 2009.





(3) In
2007, the Company’s basis of its investment in the Martinsburg Mall was reduced
by distributions and losses to zero.  Any subsequent distributions
received from the Martinsburg Mall were recorded in income.  At March
31, 2008, the Company recorded $40,435 of distributions received in income from
joint ventures.





(4)
Interest income earned by the Company at the rate of 11% per annum on the
outstanding $8,600,000 loan from the Company to Lightstone I is included in the
calculation of the Company’s share of the loss from joint ventures for the Four
Malls.





(5) In
2007, the Company’s basis of its investment in the Macon/Burlington Malls was
reduced by distributions and losses to zero.  Any subsequent
distributions received from the Macon/Burlington Malls were recorded in
income.  At March 31, 2008, the Company recorded $89,986 of
distributions received in income from joint ventures.




12


The
summary financial information for the Shawnee/Brazos Malls is as
follows:





March
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008(Amounts
      in thousands)Condensed
      Balance SheetsNet
      real estate
                        
                        $
                        61,504
                        
                        
                        $
                        61,751In-place
      lease values and acquired lease rights
                        
                        
                        829
                        
                        
                        
                        916Prepaid
      expenses and deposits in escrow
                        
                        
                        2,210
                        
                        
                        
                        1,706Cash
      and cash equivalents
                        
                        
                        1,135
                        
                        
                        
                        440Deferred
      financing costs
                        
                        
                        708
                        
                        
                        
                        622Other
      assets
                        
                        
                        1,171
                        
                        
                        
                        1,308Total
      Assets
                        
                        $
                        67,557
                        
                        
                        $
                        66,743Nonrecourse
      mortgage debt
                        
                        $
                        39,061
                        
                        
                        $
                        39,061Mezzanine
      notes payable
                        
                        
                        36,834
                        
                        
                        
                        35,899Other
      liabilities
                        
                        
                        8,336
                        
                        
                        
                        7,415Total
      Liabilities
                        
                        
                        84,231
                        
                        
                        
                        82,375Members’
      Deficit
                        
                        
                        (16,674
                        )
                        
                        
                        (15,632
                        )Total
      Liabilities and Members’ Deficit
                        
                        $
                        67,557
                        
                        
                        $
                        66,743





Three
      Months EndedMarch
      31,2009
                            
                            
                            2008(Amounts
      in thousands)Condensed
      Statements of OperationsRevenues
                            
                            $
                            2,562
                            
                            
                            $
                            2,254Interest
      on mortgage debt and other debt
                            
                            
                            (1,499
                            )
                            
                            
                            (1,507
                            )Other
      expenses
                            
                            
                            (1,349
                            )
                            
                            
                            (1,596
                            )Loss
      before depreciation and amortization
                            
                            
                            (286
                            )
                            
                            
                            (849
                            )Depreciation
      and amortization
                            
                            
                            (751
                            )
                            
                            
                            (773
                            )Net
      Loss
                            
                            $
                            (1,037
                            )
                            
                            $
                            (1,622
                            )




13


The
summary financial information for IATG is as follows:





March
      31,2009(Amounts
      in thousands)Condensed
      Balance SheetsNet
      real estate
                    
                    $
                    5,641Cash
      and cash equivalents
                    
                    
                    58Accounts
      receivable
                    
                    
                    8Deferred
      expenses
                    
                    
                    214Total
      Assets
                    
                    $
                    5,921Note
      payable
                    
                    $
                    7,034Other
      liabilities
                    
                    
                    2,144Total
      Liabilities
                    
                    
                    9,178Members’
      Deficit
                    
                    
                    (3,257
                    )Total
      Liabilities and Members’ Deficit
                    
                    $
                    5,921





One
      Month EndedMarch
      31,2009(Amounts
      in thousands)Condensed
      Statements of OperationsRevenues
                    
                    $
                    62Interest
      on note payable
                    
                    
                    (69
                    )Other
      expenses
                    
                    
                    (106
                    )Loss
      before depreciation and amortization
                    
                    
                    (113
                    )Depreciation
      and amortization
                    
                    
                    (18
                    )Net
      Loss
                    
                    $
                    (131
                    )





The
Lightstone Group is controlled by David Lichtenstein.  At March 31,
2009, in addition to Presidential’s investments of $2,798,515 in these joint
ventures with entities controlled by Mr. Lichtenstein, Presidential has two
loans that are due from entities that are controlled by Mr. Lichtenstein in the
aggregate outstanding principal amount of $12,825,000 with a net carrying value
of $2,274,994.




14


The
$5,073,509 net carrying value of investments in and advances to joint ventures
with entities controlled by Mr. Lichtenstein and loans outstanding to entities
controlled by Mr. Lichtenstein constitute approximately 18% of the Company’s
total assets at March 31, 2009.





5.           DISCONTINUED
OPERATIONS





For the
three months ended March 31, 2009 and 2008, income from discontinued operations
includes the Crown Court property in New Haven, Connecticut (which consists of
105 apartment units and 2,000 square feet of commercial space) and a cooperative
apartment unit in Riverdale, New York.  The Crown Court property was
designated as held for sale during the three months ended September 30, 2008 and
sold on April 1, 2009.  The cooperative apartment unit in Riverdale,
New York was designated as held for sale during the three months ended March 31,
2009.  In addition, income from discontinued operations for the three
months ended March 31, 2008, included 42 cooperative apartment units at the
Towne House Apartments in New Rochelle, New York and another cooperative
apartment unit in New Haven, Connecticut, which were sold during the three
months ended September 30, 2008.





The
following table summarizes income (loss) for the properties sold or held for
sale:





Three Months EndedMarch
      31,2009
                  
                  
                  2008Revenues:Rental
                  
                  $
                  132,059
                  
                  
                  $
                  270,370Rental
      property expenses:Operating
      expenses
                  
                  
                  3,140
                  
                  
                  
                  112,971Interest
      on mortgage debt
                  
                  
                  36,091
                  
                  
                  
                  37,787Real
      estate taxes
                  
                  
                  49,349
                  
                  
                  
                  44,360Depreciation
                  
                  
                  88
                  
                  
                  
                  16,600Total
                  
                  
                  88,668
                  
                  
                  
                  211,718Other
      income:Investment
      income
                  
                  
                  1
                  
                  
                  
                  98Income
      from discontinued operations
                  
                  $
                  43,392
                  
                  
                  $
                  58,750





The Crown
Court property in New Haven, Connecticut was owned subject to a long-term net
lease with an option to purchase the property in April, 2009 for a purchase
price of $1,635,000 over the outstanding principal mortgage balance at the date
of the exercise of the option.  On April 1, 2009, the Company
completed the sale of the Crown Court property.  The gain from sale
for financial reporting purposes is estimated to be approximately $3,285,000 and
the estimated net proceeds of sale will be approximately
$1,631,000.




15


The
Company owns a small portfolio of cooperative apartments located in New York and
Connecticut.  These apartments are held for the production of rental
income and generally are not marketed for sale.  However, from time to
time, the Company will receive purchase offers for some of these apartments or
decide to market specific apartments and will make sales if the purchase price
is acceptable to management.





During
the three months ended March 31, 2009, the Company designated a cooperative
apartment unit in Riverdale, New York as held for sale.  The Company
expects to sell the unit within one year for net proceeds in excess of its
carrying value.  The carrying value of the unit at March 31, 2009 was
$24,594, net of accumulated depreciation of $3,831.





In
September, 2008, the Company sold a package of 42 cooperative apartment units at
Towne House located in New Rochelle, New York for a sales price of
$3,450,000.  The net proceeds of sale were $3,343,187 and the gain
from sale for financial reporting purposes was $2,806,499.





In July,
2008, the Company sold one cooperative apartment unit located in New Haven,
Connecticut for a sales price of $122,000.  The net proceeds of sale
were $113,990 and the gain from the sale for financial reporting purposes was
$85,759.





The
combined assets and liabilities of the Crown Court property and the cooperative
apartment unit in Riverdale, New York at March 31, 2009 and the assets and
liabilities of the Crown Court property at December 31, 2008 are segregated in
the consolidated balance sheets.  The components are as
follows:





March
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008Assets
      related to discontinued operations:Land
                    
                    $
                    169,273
                    
                    
                    $
                    168,000Buildings
                    
                    
                    3,117,696
                    
                    
                    
                    3,090,544Furniture
      and equipment
                    
                    
                    45,382
                    
                    
                    
                    45,382Less:
      accumulated depreciation
                    
                    
                    (2,916,278
                    )
                    
                    
                    (2,912,447
                    )Total
                    
                    $
                    416,073
                    
                    
                    $
                    391,479Liabilities
      related to discontinued operations:Mortgage
      debt
                    
                    $
                    2,053,964
                    
                    
                    $
                    2,078,971





6.           HATO
REY PARTNERSHIP





PDL, Inc.
(a wholly owned subsidiary of Presidential) is the general partner of the Hato
Rey Partnership. Presidential and PDL, Inc. have an aggregate 60% general and
limited partner interest in the Hato Rey Partnership.  The Company
exercises effective control over the partnership through its ability to manage
the affairs of the partnership in the ordinary course of business. Accordingly,
the Company consolidates the Hato Rey Partnership in the accompanying
consolidated financial statements.




16


The Hato
Rey Partnership owns and operates the Hato Rey Center, an office building with
209,000 square feet of commercial space, located in Hato Rey, Puerto
Rico.  The Company agreed to lend up to $2,500,000 to the Hato Rey
Partnership to pay for the cost of improvements to the building and fund any
negative cash flows from the operation of the property.  The loan,
which is advanced from time to time as funds are needed, bore interest at the
rate of 11% per annum until May 11, 2008 and 13% thereafter, with interest and
principal to be paid out of the first positive cash flow from the property or
upon a refinancing of the first mortgage on the property.  At March
31, 2009, the Company had advanced $2,434,275 of the loan to the Hato Rey
Partnership and subsequent to March 31, 2009, the Company advanced an additional
$65,725.  The $2,434,275 loan and accrued interest in the amount of
$574,720 have been eliminated in consolidation.





On
January 1, 2009, the Company adopted SFAS No. 160 which requires amounts
attributable to noncontrolling interests to be reported
separately.  For the three months ended March 31, 2009, the Hato Rey
Partnership had a loss of $95,258.  The consolidated financial
statements reflect the separate disclosure of the noncontrolling interest’s
share (40%) of the loss of $38,103.  Prior to the adoption of SFAS No.
160, the partners constituting the noncontrolling interest in the Hato Rey
Partnership had no basis in their investment and, as a result, the Company was
required to record in its consolidated financial statements any losses
attributable to the noncontrolling interest and the Company would have recorded
any future earnings of the noncontrolling interest up to the amount of the
losses previously recorded by the Company attributable to the noncontrolling
interest.  Under SFAS No. 160, this rule is no longer
applicable.  For the years ended December 31, 2008 and 2007, the Hato
Rey Partnership had losses of $481,352 and $521,102, respectively, of which
$192,541 and $208,441, respectively, represented the noncontrolling interest
share absorbed by the Company.





7.           INCOME
TAXES





Presidential
has elected to qualify as a Real Estate Investment Trust under the Internal
Revenue Code.  A REIT which distributes at least 90% of its real
estate investment trust taxable income to its shareholders each year by the end
of the following year and which meets certain other conditions will not be taxed
on that portion of its taxable income which is distributed to its
shareholders.





The
Company adopted FIN 48 on January 1, 2007.  If the Company’s tax
positions in relation to certain transactions were examined and were not
ultimately upheld, the Company would be required to pay an income tax assessment
and related interest.  Alternatively, the Company could elect to pay a
deficiency dividend to its shareholders in order to continue to qualify as a
REIT and the related interest assessment to the taxing authorities.





Upon
adoption of FIN 48 the Company recorded a reduction to the January 1, 2007
balance of retained earnings of $460,800 for accrued interest for prior years
related to the tax positions for which the Company may have been required to pay
a deficiency dividend.  In addition, the Company recorded interest
expense of $356,780 for the year ended December 31, 2007 and $147,526 for the
six months ended June 30, 2008 for the interest related to these
matters.  The Company recognized this interest expense in general and
administrative expenses in its consolidated statements of
operations.  As of June 30, 2008, the Company had accrued $965,106 of
interest related to these matters, which was included in accrued liabilities in
its consolidated balance sheet. During the three months ended September 30,
2008, the statute of limitations with respect to the tax year related to the FIN
48 interest accrual expired and the Company reversed the $965,106 interest
accrual.  As of March 31, 2009, the tax years that remain open to
examination by the federal, state and local taxing authorities are the 2005 –
2007 tax years and the Company was not required to accrue any liability for
those years pursuant to FIN 48.


17




For the
year ended December 31, 2008, the Company had taxable income (before
distributions to shareholders) of approximately $2,293,000 ($0.68 per share),
which is comprised of capital gains of $5,186,000 ($1.53 per share) and an
ordinary loss of $2,893,000 ($0.85 per share).  The Company intends to
apply approximately $230,000 of its 2006 net operating loss carryforward and all
of its available 2008 distributions to its 2008 taxable income to reduce its
2008 taxable income to zero.  Therefore, no provision for Federal
income taxes was made at December 31, 2008.





As
previously stated, in order to maintain REIT status, Presidential is required to
distribute 90% of its REIT taxable income (exclusive of capital
gains).  As a result of the ordinary tax loss of $.85 per share for
2008, the Company will not be required to make a distribution in 2009 for the
2008 year in order to maintain its qualification as a REIT.





For the
three months ended March 31, 2009, the Company had an ordinary tax loss of
approximately $1,014,000 ($0.30 per share).





8.           ACCUMULATED
OTHER COMPREHENSIVE LOSS





The
components of accumulated other comprehensive loss are as follows:





March
      31,
                      
                      
                      December
      31,2009
                      
                      
                      2008Defined
      benefit plan liability
                      
                      $
                      (3,572,373
                      )
                      
                      $
                      (3,572,373
                      )Contractual
      postretirement benefits liability
                      
                      
                      168,068
                      
                      
                      
                      174,232Minimum
      contractual pension benefit liability
                      
                      
                      (199,373
                      )
                      
                      
                      (199,373
                      )Net
      unrealized gain on securities available for
      sale
                      
                      
                      5,120
                      
                      
                      
                      7,637Total
      accumulated other comprehensive loss
                      
                      $
                      (3,598,558
                      )
                      
                      $
                      (3,589,877
                      )





The
Company’s other comprehensive income (loss) consists of the changes in the net
unrealized gain (loss) on securities available for sale and the adjustments to
the pension liabilities and the postretirement benefits liability, if
any.  Thus, comprehensive income (loss), which consists of net income
(loss) plus or minus other comprehensive income, is as follows:


18





Three
      Months EndedMarch
      31,2009
                  
                  
                  2008Net
      income (loss)
                  
                  $
                  751,360
                  
                  
                  $
                  (918,658
                  )Other
      comprehensive income (loss)-Net
      unrealized loss on securities available for sale
                  
                  
                  (2,517
                  )
                  
                  
                  (602
                  )Adjustment
      for contractual postretirement benefits
                  
                  
                  (6,164
                  )
                  
                  
                  29,529Comprehensive
      income (loss)
                  
                  
                  742,679
                  
                  
                  
                  (889,731
                  )Comprehensive
      loss attributable to noncontrolling interest
                  
                  
                  38,103
                  
                  
                  
                  -Comprehensive
      income (loss) attributable to Presidential Realty
    Corporation
                  
                  $
                  780,782
                  
                  
                  $
                  (889,731
                  )





9.           COMMITMENTS
AND CONTINGENCIES





Presidential
is not a party to any material legal proceedings.  The Company may
from time to time be a party to routine litigation incidental to the ordinary
course of its business.





In
February, 2009, the Company completed a settlement of various claims it had
asserted against Lightstone and Mr. Lichtenstein (see Notes 3 and
4).





In the
opinion of management, all of the Company’s properties are adequately covered by
insurance in accordance with normal insurance practices.





The
Company is involved in an environmental remediation process for contaminated
soil found on its Mapletree Industrial Center property in Palmer,
Massachusetts.  The land area involved is approximately 1.25 acres.
Since the most serious identified threat on the site is to songbirds, the
proposed remediation will consist of removing all exposed materials and a layer
of soil.  The Company estimated that the costs of the cleanup will not
exceed $1,000,000.  In accordance with the provisions of SFAS No. 5,
“Accounting for Contingencies”, in the fourth quarter of 2006, the Company
accrued a $1,000,000 liability, which was discounted by $145,546, and charged
$854,454 to expense.  The discount rate used was 4.625%, which was the
interest rate on 10 year Treasury Bonds.  At March 31, 2009, the
accrued liability balance was $907,030 and the discount balance was
$141,436.


19


The
remediation must comply with the requirements of the Massachusetts Department of
Environmental Protection (“MADEP”) and during the three months ended March 31,
2009, the Company obtained the consent of MADEP to a specific plan of
remediation, which the Company plans to complete in 2009.  The Company
is securing final bids for completion of the work and management expects that
the actual cost of the remediation will be substantially less than the $907,030
balance of the accrued liability less the discount balance of $141,436 at March
31, 2009.





Actual
costs incurred may vary from these estimates due to the inherent uncertainties
involved. The Company believes that any liability in excess of amounts accrued
which may result from the resolution of this matter will not have a material
adverse effect on the financial condition, liquidity or the cash flow of the
Company.





10.           CONTRACTUAL
PENSION AND POSTRETIREMENT BENEFITS





The
following table sets forth the components of net periodic benefit
costs:





Contractual
                
                
                ContractualPension
      Benefits
                
                
                Postretirement
      BenefitsThree
      Months Ended
                
                
                Three
      Months EndedMarch
      31,
                
                
                March
      31,2009
                
                
                2008
                
                
                2009
                
                
                2008Service
      cost
                
                $
                -
                
                
                $
                -
                
                
                $
                406
                
                
                $
                518Interest
      cost
                
                
                19,450
                
                
                
                19,398
                
                
                
                6,701
                
                
                
                9,695Amortization
      of prior service cost
                
                
                (7,730
                )
                
                
                (11,594
                )
                
                
                926
                
                
                
                926Recognized
      actuarial loss (gain)
                
                
                14,029
                
                
                
                -
                
                
                
                (8,194
                )
                
                
                (631
                )Net
      periodic benefit cost
                
                $
                25,749
                
                
                $
                7,804
                
                
                $
                (161
                )
                
                $
                10,508





During
the three months ended March 31, 2009, the Company made contributions of $54,977
and $6,750 for contractual pension benefits and postretirement benefits,
respectively.  The Company anticipates additional contributions of
$18,326 and $15,000 for contractual pension benefits and postretirement
benefits, respectively, for the remainder of 2009.





11.           DEFINED
BENEFIT PLAN





The
following table sets forth the components of net periodic benefit
costs:





Three
      Months EndedMarch
      31,2009
                  
                  
                  2008Service
      cost
                  
                  $
                  39,393
                  
                  
                  $
                  59,414Interest
      cost
                  
                  
                  69,452
                  
                  
                  
                  76,199Expected
      return on plan assets
                  
                  
                  (36,891
                  )
                  
                  
                  (91,989
                  )Amortization
      of prior service cost
                  
                  
                  3,154
                  
                  
                  
                  3,154Amortization
      of accumulated loss
                  
                  
                  63,183
                  
                  
                  
                  4,522Net
      periodic benefit cost
                  
                  $
                  138,291
                  
                  
                  $
                  51,300


20


The
Company’s funding policy for the defined benefit plan is based on contributions
that comply with the minimum and maximum amounts required by
law.  During the three months ended March 31, 2009, the Company did
not make a contribution to the defined benefit plan.  The Company is
required to and intends to make a $600,000 contribution to the plan in
2009.


21


PRESIDENTIAL
REALTY CORPORATION AND SUBSIDIARIES





ITEM
      2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND
  2008





Forward-Looking
Statements





Certain
statements made in this report may constitute “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.  Such
forward-looking statements include statements regarding the intent, belief or
current expectations of the Company and its management and involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements.  Such factors include, among other
things, the following:





·
            generally
      adverse economic and business conditions, which, among other things (a)
      affect the demand for apartments, retail and office space at properties
      owned by the Company or which are security for loans made by the Company,
      (b) affect the availability and creditworthiness of prospective tenants
      and the rental rates obtainable at the properties, and (c) affect consumer
      demand for the products offered by the tenants at the malls owned by the
      joint ventures in which the Company is a member, which adversely affects
      the operating results and valuations of such
  malls;


·
            adverse
      changes in the real estate markets, including a severe tightening of the
      availability of credit, which adversely affect the ability of the Company
      or the joint ventures in which the Company is a member to sell, or
      refinance the mortgages on, their properties and which may also affect the
      ability of prospective tenants to rent space at these
      properties;


·
            risks
      of real estate development, ownership and
  operation;


·
            governmental
      actions and initiatives; and


·
            environmental
      and safety requirements.





Overview





Presidential
Realty Corporation is taxed for federal income tax purposes as a real estate
investment trust.  Presidential owns real estate directly and through
a partnership and joint ventures and makes loans secured by interests in real
estate.





During
the past year, the downturn in the economy, higher unemployment and lack of
consumer confidence have adversely affected the operating results of the
shopping mall properties in which the Company has invested. These conditions,
among others, resulted in defaults in 2008 on two of the mezzanine loans made by
the Company to joint ventures owning seven shopping mall properties and in
defaults on the first mortgage loans secured by six of these
properties.  In January, 2009, the borrower defaulted in the payment
of interest on the Company’s third mezzanine loan.  (See Liquidity and
Capital Resources – Joint Venture Mezzanine Loans and Settlement Agreement
below.)


22


In
addition, the turmoil in the credit markets has made it very difficult for the
Company and its joint venture partners to obtain refinancing of the mortgage
loans on some of its properties on satisfactory terms. For example, the Company
was unable to refinance the existing $15,163,995 first mortgage on its Hato Rey
Center office building in May, 2008 when the terms of the mortgage anticipated
repayment. As a result, while the mortgage is not in default, the annual
interest rate was increased by 200 basis points (the payment of which is
deferred until maturity) and the mortgagee is entitled to receive all net cash
flow from the property to reduce the outstanding principal
balance.  During 2008 and the first three months of 2009, there was no
net cash flow available to reduce the principal balance of the mortgage and no
assurances can be given that there will be any net cash flow available in
2009.  While the Company has been successful in decreasing the vacancy
rate at the Hato Rey Center property, the worsening economy may adversely affect
the Company’s ability to continue to decrease vacancy rates in the near future
and to refinance the property. (See Hato Rey Partnership below.)





The
restrictive credit markets also adversely affect the ability of the Company and
the joint ventures to sell properties owned by them on satisfactory terms
because of the inability of prospective purchasers to obtain financing on
satisfactory terms.





There are
no current market indications of when the general U.S. economy will rebound or
when credit will become more easily available.  The Company's Board of
Directors and management will continue to review the options available to the
Company.





From time
to time in the Company’s recent history, the Company has considered various
strategic alternatives, including a merger, consolidation or sale of all or
substantially all of its assets.  In the past, no appropriate
opportunity has been found but the Board of Directors and management will always
consider reasonable proposals.  In the current economic environment,
the Company may seek to sell one or more of its assets if reasonable prices can
be determined and obtained.  If a sale or sales can be made,
management may consider submitting a plan of liquidation to its shareholders for
approval.  The plan of liquidation would provide for the sale of all
of the Company’s assets over time and the distribution of the net proceeds of
sale to the shareholders after satisfaction of the Company’s
liabilities.  While management has considered this course of action,
among others, as noted above, there has been no determination to adopt such a
plan of liquidation at this time or to enter into any strategic
alternative.  Further, there can be no assurance that the Company will
be able to sell any of its assets at prices that management deems
fair.





Critical
Accounting Policies





In
preparing the consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America (“GAAP”),
management is required to make estimates and assumptions that affect the
financial statements and disclosures.  These estimates require
difficult, complex and subjective judgments.  The Company’s critical
accounting policies are described in its Form 10-K for the year ended December
31, 2008.  There have been no significant changes in the Company’s
critical accounting policies since December 31, 2008.


23


Results
of Operations





Financial
Information for the three months ended March 31, 2009 and 2008:





Continuing
Operations:





Revenues
decreased by $205,424 primarily as a result of decreases in interest income on
mortgages–notes receivable and interest income on mortgages-notes
receivable-related parties, partially offset by an increase in rental
revenues.





Rental
revenues increased by $34,672 due to increased rental revenues at the Hato Rey
Center property of $41,850.





Interest
on mortgages-notes receivable decreased by $214,870 primarily as a result of
repayments of $5,585,000 on notes receivable during 2008.  Interest
income earned on those notes was $210,763 during the 2008 period.





Interest
on mortgages-notes receivable-related parties decreased by $35,500 as a result
of a decrease of $35,500 in payments of interest received on the Consolidated
Loans (see Liquidity and Capital Resources – Consolidated Loans
below).





Costs and
expenses decreased by $48,796 primarily due to decreases in general and
administrative expenses and amortization of in-place lease values and mortgage
costs. These decreases were partially offset by increases in rental property
operating expenses, interest on mortgage debt and depreciation
expense.





General
and administrative expenses decreased by $102,003 primarily as a result of
decreases in salary expense of $139,116 and interest expense accrued in
accordance with FIN 48 of $78,842.  Salary expense decreased primarily
due to a lower amount of salary to be accrued in 2009 compared to 2008, a
difference of $105,185, pursuant to an amendment of an executive employment
agreement which would require payments upon the retirement of the
executive.  With respect to FIN 48, the Company accrued $78,842 of
interest in the 2008 period related to certain tax positions for which the
Company may have been required to pay a deficiency dividend.  When the
statute of limitations with respect to these tax positions expired in September,
2008, the accrued liability was reversed. The Company has no such further tax
positions requiring an interest accrual in 2009. These decreases in general and
administrative expenses were partially offset by increases in pension plan
expenses of $104,936 and professional fees of $10,994.





Rental
property operating expenses increased by $27,913 primarily as a result of an
increase in bad debt expense of $26,253 at the Hato Rey Center
property.





Interest
on mortgage debt increased by $41,881 primarily as a result of a $72,783
increase in mortgage interest expense on the Hato Rey Center property first
mortgage. The terms of the existing first mortgage provided for a 2% per annum
increase in the interest rate on the mortgage beginning on May 12,
2008.  This increase was partially offset by a $29,421 decrease in the
amortization of discount on mortgage payable.


24


Depreciation
on real estate increased by $19,134 primarily as a result of an $18,905 increase
in depreciation on the Hato Rey Center property.





Amortization
of in-place lease values and mortgage costs decreased by $39,786 as a result of
a $23,450 decrease in the amortization of in-place lease values and a $16,336
decrease in the amortization of mortgage costs.  In-place lease values
were recorded in connection with the partial step acquisition of the Hato Rey
Partnership in prior years and amortize over the remaining terms of the
leases.





Other
income increased by $1,842,004 primarily as a result of a $1,700,000 gain
recorded upon the settlement of some joint venture loans to David Lichtenstein
and The Lightstone Group (“Lightstone”).  In addition, the equity in
the loss from joint ventures decreased by $147,424 as a result of a decrease of
$212,960 in the loss from the investments in nine malls, offset by a loss of
$65,536 from the investment in IATG Puerto Rico, LLC (“IATG”).  (See
Liquidity and Capital Resources – Joint Venture Mezzanine Loans and Settlement
Agreement and Investments in and Advances to Joint Ventures below.)





Loss from
continuing operations decreased by $1,685,376 from a loss of $977,408 in 2008 to
income of $707,968 in 2009. The $1,685,376 decrease in loss was a result of the
$1,700,000 gain recorded upon the settlement of some joint venture
loans.





Discontinued
Operations:





In 2009,
the Company has two properties that are classified as discontinued
operations:  the Crown Court property in New Haven, Connecticut (which
consists of 105 apartment units and 2,000 square feet of commercial space) and a
cooperative apartment unit in Riverdale, New York.  The Crown Court
property was designated as held for sale during the three months ended September
30, 2008.  The Crown Court property was owned subject to a long-term
net lease with an option to purchase the property in April, 2009 for a purchase
price of $1,635,000 over the outstanding principal mortgage balance at the date
of the exercise of the option.  On April 1, 2009, the Company
completed the sale of the Crown Court property.  The gain from sale
for financial reporting purposes is estimated to be approximately $3,285,000 and
the estimated net proceeds of sale will be approximately
$1,631,000.  In addition, a cooperative apartment unit in Riverdale,
New York was designated as held for sale during the three months ended March 31,
2009.





In 2008,
the Company had two properties that were classified as discontinued
operations.  The Towne House property in New Rochelle, New York and a
cooperative apartment unit in New Haven, Connecticut were sold during the
quarter ended September 30, 2008.





The
following table compares the total income (loss) from discontinued operations
for the three month periods ended March 31, for properties included in
discontinued operations:


25





2009
                  
                  
                  2008Income
      (loss) from discontinued operations:Cooperative
      apartment unit, New Haven, CT
                  
                  $
                  -
                  
                  
                  $
                  251Cooperative
      apartment unit, Riverdale, NY
                  
                  
                  (2,826
                  )
                  
                  
                  (907
                  )Crown
      Court, New Haven, CT
                  
                  
                  46,218
                  
                  
                  
                  34,484Towne
      House, New Rochelle, NY
                  
                  
                  -
                  
                  
                  
                  24,922Income
      from discontinued operations
                  
                  $
                  43,392
                  
                  
                  $
                  58,750





Balance
Sheet





Net
mortgage portfolio increased by $116,588 primarily as a result of the $200,000
note receivable (face value $750,000) from the Settlement Agreement with David
Lichtenstein and Lightstone in February of 2009 (see Liquidity and Capital
Resources – Joint Venture Mezzanine Loans and Settlement Agreement
below).  This increase was partially offset by the $75,000 principal
repayment the Company received on its loan receivable relating to the Cambridge
Green sale in 2007.





Investments
in and advances to joint ventures increased by $1,286,628 as a result of the
$1,500,000 investment recorded for the Company’s 50% ownership interest in IATG
Puerto Rico, LLC (“IATG”), which the Company received from the Settlement
Agreement with Lightstone (see Liquidity and Capital Resources – Joint Venture
Mezzanine Loans and Settlement Agreement below), partially offset by $213,372 of
equity in the loss from the joint ventures.





Prepaid
expenses and deposits in escrow increased by $112,533 primarily as a result of
increases of $291,686 in prepaid expenses, partially offset by decreases of
$179,153 in deposits in escrow.





Other
assets decreased by $144,327 primarily as a result of a decrease in deferred
charges of $119,699 and the $16,651 of amortization of in-place lease
values.





Other
liabilities decreased by $167,630 primarily as a result of a $162,338 decrease
in deferred income.





In
January, 2009, three independent directors of the Company each received 1,000
shares of the Company’s Class B common stock as a partial payment of directors’
fees for the 2009 year.  The shares were valued at $1.61 per share,
which was the market value of the Class B common stock at the grant date, and,
accordingly, the Company recorded $4,830 in prepaid directors’ fees (to be
amortized during 2009) based on the market value of the stock.  The
Company recorded additions to the Company’s Class B common stock of $300 at par
value of $.10 per share and $4,530 to additional paid-in capital.





Liquidity
and Capital Resources





Presidential
obtains funds for working capital and investment from its available cash and
cash equivalents, from operating activities, from refinancing of mortgage loans
on its real estate equities or from sales of such equities, and from repayments
on its mortgage portfolio.  The Company also has at its disposal a
$250,000 unsecured line of credit from a lending institution.  At
March 31, 2009, there was no outstanding balance due under the line of
credit.


26


Management
believes that the Company has sufficient liquidity and capital resources to
carry on its existing business and, barring any unforeseen circumstances, to pay
the dividends required to maintain REIT status in the foreseeable
future.    Except as discussed herein, management is not
aware of any other trends, events, commitments or uncertainties that will have a
significant effect on liquidity.





In the
fourth quarter of 2008, the Company reduced its dividend from $.16 per share to
$.08 per share.  The decision of the Board of Directors of the Company
to reduce the Company’s dividend at that time recognized, among other things,
the adverse economic conditions currently affecting real estate markets, the
existing defaults on two of the Company’s loans to affiliates of David
Lichtenstein, the Company’s inability at the present time to refinance the Hato
Rey Center office building mortgage and the desirability of conserving the
Company’s cash resources under these circumstances.  On February 4,
2009, the Company announced that it was not declaring a dividend for the first
quarter of 2009 and that it was unlikely that it would declare any dividend in
2009.





To the
extent that payments received on its mortgage portfolio or payments received
from sales are taxable as capital gains, the Company has the option to
distribute the gain to its shareholders or to retain the gain and pay Federal
income tax on it.  The Company does not have a specific policy as to
the retention or distribution of capital gains.  The Company’s
dividend policy regarding capital gains for future periods will be based upon
many factors including, but not limited to, the Company’s present and projected
liquidity, its desire to retain funds available to pay operating expenses or for
additional investment, and its ability to reduce taxes by paying
dividends.





In April,
2009, the Company completed the sale of its Crown Court property and received
net proceeds of sale of approximately $1,631,000.





At March
31, 2009, Presidential had $5,414,137 in available cash and cash equivalents, a
decrease of $570,413 from the $5,984,550 at December 31, 2008.  This
decrease in cash and cash equivalents was due to cash used in operating
activities of $361,657, cash used in investing activities of $88,290, and by
cash used in financing activities of $120,466.





Joint
Venture Mezzanine Loans and Settlement Agreement





In
February, 2008, Lightstone III defaulted on payments of interest due under the
Company’s $9,500,000 loan related to the Macon/Burlington
Malls.  Lightstone III also defaulted on payments of interest due on
the first mortgage loan covering the properties and the holder of the first
mortgage commenced foreclosure proceedings and appointed a receiver to operate
the properties.  The Company believes that the outstanding principal
balance of the first mortgage substantially exceeds the current value of the
Macon/Burlington Malls and that it is unlikely that the Company will be able to
recover any interest or any principal on its mezzanine loan from the collateral
that it holds as security for the loan.


27





In
October, 2008, Lightstone I defaulted on the payment of interest due under the
Company’s $8,600,000 mezzanine loan relating to the Four Malls and also did not
make the payments of the preferential return of 11% per annum due on the
Company’s $1,438,410 investment in the Martinsburg Mall.  Lightstone I
also defaulted on payments of interest due under the first mortgage covering the
Martinsburg Mall and three of the Four Malls (Bradley Square, Mount Berry Square
and Shenango Valley) on and after August 1, 2008 and the holder of the first
mortgage commenced foreclosure proceedings and appointed a receiver to operate
the properties.  The Company believes that the outstanding principal
balance of the first mortgage substantially exceeds the current value of the
mortgaged properties and that it is unlikely that the Company will be able to
recover any amount of its mezzanine loan in the amount of $8,600,000 and
investment in the amount of $1,438,410 from the collateral that it holds as
security for its mezzanine loan and investment.





The
Company’s mezzanine loan in the amount of $7,835,000 to Lightstone II secured by
interests in the Shawnee Mall and the Brazos Mall (“Shawnee/Brazos Malls”) was
in good standing at December 31, 2008.  However, the borrower failed
to make the interest payments due on January 1, 2009 and on the first day of
subsequent months and the loan due to the Company is now in
default.  The first mortgage loan secured by the properties was due to
mature in January of 2009 but Lightstone II obtained a one year extension of the
maturity date until January of 2010.  In connection with the
extension, the holder of the first mortgage exercised its right (exercisable
because the cash flow from the properties did not satisfy a required debt
service coverage ratio) to retain all cash flow from the properties (after
payment of all operating expenses but before payment of interest on the
Company’s mezzanine loan) as additional security for the repayment of the first
mortgage loan.  Lightstone II is attempting to sell the properties
(which sale requires the consent of Presidential), but a sale will be difficult
to accomplish under current market conditions and with only short term financing
on the properties.





Subsequent
to the defaults under the $9,500,000 and $8,600,000 mezzanine loans, the Company
asserted various claims against Lightstone and Mr. Lichtenstein personally with
respect to such loans and on February 27, 2009 completed a settlement of such
claims.  Under the settlement:





(1)
$5,000,003 of the indebtedness under the $9,500,000 mezzanine loan and
$5,000,003 of the indebtedness under the $8,600,000 mezzanine loan were assumed
by an affiliate of Lightstone which is the debtor on an existing loan from the
Company in the outstanding principal amount of $2,074,994.  The total
indebtedness was consolidated into a nonrecourse loan in the outstanding
principal amount of $12,075,000 (the “Consolidated Note”) and is secured by the
ownership interests in entities owning nine apartment properties (1,056
apartment units) located in Virginia (which had previously secured the
$2,074,994 indebtedness) and the ownership interests in entities owning nine
additional apartment properties (931 apartment units) located in Virginia and
North Carolina.


28


The
Consolidated Note accrues interest at the rate of 13% per annum and is due on
February 1, 2012.  All net cash flow from the eighteen apartment
properties will be utilized to pay the interest accrued on the Consolidated Note
and to the extent that there is not sufficient cash flow to pay all accrued
interest, the unpaid interest will be deferred until the maturity of the
Consolidated Note. The Company anticipates that a substantial portion of the
annual interest will not be paid currently and will be deferred in accordance
with the terms of the Consolidated Note.  The Company also anticipates
that it is likely that on the maturity date of the Consolidated Note, the
outstanding principal balance of the Consolidated Note plus any unpaid deferred
interest thereon will exceed the value of the Company’s security therefor and,
accordingly, since the Consolidated Loan is a nonrecourse loan, the Company does
not expect to obtain payment in full of the Consolidated Note on
maturity.





(2) The
Company obtained a 50% ownership interest in IATG, the Lightstone affiliate that
owns The Las Piedras Industrial Complex, an industrial property located in Las
Piedras, Puerto Rico and consisting of approximately 68 acres of land and
380,800 square feet of rentable space contained in several buildings in the
complex.  The property is substantially vacant and the owners may
attempt to sell the property.  Lightstone has agreed to advance funds
to pay any negative cash flow from the operations of the property until a sale
can be accomplished and has agreed that if it does not do so, it will transfer
its remaining 49% interest in the property to Presidential.





(3) The
Company received at closing $250,000 in cash and a note from Mr. Lichtenstein in
the amount of $750,000 payable without interest on March 1, 2010.  Mr.
Lichtenstein is not personally liable for payment of the $750,000 note, but the
note is secured by a 25% ownership interest in the Las Piedras
property.





(4) The
Company received a personal guaranty from Mr. Lichtenstein that the Company will
receive all accrued interest on the Company’s $7,835,000 mezzanine loan
(relating to the Shawnee/Brazos Malls) through the date of repayment and
$500,000 of the principal amount of the loan, which personal guaranty is limited
to $500,000.  As part of the settlement, the Company agreed to modify
its right to receive repayment in full of the $7,835,000 loan before Mr.
Lichtenstein receives any return on his capital contributions to the borrowing
entity to the following extent: the Company will receive the first net proceeds
of any sale or refinancing of the Shawnee/Brazos Malls in an amount equal to all
accrued and unpaid interest and $2,000,000 of principal; Mr. Lichtenstein will
receive the next $1,000,000 of any such net sale or refinancing proceeds; the
Company will receive the next $1,000,000 of any such net proceeds and any
additional net proceeds shall be paid 50% to the Company and 50% to Mr.
Lichtenstein.  Mr. Lichtenstein’s guaranty is secured by his remaining
interest in IATG.





The
Company has agreed with Lightstone that it will not foreclose on its $7,835,000
mezzanine loan so long as the first mortgage on the Shawnee/Brazos Malls is not
accelerated or due at maturity and the holder of the first mortgage is retaining
funds from operations of the properties in an amount sufficient to pay the
interest due on the mezzanine loan.





It is
impossible to predict at this time whether or to what extent the Company will be
able to recover any amounts on the $7,835,000 mezzanine loan.  While
the Shawnee/Brazos Malls currently generate more than sufficient cash flow to
service the first mortgage and the Company’s mezzanine loan, if the adverse
market conditions currently affecting the sale and refinancing of shopping mall
properties persist through 2009, it may not be possible to extend or refinance
the first mortgage when it becomes due in January of 2010 or to sell the
properties for an amount in excess of the first mortgage balance.  The
carrying value on the Company’s financial statements of the $7,835,000 mezzanine
loan and the Company’s minority interest in the entity owning the Shawnee/Brazos
Malls was $1,511,887 at December 31, 2008.


29




While
under existing market conditions it is difficult to place a value on the assets
and collateral received from Lightstone and Mr. Lichtenstein in settlement of
the Company’s claims against them, management believes that the settlement is in
the best interests of the Company taking into account the nature of the
Company’s claims and the cost and unpredictability of litigation and collection
of any judgment that might have been obtained.





The
defaults in payment of the Company’s $9,500,000 mezzanine loan to Lightstone
III, the $8,600,000 mezzanine loan to Lightstone I, and the $7,835,000 mezzanine
loan to Lightstone II have had and will have a material adverse affect on the
Company’s business, financial condition, results of operations and
prospects.





The
principal effect of the transactions resulting from the Settlement Agreement on
the Company’s consolidated financial statements in 2009, is as
follows:





(i)  The
carrying value of the $12,075,000 Consolidated Note on the Company’s
consolidated balance sheet is $2,074,994. This is the same carrying value of the
$2,074,994 note that was on the Company’s consolidated balance sheet prior to
the consolidation of this note with the additional $10,000,006 indebtedness
received in the settlement agreement.  The $10,000,006 additional
portion of the note was received in partial settlement of the $9,500,000 and
$8,600,000 mezzanine loans, which had a net carrying value of $0 on the
Company’s consolidated balance sheet. Accordingly, there was no significant
adjustment on the Company’s consolidated balance sheet in 2009 as a result of
the receipt of the Consolidated Note. No gain or loss was recorded on the
Company’s consolidated financial statements in connection with the consolidation
of the $2,074,994 and $10,000,006 indebtedness and the substitution of the
collateral for the $10,000,006 indebtedness.





(ii) The
50% membership interest in IATG obtained by the Company was recorded on the
Company’s consolidated balance sheet at its preliminary estimated fair value of
$1,500,000 and a gain on the settlement of the joint venture loans in the amount
of $1,500,000 was recognized on the Company’s consolidated financial
statements.





(iii) The
$750,000 non-interest bearing, nonrecourse note due in March, 2010, which is
secured by an additional 25% ownership interest in IATG was recorded on the
Company’s consolidated balance sheet at its preliminary estimated fair value of
$200,000 and a gain on the settlement of the joint venture loans in the amount
of $200,000 was recognized on the Company’s consolidated financial
statements.





In
summary, as a result of the Settlement Agreement, in 2009, the Company recorded
assets of $1,700,000 on the Company’s consolidated balance sheet (a $200,000
note receivable and a $1,500,000 investment in joint ventures) and recorded a
$1,700,000 gain on the settlement of joint venture loans in its consolidated
financial statements.





The
Company based the preliminary estimated fair value of the IATG property on the
current information available to the Company.  The Company is
currently in the process of obtaining an appraisal of the property owned by IATG
and anticipates that the appraisal will be completed by the quarter ended June
30, 2009. Based on the fair value of such appraisal, the preliminary estimates
made by the Company may be adjusted in the second quarter of
2009.


30




Operating
Activities





Cash from
operating activities includes interest on the Company’s mortgage portfolio, net
cash received from rental property operations and distributions received from
joint ventures.  In 2009, cash received from interest on the Company’s
mortgage portfolio was $71,811.  Net cash received from rental
property operations was $64,821.  Net cash received from rental
property operations is before additions and improvements and mortgage
amortization.  In 2009, the Company did not receive any distributions
from the joint ventures.





Investing
Activities





Presidential
holds a portfolio of mortgage notes receivable.  During 2009, the
Company received principal payments of $86,701 on its mortgage
portfolio.





During
the first quarter of 2009, the Company invested $174,991 in additions and
improvements to its properties.





Financing
Activities





The
Company’s indebtedness at March 31, 2009, consisted of mortgage debt of
$16,298,326 for continuing operations and $2,053,964 for discontinued
operations.  The mortgage debt is collateralized by individual
properties.  The $15,163,995 mortgage on the Hato Rey Center property
is nonrecourse to the Company, whereas the $1,067,813 Building Industries Center
mortgage and the $66,518 Mapletree Industrial Center mortgage are recourse to
Presidential.  The $2,053,964 mortgage on the Crown Court property,
which is classified as a discontinued operation, is nonrecourse to the
Company.  In addition, some of the Company’s mortgages provide for
Company liability for damages resulting from specified acts or circumstances,
such as for environmental liabilities and fraud.  Generally, mortgage
debt repayment is serviced with cash flow from the operations of the individual
properties.  During 2009, the Company made $118,966 of principal
payments on mortgage debt.





The
mortgages on the Company’s properties are at fixed rates of interest and will
fully amortize by periodic principal payments, with the exception of the
Building Industries Center mortgage, which has a balloon payment of $1,038,086
due at maturity in March, 2010, and the Hato Rey Center mortgage.  The
Company expects to repay the $1,038,086 balloon payment due in March, 2010 on
the Building Industries Center mortgage, unless it is able to obtain an
extension on satisfactory terms.  The $15,163,995 Hato Rey Center
mortgage matures in May, 2028, and had a fixed rate of interest of 7.38% per
annum until May, 2008; thereafter the interest rate increased by 2% and
additional repayments of principal will be required from surplus cash flows from
operations of the property (see Hato Rey Partnership below).





31




Investments
In and Advances to Joint Ventures


At
December 31, 2008, the Company had investments in and advances to four joint
ventures which owned and operated nine shopping malls located in seven states.
These investments in and advances to joint ventures were made to entities
controlled by David Lichtenstein and Lightstone.  As a result of the
February 27, 2009, Settlement Agreement, the Company now has investments in and
advances to joint ventures in two entities that are controlled by Mr.
Lichtenstein and Lightstone. The Company accounts for these investments using
the equity method.





The first
investment is the Company’s mezzanine loan in the amount of $7,835,000 to
Lightstone II which is secured by ownership interests in the Shawnee/Brazos
Malls.  In connection with this loan, the Company received a 29%
ownership interest in Lightstone II. The loan matures in 2014 and has an
interest rate of 11% per annum.  Since January 1, 2009, the interest
payments due on the $7,835,000 loan have not been made and the loan is in
default (see Joint Venture Mezzanine Loans and Settlement Agreement
above).  The $7,835,000 investment has been reduced by payments of
interest (distributions received) and the Company’s share of the losses recorded
from the joint venture and the balance of the Company’s investment in the
Shawnee/Brazos Malls at March 31, 2009 is $1,364,051.





The
second investment is a 50% ownership interest in IATG, the Lightstone affiliate
that owns The Las Piedras Industrial Complex, an industrial property located in
Las Piedras, Puerto Rico and consisting of approximately 68 acres of land and
380,800 square feet of rentable space contained in several buildings in the
complex.





The
Company’s preliminary estimate of the fair value of its 50% ownership interest
in IATG is $1,500,000 and in March, 2009, the Company recorded a $1,500,000
investment in joint ventures on its consolidated balance sheet and recognized a
gain on settlement of joint venture loans of $1,500,000 in its consolidated
financial statements (see Joint Venture Mezzanine Loans and Settlement Agreement
above).





Activity
in investments in and advances to joint ventures for the period ended March 31,
2009 is as follows:





Balance at
                        December 31,
                        2008
                      
                      
                      Investments
                      
                      
                      Equity
                        in the
                        Loss
                        from
                        Joint
                        Ventures
                      
                      
                      Balance at
                        March 31,
                        2009Shawnee/BrazosMalls
      (1)
                      
                      $
                      1,511,887
                      
                      
                      $
                      -
                      
                      
                      $
                      (147,836
                      )
                      
                      $
                      1,364,051IATG
      (2)
                      
                      
                      -
                      
                      
                      
                      1,500,000
                      
                      
                      
                      (65,536
                      )
                      
                      
                      1,434,464$
                      1,511,887
                      
                      
                      $
                      1,500,000
                      
                      
                      $
                      (213,372
                      )
                      
                      $
                      2,798,515
  32




Equity in
the income (loss) from joint ventures is as follows:


Three
      Months Ended
                                      March
      31,2009
                                    
                                    
                                    2008Shawnee/Brazos
      Malls
                                    (1)
                                    
                                    $
                                    (147,836
                                    )
                                    
                                    $
                                    (315,597
                                    )IATG
                                    (2)
                                    
                                    
                                    (65,536
                                    )
                                    
                                    
                                    -Martinsburg
      Mall
                                    (3)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    40,435Four
      Malls
                                    (4)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (175,620
                                    )Macon/Burlington
      Malls
                                    (5)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    89,986$
                                    (213,372
                                    )
                                    
                                    $
                                    (360,796
                                    )




(1)
Interest income earned by the Company at the rate of 11% per annum on the
outstanding $7,835,000 loan from the Company to Lightstone II is included in the
calculation of the Company’s share of the loss from joint ventures for the
Shawnee/Brazos Malls.





(2) The
fair value of the Company’s 50% ownership interest in IATG is estimated to be
$1,500,000.  The Company also recorded its 50% share of the loss from
IATG for the month ended March 31, 2009.





(3) In
2007, the Company’s basis of its investment in the Martinsburg Mall was reduced
by distributions and losses to zero.  Any subsequent distributions
received from the Martinsburg Mall were recorded in income.  At March
31, 2008, the Company recorded $40,435 of distributions received in income from
joint ventures.





(4)
Interest income earned by the Company at the rate of 11% per annum on the
outstanding $8,600,000 loan from the Company to Lightstone I is included in the
calculation of the Company’s share of the loss from joint ventures for the Four
Malls.





(5) In
2007, the Company’s basis of its investment in the Macon/Burlington Malls was
reduced by distributions and losses to zero.  Any subsequent
distributions received from the Macon/Burlington Malls were recorded in
income.  At March 31, 2008, the Company recorded $89,986 of
distributions received in income from joint ventures.





The
Lightstone Group is controlled by David Lichtenstein.  At March 31,
2009, in addition to Presidential’s investments of $2,798,515 in these joint
ventures with entities controlled by Mr. Lichtenstein, Presidential has two
loans that are due from entities that are controlled by Mr. Lichtenstein in the
aggregate outstanding principal amount of $12,825,000 with a net carrying value
of $2,274,994.





The
$5,073,509 net carrying value of investments in and advances to joint ventures
with entities controlled by Mr. Lichtenstein and loans outstanding to entities
controlled by Mr. Lichtenstein constitute approximately 18% of the Company’s
total assets at March 31, 2009.





Hato Rey
Partnership





At March
31, 2009 the Company has an aggregate 60% general and limited partnership
interest in the Hato Rey Partnership.  The Hato Rey Partnership owns
and operates the Hato Rey Center, an office building in Hato Rey, Puerto
Rico.


33




In 2005
and 2006, tenants vacated 82,387 square feet of space to occupy their own newly
constructed office buildings and Presidential commenced an aggressive program to
lease the vacant space.  Since March, 2006 the vacancy rate at the
property has been reduced from 48% to approximately 22% at April 30,
2009.  However, as a result of local economic conditions and higher
than historical vacancy rates in the Hato Rey area, the rent up of vacant space
at the building has been slower than anticipated.





Over the
last three years, Presidential has loaned $2,500,000 to the owning partnership
to fund negative cash flow from the operations of the property during the
periods of high vacancy rates and to pay the costs of a modernization
program.  Interest accrued on the loan at the rate of 11% until May,
2008 and 13% thereafter, with interest and principal to be paid from the first
positive cash flow from the property or upon a refinancing of the first mortgage
on or sale of the property. At March 31, 2009, total advances under the loan
were $2,434,275 and subsequent to March 31, 2009, the Company advanced an
additional $65,725.  The $2,434,275 loan and the accrued interest in
the amount of $574,720 have been eliminated in consolidation.





The
Company had expected to refinance the existing first mortgage on the building in
the second quarter of 2008, when the terms of the existing mortgage were to be
automatically modified to increase the interest rate thereon, but the
combination of the slower than anticipated rent up and the turmoil in the
lending markets made a refinancing unfeasible.  The modification of
the terms of the existing mortgage provided for an increase in its interest rate
by 2% per annum (from 7.38% to 9.38%) and that payment of the additional 2% will
be deferred until the maturity date of the mortgage in 2028.  In
addition, the modification provides that all net cash flow from the property
will be utilized to repay the outstanding principal of the mortgage loan, which
will be prepayable without penalty.  The Company intends to refinance
this mortgage when occupancy rates at the property have further improved and
lending markets have returned to a more normal state.  The management
of Presidential believes that the vacancy rate at the property can continue to
be reduced over the next few years.  However, until the first mortgage
is refinanced, the Company will not receive any cash payments on its loan to the
partnership since principal and interest on the Company’s loan are payable only
out of operating cash flow or refinancing or sale proceeds and, under the terms
of the modified mortgage, all net cash flow will be utilized to reduce principal
on the first mortgage. During 2009, there was no net cash flow available to
reduce the principal on the first mortgage.





On
January 1, 2009, the Company adopted SFAS No. 160 which requires amounts
attributable to noncontrolling interests to be reported
separately.  For the three months ended March 31, 2009, the Hato Rey
Partnership had a loss of $95,258.  The consolidated financial
statements reflect the separate disclosure of the noncontrolling interest’s
share (40%) of the loss of $38,103.  Prior to the adoption of SFAS No.
160, the partners constituting the noncontrolling interest in the Hato Rey
Partnership had no basis in their investment and, as a result, the Company was
required to record in its consolidated financial statements any losses
attributable to the noncontrolling interest and the Company would have recorded
any future earnings of the noncontrolling interest up to the amount of the
losses previously recorded by the Company attributable to the noncontrolling
interest.  Under SFAS No. 160, this rule is no longer
applicable.  For the years ended December 31, 2008 and 2007, the Hato
Rey Partnership had losses of $481,352 and $521,102, respectively, of which
$192,541 and $208,441, respectively, represented the noncontrolling interest
share absorbed by the Company.


34




Environmental
Matters





Mapletree
Industrial Center – Palmer, Massachusetts





The
Company is involved in an environmental remediation process for contaminated
soil found on this property.  The land area involved is approximately
1.25 acres.  Since the most serious identified threat on the site is
to songbirds, the proposed remediation will consist of removing all exposed
metals and a layer of soil. The Company estimated that the costs of the cleanup
will not exceed $1,000,000.  In accordance with the provisions of SFAS
No. 5, “Accounting for Contingencies”, in the fourth quarter of 2006, the
Company accrued a $1,000,000 liability which was discounted by $145,546 and
charged $854,454 to expense.  The discount rate used was 4.625%, which
was the interest rate on 10 year Treasury Bonds.  At March 31, 2009,
the accrued liability balance was $907,030 and the discount balance was $141,436
for a net accrued liability of $765,594.





The
remediation must comply with the requirements of the Massachusetts Department of
Environmental Protection (“MADEP”) and during the three months ended March 31,
2009, the Company obtained the consent of MADEP to a specific plan of
remediation, which the Company plans to complete in 2009.  The Company
is securing final bids for completion of the work and management expects that
the actual cost of the remediation will be substantially less than the balance
of the accrued liability at March 31, 2009.





Actual
costs incurred may vary from these estimates due to the inherent uncertainties
involved. The Company believes that any liability in excess of amounts accrued
which may result from the resolution of this matter will not have a material
adverse effect on the financial condition, liquidity or the cash flow of the
Company.





Consolidated
Loans





Presidential
holds two nonrecourse loans (the “Consolidated Loans”), which it received in
1991 from Ivy Properties, Ltd. and its affiliates “(Ivy”).  At March
31, 2009, the Consolidated Loans have an outstanding principal balance of
$4,770,050 and a net carrying value of zero.  Pursuant to existing
agreements, the Company is entitled to receive, as payments of principal and
interest on the Consolidated Loans, 25% of the cash flow of Scorpio
Entertainment, Inc. (“Scorpio”), a company owned by two of the Ivy principals
(Steven Baruch who is an executive officer and Director of Presidential and
Thomas Viertel who is an executive officer of Presidential) to carry on
theatrical productions.  Amounts received by Presidential from Scorpio
will be applied to unpaid and unaccrued interest on the Consolidated Loans and
recognized as income.  While these amounts have been material in the
past, the Company believes that they will not be material in
2009.  The profitability of theatrical production is by its nature
uncertain and management believes that any estimate of payments from Scorpio on
the Consolidated Loans for future periods is too speculative to
project.  During the quarters ended March 31, 2009 and 2008, the
Company received payments of zero and $35,500, respectively, from
Scorpio.  The Consolidated Loans bear interest at a rate equal to the
JP Morgan Chase Prime rate, which was 3.25% at March 31, 2009.  At
March 31, 2009, the unpaid and unaccrued interest was $3,559,279 and such
interest is not compounded.


35




ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





While the
Company is not required as a smaller reporting company to comply with this Item
3, it is providing the following general discussion of qualitative market
risk.





The
Company’s financial instruments consist primarily of notes receivable and
mortgage notes payable.  Substantially all of these instruments bear
interest at fixed rates, so the Company’s cash flows from them are not directly
impacted by changes in market rates of interest.  However, changes in
market rates of interest impact the fair values of these fixed rate assets and
liabilities.  The Company generally holds its notes receivable until
maturity or prepayment and repays its notes payable at maturity or upon sale of
the related properties, and, accordingly, any fluctuations in values do not
impact the Company’s earnings, balance sheet or cash flows.  The
Company does not own any derivative financial instruments or engage in hedging
activities.





ITEM
      4.
            CONTROLS
      AND PROCEDURES





a)
            As
      of the end of the period covered by this quarterly report on Form 10-Q,
      the Company carried out an evaluation, under the supervision and with the
      participation of our Chief Executive Officer and Chief Financial Officer,
      of the effectiveness of the design and operation of its disclosure
      controls and procedures.  Based on this evaluation, our Chief
      Executive Officer and Chief Financial Officer concluded that our
      disclosure controls and procedures are effective in timely alerting them
      to material information required to be included in this
      report.





b)
            There
      has been no change in the Company’s internal control over financial
      reporting that occurred during the Company’s most recent fiscal quarter
      that has materially affected or is reasonably likely to materially affect
      the Company’s internal control over financial
  reporting.




PART II –
OTHER INFORMATION




ITEM
      6.
              Exhibits




10.1
                  
                  Amendment
      dated February 27, 2009 to the  Presidential Realty Corporation
      Defined Benefit Plan.31.1
                  
                  Certification
      of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) of
      the Securities Exchange Act of 1934, as amended.31.2
                  
                  Certification
      of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) of
      the Securities Exchange Act of  1934, as
  amended.32.1
                  
                  Certification
      of Chief Executive Officer of the Company pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
                  
                  Certification
      of Chief Financial Officer of the Company pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.




36





SIGNATURES





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




PRESIDENTIAL
      REALTY CORPORATION(Registrant)DATE:
      May 11, 2009
                    By:
                    /s/
      Jeffrey F. JosephJeffrey
      F. JosephPresident
      and Chief Executive OfficerDATE:
      May 11, 2009
                    By:
                    /s/
      Elizabeth DelgadoElizabeth
      DelgadoTreasurer




37