UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549


FORM
10-K





(MARK
      ONE)
            x
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the
fiscal year ended  December 31,
2009


OR


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





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)
                            
                            (Zip
      Code)




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




Securities
registered pursuant to Section 12(b) of the Act:


Name
      of each exchange onTitle
      of each class
              
              which
      registeredClass
      B Common Stock
              
              NYSE
      AMEX LLC





Securities
registered pursuant to Section 12(g) of the Act:





Class A Common Stock





Title of
class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.   Yes  ̈ No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.   Yes  ̈  No x





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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.   x





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
Act).  Yes  ̈   No
x





The aggregate market value of voting
stock held by non-affiliates of the registrant based on the closing price of the
stock at June 30, 2009 was $2,581,000.  The registrant has no
non-voting stock.





The number of shares outstanding of
each of the registrant’s classes of common stock as of March 24, 2010 was
442,533 shares of Class A common stock and 2,957,147 shares of Class B common
stock.





Documents Incorporated by
Reference:  The registrant’s definitive Proxy Statement for its
Annual Meeting of Shareholders currently scheduled for June 16, 2010, which
Proxy Statement will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A not later than 120 days after the registrant’s fiscal
year end of December 31, 2009, is incorporated by reference into Part III of
this Form 10-K.





PRESIDENTIAL REALTY
CORPORATION





TABLE OF
CONTENTS





FORWARD-LOOKING
      STATEMENTS
                            1PARI
      IItem
      1.
                            
                            Business
                            1Item
      1A.
                            
                            Risk
      Factors
                            11Item
      1B.
                            
                            Unresolved
      Staff Comments
                            11Item
      2.
                            
                            Properties
                            11Item
      3.
                            
                            Legal
      Proceedings
                            15Item
      4.
                            
                            Reserved
                            16PART
      IIItem
      5.
                            
                            Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                            16Item
      6.
                            
                            Selected
      Financial Data
                            17Item
      7.
                            
                            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                            18Item
      7A.
                            
                            Quantitative
      and Qualitative Disclosures about Market Risk
                            47Item
      8.
                            
                            Financial
      Statements and Supplementary Data
                            47Item
      9.
                            
                            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                            47Item
      9A.
                            
                            Controls
      and Procedures
                            48Item
      9B.
                            
                            Other
      Information
                            49PART
      IIIItem
      10.
                            
                            Directors,
      Executive Officers and Corporate Governance
                            49Item
      11.
                            
                            Executive
      Compensation
                            49Item
      12.
                            
                            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                            49Item
      13.
                            
                            Certain
      Relationships and Related Transactions, and Director
      Independence
                            49Item
      14.
                            
                            Principal
      Accounting Fees and Services
                            50PART
      IVItem
      15.
                            
                            Exhibits,
      Financial Statement Schedules
                            50Table
      of Contents to Consolidated Financial Statements
                            56





Forward-Looking
Statements





Certain
statements made in this report that are not historical fact 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, including the expectation of the Board of Directors that it will
request the approval of the Company’s shareholders for the sale of all or
substantially all of the Company’s assets and the adoption of a plan of
liquidation. 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:





·
            continuing
      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 venture in which the Company is a member, which
      adversely affects the operating results and valuations of such
      malls;


·
            continuing
      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 venture 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;


·
            the
      risk that the Board of Directors may not seek shareholder approval of the
      sale of all or substantially all of the Company’s assets and the adoption
      of liquidation, and if such approval is sought, it is not
      obtained;


·
            general
      risks of real estate ownership and
operation;


·
            governmental
      actions and initiatives;


·
            environmental
      and safety requirements; and


·
            failure
      to comply with continuing listing standards of the NYSE
    AMEX.





PART
I





ITEM
      I.
            BUSINESS





(a)         
General





Presidential
Realty Corporation is a Delaware corporation organized in 1983 to succeed to the
business of a company of the same name which was organized in 1961 to succeed to
the business of a closely held real estate business founded in
1911.  The terms “Presidential” or the “Company” refer to the present
Presidential Realty Corporation or its predecessor company of the same name and
to any subsidiaries.  Since 1982 the Company has elected to be treated
as a real estate investment trust (“REIT”) for Federal and State income tax
purposes.  See Qualification as a
REIT.  The Company owns interests in real estate, makes loans
secured by interest in real estate and has investments in two joint ventures
(one joint venture owns two shopping malls and the other joint venture owns an
industrial complex).


1


Presidential
self-manages the properties that it owns and the property owned by PDL, Inc. and
Associates Limited Co-Partnership (the “Hato Rey Partnership”) in which the
Company is the general partner and has a 60% partnership interest.  At
December 31, 2009, the Company employed 17 people, of whom 11 are employed at
the Company’s home office and 6 are employed at the individual property
sites.  The Company does not manage any of the properties owned by the
joint ventures in which it has invested.  Those properties are managed
by an affiliate of the Company’s partner in the joint ventures.





The
Company’s principal assets fall into the following categories:





(i)  Equity
interests in rental properties.  Approximately 55% of the Company’s
assets are equity interests in commercial and residential rental
properties.  These properties have a carrying value of $16,595,998,
less accumulated depreciation of $1,516,641, resulting in a net carrying value
of $15,079,357 at December 31, 2009.  See Properties
below.





(ii)  Notes
receivable.  Approximately 10% of the Company’s assets consist of
notes receivable, which are reflected on the Company’s Consolidated Balance
Sheet at December 31, 2009 as “Net Mortgage Portfolio”.  The
$2,917,134 aggregate principal amount of these notes has been reduced by $36,212
of discounts (which reflect the difference between the stated interest rates on
the notes and the market interest rates at the time the notes were
made).  See Notes 1-B, 1-C, 1-D and 3 of Notes to Consolidated
Financial Statements.  Accordingly, the net carrying value of
the Company’s “Net Mortgage Portfolio” was $2,880,922 at December 31, 2009, of
which $2,816,665 (or approximately 10% of the Company’s assets) are loans due
from entities affiliated with The Lightstone Group (“Lightstone”), which are
controlled by David Lichtenstein.  All of the loans included in this
category of assets were current at December 31, 2009.





(iii)  Joint
ventures.  Approximately 9% of the Company’s assets consists of
investments in and advances to joint ventures with entities affiliated with
Lightstone.  The Company accounts for these investments using the
equity method.  At December 31, 2009, investments in and advances to
joint ventures were $2,595,603, all of which is related to the Las Piedras,
Puerto Rico industrial complex.  See Investments in and Advances
to Joint Ventures, Management’s Discussion and
Analysis of Financial Condition and Results of Operations and Note 4 of
Notes to Consolidated
Financial Statements.





(iv)  Securities
available for sale.  At December 31, 2009, the Company held $3,614,113
in securities available for sale, which is approximately 13% of the Company’s
assets.  Such securities consist primarily of notes and bonds issued
by agencies of the United States government.  (See Investment Strategies,
Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Note 6 of Notes to the Consolidated
Financial Statements.)





(v)  Cash
and cash equivalents.  At December 31, 2009, the Company had $784,674
in cash and cash equivalents, which is approximately 3% of the Company’s
assets.  (See Investment Strategies
below.)


2


Between
2004 and 2006, the Company made a total of $27,373,410 of investments in and
advances to joint ventures affiliated with Lightstone that owned and operated
nine shopping mall properties.  At December 31, 2008, these
investments in and advances to joint ventures had been reduced on the Company’s
consolidated balance sheet by distributions received by the Company and by the
Company’s share of the losses of the joint ventures to $1,511,887, and during
2009 the balance of the investment in the shopping mall joint ventures was
further reduced by the Company’s share of joint venture losses to
zero.





The
Company was entitled to receive interest at the rate of 11% per annum on a total
of $25,935,000 of mezzanine loans to, and $1,438,410 of its investment in, the
joint ventures and recorded these payments when received as distributions in
investments in and advances to joint ventures.  During 2008 and 2009,
a number of defaults occurred with respect to the payment of interest due on
these mezzanine loans and on the first mortgage loans secured by the properties
owned by the joint ventures and the Company does not expect to recover any
additional amounts of principal or interest on its mezzanine loans except as
provided in the Settlement Agreement referred to in the next
paragraph.





On
February 27, 2009, in order to obtain some value for its interests in some of
the joint ventures and two of the mezzanine loans, the Company entered into a
Settlement Agreement with Lightstone and David Lichtenstein individually with
respect to various claims that the Company had asserted against them in
connection with the Company’s investments in and advances to the joint ventures
described above (the “Settlement Agreement”).  The Settlement
Agreement is described below under Investments and Advances to
Joint Ventures and Management’s Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources – Joint Venture
Mezzanine Loans and Settlement Agreement.





Under the
Internal Revenue Code of 1986, as amended (the “Code”), a REIT that meets
certain requirements is not subject to Federal income tax on that portion of its
taxable income that is distributed to its shareholders, if at least 90% of its
“real estate investment trust taxable income” (exclusive of capital gains) is so
distributed.  Since January 1, 1982, the Company has elected to be
taxed as a REIT and paid regular quarterly cash distributions through December
31, 2008.  Total dividends paid by the Company in 2008 were $.56 per
share.  The Company did not pay any dividends in 2009.





While the
Company intends to operate in such a manner as to enable it to be taxed as a
REIT, and to pay dividends in an amount sufficient to maintain REIT status, no
assurance can be given that the Company will, in fact, continue to be taxed as a
REIT or that the Company will have cash available to pay sufficient dividends in
order to maintain REIT status. The Company was not required to pay any dividends
in 2009 and believes that it will not be required to pay dividends in 2010 to
maintain its REIT status. See Qualification as a REIT,
Item 5. - Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities and Note 13 of Notes to Consolidated
Financial Statements.


3


During
2009, the Company was notified by the NYSE Amex (the “Exchange”) that its Class
A and Class B shares were not in compliance with certain of the Exchange’s
continued listing standards.  The Company determined that it could not
comply with the listing standard applicable to its Class A (relating to a
minimum aggregate market value of the publicly held Class A shares) and agreed
to voluntarily delist such Class A shares.  The Company did, however,
submit a plan to regain compliance with the Exchange’s continued listing
standard with respect to its Class B shares by November 15, 2010.  On
March 18, 2010, the Company received notification from the Exchange that its
Class B shares are currently in compliance with the Exchange’s continued listing
standards.  (See the Company’s Report on Form 8-K filed March 22, 2010
for further details.)





(b)  Investment
Strategies





The
Company’s general investment strategy has been to make investments in real
property that offer attractive current yields with, in some cases, potential for
capital appreciation.  However, in light of the current economic
climate, its continuing losses from operations, the adverse results from its
investments in joint ventures with Lightstone and the unavailability of
financing on a reasonable basis, the Company is not making new investments at
this time.





Management
believes that the Company is too small to operate effectively, particularly as
an independent public company, in today’s marketplace.  To that end,
the Company has taken a number of steps and is considering
others.  The Company is conserving its resources (cash of $784,674 and
securities available for sale of $3,614,113 at December 31, 2009) so that funds
are available to service its existing assets and to operate the Company until a
strategic alternative can be effectuated that will maximize shareholder
value.  As previously noted, the Company did not pay a dividend in
2009 and it is unlikely that it will declare a dividend in 2010, except as may
be required to comply with applicable REIT requirements.





From time
to time in the Company’s recent history, the Company has considered various
strategic alternatives in an effort to maximize shareholder value, including a
merger, consolidation or sale of all or substantially all of the Company’s
assets in a single transaction followed by a liquidation of the
Company.  While in the past no appropriate opportunity has been found,
the Board of Directors and management continue to seek and consider potential
strategic transactions.  Management is currently having ongoing
discussions concerning possible strategic transactions with a number of
different parties but no definitive agreement has been reached and no assurances
can be given that the Company will be able to achieve such a
transaction.  The Company is currently negotiating with several
parties for the sale of its Building Industries Center property in White Plains,
New York and subsequent to year end, the Company listed its Mapletree Industrial
Center property in Palmer, Massachusetts for sale.  In addition, the
Board of Directors expects to request the approval of its shareholders at its
next Annual Meeting currently scheduled for June 16, 2010 for the sale of all or
substantially all of the Company’s assets, and the adoption of a Plan of
Liquidation of the Company.





In light
of the above, the Company does not expect to make any new investments in real
estate except that it is negotiating for the purchase of a 25% preferred equity
ownership position in nine of the properties securing the $12,075,000
consolidated note (the “Consolidated Note”) that the Company received, among
other things, in the Settlement Agreement.


4


The
Company’s investment policy is not contained in or subject to restrictions
included in the Company’s Certificate of Incorporation or Bylaws, and there are
no limits in the Company’s Certificate of Incorporation or Bylaws on the
percentage of assets that it may invest in any one type of asset or the
percentage of securities of any one issuer that it may acquire.  The
investment policy may, therefore, be changed by the Board of Directors of the
Company without the concurrence of the holders of its outstanding
stock.  However, to continue to qualify as a REIT, the Company must
restrict its activities to those permitted under the Code.  See Qualification as a
REIT.





(c) Investments in and Advances
to Joint Ventures





During
2004 and 2005, the Company made investments in and loans to four joint ventures
and received 29% ownership interests in these joint ventures. The joint ventures
own nine shopping malls in seven states. The initial aggregate investment in the
joint ventures (original principal amount of the loans made to and investments
made in the joint ventures) was $27,038,410. The Company accounted for these
investments and loans under the equity method because it exercises significant
influence over, but does not control, these entities, which are controlled by
Lightstone and David Lichtenstein. Investments are recorded at cost, as
investments in and advances to joint ventures, and adjusted for the Company’s
share of each venture’s income or loss and increased by cash contributions and
decreased by distributions received (including interest payments on the loans).
Real estate held by such entities is reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable, and is written down to its estimated fair value if an impairment is
determined to exist. Starting in 2007, the shopping malls began to suffer from,
among other things, competition from other shopping malls, the inability to
attract new tenants and declining rental rates, which conditions worsened during
the continuing economic downturn, and in 2008 and 2009, the joint ventures
defaulted on the Presidential loans. In addition, in 2008, Lightstone defaulted
on payments of interest due on the first mortgage loans on six of the mall
properties and the holders of the first mortgages commenced foreclosure
proceedings and appointed a receiver to operate those properties. In January,
2010, the mortgage on two more of the mall properties became due and is in
default and the holder of the first mortgage has commenced foreclosure
proceedings on those properties.





By
December 31, 2008, the Company’s carrying amount in three of the four joint
ventures was reduced to zero.  In February, 2009, in order to address
the loan defaults and various claims raised by the Company against Lightstone
and Mr. Lichtenstein personally, the Company, Lightstone and Mr. Lichtenstein
entered into a Settlement Agreement.  As a result of the Settlement
Agreement, the Company relinquished its interest in the collateral for two of
the loans having an outstanding principal balance of $18,100,000 and the related
joint ventures, which the Company believed were of no value; obtained the
assumption of  $10,000,006 of the loan balance by an affiliate of Mr.
Lichtenstein; modified the terms of its $7,835,000 mezzanine loan with respect
to one of the joint ventures and obtained a $500,000 personal guaranty with
respect to that loan; and obtained a 50% ownership interest in the IATG joint
venture described below.  Accordingly, at December 31, 2009, the
Company has an interest in two joint ventures and accounts for these investments
under the equity method of accounting.


5


The first
investment is the Company’s mezzanine loan in the amount of $7,835,000 to a
joint venture (“Lightstone II”) that is secured by ownership interests in the
Brazos Mall in Lake Jackson, Texas and the Shawnee Mall in Shawnee, Oklahoma
(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.  In addition, the first mortgage on the
Shawnee/Brazos Malls matured on January 10, 2010 and was not
paid.  The Company has been advised that Lightstone has been unable to
refinance the first mortgage loan and is attempting to obtain an extension of
the existing mortgage loan.  However, the holder of the first mortgage
has commenced foreclosure proceedings and the Company believes that it will not
be able to obtain any recovery on its mezzanine loan other than the recovery of
$500,000 from David Lichtenstein on his limited guaranty received pursuant to
the Settlement Agreement, which $500,000 was received in March,
2010.  As a result of the $500,000 guaranty payment received in March,
2010, at December 31, 2009, the Company recognized a $500,000 gain on settlement
of joint venture loans in its consolidated financial statements and recorded a
$500,000 receivable due from Mr. Lichtenstein on its consolidated balance
sheet.  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.  As a result of the operating loss and
impairment loss for the joint ventures in 2009, the balance of the Company’s
investment in the Shawnee/Brazos Malls at December 31, 2009 was reduced to
zero.





The
second investment is a 50% ownership interest in IATG Puerto Rico, LLC (“IATG”),
the Lightstone affiliate that owns The Las Piedras Industrial Complex, an
industrial property located in Las Piedras, Puerto Rico consisting of
approximately 68 acres of land and 380,800 square feet of rentable space
contained in several buildings in the complex. Pursuant to an
independent appraisal of the property owned by IATG and based on that appraised
value of $6,500,000, the Company estimated the value of its 50% ownership
interest in the IATG property to be $3,250,000 and it had a carrying value of
$2,595,603 as of December 31, 2009. 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.





In
addition, as part of the Settlement Agreement, a total of $10,000,006 of
$18,100,000 aggregate amount of defaulted mezzanine loans owed by various
Lightstone entitieswere assumed by an
affiliate of Lightstone that 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 all
of 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 75% of 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.





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 on the maturity date of the Consolidated Note, it is likely that the
outstanding principal balance of the Consolidated Note plus any unpaid deferred
interest thereon will exceed the value of the Company’s security therefore and,
accordingly, since the Consolidated Note is a nonrecourse loan, the Company does
not expect to obtain payment in full of the Consolidated Note on
maturity.


6


For
additional information about the history of the Company’s investment in and
loans to the joint ventures controlled by Lightstone and the terms of the
Settlement Agreement, see Management’s Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources –Joint Venture Mezzanine Loans and Settlement
Agreement.





(d)  Loans and
Investments





The
following table sets forth information as of December 31, 2009 with respect to
the mortgage loan portfolio resulting from the sale of properties or loans
originated by the Company.


7





NET
MORTGAGE PORTFOLIO





DECEMBER 31, 2009InterestNet
                                                          
                                                          
                                                          
                                                          
                                                          RateNote
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          Carrying
                                                          
                                                          Maturity
                                                          
                                                          
                                                          December
      31,Name of Property
                                                          
                                                          
                                                          Receivable
                                                          
                                                          
                                                          Discount
                                                          
                                                          
                                                          Value
                                                          
                                                          Date
                                                          
                                                          
                                                          2009Virginia
      and North Carolina Apartment Properties
                                                          (1)
                                                          
                                                          $
                                                          2,074,994
                                                          
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          2,074,994
                                                          
                                                          2012
                                                          
                                                          
                                                          
                                                          13.00%The
      Las Piedras Industrial Complex Las Piedras, Puerto
    Rico
                                                          (2)
                                                          
                                                          
                                                          750,000
                                                          
                                                          
                                                          
                                                          8,329
                                                          
                                                          
                                                          
                                                          741,671
                                                          
                                                          2010
                                                          (a)
                                                          
                                                          NoneVarious
      Sold Co-op Apartments
                                                          
                                                          
                                                          
                                                          92,140
                                                          (b)
                                                          
                                                          
                                                          27,883
                                                          
                                                          
                                                          
                                                          64,257
                                                          
                                                          Various
                                                          
                                                          
                                                          VariousTotal
      Notes Receivable
                                                          
                                                          
                                                          $
                                                          2,917,134
                                                          
                                                          
                                                          $
                                                          36,212
                                                          
                                                          
                                                          $
                                                          2,880,922





(a)
            The
      Company is currently negotiating an extension of this loan or receipt of
      the underlying collateral.





(b)
            Notes
      received from the sales of cooperative apartments.  Interest
      rates and maturity dates vary in accordance with the terms of each
      individual note.


8





(1) On
February 27, 2009, the Company completed a Settlement Agreement with 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 $18,100,000 of mezzanine loans 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 all of 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 75% of 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 Consolidated Note accrues interest at the rate of 13% per annum
and is due on February 1, 2012.  (See Management’s Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources – Joint Venture Mezzanine Loans and Settlement Agreementand Note 3 of Notes to the Consolidated
Financial Statements.)





(2) Under
the terms of the Settlement Agreement, the Company also received a $750,000
non-interest bearing, nonrecourse note due on January 31, 2010, which is secured
by a 25% ownership interest in IATG Puerto Rico, LLC (“IATG”) (in which the
Company already owns a 50% interest), the Lightstone affiliate that owns The Las
Piedras Industrial Complex, an industrial property located in Las Piedras,
Puerto Rico.  The Company is currently negotiating an extension of
this loan or receipt of the underlying collateral.  (See Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Liquidity and
Capital Resources – Joint Venture Mezzanine Loans and Settlement
Agreement.)





(e)          Qualification as a
REIT





Since
1982, the Company has operated in a manner intended to permit it to qualify as a
REIT under Sections 856 to 860 of the Code.  The Company intends to
continue to operate in a manner to permit it to qualify as a
REIT.  However, no assurance can be given that it will be able to
continue to operate in such a manner or to remain qualified.





In any
year that the Company qualifies as a REIT and meets other conditions, including
the distribution to stockholders of at least 90% of its “real estate investment
trust taxable income” (excluding long-term capital gains but before a deduction
for dividends paid), the Company will be entitled to deduct the distributions
that it pays to its stockholders in determining its ordinary income and capital
gains that are subject to federal income taxation (see Note 9 of Notes to Consolidated
Financial Statements).  Income not distributed is subject to
tax at rates applicable to a domestic corporation.  In addition, the
Company is subject to an excise tax (at a rate of 4%) if the amounts actually or
deemed distributed during the year do not meet certain distribution
requirements.  In order to receive this favorable tax treatment, the
Company must restrict its operations to those activities that are permitted
under the Code and to restrict itself to the holding of assets that a REIT is
permitted to hold.


9


No
assurance can be given that the Company will continue to be taxed as a REIT;
that the Company will have sufficient cash to pay dividends in order to maintain
REIT status or that the Company will make cash distributions in the
future.  In addition, even if the Company continues to qualify as a
REIT, the Board of Directors has the discretion to determine whether or not to
distribute long-term capital gains and other types of income not required to be
distributed in order to maintain REIT tax treatment.





(f)           Relationship with Ivy
Properties, Ltd.





The
Company holds nonrecourse purchase money notes receivable from Ivy Properties,
Ltd. and its affiliates (“Ivy”) relating to loans made to Ivy in connection with
Ivy’s former cooperative conversion business, or as a result of a settlement of
disputes between Ivy and the Company, all of which transactions and settlement
negotiations occurred between 1989 and 1996.  At December 31, 2009,
the notes receivable from Ivy had a carrying amount of zero and an outstanding
principal balance of $4,770,050 (the “Ivy Consolidated Loan”).  These
notes were received by the Company in 1991 in exchange for nonrecourse loans
that had been previously written off by the Company.  Accordingly,
these notes were recorded at zero except for a small portion of the notes that
was adequately secured and was repaid in 2002.





Ivy is
owned by Thomas Viertel, Steven Baruch and Jeffrey Joseph (the “Ivy
Principals”), who are the sole partners of Pdl Partnership, which owns 198,735
shares of the Company’s Class A common stock. As a result of the ownership of
these shares and 27,601 aggregate additional shares of Class A common stock
owned individually by the Ivy Principals, Pdl Partnership and the Ivy Principals
have beneficial ownership of an aggregate of approximately 51% of the
outstanding shares of Class A common stock of the Company, which class of stock
is entitled to elect two-thirds of the Board of Directors of the
Company.  By reason of such beneficial ownership, the Ivy Principals
are in a position substantially to control elections of the Board of Directors
of the Company.  In addition, these three officers own an aggregate of
211,477 shares of the Company’s Class B common stock.  Jeffrey Joseph
is the Chief Executive Officer, the President and a Director of Presidential;
Thomas Viertel is an Executive Vice President, the Chief Financial Officer and a
Director of Presidential; and Steven Baruch is an Executive Vice President and a
Director of Presidential.





Since
1996, the Ivy Principals have made payments on the Ivy Consolidated Loan in an
amount equal to 25% of the operating cash flow (after provision for certain
reserves) of Scorpio Entertainment, Inc. (“Scorpio”), a company owned by Messrs.
Viertel and Baruch to carry on theatrical productions.  Amounts
received by Presidential from Scorpio are applied to unpaid and unaccrued
interest on the Ivy Consolidated Loan and recognized as income.  These
amounts have been material in the past.  However, the profitability of
theatrical productions is by its nature uncertain and management believes that
any estimate of payments from Scorpio on the Ivy Consolidated Loan for future
periods is too speculative to project.  During 2009 and 2008,
Presidential received interest payments of zero and $146,750, respectively, on
the Ivy Consolidated Loan.  Although, as stated above, management
believes that any estimate of payments by Scorpio for future periods are too
speculative to project, in light of the continuing material adverse effect of
the current economic downturn on the theatrical production business, the Company
does not expect to receive any payments on the Ivy Consolidated Loan in
2010.  The Ivy Consolidated Loan bears interest at a rate equal to the
JP Morgan Chase Prime rate, which was 3.25% at December 31, 2009.  At
December 31, 2009, the unpaid and unaccrued interest was $3,677,702 and such
interest is not compounded.


10


Any
transactions relating to or otherwise involving Ivy and the Ivy Principals were
and remain subject to the approval by a committee of three members of the Board
of Directors with no affiliations with the owners of Ivy.





For
further historical information about the loan transactions with Ivy, reference
is made to the Company’s Annual Report on Form 10-K for the year ended December
31, 2003.





(g)       
  Competition





The real
estate business is highly competitive in all respects.  In all phases
of its business Presidential faces competition from companies with greater
financial and other resources.  With fewer financial institutions
offering loans under current market conditions, it will be more difficult for
the Company to find sources of financing for its properties, such as the Hato
Rey Center property, since it will be competing for available funds with other
borrowers with greater financial resources.  To the extent that
Presidential seeks to acquire additional properties or originate new loans, it
will face competition from other potential purchasers or lenders with greater
financial resources.





ITEM
      1A.
            RISK
      FACTORS





Not
required for a smaller reporting company.





ITEM
      1B.
            UNRESOLVED STAFF
      COMMENTS





None.





ITEM
      2.
            PROPERTIES





As of
December 31, 2009, the Company had an ownership interest in 592,000 square feet
of commercial, industrial and professional space and four cooperative apartment
units, all of which are carried on its balance sheet at $15,079,357 (net of
accumulated depreciation of $1,516,641).  The Company has mortgage
debt on two of these properties in the aggregate principal amount of
$14,969,607.  The $14,924,629 mortgage on the Hato Rey Center property
is nonrecourse to the Company, whereas the $44,978 Mapletree Industrial Center
mortgage is recourse to Presidential.





At
December 31, 2009, Presidential and PDL, Inc., a wholly owned subsidiary of
Presidential, owned an aggregate 60% general and limited partner interest in the
Hato Rey Partnership, which owns and operates the Hato Rey Center, an office
building with 207,000 square feet of commercial space, located in Hato Rey,
Puerto Rico.  The Company’s consolidated financial statements include
100% of the account balances of this partnership.


11


Presidential
owns four cooperative apartment units.  Although it may from time to
time sell individual or groups of these apartments, Presidential intends to
continue to hold them as rental apartments.





As of
December 31, 2009, the Company also has an ownership interest in one commercial
property and one cooperative apartment unit that are classified as assets
related to discontinued operations.  At December 31, 2009, the
carrying value of these properties was $231,813 (net of accumulated depreciation
of $1,199,567) and the mortgage debt related to one of these properties, which
is recourse to Presidential, was $1,045,867.





The chart
below lists the Company’s properties as of December 31, 2009.


12





REAL
ESTATE





Average
                                                            
                                                            
                                                            Gross Amount of Real Estate
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            Net Amount ofVacancy
                                                            
                                                            
                                                            At December 31, 2009
                                                            
                                                            
                                                            Accumulated
                                                            
                                                            
                                                            Real Estate
                                                            
                                                            
                                                            MortgageRate
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            Buildings
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            Depreciation
                                                            
                                                            
                                                            At
                                                            
                                                            
                                                            BalanceRentable
                                                            
                                                            Percent
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            and
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            December 31,
                                                            
                                                            
                                                            December 31,
                                                            
                                                            
                                                            December 31,
                                                            
                                                            
                                                            Maturity
                                                            
                                                            InterestProperty
                                                            
                                                            Space (approx.)
                                                            
                                                            2009
                                                            
                                                            
                                                            Land
                                                            
                                                            
                                                            Improvements
                                                            
                                                            
                                                            Total
                                                            
                                                            
                                                            2009
                                                            
                                                            
                                                            2009
                                                            
                                                            
                                                            2009
                                                            
                                                            
                                                            Date
                                                            
                                                            RateCommercial
      BuildingsMapletree
      Industrial Center,  Palmer, MA
                                                            
                                                            385,000
      sq.ft.
                                                            
                                                            
                                                            10.18
                                                            %
                                                            
                                                            $
                                                            79,100
                                                            
                                                            
                                                            $
                                                            908,839
                                                            
                                                            
                                                            $
                                                            987,939
                                                            
                                                            
                                                            $
                                                            323,096
                                                            
                                                            
                                                            $
                                                            664,843
                                                            
                                                            
                                                            $
                                                            44,978
                                                            
                                                            
                                                            June,
      2011
                                                            
                                                            
                                                            3.25
                                                            %The
      Hato Rey Center, Hato Rey, PR
                                                            
                                                            207,000
      sq.ft.
                                                            
                                                            
                                                            22.65
                                                            %
                                                            
                                                            
                                                            1,905,985
                                                            
                                                            
                                                            
                                                            13,647,606
                                                            
                                                            
                                                            
                                                            15,553,591
                                                            
                                                            
                                                            
                                                            1,174,229
                                                            
                                                            
                                                            
                                                            14,379,362
                                                            
                                                            
                                                            
                                                            14,924,629
                                                            (1)
                                                            
                                                            May,
      2028
                                                            
                                                            
                                                            9.38
                                                            %ResidentialIndividual
      Cooperative ApartmentsVarious
      Cooperative Apartments, NY & CT
                                                            
                                                            4
      Apt. Units
                                                            
                                                            
                                                            0.00
                                                            %
                                                            
                                                            
                                                            10,897
                                                            
                                                            
                                                            
                                                            43,571
                                                            
                                                            
                                                            
                                                            54,468
                                                            
                                                            
                                                            
                                                            19,316
                                                            
                                                            
                                                            
                                                            35,152
                                                            
                                                            
                                                            
                                                            -$
                                                            1,995,982
                                                            
                                                            
                                                            $
                                                            14,600,016
                                                            
                                                            
                                                            $
                                                            16,595,998
                                                            
                                                            
                                                            $
                                                            1,516,641
                                                            
                                                            
                                                            $
                                                            15,079,357
                                                            
                                                            
                                                            $
                                                            14,969,607Real
      Estate of Discontinued
    OperationsCommercial
      BuildingsBuilding
      Industries Center,  White Plains, NY
                                                            
                                                            23,500
      sq.ft.
                                                            
                                                            2.89
                                                            %
                                                            
                                                            $
                                                            61,328
                                                            
                                                            
                                                            $
                                                            1,360,565
                                                            
                                                            
                                                            $
                                                            1,421,893
                                                            
                                                            
                                                            $
                                                            1,196,304
                                                            
                                                            
                                                            $
                                                            225,589
                                                            
                                                            
                                                            $
                                                            1,045,867
                                                            (2)
                                                            
                                                            June,
      2010
                                                            
                                                            
                                                            5.45
                                                            %ResidentialIndividual
      Cooperative ApartmentsCooperative
      Apartment, Riverdale, NY
                                                            
                                                            1
      Apt. Unit
                                                            
                                                            0.00
                                                            %
                                                            
                                                            
                                                            1,273
                                                            
                                                            
                                                            
                                                            8,214
                                                            
                                                            
                                                            
                                                            9,487
                                                            
                                                            
                                                            
                                                            3,263
                                                            
                                                            
                                                            
                                                            6,224
                                                            
                                                            
                                                            
                                                            -$
                                                            62,601
                                                            
                                                            
                                                            $
                                                            1,368,779
                                                            
                                                            
                                                            $
                                                            1,431,380
                                                            
                                                            
                                                            $
                                                            1,199,567
                                                            
                                                            
                                                            $
                                                            231,813
                                                            
                                                            
                                                            $
                                                            1,045,867





(1)
            See
      The Hato Rey Center - Hato Rey, Puerto Rico
  below.





(2)
            This
      mortgage amortizes monthly with a balloon payment due at
      maturity.


In
January, 2010, the maturity date of the mortgage was extended from March, 2010
to June, 2010.


In March,
2010, the mortgage was refinanced (see Other Matters below).


13


Mapletree
Industrial Center – Palmer, Massachusetts





The
Company is involved in an environmental remediation process for contaminated
soil found on its property.  In 2006, the Company accrued a $1,000,000
liability, which was discounted by $145,546, and charged $854,454 to
expense.  At December 31, 2009, the accrued liability balance was
$388,971 and the discount balance was $118,535.  See Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Environmental
Matters and Note 10 of Notes to Consolidated
Financial Statements.





The Hato
Rey Center – Hato Rey, Puerto Rico





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 was reduced from 48% to a low of approximately 20% at January 31,
2009.  However, as a result of local economic conditions and higher
than historical vacancy rates in the Hato Rey area, the vacancy rate has
increased to 26% at December 31, 2009.





Over the
last three years through September 30, 2009, 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.  In July, 2009, the Company
agreed to loan an additional $250,000 to the Hato Rey Partnership under the same
terms as the $2,500,000 agreement.  At December 31, 2009, total
advances under the loan were $2,608,000 and subsequent to December 31, 2009, the
Company advanced an additional $62,000.  The $2,608,000 loan and the
accrued interest in the amount of $823,786 have been eliminated in
consolidation.





The first
mortgage loan on the Hato Rey Center property is due on May 11, 2028 but
provides that if it was not repaid on or before May 11, 2008, the interest rate
on the loan would be increased by two percentage points (to 9.38% per annum of
which 2% per annum is deferred until maturity) and all cash flow from the
property, after payment of all operating expenses, will be applied to pay down
the outstanding principal balance of the loan.  The Company did not
repay the existing mortgage on May 11, 2008 and the mortgage provisions
described above became applicable.  During 2008 and 2009, no funds
were available from net cash flow to pay down the mortgage
balance.  At December 31, 2009, the outstanding principal balance of
the first mortgage loan was $14,924,629 and the deferred interest was
$545,685.





The net
amount of real estate of the Hato Rey Center of $14,379,362 at December 31,
2009, constitutes more than 10% of the assets of the Company.  The
following additional information is provided for this property:





1)  The
occupancy rate at the building at December 31, 2009 was 74% and included one
tenant who occupied more than 10% of the building’s square
footage.  This tenant is a Puerto Rico governmental agency that is
responsible for the monitoring, evaluating and approval of college
courses.  The tenant’s lease term is for five years expiring February
29, 2012 with a monthly base rent of $35,012 for the 22,113 square feet it
occupies.


14


2)  In
addition to governmental agencies, the Hato Rey Center is occupied by many
professionals including accountants, attorneys, engineers and computer
consultants.  The average effective annual rent per square foot at the
building is $21.30.





3)  The
following is a schedule of lease expirations at the Hato Rey Center for the next
ten years:





Number
      of
                    
                    
                    Total
                    
                    
                    
                    
                    
                    PercentageTenants
      Whose
                    
                    
                    Square
                    
                    
                    
                    
                    
                    of
      GrossLeases
      Will
                    
                    
                    Feet
                    
                    
                    Annual
                    
                    
                    AnnualExpire
                    
                    
                    Expiring
                    
                    
                    Rental
                    
                    
                    Rental2010
                    
                    
                    44
                    
                    
                    
                    48,019
                    
                    
                    $
                    1,022,454
                    
                    
                    
                    33.50
                    %2011
                    
                    
                    29
                    
                    
                    
                    28,729
                    
                    
                    
                    601,193
                    
                    
                    
                    19.692012
                    
                    
                    12
                    
                    
                    
                    33,482
                    
                    
                    
                    666,524
                    
                    
                    
                    21.832013
                    
                    
                    3
                    
                    
                    
                    26,837
                    
                    
                    
                    577,437
                    
                    
                    
                    18.922014
                    
                    
                    4
                    
                    
                    
                    6,175
                    
                    
                    
                    184,943
                    
                    
                    
                    6.062015-2019
                    
                    None
                    
                    
                    None
                    
                    
                    None
                    
                    
                    None92
                    
                    
                    
                    143,242
                    
                    
                    $
                    3,052,551
                    
                    
                    
                    100.00
                    %





4)  The
federal tax basis at December 31, 2009 for the Hato Rey Center building and its
improvements was $4,292,702.  Depreciation is provided on the
straight-line method over the assets’ estimated useful lives, which is 31-1/2
years for the building and which range from 5 to 20 years for the
improvements.





5)  The
real estate tax rate is 8.83% and annual real estate taxes for the property were
$357,177 for 2009, including $87,943 for a temporary special tax enacted by the
government of Puerto Rico.  The Company does not expect any increases
in real estate taxes as a result of any proposed building
improvements.





Other
Matters





In the
opinion of management, all of the Company’s properties are adequately covered by
insurance in accordance with normal insurance practices.  All real
estate owned by the Company is owned in fee simple with title generally insured
for the benefit of the Company by reputable title insurance
companies.





The
mortgages on the Company’s properties have fixed rates of interest and amortize
monthly with the exception of the Building Industries Center mortgage, which
originally had a balloon payment of $1,038,086 due at maturity in March, 2010,
and the Hato Rey Center mortgage described above.  In January, 2010,
the maturity date of the Building Industries Center property mortgage was
extended from March 1, 2010 to June 1, 2010 under the same terms.  In
March, 2010, the Company obtained a new $1,250,000 mortgage on its Building
Industries Center property and repaid the $1,038,086 outstanding balance of the
prior mortgage.  The new mortgage bears interest at the rate of 6.25%
per annum, requires monthly payments of principal and interest of $8,246 and has
a balloon payment of $1,182,375 due at maturity on March 31, 2013.





ITEM
      3.
            LEGAL
      PROCEEDINGS





None.


15


ITEM
      4.
            RESERVED




PART
II





ITEM
      5.
            MARKET FOR
      REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY
SECURITIES





(a)
            The
      principal market for the Company’s Class B Common Stock is the NYSE AMEX
      LLC (ticker symbol PDLB).  The principal market for the
      Company’s Class A Common Stock was the NYSE AMEX LLC (ticker symbol PDLA)
      through September 3, 2009 and the over the counter market (ticker symbol
      PDNLA) thereafter.  The high and low prices for the stock on
      such principal exchanges for each quarterly period during the past two
      years, and the per share dividends declared per quarter, are as
      follows:





DividendsStock Prices
                          
                          
                          Paid
      PerShare
      onClass
      A
                          
                          
                          Class B
                          
                          
                          Class AHigh
                          
                          
                          Low
                          
                          
                          High
                          
                          
                          Low
                          
                          
                          and Class BCalendar 2008First
      Quarter
                          
                          $
                          6.20
                          
                          
                          $
                          4.40
                          
                          
                          $
                          6.28
                          
                          
                          $
                          4.50
                          
                          
                          $
                          .16Second
      Quarter
                          
                          
                          5.55
                          
                          
                          
                          4.95
                          
                          
                          
                          6.10
                          
                          
                          
                          4.47
                          
                          
                          
                          .16Third
      Quarter
                          
                          
                          5.40
                          
                          
                          
                          4.30
                          
                          
                          
                          6.50
                          
                          
                          
                          4.40
                          
                          
                          
                          .16Fourth
      Quarter
                          
                          
                          4.61
                          
                          
                          
                          2.95
                          
                          
                          
                          4.95
                          
                          
                          
                          0.84
                          
                          
                          
                          .08Calendar 2009First
      Quarter
                          
                          $
                          2.72
                          
                          
                          $
                          1.56
                          
                          
                          $
                          2.25
                          
                          
                          $
                          0.35
                          
                          
                          $
                          .00Second
      Quarter
                          
                          
                          1.52
                          
                          
                          
                          1.08
                          
                          
                          
                          1.30
                          
                          
                          
                          0.85
                          
                          
                          
                          .00Third
      Quarter
                          
                          
                          1.32
                          
                          
                          
                          0.83
                          
                          
                          
                          0.90
                          
                          
                          
                          0.32
                          
                          
                          
                          .00Fourth
      Quarter
                          
                          
                          1.50
                          
                          
                          
                          0.40
                          
                          
                          
                          0.91
                          
                          
                          
                          0.49
                          
                          
                          
                          .00





(b)
              The
      number of record holders for the Company’s Common Stockat
      December 31, 2009 was 79 for Class A and 434 for Class
  B.





(c)
            Under
      the Code, a REIT which meets certain requirements is not subject to
      Federal income tax on that portion of its taxable income which is
      distributed to its shareholders, if at least 90% of its “real estate
      investment trust taxable income” (exclusive of capital gains) is so
      distributed.  Since January 1, 1982, the Company has elected to
      be taxed as a REIT and paid regular quarterly cash distributions through
      December 31, 2008.  In 2009, the Company did not pay any
      dividends.  No assurance can be given that the Company will
      continue to be taxed as a REIT, or that the Company will have sufficient
      cash to pay dividends in order to maintain REIT status.  See
      Item 1. -
      Business - Qualification as a REIT
above.





(d)
            The
      following table sets forth certain information as of December 31, 2009,
      relating to the Company’s 2005 Restricted Stock Plan, which was approved
      by security holders (the Company has no other equity compensation
      plans):


16





Number
      ofsecuritiesremainingavailablefor
      futureissuanceNumber
      of
                                    
                                    
                                    
                                    under
      equitysecurities
                                    
                                    
                                    
                                    compensationto
      be issued
                                    
                                    Weighted
      average
                                    
                                    plansupon
      exercise
                                    
                                    exercise
      price of
                                    
                                    (excludingof
      outstanding
                                    
                                    outstanding
      options,
                                    
                                    securitiesoptions,
      warrants
                                    
                                    warrants
      and
                                    
                                    reflected
      inand
      rights
                                    
                                    rights
                                    
                                    column
      (a))(a)
                                    
                                    (b)
                                    
                                    (c)None
                                    
                                    None
                                    
                                    47,500Class
      BCommon
      Shares





ITEM
6.                SELECTED FINANCIAL
DATA





Not
required for a smaller reporting company.


17


ITEM
      7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF
      OPERATIONS





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 three years, 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, have resulted in defaults in 2008 and 2009 on the three mezzanine
loans made by the Company to joint ventures owning nine shopping mall properties
and in defaults on the first mortgage loans secured by eight of these
properties.  (See Liquidity and Capital
Resources – Joint Venture Mezzanine Loans and Settlement Agreement
below.)





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 $14,924,629 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 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 2010.  (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.





Presidential
obtains funds for working capital and investment from its available cash and
cash equivalents, from its securities available for sale, 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.
Management believes that, barring any unforeseen circumstances, the Company has
sufficient liquidity and capital resources to carry on its existing business and
to pay any dividends required to maintain REIT status until the Company can
effectuate a plan of liquidation or enter into a strategic
transaction.  However, in the current ongoing economic downturn, given
our continuing decline in revenues, expected losses from continuing operations
and negative cash flows from operating activities, management believes that
Presidential might have insufficient liquidity and capital resources to operate
in future years without sales of its assets.  (See Liquidity and Capital
Resources below.)


18


Investments
in and Advances to Joint Ventures





The
Company has investments in and advances to joint ventures in two entities that
are controlled by The Lightstone Group (“Lightstone”) and David Lichtenstein.
The Company accounts for these investments under the equity method of
accounting. At December 31, 2009, investments in and advances to joint ventures
was $2,595,603.





The first
investment is the Company’s mezzanine loan in the amount of $7,835,000 made to
Lightstone II in 2005, which is secured by ownership interests in the Shawnee
Mall and the Brazos Mall properties (“Shawnee/Brazos Malls”).  The
Company is entitled to receive interest at the rate of 11% per annum on the
mezzanine loan and recorded these interest payments as distributions in
investments and advances to joint ventures.  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 when the holder of the first mortgage on these properties began sweeping
all cash flow from the properties and, accordingly, the Company’s loan
receivable is in default.  The first mortgage on the properties became
due on January 10, 2010 and has not been paid.  Lightstone has been
unable to refinance the first mortgage indebtedness and is attempting to obtain
an extension of the existing mortgage.  However, the holder of the
first mortgage has commenced foreclosure proceedings and the Company believes
that it is likely that the first mortgage will be foreclosed and the Company
will not be able to obtain any recovery on its mezzanine loan other than the
recovery of $500,000 from David Lichtenstein on his limited guaranty received
pursuant to the Settlement Agreement referred to in the next
paragraph.  In March, 2010, the Company received the $500,000 guaranty
payment and, as a result, at December 31, 2009, the Company recognized a
$500,000 gain on settlement of joint venture loans in its consolidated financial
statements and recorded a $500,000 receivable due from Mr. Lichtenstein on its
consolidated balance sheet.  At December 31, 2008, the balance of the
Company’s investment in and advances to this joint venture was
$1,511,887.  As a result of the operating loss and impairment loss
from the Shawnee/Brazos Malls in 2009, the Company’s investment in and advances
to the Shawnee/Brazos Malls was reduced to zero at December 31,
2009.





As a
result of the default on the $7,835,000 mezzanine loan in 2009 and the defaults
on $18,100,000 of mezzanine loans (which were also investments in and advances
to joint ventures) in 2008, on February 27, 2009, the Company entered into a
Settlement Agreement with Lightstone and Mr. Lichtenstein with respect to
various claims that the Company had asserted against them in connection with the
Company’s investments in and advances to the joint ventures (the “Settlement
Agreement”).  The Settlement Agreement is described below under Liquidity and Capital
Resources – Joint Venture Mezzanine Loans and Settlement
Agreement.





The
second investment, a 50% ownership interest in IATG Puerto Rico, LLC (“IATG”),
the Lightstone affiliate that owns The Las Piedras Industrial Complex, an
industrial property located in Las Piedras, Puerto Rico consisting of
approximately 68 acres of land and 380,800 square feet of rentable space
contained in several buildings in the complex, was received by the Company as
part of the Settlement Agreement referenced above. Pursuant to an independent
appraisal of the property owned by IATG and based on that appraised value of
$6,500,000, the Company estimated the value of its 50% ownership interest in the
IATG property to be $3,250,000 and the Company recorded a $3,250,000 investment
in joint ventures on its consolidated balance sheet and recognized a $3,250,000
gain on the settlement of joint venture loans in its consolidated financial
statements.


19


Real Estate Loans





During
2009, in connection with the Settlement Agreement with Lightstone and Mr.
Lichtenstein, the Company consolidated an existing $2,074,994 note receivable
into a larger $12,075,000 Consolidated Note (the “Consolidated Note”) and also
received a $750,000 non-interest bearing note due from Mr. Lichtenstein (see
Liquidity and Capital
Resources – Joint Venture Mezzanine Loans and Settlement
Agreement).





In
addition, during 2009, the Company received repayment of its $75,000 loan
receivable related to the sale of Cambridge Green in 2007.





Hato Rey Partnership





PDL, Inc.
(a wholly owned subsidiary of Presidential) is the general partner of PDL, Inc.
and Associates Limited Co-Partnership (the “Hato Rey
Partnership”).  The Hato Rey Partnership owns and operates the Hato
Rey Center, an office building in Hato Rey, Puerto Rico.





At
December 31, 2008 and 2009, Presidential and PDL, Inc. owned an aggregate 60%
general and limited partner interest in the Hato Rey Partnership.  The
Company consolidates the Hato Rey Partnership in the Company’s consolidated
financial statements.





On
January 1, 2009, the Company adopted the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 810-10-65, which requires
amounts attributable to noncontrolling interests to be reported
separately.  For the year ended December 31, 2009, the Hato Rey
Partnership had a loss of $661,640.  The consolidated financial
statements reflect the separate disclosure of the noncontrolling interest’s
share (40%) of the loss of $264,656.  Prior to the adoption of ASC
810-10-65, 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.  For the year ended December 31, 2008, the Hato Rey
Partnership had a loss of $481,352, of which $192,541 represented the
noncontrolling interest share absorbed by the Company.





Discontinued
Operations





In April,
2009, the Company completed the sale of Crown Court located in New Haven,
Connecticut for a sales price of $3,604,083, with net cash proceeds of sale of
$1,545,851.





In
October, 2009, the Company sold a cooperative apartment unit located in
Riverdale, New York for a sales price of $154,000, with net cash proceeds of
sale of $145,738.


20


During
the three months ended June 30, 2009 and the three months ended December 31,
2009, the Company designated another cooperative apartment in Riverdale, New
York and the Building Industries Center property in White Plains, New York,
respectively, as held for sale.





Securities Available for
Sale





In May,
2009, the Company invested $4,431,622 of its available cash in notes and bonds
issued by agencies of the United States government.  Primarily as a
result of the sale of some of these investments, the Company held $3,614,113 of
securities available for sale at December 31, 2009.





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. Management has discussed with the Company’s Audit
Committee the implementation of the critical accounting policies described below
and the estimates required with respect to such policies.





Real
Estate





Real
estate is carried at cost, net of accumulated depreciation and
amortization.  Additions and improvements are capitalized and repairs
and maintenance are charged to rental property operating expenses as
incurred.  Depreciation is generally provided on the straight-line
method over the estimated useful life of the asset. The useful life of each
property, as well as the allocation of the costs associated with a property to
its various components, requires estimates by management. If management
incorrectly estimates the allocation of those costs or incorrectly estimates the
useful lives of its real estate, depreciation expense may be
miscalculated.





The
Company reviews each of its properties for impairment if events or changes in
circumstances warrant. If impairment were to occur, the property would be
written down to its estimated fair value.  The Company assesses the
recoverability of its investment in real estate based on undiscounted cash flow
estimates.  The future estimated cash flows of a property are based on
current rental revenues and operating expenses, as well as the current local
economic climate affecting the property.  Considerable judgment is
required in making these estimates and changes in these estimates could cause
the estimated cash flows to change and an impairment could occur. As of December
31, 2009, the Company’s net real estate was carried at
$15,079,357.  During 2009, no impairment loss was recorded on any real
estate owned by the Company.





Investments in Joint
Ventures





The
Company has equity investments in joint ventures and accounts for these
investments using the equity method of accounting.  These investments
are recorded at cost and adjusted for the Company’s share of each entity’s
income or loss and adjusted for cash contributions or
distributions.  Real estate held by such entities is reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable, and is written down to its estimated
fair value if an impairment is determined to exist.  During 2009,
impairment losses of approximately $20,854,000 were recorded by the joint
ventures on two of these properties.


21


Assets and Liabilities Related to
Discontinued Operations





Assets
related to discontinued operations are carried at the lower of cost (net of
accumulated depreciation and amortization) or fair value less costs to
sell.  An operating property is classified as held for sale and,
accordingly, as a discontinued operation when, in the judgment of management, a
sale that will close within one year is probable. The Company discontinues
depreciation and amortization when a property is classified as a discontinued
operation.  At December 31, 2009, assets related to discontinued
operations for the Building Industries Center property and a cooperative
apartment unit were $231,813.  During 2009, no impairment charges were
recorded for these properties.





Liabilities
related to assets held for sale at December 31, 2009 consist of the $1,045,867
recourse mortgage debt on the Building Industries Center property (see Liquidity and Capital
Resources - Discontinued Operations below).  Subsequent to year
end, the Company obtained a new $1,250,000 mortgage on the Building Industries
Center property and repaid the $1,038,086 outstanding balance of the prior
mortgage.  The new mortgage has a three year term, but will be repaid
in full upon the sale of the property.





Mortgage
Portfolio





The
Company evaluates the collectibility of both accrued interest and principal on
its $2,917,134 mortgage portfolio to determine whether there are any impaired
loans. If a mortgage loan was considered to be impaired, the Company would
establish a valuation allowance equal to the difference between a) the carrying
value of the loan, and b) the present value of the expected cash flows from the
loan at its effective interest rate, or at the estimated fair value of the real
estate collateralizing the loan. Although a loan modification could be an
indicator of a possible impairment, the Company has in the past, and may in the
future, modify loans for business purposes and not as a result of debtor
financial difficulties.  Income on impaired loans is recognized only
as cash is received.  At December 31, 2009, all loans were current as
to payment of principal and interest according to their terms, as modified, and
no loans have been classified as impaired.





Securities Available for
Sale





Securities
available for sale are reported at fair value in accordance with the Fair Value
Measurements and Disclosures Topic of the ASC.  The valuation of
securities available for sale was determined to be Level 1 financial assets
within the valuation hierarchy in this topic, and is based on current market
quotes received from financial sources that trade such securities. Unrealized
gains and losses are reported as other comprehensive income or loss in the
consolidated statement of stockholders’ equity until realized.  The
Company evaluates these investments for other-than-temporary declines in value,
and, if such declines were other than temporary, the Company would record a loss
on the investments. Gains and losses on sales of securities are determined using
the specific identification method.





The
Company’s investments are in marketable equity and debt securities consisting
primarily of notes and bonds of agencies of the federal
government.  Disposition of such securities may be appropriate for
either liquidity management or in response to changing economic conditions, so
they are classified as securities available for sale. At December 31, 2009,
securities available for sale were $3,614,113 and accumulated other
comprehensive loss on securities available for sale was
$14,535.


22


Rental
Revenue Recognition





The
Company recognizes rental revenue on the straight-line basis from the later of
the date of the commencement of the lease or the date of acquisition of the
property subject to existing leases, which averages minimum rents over the terms
of the leases. Certain leases require the tenants to reimburse a pro rata share
of real estate taxes, utilities and maintenance costs.





Allowance
for Doubtful Accounts





Management
assesses the collectibility of amounts due from tenants and other receivables,
using indicators such as past-due accounts, the nature and age of the
receivable, the payment history and the ability of the tenant or debtor to meet
its payment obligations.  Management’s estimate of allowances for
doubtful accounts is subject to revision as these factors
change.  Rental revenue is recorded on the accrual method and rental
revenue recognition is generally discontinued when the tenant in occupancy is
delinquent for ninety days or more.  Bad debt expense is charged for
vacated tenant accounts and subsequent receipts collected for those receivables
will reduce bad debt expense. At December 31, 2009, other receivables, net of an
allowance for doubtful accounts of $234,316, were $804,376. For the years ended
December 31, 2009 and 2008, bad debt expense for continuing operations relating
to tenant obligations was $134,516 and $41,595, respectively.





Pension Plans





The
Company maintains a qualified Defined Benefit Pension Plan, which covers
substantially all of its employees.  The plan provides for monthly
retirement benefits commencing at age 65. The Company makes annual contributions
that meet the minimum funding requirements and the maximum contribution levels
under the Internal Revenue Code.  Net periodic benefit costs for the
years ended December 31, 2009 and 2008 were $441,590 and $183,321,
respectively.  The projected benefit obligation at December 31, 2009
was $9,456,810 and the fair value of the plan assets was $7,499,288. At December
31, 2009 and 2008, the discount rate used in computing the projected benefit
obligation was 5.52% and 6.37%, respectively.  The expected long-term
rate of return on plan assets was 7% for both years.  The Company was
not required to make any contributions to the plan in 2009 for the 2008 tax
year, but chose to make a contribution of $900,000.  As a result of
the precipitous decline in the stock market in the second half of 2008 and the
first quarter of 2009, which adversely affected the value of the assets in the
Defined Benefit Pension Plan portfolio, the Company will be required by the
rules governing the funding of pension plans to make contributions to the
Defined Benefit Pension Plan in the approximate amount of $100,000 in 2010 and
will be required to make additional contributions in subsequent
years.  The Company may make contributions in excess of the required
contributions if it believes it is prudent to do so.  Management and
trustees regularly review the plan assets, the actuarial assumptions and the
expected rate of return.  Changes in actuarial assumptions, interest
rates or changes in the fair value of the plan assets can materially affect the
benefit obligation, the required funding and the benefit costs.  At
February 28, 2009, the Company froze the accrual of additional benefits under
the Defined Benefit Pension Plan so that the benefits payable to participants
will not be increased as a result of additional years of service or increased
compensation levels after the freeze date.


23


In
addition, the Company has contractual retirement agreements with certain active
and retired officers providing for unfunded pension benefits.  The
Company accrues on an actuarial basis the estimated costs of these benefits
during the years the employee provides services.  The benefits
generally provide for annual payments in specified amounts for each participant
for life, commencing three years after retirement, with an annual cost of living
increase.  Benefits paid for the years ended December 31, 2009 and
2008 were $73,303 and $216,660, respectively.  Benefit costs for the
years ended December 31, 2009 and 2008 were $192,235 and $31,149, respectively.
The projected contractual pension benefit obligation at December 31, 2009 was
$524,854.  At December 31, 2009 and 2008, the discount rate used in
computing the projected benefit obligation was 5.74% and 6.24%,
respectively.  Changes in interest rates and actuarial assumptions,
amendments to the plan and life expectancies could materially affect benefit
costs and the contractual accumulated pension benefit obligation.





Fourth
Floor Management Corp. Profit Sharing Plan





Fourth
Floor Management Corp., a 100% owned subsidiary of Presidential Realty
Corporation that manages the Company’s properties, maintains a profit sharing
plan for substantially all of its employees.  The profit sharing plan
provides for annual contributions up to a maximum of 5% of the employees annual
compensation.  The Company made a $9,250 contribution to the plan in
March, 2010 for the 2009 plan year and a $9,420 contribution to the plan in
March, 2009 for the 2008 plan year.  Contributions are charged to
general and administrative expense.





Income
Taxes





The
Company operates in a manner intended to enable it to continue to qualify as a
Real Estate Investment Trust (“REIT”) under Sections 856 to 860 of the Code.
Under those sections, a REIT which meets certain requirements is not subject to
Federal income tax on that portion of its taxable income which is distributed to
its shareholders, if at least 90% of its REIT taxable income (exclusive of
capital gains) is so distributed.  As a result of its ordinary tax
loss for 2009 there is no requirement to make a distribution in
2010.  In addition, no provision for income taxes was required at
December 31, 2009.  If the Company fails to distribute the required
amounts of income to its shareholders, or otherwise fails to meet the REIT
requirements, it would fail to qualify as a REIT and substantial adverse tax
consequences could result.  The Company believes that it will not be
required to pay a dividend in 2010 to maintain its REIT status.





Accounting for Uncertainty in Income
Taxes





The
Company complies with the requirements of the recognition of current and
deferred income tax accounts, including accrued interest and penalties in
accordance with ASC 740-10-25.  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.


24


Results of
Operations





2009 vs
2008





Financial
Highlights from Consolidated Statements of Operations:





Year Ended December 31,2009
                  
                  
                  2008Revenues
                  
                  $
                  5,512,276
                  
                  
                  $
                  6,031,977Loss
      from continuing operations
                  
                  $
                  (543,052
                  )
                  
                  $
                  (4,067,204
                  )Discontinued
      Operations:Income
      (loss) from discontinued operations
                  
                  
                  (66,901
                  )
                  
                  
                  149,302Net
      gain from sales of discontinued operations
                  
                  
                  3,329,480
                  
                  
                  
                  2,892,258Total
      income from discontinued operations
                  
                  
                  3,262,579
                  
                  
                  
                  3,041,560Net
      income (loss)
                  
                  
                  2,719,527
                  
                  
                  
                  (1,025,644
                  )Add:
      Net loss from noncontrolling interest
                  
                  
                  264,656
                  
                  
                  -Net
      Income (Loss) attributable to Presidential Realty
    Corporation
                  
                  $
                  2,984,183
                  
                  
                  $
                  (1,025,644
                  )





Continuing
Operations:





Revenues
decreased by $519,701 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 $35,119 due to increased rental revenues at the Hato Rey
Center property of $76,181, partially offset by a $42,967 decrease in rental
revenues at the Mapletree Industrial Center property.





Interest
on mortgages-notes receivable decreased by $426,735 primarily as a result of
repayments of $5,585,000 on notes receivable during 2008.  Interest
income and amortization of discounts on those notes was $586,671 during the 2008
period.  This decrease was partially offset by an increase of $82,666
in interest received on the Consolidated Note and the $77,671 amortization of
discount on the $750,000 note receivable received in the Settlement Agreement
(see Liquidity and
Capital Resources – Joint Venture Mezzanine Loans and Settlement
Agreement below).





Interest
on mortgages-notes receivable-related parties decreased by $146,750 as a result
of a decrease of $146,750 in payments of interest received on the Ivy
Consolidated Loan.  Payments received on the Ivy Consolidated Loan
fluctuate because they are based on the cash flow of Scorpio Entertainment, Inc.
(see Liquidity and
Capital Resources – Ivy Consolidated Loan below).


25


Costs and
expenses increased by $1,000,316 primarily due to increases in general and
administrative expenses, interest on mortgage debt, real estate tax expense and
depreciation expense.  These increases were partially offset by a
decrease in amortization of in-place lease values and mortgage
costs.





General
and administrative expenses increased by $871,266 primarily as a result of the
impact of the reversal in 2008 of $817,580 of interest expense accrued in
accordance with the ASC Income Tax Topic 740-10-25, which deals with uncertainty
in income taxes and the recognition of current and deferred income tax accounts
including accrued interest and penalties.  The Company had previously
accrued interest expense relating to certain tax positions for which the Company
may have been required to pay a deficiency dividend. In September, 2008, the
statute of limitations with respect to these tax positions expired and,
accordingly, the accrued liability was reversed and general and administrative
expenses were reduced by such reversal.  The Company has no other tax
positions requiring an interest accrual in 2009.





The
increase in general and administrative expenses without the $817,580 impact of
the 2008 reversal of the accrued interest discussed above, was $53,686. This
increase was primarily a result of increases in pension plan expenses of
$377,676 and professional fees of $125,867, which were partially offset by
decreases in salary expense of $423,794.  The decrease in salary
expense was primarily a result of a $407,825 decrease in salary expense accrued
pursuant to an amendment of an executive employment agreement which would
require payments upon the retirement of the executive.





Interest
on mortgage debt increased by $56,381 primarily as a result of a $107,977
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 beginning on May 12, 2008, which
increase is due at maturity.  This increase was partially offset by a
$48,254 decrease in the amortization of discount on mortgage
payable.





Real
estate tax expenses increased by $90,586 primarily as a result of an increase of
$87,943 in real estate tax expense at the Hato Rey Center property.





Depreciation
on real estate increased by $41,435 primarily as a result of a $38,886 increase
in depreciation on the Hato Rey Center property.





Amortization
of in-place lease values and mortgage costs decreased by $84,048 as a result of
a $61,286 decrease in the amortization of in-place lease values and a $22,762
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 $5,044,169 primarily as a result of a $4,479,289 gain
recorded upon the settlement of certain joint venture loans to David
Lichtenstein and Lightstone.  In addition, in the fourth quarter of
2009, the Company recognized $185,000 of other income from the sale of an
easement at its Mapletree Industrial Center property in Palmer,
Massachusetts.  Other income also increased in 2009 as a result of the
$1,000,000 write-off of the Company’s investment in Broadway Partners Fund A II
in 2008.  These increases were partially offset by the $597,599
increase in the loss from joint ventures, which included the loss of $654,397
from the investment in IATG and the $56,798 decrease in the loss from the
investments in the nine malls.  (See Liquidity and Capital
Resources – Joint Venture Mezzanine Loans and Settlement Agreement and
Investments in and Advances to Joint Ventures below.)


26


Loss from
continuing operations decreased by $3,524,152 from $4,067,204 in 2008 to
$543,052 in 2009.  The $3,524,152 decrease in loss in 2009 was a
result of the $4,479,289 gain recorded upon the settlement of some joint venture
loans with David Lichtenstein and Lightstone and the nonrecurring write-off in
2008 of $1,000,000 of other investments.  These decreases were
partially offset by a $426,735 decrease in interest income on mortgages-notes
receivable, an increase of $871,266 in general and administrative expenses and a
$597,599 increase in the loss from joint ventures.





Discontinued
Operations:





In 2009,
the Company had four properties that were 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), the Building
Industries Center property in White Plains, New York (which consists of 23,500
square feet of commercial space), and two cooperative apartment units in
Riverdale, New York. The Crown Court property was designated as held for sale in
September, 2008. This 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 net proceeds of sale were $1,545,851 and the gain from
sale for financial reporting purposes was $3,208,336. During the fourth quarter
of 2009, the Company began to market the Building Industries Center property for
sale and designated it as held for sale. In addition, two cooperative apartment
units in Riverdale, New York were designated as held for sale during 2009. On
October 15, 2009, the Company completed the sale of one of these apartment units
for a sales price of $154,000. The gain from sale for financial reporting
purposes was $121,144 and the net proceeds of sale were $145,738.





In 2008,
the Company had two other 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 from discontinued operations for the
years ended December 31, 2009 and 2008 for properties included in discontinued
operations:


27





2009
                
                
                2008Income
      (loss) from discontinued operations:Building
      Industries Center, White Plains, NY
                
                $
                (101,673
                )
                
                $
                (96,439
                )Cooperative
      apartment unit, New Haven, CT
                
                
                -
                
                
                
                854Cooperative
      apartment units, Riverdale, NY
                
                
                (9,696
                )
                
                
                (4,737
                )Crown
      Court, New Haven, CT
                
                
                44,468
                
                
                
                161,209Towne
      House, New Rochelle, NY
                
                
                -
                
                
                
                88,415Income
      (loss) from discontinued operations
                
                
                (66,901
                )
                
                
                149,302Net
      gain from sales of discontinued operations:Cooperative
      apartment unit, New Haven, CT
                
                
                -
                
                
                
                85,759Cooperative
      apartment unit, Riverdale, NY
                
                
                121,144
                
                
                
                -Crown
      Court, New Haven, CT
                
                
                3,208,336
                
                
                
                -Towne
      House, New Rochelle, NY
                
                
                -
                
                
                
                2,806,499Net
      gain from sales of discontinued operations
                
                
                3,329,480
                
                
                
                2,892,258Total
      income from discontinued operations
                
                $
                3,262,579
                
                
                $
                3,041,560





Balance
Sheet





December 31, 2009 vs
December 31, 2008





Net real
estate decreased by $396,407 primarily as a result of the $225,589
reclassification in 2009 of net real estate related to the Building Industries
Center property from net real estate to assets related to discontinued
operations.  The Building Industries Center property at the beginning
of the year had a carrying value of $1,403,571, less accumulated depreciation of
$1,168,225, resulting in a net carrying value of $235,346.  In
addition, the Company sold one cooperative apartment unit, which decreased net
real estate by $24,594.  The Company also purchased additions and
improvements to its properties of $332,510 and recorded depreciation of
$480,534.





Net
mortgage portfolio increased by $631,719 primarily as a result of the $750,000
note receivable 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).  The note was recorded at its fair value of $664,000 ($750,000
note receivable less a discount of $86,000).  The carrying value of
the note at December 31, 2009 was $741,671 as a result of $77,671 of
amortization of discount for the period.  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 $1,083,716 as a result of the
$3,250,000 investment recorded for the Company’s 50% ownership interest in 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 the $2,166,284 loss from the joint
ventures.


28


Assets
related to discontinued operations decreased by $159,666, primarily as a result
of the sale of the Crown Court property, partially offset by the classification
of the Building Industries Center property as a discontinued
operation.





Other
receivables increased by $341,897 primarily as a result of a $500,000 receivable
due from Mr. Lichtenstein, partially offset by a $73,389 decrease in net tenant
accounts receivable and an $88,768 decrease in miscellaneous
receivables.





Cash and
cash equivalents decreased by $5,199,876 primarily as a result of the $4,431,622
purchase of securities available for sale.





Securities
available for sale increased by $3,604,465 as a result of the $4,431,622
purchase of securities available for sale, partially offset by the $804,985 sale
of securities and the $22,172 decrease in the fair value of the
securities.  The Company utilized the $804,766 proceeds from the sale
of securities to make a $903,918 cash contribution to the Company’s defined
benefit plan.  See Liquidity and Capital
Resources below.





Other
assets decreased by $174,977 primarily as a result of decreases of $47,070 in
deferred charges and $56,888 for the amortization of in-place lease
values.  In addition, accumulated depreciation on non-rental property
increased by $42,711.





Mortgage
debt decreased by $1,422,678 primarily due to the reclassification of the
$1,045,867 Building Industries Center mortgage debt to liabilities related to
discontinued operations.





Liabilities
related to discontinued operations decreased by $1,033,104 primarily as a result
of the sale of the Crown Court property, partially offset by the
reclassification of the mortgage debt of the Building Industries Center to
discontinued operations.





Contractual
pension and postretirement benefits liabilities decreased by $880,222 primarily
due to an $842,792 decrease in the contractual pension benefit obligation as a
result of the death of a participant in 2009.  In addition, there was
a $37,430 decrease in the contractual postretirement benefits
obligation.





Defined
benefit plan liability decreased by $295,617 primarily as a result of the
$903,918 Company contribution made in the third quarter of 2009.  This
decrease was partially offset by the $441,590 net periodic benefit cost for the
defined benefit plan.





Accrued
liabilities decreased by $202,863 primarily as a result of the decrease of
$511,990 in the accrual for environmental expenses and the discount
thereon.  This decrease was partially offset by an increase of
$326,470 in accrued mortgage interest expense, of which $339,993 pertains to the
deferred mortgage interest accrued for the mortgage on the Hato Rey
Center.





Other
liabilities decreased by $231,058 primarily as a result of a $102,746 decrease
in deferred commission income, a $47,019 decrease in deferred rental income and
a $30,400 decrease in tenant security deposit liabilities.


29


During
2009, the Company awarded 3,000 shares of the Company’s Class B common stock to
three independent directors of the Company as partial payment of directors’ fees
for the 2009 year.  These shares were issued from the Company’s 2005
Restricted Stock Plan (the “2005 Plan”).  Stock granted to directors
is fully vested on the grant date and stock granted in prior years to officers
and employees are vesting at 20% per year.  Notwithstanding the
vesting schedule, the officers and employees are entitled to receive
distributions, if any, on the total number of shares awarded. The issued shares
are valued at the market value of the Class B common stock at the grant date.
The following is a summary of the shares issued in 2009 and the expense related
to the shares vested in 2009.


30





2009Unvested
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            Unvested
                            
                            
                            Class BShares
                            
                            
                            
                            
                            
                            Market
                            
                            
                            
                            
                            
                            Shares
                            
                            
                            Commonat
                            
                            
                            Shares
                            
                            
                            Value at
                            
                            
                            Shares
                            
                            
                            at
                            
                            
                            Stock - Par
                            
                            
                            AdditionalDate of
                            
                            December
                            
                            
                            Issued
                            
                            
                            Date of
                            
                            
                            Vested
                            
                            
                            December
                            
                            
                            Value $.10
                            
                            
                            Paid -in
                            
                            
                            Directors'
                            
                            
                            SalaryIssuance
                            
                            31, 2008
                            
                            
                            in 2009
                            
                            
                            Grant
                            
                            
                            in 2009
                            
                            
                            31, 2009
                            
                            
                            Per Share
                            
                            
                            Capital
                            
                            
                            Fees
                            
                            
                            ExpenseAug.,
      2005 (1)
                            
                            
                            4,000
                            
                            
                            
                            
                            
                            $
                            7.51
                            
                            
                            
                            2,000
                            
                            
                            
                            2,000Aug.,
      2005 (1)
                            
                            
                            400
                            
                            
                            
                            
                            
                            
                            9.04
                            
                            
                            
                            200
                            
                            
                            
                            200Jan.,
      2006
                            
                            
                            9,000
                            
                            
                            
                            
                            
                            
                            7.40
                            
                            
                            
                            4,500
                            
                            
                            
                            4,500
                            
                            
                            
                            
                            
                            $
                            33,300
                            
                            
                            
                            
                            
                            $
                            33,300Dec.,
      2006
                            
                            
                            3,900
                            
                            
                            
                            
                            
                            
                            7.05
                            
                            
                            
                            1,300
                            
                            
                            
                            2,600
                            
                            
                            
                            
                            
                            
                            9,165
                            
                            
                            
                            
                            
                            
                            9,165Dec.,
      2007
                            
                            
                            2,000
                            
                            
                            
                            
                            
                            
                            5.80
                            
                            
                            
                            500
                            
                            
                            
                            1,500
                            
                            
                            
                            
                            
                            
                            2,900
                            
                            
                            
                            
                            
                            
                            2,900Jan.,
      2009
                            
                            
                            
                            
                            
                            
                            3,000
                            
                            
                            
                            1.61
                            
                            
                            
                            3,000
                            
                            
                            
                            
                            
                            
                            $
                            300
                            
                            
                            
                            4,530
                            
                            
                            $
                            4,83019,300
                            
                            
                            
                            3,000
                            
                            
                            
                            
                            
                            
                            
                            11,500
                            
                            
                            
                            10,800
                            
                            
                            $
                            300
                            
                            
                            $
                            49,895
                            
                            
                            $
                            4,830
                            
                            
                            $
                            45,365





(1)
            These
      shares were part of 11,000 shares granted in 2004 and 2005 and issued in
      2005.  The Company recorded salary expense of $9,040 in 2005 and
      $75,100 in 2004. In 2005, when the shares were issued, the Company
      recorded additions to Class B common stock of $1,100 and $83,040 to
      additional paid-in capital.


31


Accumulated
other comprehensive loss decreased by $790,413 primarily as a result of a
$961,724 adjustment for the contractual pension benefits, partially offset by an
adjustment of $166,711 for the defined benefit plan.  The adjustment
for contractual pension benefits was due to the death of a participant in 2009,
as discussed above.





Liquidity and Capital
Resources





(a)   
General





Presidential
obtains funds for working capital and investment from its available cash and
cash equivalents, from securities available for sale, 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.





From time
to time in the Company’s recent history, the Company has considered various
strategic alternatives in an effort to maximize shareholder value, including a
merger, consolidation or sale of all or substantially all of the Company’s
assets in a single transaction followed by a liquidation of the
Company.  While in the past no appropriate opportunity has been found,
the Board of Directors and management continue to seek and consider potential
strategic transactions.  Management is currently having ongoing
discussions concerning possible strategic transactions with a number of
different parties but no definitive agreement has been reached and no assurances
can be given that the Company will be able to achieve such a
transaction.  The Company is currently negotiating with several
parties for the sale of its Building Industries Center property in White Plains,
New York and subsequent to year end, the Company listed its Mapletree Industrial
Center property in Palmer, Massachusetts for sale.  In addition, the
Board of Directors expects to request the approval of its shareholders at its
next Annual Meeting currently scheduled for June 16, 2010 for the sale of all or
substantially all of the Company’s assets and the adoption of a Plan of
Liquidation of the Company.





Based on
the above, management believes that, barring any unforeseen circumstances, the
Company has sufficient liquidity and capital resources to carry on its existing
business and to pay any dividends required to maintain REIT status until the
Company can effectuate a plan of liquidation or enter into a strategic
transaction as described above.  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
then existing defaults on two of the Company’s loans to affiliates of David
Lichtenstein, the Company’s inability to refinance the Hato Rey Center office
building mortgage and the desirability of conserving the Company’s cash
resources under these circumstances.  For these reasons, the Company
did not declare a dividend in 2009 and does not expect to declare one in
2010.


32


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.





At
December 31, 2009, Presidential had $784,674 in available cash and cash
equivalents, a decrease of $5,199,876 from the $5,984,550 available at December
31, 2008.  This decrease in cash and cash equivalents was due to cash
used in operating activities of $2,571,046, cash used in investing activities of
$2,226,025, and by cash used in financing activities of $402,805.





In May,
2009, the Company invested $4,431,622 of its cash in securities available for
sale.  Securities available for sale consist primarily of notes and
bonds issued by agencies of the United States government maturing at dates
ranging from 2010 through 2013 with interest rates ranging from 1.625% to
5.125%.  The Company purchased these notes and bonds to utilize its
cash to earn higher interest rates while retaining substantial liquidity in its
investments.  The balance of securities available for sale at December
31, 2009 was $3,614,113.





(b) Joint Venture Mezzanine
Loans and Settlement Agreement





During
2004 and 2005, the Company made investments in and loans to four joint ventures
and received 29% ownership interests in these joint ventures.  The
initial aggregate investment in the joint ventures (original principal amount of
the loans made to and the investments in the joint ventures) was
$27,038,410.  The Company accounted for these investments and loans
under the equity method because it exercises significant influence over, but
does not control, these entities, which are controlled by The Lightstone Group
(“Lightstone”) and David Lichtenstein.  The joint ventures own nine
shopping malls in seven states.





The first
investment, the Martinsburg Mall in Martinsburg, West Virginia, was purchased in
September, 2004, by PRC Member LLC, a limited liability company which was
originally wholly owned by the Company.  The Company made a $1,438,410
investment in PRC Member, LLC and PRC Member LLC obtained a mezzanine loan from
Lightstone in the amount of $2,600,000, which was secured by a pledge of
ownership interests in the entity that owned the Martinsburg
Mall.  The loan was due to mature on September 27, 2014, and the
interest rate on the loan was 11% per annum.  Lightstone Member LLC
(“Lightstone I”) managed the property and David Lichtenstein received a 71%
ownership interest in PRC Member LLC, and the Company owned the remaining 29%
ownership interest.





In
September, 2004, the Company made a $8,600,000 mezzanine loan to Lightstone I in
connection with the acquisition by Lightstone I of four shopping malls, namely
the Shenango Valley Mall in Hermitage, Pennsylvania; the West Manchester Mall in
York, Pennsylvania; the Bradley Square Mall in Cleveland, Tennessee and the
Mount Berry Square Mall in Rome, Georgia (the “Four Malls”).  The loan
was secured by the ownership interests in the entities that owned the Four Malls
and the Martinsburg Mall and the Company received a 29% ownership interest in
the Four Malls.  The loan was due to mature on September 27, 2014 and
the interest rate on the loan was 11% per annum.


33


In
December, 2004, the Company made a $7,500,000 mezzanine loan to Lightstone
Member II LLC (“Lightstone II”) in connection with the acquisition by Lightstone
II of the Brazos Mall in Lake Jackson, Texas and the Shawnee Mall in Shawnee,
Oklahoma (the “Shawnee/Brazos Malls”).  The loan is secured by the
ownership interests in the entities that own the Shawnee/Brazos Malls and the
Company received a 29% ownership interest in these entities.  The loan
matures on December 23, 2014 and the interest rate on the loan is 11% per
annum.  In June, 2006, the Company made an additional $335,000
mezzanine loan to Lightstone II.  The loan was added to the original
$7,500,000 loan and has the same interest rate and maturity date as the original
loan.





In July,
2005, the Company made a $9,500,000 mezzanine loan to Lightstone Member III LLC
(“Lightstone III”) in connection with the acquisition by Lightstone III of the
Macon Mall in Macon, Georgia and the Burlington Mall in Burlington, North
Carolina (the “Macon/Burlington Malls”).  The loan was secured by the
ownership interests in the entities that owned the Macon/Burlington Malls and
the Company received a 29% ownership interest in these entities.  The
loan was due to mature on June 30, 2015 and the interest rate on the loan was
11% per annum.





Starting
in 2007, the shopping malls began to suffer from among other things, competition
from other and, in some circumstances, newer shopping malls, the inability to
attract new tenants and declining rental rates, which conditions worsened during
the continuing economic downturn, and in 2008 and 2009, the joint ventures
defaulted on the Presidential loans.





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 loan commenced foreclosure proceedings and appointed a receiver to
operate the properties.  The Company believed that the outstanding
principal balance of the first mortgage loan substantially exceeded the then
current value of the Macon/Burlington Malls and that it was unlikely that the
Company would be able to recover any interest or any principal on its mezzanine
loan from the collateral that it held as security for the loan.





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 loan
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 loan commenced foreclosure proceedings and appointed a
receiver to operate the properties.  At that time, the Company
believed that the outstanding principal balance of the first mortgage loan
substantially exceeded the current value of the mortgaged properties and that it
was unlikely that the Company would 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 held as security for its mezzanine loan
and investment.  Accordingly a portion of the mezzanine loan
indebtedness was assumed by another Lightstone entity pursuant to the Settlement
Agreement with Lightstone.  As of December 31, 2009, the mortgagee had
not completed the foreclosure of its mortgage and the properties continue to be
operated by a receiver.


34


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 was in good standing at
December 31, 2008.  However, in January, 2009, the holder of the first
mortgage loan 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 and Lightstone II failed
to make the interest payments due on the Company’s mezzanine loan on January 1,
2009 and on the first day of subsequent months.  The first mortgage
loan on the properties became due on January 10, 2010 and has not been
paid.  Lightstone has been unable to refinance the first mortgage loan
indebtedness and is attempting to obtain an extension of the existing mortgage
loan.  However, the holder of the first mortgage loan has commenced
foreclosure proceedings and the Company believes that it is likely that the
first mortgage loan will be foreclosed and the Company will not be able to
obtain any recovery on its mezzanine loan other than the recovery of $500,000
from David Lichtenstein on his limited guaranty received pursuant to the
Settlement Agreement.





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 and
executed a Settlement Agreement with respect to such claims.  Under
the Settlement Agreement:





(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 all
of 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 75% of the ownership interests in entities owning
nine additional apartment properties (931 apartment units) located in Virginia
and North Carolina.





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 therefore and,
accordingly, since the Consolidated Note is a nonrecourse loan, the Company does
not expect to obtain payment in full of the Consolidated Note on
maturity.


35


(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 due on January 31,
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.  The Company is currently negotiating an extension
of this loan or receipt of the underlying collateral.





(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 $500,000 guaranty, which was secured
by his remaining interest in IATG, was paid to the Company in March, 2010 and
the security for the guaranty was released.  As a result of the
$500,000 guaranty payment received in March, 2010, at December 31, 2009, the
Company recognized a $500,000 gain on settlement of joint venture loans in its
consolidated financial statements and recorded a $500,000 receivable due from
Mr. Lichtenstein on its consolidated balance sheet.





The
carrying value on the Company’s consolidated financial statements of the
$7,835,000 mezzanine loan and the Company’s minority interest in the entity
owning the Shawnee/Brazos Malls was zero and $1,511,887 at December 31, 2009 and
2008, respectively.





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 was
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 continues to have a material adverse affect
on the Company’s business, financial condition, results of operations and
prospects.





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


36


(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 fair value of $3,250,000 and a gain
on the settlement of the joint venture loans in the amount of $3,250,000 was
recognized on the Company’s consolidated financial statements.





(iii) The
$750,000 non-interest bearing, nonrecourse note due on January 31, 2010, which
is secured by an additional 25% ownership interest in IATG, was recorded on the
Company’s consolidated balance sheet at its fair value of $664,000 ($750,000
note receivable less a discount on the note receivable of $86,000) and a gain on
the settlement of the joint venture loans in the amount of $664,000 was
recognized on the Company’s consolidated financial statements.  The
Company is currently negotiating an extension of this loan or receipt of the
underlying collateral.





In March,
2009, the Company’s preliminary estimate of the fair value of the 50% ownership
interest in IATG was $1,500,000 and its preliminary estimate of the fair value
of the $750,000 note was $200,000. The Company recorded a $1,500,000 investment
in joint ventures and a $200,000 note receivable on its consolidated balance
sheet and recognized a gain on settlement of joint venture loans of $1,700,000
in its consolidated financial statements at March 31, 2009.





The
Company based the preliminary estimated fair value of its interest in the IATG
property on information available to it at the time.  During the
quarter ended June 30,2009, the Company obtained an independent appraisal of the
property owned by IATG and based on the appraised value of $6,500,000, the
Company has adjusted the preliminary estimate of the value of its 50% ownership
interest in the IATG property from $1,500,000 to $3,250,000 and its preliminary
estimate of the $750,000 note receivable from $200,000 to
$664,000.  Accordingly, in June, 2009, the Company recorded an
additional $1,750,000 in investments in joint ventures and an additional
$464,000 for the note receivable on its consolidated balance sheet and
recognized an additional gain of $2,214,000 on the gain on settlement of joint
venture loans in its consolidated financial statements.  While
management believes that the $6,500,000 appraised value of the IATG property is
a reasonable value, there can be no assurance that if and when the property
is sold, it can be sold for its appraised value.





(iv) At
December 31, 2009, the Company recorded a $500,000 receivable due from Mr.
Lichtenstein on its consolidated balance sheet and recognized a $500,000 gain on
settlement of joint venture loans in its consolidated financial
statements.


37


In
summary, as a result of the Settlement Agreement, in 2009 the Company recorded
assets of $4,414,000 on the Company’s consolidated balance sheet (a $500,000
receivable, a $750,000 note receivable less an $86,000 discount on the note
receivable and a $3,250,000 investment in joint ventures) and recorded a
$4,414,000 gain on the settlement of joint venture loans in its consolidated
financial statements.  The Company also received a net cash payment of
$65,289 ($250,000 less $184,711 of expenses for the settlement), which was also
recorded in gain on settlement of joint venture loans in its consolidated
financial statements.  In addition, for the period ended December 31,
2009, the Company recognized in interest income $77,671 of the amortization of
discount recorded on the note receivable.





The
$12,075,000 Consolidated Note accrues interest at the rate of 13% per
annum.  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 therefore, the Company accrues the interest due on this portion of the
note.  However, at this point in time, the Company cannot determine
how much of the interest due on the $10,000,006 portion of the note will be paid
and, accordingly, such interest is recorded on a cash basis as interest is
received.  For the year ended December 31, 2009, the Company received
the $230,785 of interest payments that were due on the $2,074,994 portion of the
note.  In addition, the Company received interest payments of $82,666
on the $10,000,006 portion of the note.  At December 31, 2009, the
deferred and unaccrued interest on the $10,000,006 portion of the note was
$1,029,557.





(c) Mortgage Loans
Payable





The first
mortgage on the Building Industries Center property in White Plains, New York
was due on March 1, 2010 with an outstanding principal balance of
$1,038,086.  In January, 2010, the maturity date of the Building
Industries Center property mortgage was extended from March 1, 2010 to June 1,
2010 under the same terms, including a 5.45% per annum interest
rate.  In March, 2010, the Company obtained a new $1,250,000 mortgage
on its Building Industries Center property and repaid the $1,038,086 outstanding
balance of the prior mortgage.  The new mortgage bears interest at the
rate of 6.25% per annum, requires monthly payments of principal and interest of
$8,246 and has a balloon payment of $1,182,375 due at maturity on March 31,
2013.





As
described under “Hato
Rey Partnership” below, the first mortgage on the Hato Rey Center
property provides that all cash flow from the property, after payment of all
operating expenses, will be utilized to repay the outstanding principal of the
first mortgage loan on the property.  In addition, the Company has
loaned the partnership which owns the Hato Rey Center property a total of
$2,608,000 through December 31, 2009 (which loan may be increased to up to
$2,750,000), which loans bears interest at the rate of 13% per annum with such
interest and principal to be paid from the first positive cash flow from the
property or upon a refinancing of the first mortgage on the
property.  Since all cash flow will be devoted to repayment of the
first mortgage, the Company does not expect to receive payment of any interest
or principal on the loan to the partnership until the first mortgage is
refinanced.  While the property generates sufficient cash flow to
support a refinancing of the first mortgage under ordinary market conditions, in
light of the current restrictive credit market, the Company does not expect to
be able to refinance the first mortgage in 2010.


38


(d) Insurance





The
Company carries comprehensive liability, fire, extended coverage, rental loss
and acts of terrorism insurance on all of its properties.  Management
believes that all of its properties are adequately covered by
insurance.  In 2009, the cost for this insurance was approximately
$250,000.  The Company has renewed its insurance coverage for 2010 and
the Company estimates that the premium costs will be approximately $248,000 for
2010.  Although the Company has been able to obtain terrorism coverage
on its properties in the past, this coverage may not be available in the
future.





(e) Ivy Consolidated
Loan





Presidential
holds two nonrecourse notes (the “Ivy Consolidated Loan”), which it received in
1991 from Ivy Properties, Ltd. and its affiliates (“Ivy”).  At
December 31, 2009, the Ivy Consolidated Loan has an outstanding principal
balance of $4,770,050 and a net carrying value of zero. Pursuant to existing
agreements between the Company and the Ivy principals, the Company is entitled
to receive, as payments of principal and interest on the Ivy Consolidated Loan,
25% of the cash flow of Scorpio Entertainment, Inc. (“Scorpio”), a company owned
by two of the Ivy principals (Steven Baruch, Executive Vice President and a
Director of Presidential, and Thomas Viertel, Executive Vice President, Chief
Financial Officer and a Director of Presidential) to carry on theatrical
productions.  Amounts received by Presidential from Scorpio will be
applied to unpaid and unaccrued interest on the Ivy Consolidated Loan and
recognized as income.  These amounts have been material in the
past.  However, the profitability of theatrical production is by its
nature uncertain and management believes that any estimate of payments from
Scorpio on the Ivy Consolidated Loan for future periods is too speculative to
project.  Presidential received payments of $0 in 2009 and $146,750 in
2008 of interest income on the Ivy Consolidated Loan.  Although, as
stated above, management believes that any estimate of payments by Scorpio for
future periods are too speculative to project, in light of the continuing
material adverse effect of the current economic downturn on the theatrical
production business, the Company does not expect to receive any payments on the
Ivy Consolidated Loan in 2010.  The Ivy Consolidated Loan bear
interest at a rate equal to the JP Morgan Chase Prime rate, which was 3.25% at
December 31, 2009.  At December 31, 2009, the unpaid and unaccrued
interest was $3,677,702 and such interest is not compounded.





(f) 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 $618,317.  Net cash received from rental
property operations was $593,026.  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.





(g) Investing
Activities





Presidential
holds a portfolio of mortgage notes receivable.  During 2009, the
Company received principal payments of $122,533 on its mortgage
portfolio.


39


In 2009,
the Company received $1,545,851 of net proceeds from the sale of its Crown Court
property and $145,738 from the sale of a cooperative apartment unit in
Riverdale, New York.





During
2009, the Company invested $478,580 in additions and improvements to its
properties, including $386,976 for the Hato Rey Center.  It is
projected that additions and improvements in 2010 will be approximately
$389,000, including $283,000 for the Hato Rey Center.





In May,
2009, the Company invested $4,431,622 in securities available for
sale.  The Company purchased notes and bonds issued by agencies of the
United States government in order to utilize its cash to earn higher interest
rates while retaining substantial liquidity in its investments.





During
the quarter ended September 30, 2009, the Company received $804,766 of proceeds
from the sales of securities.  The Company utilized these cash
proceeds and operating cash to make a $903,918 contribution to the Company’s
underfunded defined benefit plan.





(h) Financing
Activities





The
Company’s indebtedness at December 31, 2009, consisted of mortgage debt of
$14,969,607 for continuing operations and $1,045,867 for discontinued
operations.  The mortgage debt is collateralized by individual
properties.  The $14,924,629 mortgage on the Hato Rey Center property
is nonrecourse to the Company, whereas the $44,978 Mapletree Industrial Center
mortgage is recourse to Presidential.  The $1,045,867 mortgage on the
Building Industries Center property, which is classified as a discontinued
operation, is recourse 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 $401,818 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 had a balloon payment due of
$1,038,086, which was repaid in March, 2010, from the proceeds from the new
mortgage (see Mortgage
Loans Payable above), and the Hato Rey Center mortgage.  The
$14,924,629 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% (which additional 2% is deferred until maturity) and additional
repayments of principal will be required from net cash flows from operations of
the property (see Hato
Rey Partnership below).





Discontinued
Operations





For the
years ended December 31, 2009 and 2008, income from discontinued operations
includes the Crown Court property, the Building Industries Center property and
two cooperative apartment units in Riverdale, New York.  The Crown
Court property was designated as held for sale during the three months ended
September 30, 2008 and sold in April, 2009.  The Building Industries
Center property was designated as held for sale during the three months ended
December 31, 2009.  The two cooperative apartment units were
designated as held for sale during 2009 and one was sold in October,
2009.  In addition, income from discontinued operations for the year
ended December 31, 2008, included the Towne House property in New Rochelle, New
York and another cooperative apartment unit in New Haven,
Connecticut.


40


During
the quarter ended December 31, 2009, the Company began to market the Building
Industries Center property for sale and designated it as held for
sale.  The Company expects to sell the property within one year for
net proceeds in excess of its carrying value.  The carrying value of
the property at December 31, 2009 was $225,589, net of accumulated depreciation
of $1,196,304.  The property is also subject to a first mortgage with
an outstanding balance of $1,045,867 at December 31, 2009 (see Mortgage Loans
Payable above).





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 net proceeds of sale were $1,545,851 and the gain
from sale for financial reporting purposes was $3,208,336.





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 and on October 15, 2009
completed the sale for this unit for a sales price of $154,000.  The
net proceeds of sale were $145,738 and the gain from sale for financial
reporting purposes was $121,144.





During
the three months ended June 30, 2009, the Company designated another 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 December 31, 2009
was $6,224, net of accumulated depreciation of $3,263.





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
following table summarizes income for the properties sold or held for
sale:


41





Year Ended December 31,2009
                  
                  
                  2008Revenues:Rental
                  
                  $
                  498,549
                  
                  
                  $
                  1,318,018Rental
      property expenses:Operating
      expenses
                  
                  
                  244,194
                  
                  
                  
                  558,515Interest
      on mortgage debt
                  
                  
                  94,626
                  
                  
                  
                  207,837Real
      estate taxes
                  
                  
                  194,703
                  
                  
                  
                  326,025Depreciation
      on real estate
                  
                  
                  28,298
                  
                  
                  
                  65,577Amortization
      of mortgage costs
                  
                  
                  3,948
                  
                  
                  
                  11,698Total
                  
                  
                  565,769
                  
                  
                  
                  1,169,652Other
      income:Investment
      income
                  
                  
                  319
                  
                  
                  
                  936Income
      (loss) from discontinued operations
                  
                  
                  (66,901
                  )
                  
                  
                  149,302Net
      gain from sales of discontinued operations
                  
                  
                  3,329,480
                  
                  
                  
                  2,892,258Total
      income from discontinued operations
                  
                  $
                  3,262,579
                  
                  
                  $
                  3,041,560





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.  In addition, the first mortgage on the Shawnee/Brazos Malls
matured on January 10, 2010 and the holder of the first mortgage has commenced
foreclosure proceedings.  (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.  As
a result of the operating loss and impairment loss for the joint ventures in
2009, the balance of the Company’s investment in the Shawnee/Brazos Malls at
December 31, 2009 was reduced to zero.





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.


42


The
Company’s estimate of the fair value of its 50% ownership interest in IATG is
$3,250,000 and the Company recorded a $3,250,000 investment in joint ventures on
its consolidated balance sheet and recognized a gain on settlement of joint
venture loans of $3,250,000 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 year ended December 31,
2009 is as follows:





Equityin
      theLossBalance
      at
                      
                      
                      
                      
                      
                      from
                      
                      
                      Balance
      atDecember
      31,
                      
                      
                      
                      
                      
                      Joint
                      
                      
                      December
      31,2008
                      
                      
                      Investments
                      
                      
                      Ventures
                      
                      
                      2009Shawnee/BrazosMalls (1)
                      
                      $
                      1,511,887
                      
                      
                      $
                      -
                      
                      
                      $
                      (1,511,887
                      )
                      
                      $
                      -IATG
      (2)
                      
                      
                      -
                      
                      
                      
                      3,250,000
                      
                      
                      
                      (654,397
                      )
                      
                      
                      2,595,603$
                      1,511,887
                      
                      
                      $
                      3,250,000
                      
                      
                      $
                      (2,166,284
                      )
                      
                      $
                      2,595,603





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





Year Ended December 31,2009
                    
                    
                    2008Shawnee/Brazos
      Malls
                    (1)
                    
                    $
                    (1,511,887
                    )
                    
                    $
                    (1,843,970
                    )IATG
                    (2)
                    
                    
                    (654,397
                    )
                    
                    
                    -Martinsburg
      Mall
                    (3)
                    
                    
                    -
                    
                    
                    
                    151,396Four
      Malls
                    (4)
                    
                    
                    -
                    
                    
                    
                    33,903Macon/Burlington
      Malls
                    (5)
                    
                    
                    -
                    
                    
                    
                    89,986$
                    (2,166,284
                    )
                    
                    $
                    (1,568,685
                    )





(1)
Interest due to 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.  At December 31, 2009, the Company’s investment in the
Shawnee/Brazos Malls was reduced to zero as a result of the Company’s share of
the loss from operations and an impairment loss recorded on the value of the
properties.  The Company’s share of these losses was limited to the
extent of the Company’s investment in and advances to the joint
venture.





(2) The
fair value of the Company’s 50% ownership interest in IATG is
$3,250,000.  The Company also recorded its 50% share of the loss from
IATG for the ten month period ended December 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.


43


(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 was included in the
calculation of the Company’s share of the income (loss) from joint ventures for
the Four Malls.  In the second quarter of 2008, the Company’s basis of
its investment in the Four Malls was reduced by distributions and losses to
zero.  Any subsequent distributions received from the Four Malls were
recorded in income.





(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.





The
Lightstone Group is controlled by David Lichtenstein.  At December 31,
2009, in addition to Presidential’s investments of $2,595,603 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 $2,816,665.





The
$5,412,268 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 20% of the Company’s
total assets at December 31, 2009.





Hato Rey
Partnership





At
December 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.





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 was reduced from 48% to a low of approximately 20% at January 31,
2009.  However, as a result of local economic conditions and higher
than historical vacancy rates in the Hato Rey area, the vacancy rate has
increased to 26% at December 31, 2009.





Over the
last three years through September 30, 2009, 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.  In July, 2009, the Company
agreed to loan an additional $250,000 to the Hato Rey Partnership under the same
terms as the $2,500,000 agreement.  At December 31, 2009, total
advances under the loan were $2,608,000 and subsequent to December 31, 2009, the
Company advanced an additional $62,000.  The $2,608,000 loan and the
accrued interest in the amount of $823,786 have been eliminated in
consolidation.


44


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.





Contractual
Commitments





The
Company’s significant contractual commitments are its liabilities under mortgage
debt and employment agreements, which are payable as follows:





Mortgage
                  
                  
                  EmploymentDebt(1)
                  
                  
                  Agreements
                  
                  
                  TotalYear
      ending December 31:2010
                  
                  $
                  375,916
                  
                  
                  $
                  976,740
                  
                  
                  $
                  1,352,6562011
                  
                  
                  388,221
                  
                  
                  
                  976,740
                  
                  
                  
                  1,364,9612012
                  
                  
                  398,803
                  
                  
                  
                  819,930
                  
                  
                  
                  1,218,7332013
                  
                  
                  432,755
                  
                  
                  
                  422,270
                  (2)
                  
                  
                  855,0252014
                  
                  
                  466,270
                  
                  
                  
                  434,930
                  
                  
                  
                  901,200Thereafter
                  
                  
                  12,907,642
                  
                  
                  
                  447,980
                  
                  
                  
                  13,355,622TOTAL
                  
                  $
                  14,969,607
                  
                  
                  $
                  4,078,590
                  
                  
                  $
                  19,048,197





(1)
Mortgage debt bears interest at fixed rates varying from 3.25% to 9.38% per
annum (see Note 7 of Notes to Consolidated
Financial Statements).





(2)
Employment agreements will expire in 2012 and contain provisions for three years
of consulting fees thereafter.





The
Company also has contractual commitments for pension and postretirement
benefits.  The contractual pension benefits generally provide for
annual payments in specified amounts for each participant for life, commencing
three years after retirement, with an annual adjustment for an increase in the
consumer price index.  The contractual benefit plans are not
funded.  For the year ended December 31, 2009, the Company paid
$73,303 for pension benefits and $19,210 for postretirement
benefits.  The Company expects that payments for these contractual
benefits will be approximately $16,138 in 2010.


45





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 consisted 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 ASC
Contingencies Topic, 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 December 31, 2009, the accrued
liability balance was $388,971 and the discount balance was $118,535 for a net
accrued liability of $270,436.





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.  The Company has commenced the remediation work and
expects to complete it by June, 2010.  While the final cost of the
remediation work has not been finally determined, management believes that it
will be less than the balance of the net accrued liability at December 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.





Recent Accounting
Pronouncements





In June,
2009, the FASB issued ASC Topic 105, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles – a replacement of
FASB Statement No. 162”.  This standard establishes the FASB ASC as
the primary source of authoritative generally accepted accounting principles
(“GAAP”) recognized by the FASB to be applied by nongovernmental
entities.  Rules and interpretive releases of the Securities and
Exchange Commission (“SEC”) are also sources of authoritative GAAP for SEC
registrants.  This standard and the ASC became effective for interim
and annual periods ending after September 15, 2009.  The ASC
supersedes all existing non-SEC accounting and reporting standards and the FASB
will not issue new standards in the form of Statements, FASB Staff Positions, or
Emerging Issues Task Force Abstracts.  Instead, the FASB will issue
Accounting Standards Updates, which will serve only to: (a) update the ASC; (b)
provide background information about the guidance; and (c) provide the basis for
conclusions on the change(s) in the ASC.  The Company’s adoption of
this standard and the ASC during the quarter ended September 30, 2009 did not
have a material effect on the Company’s consolidated financial
statements.  All accounting references have been updated, and
therefore Statement of Financial Accounting Standards (“SFAS”) references have
been replaced with ASC references except for SFAS references that have not been
integrated into the codification.





In
December, 2007, the FASB issued ASC 810-10-65, “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.  This standard became effective on January 1,
2009.  The Company’s adoption of this standard resulted in additional
disclosures in the Company’s consolidated financial statements, including the
reporting of a net loss attributable to a noncontrolling interest of $264,656
for the year ended December 31, 2009.


46





In June,
2008, the FASB issued ASC 260-10-65-2, “Determining Whether Instruments Granted
in Share-Based Payment Transactions are Participating
Securities”.  This standard 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.  This standard became
effective on January 1, 2009.  The Company’s adoption of this standard
on January 1, 2009 did not have a material effect on the Company’s consolidated
financial statements.





In June,
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)”.  SFAS No. 167 modified the existing quantitative guidance used
in determining the primary beneficiary of a variable interest entity (“VIE”) by
requiring entities to qualitatively assess whether an enterprise is a primary
beneficiary, based on whether the entity has (i) power over the significant
activities of the VIE, and (ii) an obligation to absorb losses or the right to
receive benefits that could be potentially significant to the
VIE.  SFAS No. 167 becomes effective for all new and existing VIEs on
January 1, 2010.  The Company’s adoption of SFAS No. 167 is expected
to have no impact on the Company’s consolidated financial
statements.





Off-Balance Sheet
Arrangements





The
Company does not believe that it has any off-balance sheet arrangements that
have, or are reasonably likely to have, a material effect on its financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.





ITEM
      7A.
            QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





While the
Company is not required as a smaller reporting company to comply with this Item
7A, 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
      8.
            FINANCIAL STATEMENTS
      AND SUPPLEMENTARY DATA





See Table
of Contents to Consolidated Financial Statements.





ITEM
      9.
            CHANGES IN AND
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





None.


47


ITEM
      9A.
            CONTROLS AND
      PROCEDURES




(a)
Evaluation of Disclosure Controls and Procedures





The
Company maintains disclosure controls and procedures or controls and other
procedures that are designed to ensure that the information required to be
disclosed by the Company in the reports that it files or submits under the
Securities Exchange Act of 1934, or Exchange Act, is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms of the Securities and Exchange Commission.  Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in the reports that a company
files or submits under the Exchange Act is accumulated and communicated to our
management, including our chief executive officer and chief financial officer,
as appropriate to allow timely decisions regarding required
disclosure.





The
Company carried out an evaluation, under the supervision and with the
participation of our chief executive and chief financial officers, of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act)
as of December 31, 2009.  Based on this evaluation, our chief
executive officer and our chief financial officer concluded that as of December
31, 2009, our disclosure controls and procedures were effective at providing
reasonable assurance that the information required to be disclosed by the
Company in reports filed under the Exchange Act is (i) recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms; and (ii) accumulated and communicated to our management, including our
chief executive officer and chief financial officer, as appropriate, to allow
timely decisions regarding disclosure.





(b)
Internal Controls over Financial Reporting





Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934.  The Company’s internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles.  The Company’s internal control over financial
reporting includes those policies and procedures that:





·
            Pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company;





·
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the Company
      are being made only in accordance with authorizations of management and
      directors of the Company; and


48





·
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the Company’s assets that
      could have a material effect on the financial
  statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2009.  In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework.  Based on
its assessment and those criteria, management believes that the Company
maintained effective internal control over financial reporting as of December
31, 2009.





This
Annual Report does not include an audit report of our registered public
accounting firm regarding our internal control over financial reporting pursuant
to temporary rules of the SEC that permit us to provide only management’s report
in this Annual Report.





ITEM
      9B.
            OTHER
      INFORMATION





None.





PART
III





ITEM
      10.
            DIRECTORS, EXECUTIVE
      OFFICERS AND CORPORATE
GOVERNANCE





Reference
is made to the Company’s definitive Proxy Statement for its Annual Meeting of
Shareholders currently scheduled for June 16, 2010, which Proxy Statement will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
and which is incorporated herein by reference.





ITEM
      11.
            EXECUTIVE
      COMPENSATION





Reference
is made to the Company’s definitive Proxy Statement for its Annual Meeting of
Shareholders currently scheduled for June 16, 2010, which Proxy Statement will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
and which is incorporated herein by reference.





ITEM
      12.
            SECURITY OWNERSHIP OF
      CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS





Reference
is made to the Company’s definitive Proxy Statement for its Annual Meeting of
Shareholders currently scheduled for June 16, 2010, which Proxy Statement will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
and which is incorporated herein by reference.





ITEM
      13.
            CERTAIN RELATIONSHIPS
      AND RELATED TRANSACTIONS, AND DIRECTOR
  INDEPENDENCE





Reference
is made to the Company’s definitive Proxy Statement for its Annual Meeting of
Shareholders currently scheduled for June 16, 2010, which Proxy Statement will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
and which is incorporated herein by reference.


49


ITEM
      14.
            PRINCIPAL ACCOUNTING
      FEES AND SERVICES





Reference
is made to the Company’s definitive Proxy Statement for its Annual Meeting to
Shareholders currently scheduled for June 16, 2010, which Proxy Statement will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
and which is incorporated herein by reference.





PART
IV





ITEM
      15.
            EXHIBITS, FINANCIAL
      STATEMENT SCHEDULES





EXHIBITS:





3.1
Certificate of Incorporation of the Company (incorporated herein by reference to
Exhibit 3.5 to Post-effective Amendment No. 1 to the Company’s Registration
Statement on Form S-14, Registration No. 2-83073).





3.2
Certificate of Amendment to Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 1987, Commission File No.
1-8594).





3.3
Certificate of Amendment to Certificate of Incorporation of the Company, filed
July 21, 1988 with the Secretary of State of the State of Delaware (incorporated
herein by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K
for the year ended December 31, 1988, Commission File No. 1-8594).





3.4
Certificate of Amendment to Certificate of Incorporation of the Company, filed
on September 12, 1989 with the Secretary of State of the State of Delaware
(incorporated herein by reference to Exhibit 3.4 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 1989, Commission File No.
1-8594).





3.5
By-laws of the Company (incorporated herein by reference to Exhibit 3.7 to
Post-effective Amendment No. 1 to the Company’s Registration Statement on Form
S-14, Registration No. 2-83073).





10.1
Employment Agreement dated as of November 1, 1982 between the Company and Robert
E. Shapiro, as amended by Amendments dated March 1, 1983, November 25, 1985,
February 23, 1987 and January 4, 1988 (incorporated herein by reference to
Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 1988, Commission File No. 1-8594).





10.2
Amended and Restated Employment and Consulting Agreement, dated December 12,
2007, between Presidential Realty Corporation and Jeffrey F. Joseph
(incorporated herein by reference to Exhibit 99.1 to the Company’s Form 8-K as
filed on December 13, 2007, Commission File No. 1-8594).





10.3
First Amendment to Amended and Restated Employment and Consulting Agreement,
dated December 12, 2007, between Presidential Realty Corporation and Jeffrey F.
Joseph (incorporated herein by reference to Exhibit 99.4 to the Company’s Form
8-K as filed on December 13, 2007, Commission File No. 1-8594).


50


10.4
Amendment to First Amendment to Amended and Restated Employment and Consulting
Agreement dated October 13, 2008 between Presidential Realty Corporation and
Jeffrey F. Joseph (incorporated herein by reference to Exhibit 99.1 to the
Company’s Form 8-K as filed on October 14, 2008, Commission File No.
1-8594).





10.5
Amendment, dated as of January 1, 2007 between the Company and Steven Baruch, to
the Amended and Restated Employment and Consulting Agreement made January 31,
2005 between the Company and Steven Baruch (incorporated herein by reference to
Exhibit 99.1 to the Company’s Form 8-K as filed on January 23, 2007, Commission
File No. 1-8594).





10.6
Amended and Restated Employment and Consulting Agreement, dated December 12,
2007, between Presidential Realty Corporation and Steven Baruch (incorporated
herein by reference to Exhibit 99.2 to the Company’s Form 8-K as filed on
December 13, 2007, Commission File No. 1-8594).





10.7
Amendment to Amended and Restated Employment and Consulting Agreement dated
October 13, 2008 between Presidential Realty Corporation and Steven Baruch
(incorporated herein by reference to Exhibit 99.2 to the Company’s Form 8-K as
filed on October 14, 2008, Commission File No. 1-8594).





10.8
Amended and Restated Employment and Consulting Agreement, dated December 12,
2007, between Presidential Realty Corporation and Thomas Viertel (incorporated
herein by reference to Exhibit 99.3 to the Company’s Form 8-K as filed on
December 13, 2007, Commission File No. 1-8594).





10.9
Amendment to Amended and Restated Employment and Consulting Agreement dated
October 13, 2008 between Presidential Realty Corporation and Thomas Viertel
(incorporated herein by reference to Exhibit 99.3 to the Company’s Form 8-K as
filed on October 14, 2008, Commission File No. 1-8594).





10.10
Employment Agreement dated as of January 1, 2009 between the Company and
Elizabeth Delgado (incorporated herein by reference to Exhibit 99.1 to the
Company’s Form 8-K as filed on June 24, 2009, Commission File No.
1-8594).





10.11
Settlement Agreement dated November 14, 1991 between the Company and Steven
Baruch, Jeffrey F. Joseph and Thomas Viertel, (incorporated herein by reference
to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 1991, Commission File No. 1-8594).





10.12
First Amendment dated August 1, 1996 to Settlement Agreement dated November 14,
1991 between the Company and Steven Baruch, Jeffrey F. Joseph and Thomas Viertel
(incorporated herein by reference to Exhibit 10.13 to the Company’s Quarterly
Report on  Form 10-Q for the period ended March 31, 1997, Commission
File No. 1-8594).





10.13
Amended and Restated Operating Agreement of PRC Member LLC dated September 27,
2004 (incorporated herein by reference to Exhibit 10.15 to the Company’s
Quarterly Report on Form 10-QSB for the period ended September 30, 2004,
Commission File No. 1-8594).


51


10.14
Loan Agreement dated September 27, 2004 in the amount of $2,600,000 between
David Lichtenstein and PRC Member LLC (incorporated herein by reference to
Exhibit 10.16 to the Company’s Quarterly Report on Form 10-QSB for the period
ended September 30, 2004, Commission File No. 1-8594).





10.15
Amended and Restated Operating Agreement of Lightstone Member LLC dated
September 27, 2004 (incorporated herein by reference to Exhibit 10.17 to the
Company’s Quarterly Report on Form 10-QSB for the period ended September 30,
2004, Commission File No. 1-8594).





10.16
Loan Agreement dated September 27, 2004 in the amount of $8,600,000 between
Presidential Realty Corporation and Lightstone Member LLC (incorporated herein
by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-QSB
for the period ended September 30, 2004, Commission File No.
1-8594).





10.17
Loan Agreement dated December 23, 2004 in the amount of $7,500,000 between
Presidential Realty Corporation and Lightstone Member II (incorporated herein by
reference to Exhibit 10.17 to the Company’s Annual Report on Form 10—KSB for the
year ended December 31, 2005, Commission File No. 1-8594).





10.18
Amended and Restated Operating Agreement of Lightstone Member II LLC dated
December 23, 2004 (incorporated herein by reference to Exhibit 10.18 to the
Company’s Annual Report on Form 10—KSB for the year ended December 31, 2005,
Commission File No. 1-8594).





10.19
Loan Agreement dated June 30, 2005 in the amount of $9,500,000 between
Presidential Realty Corporation and Lightstone Member III (incorporated herein
by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10—KSB for
the year ended December 31, 2005, Commission File No. 1-8594).





10.20
Operating Agreement of Lightstone Member III, LLC dated June 30, 2005
(incorporated herein by reference to Exhibit 10.20 to the Company’s Annual
Report on Form 10—KSB for the year ended December 31, 2005, Commission File No.
1-8594).





10.21
Settlement Agreement dated February 27, 2009 among Presidential Realty
Corporation, PRC Member LLC, David Lichtenstein and various other parties
(incorporated herein by reference to Exhibit 99.2 to the Company’s Form 8-K as
filed on March 3, 2009, Commission File No. 1-8594).





10.22
Consolidated Promissory Note dated February 27, 2009 in the original principal
amount of $12,075,000 payable to Presidential Realty Corporation from David
Lichtenstein and various affiliated entities (incorporated herein by reference
to Exhibit 99.3 to the Company’s Form 8-K as filed on March 3, 2009, Commission
File No. 1-8594).





10.23
Amended and Restated Guaranty dated February 27, 2009 between David Lichtenstein
and Presidential Realty Corporation (incorporated herein by reference to Exhibit
99.4 to the Company’s Form 8-K as filed on March 3, 2009, Commission File No.
1-8594).





10.24
First Modification to Loan Agreement and Operating Agreement dated February 27,
2009 between Presidential Realty Corporation and Lightstone Member II LLC
(incorporated herein by reference to Exhibit 99.5 to the Company’s Form 8-K as
filed on March 3, 2009, Commission File No. 1-8594).


52


10.25
Amended and Restated Limited Liability Company Agreement of IATG Puerto Rico,
LLC dated February 27, 2009 (incorporated herein by reference to Exhibit 99.6 to
the Company’s Form 8-K as filed on March 3, 2009, Commission File No.
1-8594).





10.26
Letter Agreement dated September 16, 2005 between PDL, Inc., the General
Partner, and the Limited Partners, of PDL, Inc. and Associates Limited
Co-Partnership, for PDL, Inc. to lend $1,000,000 to the partnership
(incorporated herein by reference to Exhibit 10.21 to the Company’s Annual
Report on Form 10—KSB for the year ended December 31, 2005, Commission File No.
1-8594).





10.27
Amendment, dated September 11, 2007, to the Letter Agreement dated September 16,
2006 between PDL, Inc., the General Partner, and the Limited Partners, of PDL,
Inc. and Associates Limited Co-Partnership (incorporated herein by reference to
Exhibit 10.22 to the Company’s Form 10-KSB for the year ended December 31, 2007,
Commission File No. 1-8594).





10.28
2005 Restricted Stock Plan for 115,000 shares of Class B common stock
(incorporated herein by reference to Exhibit 10.16 to the Company’s Annual
Report on Form 10—KSB for the year ended December 31, 2005, Commission File No.
1-8594).





10.29
Amended and Restated Presidential Realty Corporation Defined Benefit Plan, dated
September 10, 2003 (incorporated herein by reference to Exhibit 10.13 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2003,
Commission File No. 1-8594).





10.30
Amendment dated February 27, 2009 to the Presidential Realty Corporation Defined
Benefit Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the period ended March 31, 2009, Commission
File No. 1-8594).





10.31
Amendment dated December 23, 2009 to the Presidential Realty Corporation Defined
Benefit Plan.





14. Code
of Business Conduct and Ethics of the Company (incorporated herein by reference
to Exhibit 14 to the Company’s Form 10-KSB for the year ended December 31, 2007,
Commission File No. 1-8594).





21. List
of Subsidiaries of Registrant as of December 31, 2009.





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.


53


99.1
Consolidated Financial Statements of Lightstone Member II LLC for the years
ended December 31, 2008 and 2007 pursuant to Rule 3-09 of Regulation S-X
(incorporated herein by reference to Exhibit 99.2 to the Company’s Form 10-K for
the year ended December 31, 2008, Commission File No. 1-8594).


54


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





PRESIDENTIAL
      REALTY CORPORATIONBy:
              /s/   THOMAS
    VIERTELThomas
      ViertelChief
      Financial OfficerMarch
      30, 2010





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.





Signature and Title
                
                DateBy:
                /s/   ROBERT
FEDER
                
                March
      30, 2010Robert
      FederChairman
      of the Board ofDirectors
      and DirectorBy:
                /s/   JEFFREY F.
      JOSEPH
                
                March
      30, 2010Jeffrey
      F. JosephPresident,
      Chief Executive Officerand
      Director(Principal
      Executive Officer)By:
                /s/   THOMAS
    VIERTEL
                
                March
      30, 2010Thomas
      ViertelExecutive
      Vice President,Chief
      Financial Officerand
      Director(Principal
      Financial Officer)By:
                /s/   ELIZABETH
      DELGADO
                
                March
      30, 2010Elizabeth
      DelgadoTreasurer(Principal
      Accounting Officer)By:
                /s/   STEVEN
    BARUCH
                
                March
      30, 2010Steven
      BaruchExecutive
      Vice Presidentand
      DirectorBy:
                /s/   RICHARD
    BRANDT
                
                March
      30, 2010Richard
      BrandtDirectorBy:
                /s/   MORTIMER M.
      CAPLIN
                
                March
      30, 2010Mortimer
      M. CaplinDirector




55


PRESIDENTIAL REALTY
CORPORATION AND SUBSIDIARIES





TABLE OF CONTENTS TO
CONSOLIDATED FINANCIAL STATEMENTS





PageReport
      of Independent Registered Public Accounting Firm
                  57CONSOLIDATED
      FINANCIAL STATEMENTS:Consolidated
      Balance Sheets – December 31, 2009 and 2008
                  58Consolidated
      Statements of Operations for the Years Ended December 31, 2009 and
      2008
                  59Consolidated
      Statements of Stockholders’ Equity for the Years Ended December 31, 2009
      and 2008
                  60Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2009 and
      2008
                  61Notes
      to Consolidated Financial Statements
                  63


56


Report
of Independent Registered Public Accounting Firm





Board of
Directors and Stockholders


Presidential
Realty Corporation


White
Plains, New York





We have
audited the accompanying consolidated balance sheets of Presidential Realty
Corporation and Subsidiaries (the “Company”) as of December 31, 2009 and 2008,
and the related consolidated statements of operations, stockholders' equity and
comprehensive income (loss), and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the December 31, 2008
financial statements of Lightstone Member II LLC, the investment in which is, as
discussed in Note 4 to the consolidated financial statements, accounted for by
the equity method of accounting.  As of December 31, 2008, the
investment in the Joint Ventures was $1,511,887 and the equity in its net loss
was $1,843,970.  The financial statements of Lightstone Member II LLC
for the year ended December 31, 2008 were audited by other auditors whose report
has been furnished to us, and our opinion, insofar as it relates to the amounts
included for Lightstone Member II LLC for the year ended December 31, 2008, is
based solely on the report of the other auditors.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.





In our
opinion, based upon our audit and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Presidential Realty Corporation and
Subsidiaries as of December 31, 2009 and 2008 and the consolidated results of
its operations and its consolidated cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.





As
described in Note 5 to the consolidated financial statements, the Company has
reclassified the 2008 consolidated financial statements to reflect certain
discontinued operations.





/s/
HOLTZ, RUBENSTEIN, REMINICK


Melville,
New York


March 30,
2010


57





PRESIDENTIAL REALTY CORPORATION AND
SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS





December 31,
                                                                                    
                                                                                    
                                                                                    December 31,2009
                                                                                    
                                                                                    
                                                                                    2008AssetsReal
      estate (Note 2)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    $
                                                                                    16,595,998
                                                                                    
                                                                                    
                                                                                    $
                                                                                    17,686,971Less:
      accumulated depreciation
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    1,516,641
                                                                                    
                                                                                    
                                                                                    
                                                                                    2,211,207Net
      real estate
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    15,079,357
                                                                                    
                                                                                    
                                                                                    
                                                                                    15,475,764Net
      mortgage portfolio (Note 3)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    2,880,922
                                                                                    
                                                                                    
                                                                                    
                                                                                    2,249,203Investments
      in and advances to joint ventures (Note 4)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    2,595,603
                                                                                    
                                                                                    
                                                                                    
                                                                                    1,511,887Assets
      related to discontinued operations (Note 5)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    231,813
                                                                                    
                                                                                    
                                                                                    
                                                                                    391,479Prepaid
      expenses and deposits in escrow
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    1,132,569
                                                                                    
                                                                                    
                                                                                    
                                                                                    1,113,437Other
      receivables (net of valuation allowance of $234,316 in 2009 and $106,183
      in 2008)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    804,376
                                                                                    
                                                                                    
                                                                                    
                                                                                    462,479Cash
      and cash equivalents
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    784,674
                                                                                    
                                                                                    
                                                                                    
                                                                                    5,984,550Securities
      available for sale (Note 6)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    3,614,113
                                                                                    
                                                                                    
                                                                                    
                                                                                    9,648Other
      assets
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    518,185
                                                                                    
                                                                                    
                                                                                    
                                                                                    693,162Total
      Assets
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    $
                                                                                    27,641,612
                                                                                    
                                                                                    
                                                                                    $
                                                                                    27,891,609Liabilities
      and Stockholders' EquityLiabilities:Mortgage
      debt (Note 7)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    $
                                                                                    14,969,607
                                                                                    
                                                                                    
                                                                                    $
                                                                                    16,392,285Liabilities
      related to discontinued operations (Note 5)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    1,045,867
                                                                                    
                                                                                    
                                                                                    
                                                                                    2,078,971Contractual
      pension and postretirement benefits liabilities (Note 15)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    927,882
                                                                                    
                                                                                    
                                                                                    
                                                                                    1,808,104Defined
      benefit plan liability (Note 16)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    1,957,522
                                                                                    
                                                                                    
                                                                                    
                                                                                    2,253,139Accrued
      liabilities
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    1,797,502
                                                                                    
                                                                                    
                                                                                    
                                                                                    2,000,365Accounts
      payable
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    780,128
                                                                                    
                                                                                    
                                                                                    
                                                                                    524,718Other
      liabilities
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    464,242
                                                                                    
                                                                                    
                                                                                    
                                                                                    695,300Total
      Liabilities
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    21,942,750
                                                                                    
                                                                                    
                                                                                    
                                                                                    25,752,882Stockholders'
      Equity:Common
      stock: par value $.10 per share (Note 12)December 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
                                                                                    
                                                                                    
                                                                                    
                                                                                    570,400Additional
      paid-in capital
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    4,636,633
                                                                                    
                                                                                    
                                                                                    
                                                                                    4,586,738Retained
      earnings
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    6,855,088
                                                                                    
                                                                                    
                                                                                    
                                                                                    3,870,905Accumulated
      other comprehensive loss (Note 17)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    (2,799,464
                                                                                    )
                                                                                    
                                                                                    
                                                                                    (3,589,877
                                                                                    )Treasury
      stock (at cost)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    (3,129,388
                                                                                    )
                                                                                    
                                                                                    
                                                                                    (3,129,388
                                                                                    )Total
      Presidential Realty Corporation stockholders' equity
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    5,963,518
                                                                                    
                                                                                    
                                                                                    
                                                                                    2,138,727Noncontrolling
      interest (Note 8)
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    (264,656
                                                                                    )
                                                                                    
                                                                                    
                                                                                    -Total
      Stockholders' Equity
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    5,698,862
                                                                                    
                                                                                    
                                                                                    
                                                                                    2,138,727Total
      Liabilities and Stockholders' Equity
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    
                                                                                    $
                                                                                    27,641,612
                                                                                    
                                                                                    
                                                                                    $
                                                                                    27,891,609





See notes
to consolidated financial statements.


58


PRESIDENTIAL REALTY CORPORATION AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS





YEAR
      ENDED DECEMBER 31,2009
                            
                            
                            2008Revenues:Rental
                            
                            $
                            5,040,934
                            
                            
                            $
                            5,005,815Interest
      on mortgages - notes receivable
                            
                            
                            447,691
                            
                            
                            
                            874,426Interest
      on mortgages - notes receivable - related parties
                            
                            
                            -
                            
                            
                            
                            146,750Other
      revenues
                            
                            
                            23,651
                            
                            
                            
                            4,986Total
                            
                            
                            5,512,276
                            
                            
                            
                            6,031,977Costs
      and Expenses:General
      and administrative (Note 18)
                            
                            
                            3,596,737
                            
                            
                            
                            2,725,471Depreciation
      on non-rental property
                            
                            
                            42,711
                            
                            
                            
                            39,568Rental
      property:Operating
      expenses
                            
                            
                            2,601,225
                            
                            
                            
                            2,579,672Interest
      on mortgage debt
                            
                            
                            1,470,964
                            
                            
                            
                            1,414,583Real
      estate taxes
                            
                            
                            394,180
                            
                            
                            
                            303,594Depreciation
      on real estate
                            
                            
                            480,534
                            
                            
                            
                            439,099Amortization
      of in-place lease values and mortgage costs
                            
                            
                            57,250
                            
                            
                            
                            141,298Total
                            
                            
                            8,643,601
                            
                            
                            
                            7,643,285Other
      Income (Loss):Investment
      income
                            
                            
                            90,268
                            
                            
                            
                            112,789Other
      income (Note 19)
                            
                            
                            185,000
                            
                            
                            
                            -Write-off
      of other investments (Note 19)
                            
                            
                            -
                            
                            
                            
                            (1,000,000
                            )Equity
      in the loss from joint ventures (Note 4)
                            
                            
                            (2,166,284
                            )
                            
                            
                            (1,568,685
                            )Gain
      on settlement of joint venture loans (Notes 3 and 4)
                            
                            
                            4,479,289
                            
                            
                            
                            -Loss
      from continuing operations
                            
                            
                            (543,052
                            )
                            
                            
                            (4,067,204
                            )Discontinued
      Operations (Note 5):Income
      (loss) from discontinued operations
                            
                            
                            (66,901
                            )
                            
                            
                            149,302Net
      gain from sales of discontinued operations
                            
                            
                            3,329,480
                            
                            
                            
                            2,892,258Total
      income from discontinued operations
                            
                            
                            3,262,579
                            
                            
                            
                            3,041,560Net
      income (loss)
                            
                            
                            2,719,527
                            
                            
                            
                            (1,025,644
                            )Add:
      Net loss from noncontrolling interest (Note 8)
                            
                            
                            264,656
                            
                            
                            
                            -Net
      Income (Loss) attributable to Presidential Realty
    Corporation
                            
                            $
                            2,984,183
                            
                            
                            $
                            (1,025,644
                            )Earnings
      per Common Share attributable to PresidentialRealty
      Corporation (basic and diluted):Loss
      from continuing operations
                            
                            $
                            (0.08
                            )
                            
                            $
                            (1.10
                            )Discontinued
      Operations:Income
      (loss) from discontinued operations
                            
                            
                            (0.02
                            )
                            
                            
                            0.04Net
      gain from sales of discontinued operations
                            
                            
                            0.98
                            
                            
                            
                            0.78Total
      income from discontinued operations
                            
                            
                            0.96
                            
                            
                            
                            0.82Net
      Income (Loss) per Common Share - basic and diluted
                            
                            $
                            0.88
                            
                            
                            $
                            (0.28
                            )Cash
      Distributions per Common Share (Note 13)
                            
                            $
                            -
                            
                            
                            $
                            0.56Weighted
      Average Number of Shares Outstanding - basic and diluted
                            
                            
                            3,381,237
                            
                            
                            
                            3,683,283Amounts
      attributable to Presidential Realty Corporation Common
      Shareholders:Loss
      from continuing operations
                            
                            $
                            (278,396
                            )
                            
                            $
                            (4,067,204
                            )Total
      income from discontinued operations
                            
                            
                            3,262,579
                            
                            
                            
                            3,041,560Net
      Income (Loss)
                            
                            $
                            2,984,183
                            
                            
                            $
                            (1,025,644
                            )





See notes
to consolidated financial statements.


59


PRESIDENTIAL
REALTY CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY





Presidential
      Realty Corporation StockholdersAccumulatedAdditional
                                
                                
                                
                                
                                
                                Other
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                TotalCommon
                                
                                
                                Paid-in
                                
                                
                                Retained
                                
                                
                                Comprehensive
                                
                                
                                Treasury
                                
                                
                                Noncontrolling
                                
                                
                                Comprehensive
                                
                                
                                Stockholders'Stock
                                
                                
                                Capital
                                
                                
                                Earnings
                                
                                
                                Loss
                                
                                
                                Stock
                                
                                
                                Interest
                                
                                
                                Income
      (Loss)
                                
                                
                                EquityBalance
      at January 1, 2008
                                
                                $
                                400,049
                                
                                
                                $
                                4,486,713
                                
                                
                                $
                                6,959,104
                                
                                
                                $
                                (1,331,097
                                )
                                
                                $
                                (256,030
                                )
                                
                                $
                                -
                                
                                
                                
                                
                                
                                $
                                10,258,739Cash
      distributions ($.56 per share)
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (2,062,555
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                (2,062,555
                                )Issuance
      and vesting of restricted stock (Note 14)
                                
                                
                                300
                                
                                
                                
                                100,025
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                100,325Purchase
      of treasury stock
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (2,873,358
                                )
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                (2,873,358
                                )Comprehensive
      loss:Net
      loss
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (1,025,644
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                $
                                (1,025,644
                                )
                                
                                
                                (1,025,644
                                )Other
      comprehensive income (loss) -Net
      unrealized loss on securities available for sale
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (3,102
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (3,102
                                )
                                
                                
                                (3,102
                                )Minimum
      pension liability adjustment
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (143,709
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (143,709
                                )
                                
                                
                                (143,709
                                )Adjustment
      for defined benefit plan
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (2,441,760
                                )
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (2,441,760
                                )
                                
                                
                                (2,441,760
                                )Adjustment
      for contractual postretirement benefits
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                329,791
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                329,791
                                
                                
                                
                                329,791Comprehensive
      loss
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                $
                                (3,284,424
                                )Balance
      at December 31, 2008
                                
                                
                                400,349
                                
                                
                                
                                4,586,738
                                
                                
                                
                                3,870,905
                                
                                
                                
                                (3,589,877
                                )
                                
                                
                                (3,129,388
                                )
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                
                                2,138,727Issuance
      and vesting of restricted stock (Note 14)
                                
                                
                                300
                                
                                
                                
                                49,895
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                
                                50,195Comprehensive
      income:Net
      income (loss)
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                2,984,183
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (264,656
                                )
                                
                                $
                                2,719,527
                                
                                
                                
                                2,719,527Other
      comprehensive income (loss) -Net
      unrealized loss on securities available for sale
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (22,172
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (22,172
                                )
                                
                                
                                (22,172
                                )Minimum
      pension liability adjustment
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                961,724
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                961,724
                                
                                
                                
                                961,724Adjustment
      for defined benefit plan
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (166,711
                                )
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (166,711
                                )
                                
                                
                                (166,711
                                )Adjustment
      for contractual postretirement benefits
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                17,572
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                17,572
                                
                                
                                
                                17,572Comprehensive
      income
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                3,509,940Comprehensive
      loss attributable to noncontrolling interest
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                264,656Comprehensive
      income attributable to Presidential Realty Corporation
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                $
                                3,774,596Balance
      at December 31, 2009
                                
                                $
                                400,649
                                
                                
                                $
                                4,636,633
                                
                                
                                $
                                6,855,088
                                
                                
                                $
                                (2,799,464
                                )
                                
                                $
                                (3,129,388
                                )
                                
                                $
                                (264,656
                                )
                                
                                
                                
                                
                                
                                $
                                5,698,862





See notes
to consolidated financial statements.


60


PRESIDENTIAL
REALTY CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS





YEAR ENDED DECEMBER 31,2009
                    
                    
                    2008Cash
      Flows from Operating Activities:Cash
      received from rental properties
                    
                    $
                    5,587,124
                    
                    
                    $
                    6,108,566Interest
      received
                    
                    
                    618,317
                    
                    
                    
                    882,566Distributions
      received from joint ventures
                    
                    
                    -
                    
                    
                    
                    1,842,629Miscellaneous
      income
                    
                    
                    10,967
                    
                    
                    
                    28,282Interest
      paid on rental property mortgage debt
                    
                    
                    (1,239,120
                    )
                    
                    
                    (1,370,512
                    )Cash
      disbursed for rental property operations
                    
                    
                    (3,754,978
                    )
                    
                    
                    (3,725,579
                    )Cash
      disbursed for general and administrative costs
                    
                    
                    (3,793,356
                    )
                    
                    
                    (3,218,366
                    )Net
      cash (used in) provided by operating activities
                    
                    
                    (2,571,046
                    )
                    
                    
                    547,586Cash
      Flows from Investing Activities:Payments
      received on notes receivable
                    
                    
                    122,533
                    
                    
                    
                    5,747,679Proceeds
      from sales of properties
                    
                    
                    1,691,589
                    
                    
                    
                    3,457,177Payments
      received on settlement of joint venture loans
                    
                    
                    65,289
                    
                    
                    
                    -Payments
      disbursed for additions and improvements
                    
                    
                    (478,580
                    )
                    
                    
                    (726,164
                    )Purchase
      of securities available for sale
                    
                    
                    (4,431,622
                    )
                    
                    
                    -Proceeds
      from sales of securities
                    
                    
                    804,766
                    
                    
                    
                    -Net
      cash (used in) provided by investing activities
                    
                    
                    (2,226,025
                    )
                    
                    
                    8,478,692Cash
      Flows from Financing Activities:Principal
      payments on mortgage debt
                    
                    
                    (401,818
                    )
                    
                    
                    (445,688
                    )Payments
      disbursed for mortgage costs
                    
                    
                    (987
                    )
                    
                    
                    (3,624
                    )Purchase
      of treasury stock
                    
                    
                    -
                    
                    
                    
                    (2,873,358
                    )Cash
      distributions on common stock
                    
                    
                    -
                    
                    
                    
                    (2,062,555
                    )Net
      cash used in financing activities
                    
                    
                    (402,805
                    )
                    
                    
                    (5,385,225
                    )Net
      (Decrease) Increase in Cash and Cash Equivalents
                    
                    
                    (5,199,876
                    )
                    
                    
                    3,641,053Cash
      and Cash Equivalents, Beginning of Year
                    
                    
                    5,984,550
                    
                    
                    
                    2,343,497Cash
      and Cash Equivalents, End of Year
                    
                    $
                    784,674
                    
                    
                    $
                    5,984,550





See notes
to consolidated financial statements.


61


PRESIDENTIAL
REALTY CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS





YEAR
      ENDED DECEMBER 31,2009
                      
                      
                      2008Reconciliation
      of Net Income (Loss) to Net Cash (Used in) Provided by Operating
      ActivitiesNet
      Income (Loss)
                      
                      $
                      2,719,527
                      
                      
                      $
                      (1,025,644
                      )Adjustments
      to reconcile net income (loss) to net cash (used in) provided by operating
      activities:Net
      gain from sales of discontinued operations
                      
                      
                      (3,329,480
                      )
                      
                      
                      (2,892,258
                      )Gain
      on settlement of joint venture loans
                      
                      
                      (4,479,289
                      )
                      
                      
                      -Equity
      in the loss from joint ventures
                      
                      
                      2,166,284
                      
                      
                      
                      1,568,685Write-off
      of other investments
                      
                      
                      -
                      
                      
                      
                      1,000,000Depreciation
      and amortization
                      
                      
                      612,742
                      
                      
                      
                      697,240Amortization
      of discount on mortgage payable
                      
                      
                      -
                      
                      
                      
                      48,254Net
      change in revenue related to acquired lease rights/obligations and
      deferred rent receivable
                      
                      
                      (6,131
                      )
                      
                      
                      (55,812
                      )Amortization
      of discounts on notes and fees
                      
                      
                      (90,252
                      )
                      
                      
                      (348,740
                      )Issuance
      of stock to directors and officers
                      
                      
                      50,195
                      
                      
                      
                      100,325Distributions
      received from joint ventures
                      
                      
                      -
                      
                      
                      
                      1,842,629Changes
      in assets and liabilities:Decrease
      (increase) in other receivables
                      
                      
                      140,464
                      
                      
                      
                      (69,100
                      )Decrease
      in accounts payable and accrued liabilities
                      
                      
                      (226,393
                      )
                      
                      
                      (599,724
                      )Increase
      (decrease) in other liabilities
                      
                      
                      (167,865
                      )
                      
                      
                      35,457Decrease
      in prepaid expenses, deposits in escrow and deferred
    charges
                      
                      
                      27,938
                      
                      
                      
                      235,976Other
                      
                      
                      11,214
                      
                      
                      
                      10,298Total
      adjustments
                      
                      
                      (5,290,573
                      )
                      
                      
                      1,573,230Net
      cash (used in) provided by operating activities
                      
                      $
                      (2,571,046
                      )
                      
                      $
                      547,586SUPPLEMENTAL
      NONCASH DISCLOSURES:Fair
      value of assets received in settlement of notes receivable due from joint
      ventures:50%
      partnership interest in IATG Puerto Rico, LLC
                      
                      $
                      3,250,000Note
      receivable
                      
                      
                      664,000Other
      receivable
                      
                      
                      500,000$
                      4,414,000Satisfaction
      of mortgage debt as a result of assumption of the mortgage debt by the
      purchaser
                      
                      $
                      2,053,964





See notes
to consolidated financial statements.


62


PRESIDENTIAL REALTY
CORPORATION AND SUBSIDIARIES





NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS





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. Real Estate – Real
estate is stated at cost.  Generally, depreciation is provided on the
straight-line method over the assets’ estimated useful lives, which range from
twenty to thirty-nine years for buildings and from three to ten years for
furniture and equipment.  Maintenance and repairs are charged to
operations as incurred and renewals and replacements are
capitalized.  The Company reviews each of its property investments for
possible impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable.  Impairment of properties
is determined to exist when estimated amounts recoverable through future
operations on an undiscounted basis are below the properties’ carrying
value.  If a property is determined to be impaired, it is written down
to its estimated fair value.





B. Mortgage Portfolio –
Net mortgage portfolio represents the outstanding principal amounts of notes
receivable reduced by discounts.  The primary forms of collateral on
all notes receivable are real estate and ownership interests in entities that
own real property, and may include borrower personal guarantees.  The
Company periodically evaluates the collectibility of both accrued interest on
and principal of its notes receivable to determine whether they are
impaired.  A mortgage loan is considered to be impaired when, based on
current information and events, it is probable that the Company will be unable
to collect all amounts due according to the existing contractual terms of the
loan.  The Company also considers loan modifications as possible
indicators of impairment, although all modifications during the two years ended
December 31, 2009, with the exception of the modification to the $200,000
Cambridge Green loan (see Note 3), have been at the Company’s request for
business purposes and not as a result of debtor financial
difficulties.  When a mortgage loan is considered to be impaired, the
Company establishes a valuation allowance equal to the difference between a) the
carrying value of the loan, and b) the present value of the expected cash flows
from the loan at its effective interest rate, or at the estimated fair value of
the real estate collateralizing the loan.  Income on impaired loans,
including interest, and the recognition of deferred gains and unamortized
discounts, is recognized only as cash is received.  The Company
currently has no loans that are impaired according to their terms as
modified.





C. Sale of Real Estate –
Presidential complies with the requirements of the Property, Plant and Equipment
Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) as it pertains to sales of real
estate.  Accordingly, the gains on certain transactions were deferred
and were recognized on the installment method until such transactions complied
with the criteria for full profit recognition.  At December 31, 2009
and 2008, the Company had no deferred gains.


63


D. Discounts on Notes
Receivable – Presidential assigned discounted values to long-term notes
received from the sales of properties to reflect the difference between the
stated interest rates on the notes and market interest rates at the time the
notes were made.  Such discounts are being amortized using the
interest method.





E. 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 8).  All
significant intercompany balances and transactions have been
eliminated.





F. Investments in Joint
Ventures– The Company has equity investments in joint ventures and
accounts for these investments using the equity method of
accounting.  These investments are recorded at cost and adjusted for
the Company’s share of each entity’s income or loss and adjusted for cash
contributions or distributions.  Real estate held by such entities is
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable, and would be written down to
its estimated fair value if an impairment was determined to exist.
See


Note
4.





G. Rental Revenue
Recognition – The Company acts as lessor under operating
leases.  Rental revenue is recorded on the straight-line basis from
the later of the date of the commencement of the lease or the date of
acquisition of the property subject to existing leases, which averages minimum
rents over the terms of the leases. Certain leases require the tenants to
reimburse a pro rata share of real estate taxes, utilities and maintenance
costs.


Recognition
of rental revenue is generally discontinued when the rental is delinquent for
ninety days or more, or earlier if management determines that collection is
doubtful.





H. 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
year.  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.  For the years ended December 31, 2009 and
2008, the weighted average shares outstanding as used in the calculation of
diluted loss per share do not include 15,300 and 28,800, respectively, of
restricted shares to be vested, as their inclusion would be
antidilutive.





I. Cash and Cash Equivalents– Cash and cash equivalents includes cash on hand, cash in banks and
money market funds.





J. Securities Available for
Sale – The Company’s investments are in marketable equity and debt
securities consisting primarily of notes and bonds of agencies of the federal
government.  Disposition of such securities may be appropriate for
either liquidity management or in response to changing economic conditions, so
they are classified as securities available for sale.


64


Securities
available for sale are reported at fair value in accordance with the Fair Value
Measurements and Disclosures Topic of the ASC.  The valuation of
securities available for sale was determined to be Level 1 financial assets
within the valuation hierarchy in this topic, and is based on current market
quotes received from financial sources that trade such
securities.  Unrealized gains and losses are reported as other
comprehensive income in the consolidated statement of stockholders’ equity until
realized.  The Company evaluates these investments for
other-than-temporary declines in value, and, if such declines were other than
temporary, the Company would record a loss on the investments.  Gains
and losses on sales of securities are determined using the specific
identification method.





K. Benefits – The
Company follows ASC Topic 715 in accounting for pension and postretirement
benefits (see Notes 15 and 16).





L. Management Estimates
– The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America.  In preparing the consolidated financial statements,
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.





M. Accounting for Stock
Awards – The Company complies with the requirements of ASC Topic 718 in
accounting for stock-based compensation.  Shares of Class B common
stock granted to directors are fully vested upon the grant date and the shares
granted to officers and employees vest ratably over two to five years, with full
distribution rights at the date of the grants.  The Company recorded
the market value of the grants that vested in 2008 and 2009 to expense in each
year.





N. Discontinued
Operations - The Company complies with the requirements of the
Presentation and Property, Plant, and Equipment Topics of the ASC, with respect
to long-lived assets classified as held for sale.  The ASC 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.





O. Accounting for Uncertainty
in Income Taxes – The Company complies with the requirements of the
recognition of current and deferred income tax accounts, including accrued
interest and penalties, in accordance with ASC 740-10-25.  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.


65


P. Recently Adopted Accounting
Standards – In June, 2009, the FASB issued ASC Topic 105, “The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles – a replacement of FASB Statement No.
162”.  This standard establishes the FASB ASC as the primary source of
authoritative generally accepted accounting principles (“GAAP”) recognized by
the FASB to be applied by nongovernmental entities.  Rules and
interpretive releases of the Securities and Exchange Commission (“SEC”) are also
sources of authoritative GAAP for SEC registrants.  This standard and
the ASC became effective for interim and annual periods ending after September
15, 2009.  The ASC supersedes all existing non-SEC accounting and
reporting standards and the FASB will not issue new standards in the form of
Statements, FASB Staff Positions, or Emerging Issues Task Force
Abstracts.  Instead, the FASB will issue Accounting Standards Updates,
which will serve only to: (a) update the ASC; (b) provide background information
about the guidance; and (c) provide the basis for conclusions on the change(s)
in the ASC.  The Company’s adoption of this standard and the ASC
during the quarter ended September 30, 2009 did not have a material effect on
the Company’s consolidated financial statements.  All accounting
references have been updated, and therefore Statement of Financial Accounting
Standards (“SFAS”) references have been replaced with ASC references except for
SFAS references that have not been integrated into the
codification.





In
December, 2007, the FASB issued ASC 810-10-65, “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.  This standard became effective on January 1,
2009.  The Company’s adoption of this standard resulted in additional
disclosures in the Company’s consolidated financial statements, including the
reporting of a net loss attributable to a noncontrolling interest of $264,656
for the year ended December 31, 2009.





In June,
2008, the FASB issued ASC 260-10-65-2, “Determining Whether Instruments Granted
in Share-Based Payment Transactions are Participating
Securities”.  This standard 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.  This standard became
effective on January 1, 2009.  The Company’s adoption of this standard
on January 1, 2009 did not have a material effect on the Company’s consolidated
financial statements.





Q.  Recently Issued and Not Yet
Effective Accounting Standard - In June, 2009, the FASB issued SFAS No.
167, “Amendments to FASB Interpretation No. 46(R)”.  SFAS No. 167
modified the existing quantitative guidance used in determining the primary
beneficiary of a variable interest entity (“VIE”) by requiring entities to
qualitatively assess whether an enterprise is a primary beneficiary, based on
whether the entity has (i) power over the significant activities of the VIE, and
(ii) an obligation to absorb losses or the right to receive benefits that could
be potentially significant to the VIE.  SFAS No. 167 becomes effective
for all new and existing VIEs on January 1, 2010.  The Company’s
adoption of SFAS No. 167 is expected to have no impact on the Company’s
consolidated financial statements.


66


2.
              REAL
      ESTATE





Real
estate is comprised of the following:





December 31,2009
                        
                        
                        2008Land
                        
                        $
                        1,995,982
                        
                        
                        $
                        2,059,856Buildings
                        
                        
                        14,563,891
                        
                        
                        
                        15,546,526Furniture
      and equipment
                        
                        
                        36,125
                        
                        
                        
                        80,589Total
      real estate
                        
                        $
                        16,595,998
                        
                        
                        $
                        17,686,971





Two of
the properties owned by the Company represented 82% and 17% of total rental
revenue in 2009 and 81% and 18% of total rental revenue in 2008.





3.
            MORTGAGE
      PORTFOLIO





The
Company’s mortgage portfolio includes the following categories of notes
receivable:





(1)
            Long-term
      purchase money notes from sales of properties previously owned by the
      Company and loans and mortgages originated by the
      Company.  These notes receivable have varying interest rates
      with balloon payments due at
maturity.





(2)
            Notes
      receivable from sales of cooperative apartment units.  These
      notes generally have market interest rates and the majority of these notes
      amortize monthly with balloon payments due at
  maturity.





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





The
following table summarizes the components of the net mortgage
portfolio:





MORTGAGE
PORTFOLIO





Notes
      ReceivableProperties
                    
                    
                    
                    
                    
                    CooperativePreviously
                    
                    
                    Originated
                    
                    
                    ApartmentOwned
                    
                    
                    Loans
                    
                    
                    Units
                    
                    
                    TotalDecember
      31, 2009Notes
      receivable
                    
                    $
                    -
                    
                    
                    $
                    2,824,994
                    
                    
                    $
                    92,140
                    
                    
                    $
                    2,917,134Less:
      Discounts
                    
                    
                    -
                    
                    
                    
                    8,329
                    
                    
                    
                    27,883
                    
                    
                    
                    36,212Net
                    
                    $
                    -
                    
                    
                    $
                    2,816,665
                    
                    
                    $
                    64,257
                    
                    
                    $
                    2,880,922Due
      within one year
                    
                    $
                    -
                    
                    
                    $
                    741,671
                    
                    
                    $
                    27,366
                    
                    
                    $
                    769,037Long-term
                    
                    
                    -
                    
                    
                    
                    2,074,994
                    
                    
                    
                    36,891
                    
                    
                    
                    2,111,885Net
                    
                    $
                    -
                    
                    
                    $
                    2,816,665
                    
                    
                    $
                    64,257
                    
                    
                    $
                    2,880,922


67





December 31, 2008Notes
      receivable
                      
                      $
                      75,000
                      
                      
                      $
                      2,074,994
                      
                      
                      $
                      140,376
                      
                      
                      $
                      2,290,370Less:
      Discounts
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      41,167
                      
                      
                      
                      41,167Net
                      
                      $
                      75,000
                      
                      
                      $
                      2,074,994
                      
                      
                      $
                      99,209
                      
                      
                      $
                      2,249,203Due
      within one year
                      
                      $
                      75,000
                      
                      
                      $
                      -
                      
                      
                      $
                      44,274
                      
                      
                      $
                      119,274Long-term
                      
                      
                      -
                      
                      
                      
                      2,074,994
                      
                      
                      
                      54,935
                      
                      
                      
                      2,129,929Net
                      
                      $
                      75,000
                      
                      
                      $
                      2,074,994
                      
                      
                      $
                      99,209
                      
                      
                      $
                      2,249,203





Repayments and
Modifications





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 all of 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 75% of 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.


68


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 year ended December 31, 2009, the Company received the $230,785 of interest
payments that were due.





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 year ended December 31, 2009, the Company received $82,666 of interest
payments on this portion of the Consolidated Note and the unaccrued deferred
interest was $1,029,557.





Under the
terms of the Settlement Agreement, the Company also received a $750,000
non-interest bearing, nonrecourse note due on January 31, 2010, which is secured
by a 25% ownership interest in IATG Puerto Rico, LLC (“IATG”) (see Note
4).  The Company is currently negotiating an extension of this loan or
receipt of the underlying collateral.





In March,
2009, the Company had preliminarily estimated the fair value of the $750,000
note to be $200,000 and 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 at March 31,
2009.  Subsequently, the Company received an independent appraisal of
the IATG property (see Note 4) and based upon that appraisal, the Company
estimated the fair value of the $750,000 note to be $664,000 ($750,000 note
receivable less a discount on the note receivable of
$86,000).  Accordingly, in June, 2009, the Company recorded an
additional $464,000 for the note receivable on its consolidated balance sheet
and recognized an additional gain of $464,000 on settlement of joint venture
loans in its consolidated financial statements.  In addition, for the
period ended December 31, 2009, the Company recognized in interest income
$77,671 of the amortization of discount recorded on the note
receivable.





During
the year ended December 31, 2008, the Company received repayment of (i) its
$1,500,000 loan receivable collateralized by ownership interests in Reisterstown
Square Associates, LLC, which owns Reisterstown Apartments in Baltimore,
Maryland, and (ii) its $3,875,000 Fairfield Towers note receivable, both of
which were due from affiliates of David Lichtenstein.  In addition,
the Company also received repayment of its $100,000 loan collateralized by the
Pinewood property in Des Moines, Iowa and its $110,000 Mark Terrace note
receivable.





In March,
2007, the Company sold its Cambridge Green property in Council Bluffs,
Iowa.  As part of the sales price, the Company received a $200,000
secured note receivable which matured on March 20, 2008.  The note
receivable carried an interest rate of 7% per annum, payment of which was
deferred until maturity.  At December 31, 2007, the accrued deferred
interest was $11,083.  In March, 2008, the Company agreed to extend
the maturity of the loan to December 31, 2008 and received a $25,000 payment for
$13,917 of principal and $11,083 of accrued deferred interest and as a result
the loan balance was reduced to $186,083.  In December, 2008, the
Company agreed to accept $175,000 in full payment of the loan and accrued
interest thereon if $100,000 was paid on or before December 19, 2008 (received)
and $75,000 was paid on or before April 1, 2009.  If the note was not
paid by April 1, 2009, the note would be due in accordance with its original
terms.  At December 31, 2008, the Company recorded a bad debt expense
of $11,083.  On March 31, 2009, the Company received repayment of the
$75,000 balance of this loan.


69


The
Company had a $3,875,000 note receivable, which was received by the Company in
connection with the sale of the Fairfield Towers mortgages in 1999 and which was
collateralized by security interests in the ownership interests in entities that
own various properties located in Maryland, New Jersey and
Pennsylvania.  The loan was originally due in February, 2009, but the
Company had the right to require prepayment upon 90 days prior
notice.  On March 20, 2008, the Company notified the borrower that the
loan must be prepaid within 90 days from the date of the notice.  On
June 3, 2008, the Company received a principal payment of $1,079,239 on the loan
and on July 11, 2008, the remaining loan balance of $2,795,761 was
paid.  The Company recognized $337,496 of unamortized discount on this
loan during 2008.





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.


70


The loan
was in good standing at December 31, 2008.  However, in January, 2009,
the holder of the first mortgage loan 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 and
Lightstone II failed to make the interest payments due on the Company’s
mezzanine loan on January 1, 2009 and on the first day of subsequent
months.  The first mortgage loan on the properties became due on
January 10, 2010 and has not been paid.  Lightstone has been unable to
refinance the first mortgage indebtedness and is attempting to obtain an
extension of the existing mortgage.  However, the holder of the first
mortgage loan has commenced foreclosure proceedings and the Company believes
that it is likely that the first mortgage loan will be foreclosed and the
Company will not be able to obtain any recovery on its mezzanine loan other than
the recovery of $500,000 from David Lichtenstein on his limited guaranty
received pursuant to the Settlement Agreement.





As part
of the Settlement Agreement, the Company received a personal guaranty from Mr.
Lichtenstein of certain amounts due under the Company’s $7,835,000 mezzanine
loan (relating to the Shawnee/Brazos Malls), 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 was secured by his
remaining interest in IATG, the entity that owns The Las Piedras Industrial
Complex (see below).  In March, 2010, the Company received the
$500,000 guaranty payment and, as a result, at December 31, 2009, the Company
recognized a $500,000 gain on settlement of joint venture loans in its
consolidated financial statements and recorded a $500,000 receivable due from
Mr. Lichtenstein on its consolidated balance sheet.





The
second investment, which the Company received as part of the Settlement
Agreement, 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 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.  The property is managed by a Lightstone
affiliate and 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 was $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.


71


The
Company based the preliminary estimated fair value of its interest in the IATG
property on information available to it at the time. During the quarter ended
June 30, 2009, the Company obtained an independent appraisal of the property
owned by IATG and based on the appraised value of $6,500,000, the Company
adjusted the preliminary estimate of the value of its 50% ownership interest in
the IATG property from $1,500,000 to $3,250,000 on its consolidated financial
statements.  In the quarter ended June 30, 2009, the Company recorded
an additional $1,750,000 investment in joint ventures on its consolidated
balance sheet and recognized an additional $1,750,000 gain on the settlement of
joint venture loans in its consolidated financial statements.  While
management believes that the $6,500,000 appraised value of the IATG property is
a reasonable value, there can be no assurance that if and when the property
is sold, it can be sold for its appraised value.





In
summary, as a result of the Settlement Agreement, in 2009, the Company recorded
assets of $4,414,000 on the Company’s consolidated balance sheet (a $500,000
receivable, a $750,000 note receivable less an $86,000 discount on the note
receivable and a $3,250,000 investment in joint ventures) and recorded a
$4,414,000 gain on settlement of joint venture loans in its consolidated
financial statements.  The Company also received a net cash payment of
$65,289 ($250,000 less expenses of $184,711), which was also recorded in gain on
settlement of joint venture loans in its consolidated financial
statements.





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





Equityin
      theLossBalance
      at
                      
                      
                      
                      
                      
                      from
                      
                      
                      Balance
      atDecember
      31,
                      
                      
                      
                      
                      
                      Joint
                      
                      
                      December
      31,2008
                      
                      
                      Investments
                      
                      
                      Ventures
                      
                      
                      2009Shawnee/BrazosMalls
      (1)
                      
                      $
                      1,511,887
                      
                      
                      $
                      -
                      
                      
                      $
                      (1,511,887
                      )
                      
                      $
                      -IATG
      (2)
                      
                      
                      -
                      
                      
                      
                      3,250,000
                      
                      
                      
                      (654,397
                      )
                      
                      
                      2,595,603$
                      1,511,887
                      
                      
                      $
                      3,250,000
                      
                      
                      $
                      (2,166,284
                      )
                      
                      $
                      2,595,603





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





Year Ended December 31,2009
                      
                      
                      2008Shawnee/Brazos
      Malls
                      (1)
                      
                      $
                      (1,511,887
                      )
                      
                      $
                      (1,843,970
                      )IATG
                      (2)
                      
                      
                      (654,397
                      )
                      
                      
                      -Martinsburg
      Mall
                      (3)
                      
                      
                      -
                      
                      
                      
                      151,396Four
      Malls
                      (4)
                      
                      
                      -
                      
                      
                      
                      33,903Macon/Burlington
      Malls
                      (5)
                      
                      
                      -
                      
                      
                      
                      89,986$
                      (2,166,284
                      )
                      
                      $
                      (1,568,685
                      )





(1)
Interest due to 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.  At December 31, 2009, the Company’s investment in the
Shawnee/Brazos Malls was reduced to zero as a result of the Company’s share of
the loss from operations and an impairment loss recorded on the value of the
properties.  The Company’s share of these losses was limited to the
extent of the Company’s investment in and advances to the joint
venture.


72


(2) The
fair value of the Company’s 50% ownership interest in IATG is
$3,250,000.  The Company also recorded its 50% share of the loss from
IATG for the ten month period ended December 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.





(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 was included in the
calculation of the Company’s share of the income (loss) from joint ventures for
the Four Malls.  In the second quarter of 2008, the Company’s basis of
its investment in the Four Malls was reduced by distributions and losses to
zero.  Any subsequent distributions received from the Four Malls were
recorded in income.





(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.





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





December 31,2009
                
                
                2008Condensed
      Balance SheetsNet
      real estate
                
                $
                38,714,000
                
                
                $
                61,751,000In-place
      lease values and acquired lease rights
                
                
                607,000
                
                
                
                916,000Prepaid
      expenses and deposits in escrow
                
                
                3,903,000
                
                
                
                1,706,000Cash
      and cash equivalents
                
                
                1,311,000
                
                
                
                440,000Deferred
      financing costs
                
                
                643,000
                
                
                
                622,000Other
      assets
                
                
                1,069,000
                
                
                
                1,308,000Total
      Assets
                
                $
                46,247,000
                
                
                $
                66,743,000Nonrecourse
      mortgage debt
                
                $
                39,061,000
                
                
                $
                39,061,000Mezzanine
      notes payable (1)
                
                
                39,373,000
                
                
                
                35,899,000Other
      liabilities
                
                
                7,960,000
                
                
                
                7,415,000Total
      Liabilities
                
                
                86,394,000
                
                
                
                82,375,000Members’
      Deficit
                
                
                (40,147,000
                )
                
                
                (15,632,000
                )Total
      Liabilities and Members’ Deficit
                
                $
                46,247,000
                
                
                $
                66,743,000





(1) The
mezzanine notes payable include a $7,835,000 mezzanine note which is payable to
the Company and the balance is payable to an affiliate of
Lightstone.  The payment due to the affiliate of Lightstone is
subordinate to the Company’s mezzanine note.


73




Year Ended December 31,2009
                
                
                2008Condensed
      Statements of OperationsRevenues
                
                $
                10,478,000
                
                
                $
                9,630,000Interest
      on mortgage debt and other debt
                
                
                (6,230,000
                )
                
                
                (6,026,000
                )Other
      expenses
                
                
                (4,913,000
                )
                
                
                (7,180,000
                )Loss
      before depreciation and amortization and provision for losses on real
      estate
                
                
                (665,000
                )
                
                
                (3,576,000
                )Depreciation
      and amortization
                
                
                (2,996,000
                )
                
                
                (4,570,000
                )Provision
      for losses on real estate (1)
                
                
                (20,854,000
                )
                
                -Net
      Loss
                
                $
                (24,515,000
                )
                
                $
                (8,146,000
                )





(1) In
the fourth quarter of 2009, the joint venture entities recorded an impairment
loss of approximately $20,854,000 on the Shawnee/Brazos Malls.  The
Company’s share of the impairment loss and the loss from operations was limited
to the extent of the Company’s investment in and advances to joint
ventures.





The
summary financial information for IATG is as follows:





December 31,2009Condensed
      Balance SheetNet
      real estate
                  
                  $
                  5,506,000Cash
      and cash equivalents
                  
                  
                  43,000Accounts
      receivable
                  
                  
                  4,000Deferred
      expenses
                  
                  
                  203,000Prepaid
      expenses
                  
                  
                  14,000Total
      Assets
                  
                  $
                  5,770,000Note
      payable (1)
                  
                  $
                  7,748,000Other
      liabilities
                  
                  
                  2,456,000Total
      Liabilities
                  
                  
                  10,204,000Members’
      Deficit
                  
                  
                  (4,434,000
                  )Total
      Liabilities and Members’ Deficit
                  
                  $
                  5,770,000





(1) The
note payable is payable to an affiliate of Lightstone and payment thereof is
subordinate to the Company’s right to receive its share of any proceeds of a
sale or refinancing.


74





Ten Months EndedDecember 31,2009Condensed
      Statement of OperationsRevenues
                  
                  $
                  636,000Interest
      on note payable
                  
                  
                  (731,000
                  )Other
      expenses
                  
                  
                  (1,040,000
                  )Loss
      before depreciation and amortization
                  
                  
                  (1,135,000
                  )Depreciation
      and amortization
                  
                  
                  (174,000
                  )Net
      Loss
                  
                  $
                  (1,309,000
                  )





The
Lightstone Group is controlled by David Lichtenstein.  At December 31,
2009, in addition to Presidential’s investments of $2,595,603 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 $2,816,665.





The
$5,412,268 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 20% of the Company’s
total assets at December 31, 2009.





5.
            DISCONTINUED
      OPERATIONS





For the
years ended December 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), Building
Industries Center in White Plains, New York (which consists of 23,500 square
feet of commercial space) and two cooperative apartment units 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 Building Industries Center property was designated as held
for sale during the three months ended December 31, 2009.  One
cooperative apartment unit in Riverdale, New York was designated as held for
sale during the three months ended March 31, 2009 and sold on October 15,
2009.  Another cooperative apartment unit in Riverdale, New York was
designated as held for sale during the three months ended June 30,
2009.  In addition, income from discontinued operations for the year
ended December 31, 2008, included 42 cooperative apartment units at the Towne
House Apartments in New Rochelle, New York and one 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:


75





Year Ended December 31,2009
                
                
                2008Revenues:Rental
                
                $
                498,549
                
                
                $
                1,318,018Rental
      property expenses:Operating
      expenses
                
                
                244,194
                
                
                
                558,515Interest
      on mortgage debt
                
                
                94,626
                
                
                
                207,837Real
      estate taxes
                
                
                194,703
                
                
                
                326,025Depreciation
      on real estate
                
                
                28,298
                
                
                
                65,577Amortization
      of mortgage costs
                
                
                3,948
                
                
                
                11,698Total
                
                
                565,769
                
                
                
                1,169,652Other
      income:Investment
      income
                
                
                319
                
                
                
                936Income
      (loss) from discontinued operations
                
                
                (66,901
                )
                
                
                149,302Net
      gain from sales of discontinued operations
                
                
                3,329,480
                
                
                
                2,892,258Total
      income from discontinued operations
                
                $
                3,262,579
                
                
                $
                3,041,560





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 net proceeds of
sale were $1,545,851 and the gain from sale for financial reporting purposes was
$3,208,336.





During
the quarter ended December 31, 2009, the Company began to market the Building
Industries Center property in White Plains, New York for sale and designated it
as held for sale.  The Company expects to sell the property within one
year for net proceeds in excess of its carrying value.  The carrying
value of the property at December 31, 2009 was $225,589, net of accumulated
depreciation of $1,196,304.  The property is also subject to a first
mortgage with an outstanding balance of $1,045,867 at December 31,
2009.  Subsequent to year end, the Company obtained a new $1,250,000
mortgage on the Building Industries Center property and repaid the
$1,038,086  outstanding balance of the prior mortgage.  The
new mortgage amortizes monthly and will be repaid in full upon the sale of the
property.





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 and, on October 15, 2009,
completed the sale for this unit for a sales price of $154,000.  The
net proceeds of sale were $145,738 and the gain from sale for financial
reporting purposes was $121,144.


76


During
the three months ended June 30, 2009, the Company designated another 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 December 31, 2009
was $6,224, net of accumulated depreciation of $3,263.





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
assets and liabilities of the Building Industries Center property and the
cooperative apartment unit in Riverdale, New York at December 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:





December 31,
                    
                    
                    December 31,2009
                    
                    
                    2008Assets
      related to discontinued operations:Land
                    
                    $
                    62,601
                    
                    
                    $
                    168,000Buildings
                    
                    
                    1,324,074
                    
                    
                    
                    3,090,544Furniture
      and equipment
                    
                    
                    44,705
                    
                    
                    
                    45,382Less:
      accumulated depreciation
                    
                    
                    (1,199,567
                    )
                    
                    
                    (2,912,447
                    )Total
                    
                    $
                    231,813
                    
                    
                    $
                    391,479Liabilities
      related to discontinued operations:Mortgage
      debt
                    
                    $
                    1,045,867
                    
                    
                    $
                    2,078,971





The
$1,045,867 first mortgage loan on the Building Industries Center property was
due to mature on March 1, 2010.  In January, 2010, the maturity date
of the Building Industries Center property mortgage was extended from March 1,
2010 to June 1, 2010 under the same terms, including a 5.45% per annum interest
rate.  In March, 2010, the Company obtained a new $1,250,000 mortgage
on its Building Industries Center property and repaid the $1,038,086 outstanding
balance of the prior mortgage.  The new mortgage bears interest at the
rate of 6.25% per annum, requires monthly payments of principal and interest of
$8,246 and has a balloon payment of $1,182,375 due at maturity on March 31,
2013.


77


6.
            SECURITIES
      AVAILABLE FOR SALE





The
tables below summarize the Company’s securities available for sale:





Gross
                          
                          
                          GrossAmortized
                          
                          
                          Unrealized
                          
                          
                          Unrealized
                          
                          
                          FairCost
                          
                          
                          Gains
                          
                          
                          Losses
                          
                          
                          ValueDecember 31, 2009U.S.
      Government Agencies notes and bonds maturing within one
    year
                          
                          $
                          719,591
                          
                          
                          $
                          -
                          
                          
                          $
                          (12,402
                          )
                          
                          $
                          707,189U.S.
      Government Agencies notes and bonds maturing from one to four
      years
                          
                          
                          2,907,046
                          
                          
                          
                          5,683
                          
                          
                          
                          (16,270
                          )
                          
                          
                          2,896,459Common
      stock of REITS
                          
                          
                          2,011
                          
                          
                          
                          8,454
                          
                          
                          
                          -
                          
                          
                          
                          10,465$
                          3,628,648
                          
                          
                          $
                          14,137
                          
                          
                          $
                          (28,672
                          )
                          
                          $
                          3,614,113December 31, 2008Common
      stock of REITS
                          
                          $
                          2,011
                          
                          
                          $
                          7,637
                          
                          
                          $
                          -
                          
                          
                          $
                          9,648





Sales
activity results for securities available for sale for the year ended December
31, 2009 are as follows:





Gross
      sales proceeds
                  
                  $
                  804,766Gross
      realized gains
                  
                  $
                  343Gross
      realized losses
                  
                  
                  (562
                  )Net
      realized loss
                  
                  $
                  (219
                  )





7.
            MORTGAGE
      DEBT





All
mortgage debt is secured by individual properties.  The $14,924,629
mortgage on the Hato Rey Center property in Hato Rey, Puerto Rico is nonrecourse
to the Company, whereas the $44,978 mortgage on the Mapletree Industrial Center
property in Palmer, Massachusetts is recourse to Presidential.





Amortization
requirements of all mortgage debt as of December 31, 2009 are summarized as
follows:





Year
ending December 31:





2010
                  
                  $
                  375,9162011
                  
                  
                  388,2212012
                  
                  
                  398,8032013
                  
                  
                  432,7552014
                  
                  
                  466,270Thereafter
                  
                  
                  12,907,642TOTAL
                  
                  $
                  14,969,607





Interest
on mortgages is payable at fixed rates, summarized as follows:


78


Interest
rates:





3.25%
                  
                  $
                  44,9789.38%
                  
                  
                  14,924,629TOTAL
                  
                  $
                  14,969,607





The first
mortgage loan on the Hato Rey Center property is due on May 11, 2028 but
provides that if it was not repaid on or before May 11, 2008, the interest rate
on the loan would be increased by two percentage points (to 9.38% per annum of
which 2% per annum would be deferred until maturity) and all cash flow from the
property, after payment of all operating expenses, would be applied to pay down
the outstanding principal balance of the loan.  The Company did not
repay the existing mortgage on May 11, 2008 and the mortgage provisions
described above became applicable.  During 2008 and 2009, no funds
were available from net cash flow to pay down the mortgage
balance.  At December 31, 2009, the outstanding principal balance of
the loan was $14,924,629 and the deferred interest was $545,685.





8.
            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.





The Hato
Rey Partnership owns and operates the Hato Rey Center, an office building with
207,000 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.  In July,
2009, the Company agreed to loan an additional $250,000 to the Hato Rey
Partnership which increased the agreed upon $2,500,000 loan to
$2,750,000.  The additional $250,000 will be advanced to the
Partnership as funds are needed and will have the same terms as the $2,500,000
loan.  At December 31, 2009, the Company had advanced $2,608,000 of
the loan to the Hato Rey Partnership and subsequent to December 31, 2009, the
Company advanced an additional $62,000.  The $2,608,000 loan and
accrued interest in the amount of $823,786 have been eliminated in
consolidation.





On
January 1, 2009, the Company adopted ASC 810-10-65 which requires amounts
attributable to noncontrolling interests to be reported
separately.  For the year ended December 31, 2009, the Hato Rey
Partnership had a loss of $661,640.  The consolidated financial
statements reflect the separate disclosure of the noncontrolling interest’s
share (40%) of the loss of $264,656.  Prior to the adoption of ASC
810-10-65, 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.  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.


79


9.
            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.





In
accordance with ASC 740-10-25, if the Company’s tax position in relation to a
transaction were to be examined and 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.  As of December
31, 2009, the tax years that remain open to examination by the federal, state
and local taxing authorities are the 2006 – 2008 tax years.





Reconciliation
of the changes in the interest expense accrued liability for uncertain tax
positions is as follows:





December 31,2009
                  
                  
                  2008Balance
      beginning of year
                  
                  $
                  -
                  
                  
                  $
                  817,580Increase
      due to unrecognized tax benefit
                  
                  
                  -
                  
                  
                  
                  147,526Reduction
      due to lapse of statute of limitations
                  
                  
                  -
                  
                  
                  
                  (965,106
                  )Balance
      end of year
                  
                  $
                  -
                  
                  
                  $
                  -





Upon
filing the Company’s income tax return for the year ended December 31, 2008,
Presidential applied approximately $1,919,000 of its available net operating
loss carryforward of approximately $1,969,000 and then applied all of its
available 2008 stockholders’ distributions to reduce its taxable income for 2008
to zero.





For the
year ended December 31, 2009, the Company had a tax loss of approximately
$4,790,000 ($1.41 per share), which is comprised of an ordinary loss of
approximately $8,022,000 ($2.36 per share) and capital gains of approximately
$3,232,000 ($0.95 per share).





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 for 2009, there is no
requirement to make a distribution in 2010.  In addition, no provision
for federal income taxes was required at December 31, 2009.


80


10.
            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 consisted 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 ASC
Contingencies Topic, 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 December 31, 2009, the accrued
liability balance was $388,971 and the discount balance was $118,535 for a net
accrued liability of $270,436.





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.  The Company has commenced the remediation work and
expects to complete it by June, 2010.  While the final cost of the
remediation work has not been finally determined, management believes that it
will be less than the balance of the net accrued liability at December 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.





11.
            CONCENTRATIONS
      OF CREDIT RISK





Financial
instruments which potentially subject the Company to concentrations of credit
risk consist principally of its mortgage portfolio, cash and cash equivalents
and securities available for sale.





The
Company’s mortgage portfolio consists of long-term notes receivable
collateralized by real estate located in four states (primarily Virginia) and
Puerto Rico.  The real estate collateralizing these notes, consisting
primarily of moderate income apartment properties and, to a lesser extent,
cooperative apartment units, has at a minimum an estimated fair value equal to
the net carrying value of the notes.





Included
in the mortgage portfolio at December 31, 2009 is a collateralized $2,074,994
loan made to an entity controlled by David Lichtenstein, which is in good
standing, and a $750,000 collateralized note receivable due from Mr.
Lichtenstein.


81


The
Company generally maintains its cash in money market funds with high credit
quality financial institutions. Periodically, the Company may invest in time
deposits with such institutions. Although the Company may maintain balances at
these institutions in excess of the FDIC insurance limit, the Company does not
anticipate and has not experienced any losses.





The
Company also invests its funds in marketable equity and debt securities
available for sale.  Such investments are reflected on the Company’s
consolidated balance sheets at their fair value.





12.
            COMMON
      STOCK





The Class
A and Class B common stock of Presidential have identical rights except that the
holders of Class A common stock are entitled to elect two-thirds of the Board of
Directors and the holders of the Class B common stock are entitled to elect
one-third of the Board of Directors.





Other
than as described in Note 14, no shares of common stock of Presidential are
reserved.





13.
            DISTRIBUTIONS
      ON COMMON STOCK (UNAUDITED)





For
income tax purposes, distributions paid on common stock are allocated as
follows:





Taxable
                  
                  
                  TaxableTotal
                  
                  
                  Ordinary
                  
                  
                  Capital
                  
                  
                  Non-Year
                  
                  Distribution
                  
                  
                  Income
                  
                  
                  Gain
                  
                  
                  Taxable2009
                  
                  $
                  0.00
                  
                  
                  $
                  0.00
                  
                  
                  $
                  0.00
                  
                  
                  $
                  0.002008
                  
                  $
                  0.56
                  
                  
                  $
                  0.00
                  
                  
                  $
                  0.56
                  
                  
                  $
                  0.00





14.
            STOCK
      COMPENSATION





In 2005,
shareholders approved the adoption of the Company’s 2005 Restricted Stock Plan
(the “2005 Plan”).  The 2005 Plan provides that a total of 115,000
shares of the Company’s Class B common stock may be issued to employees,
directors and consultants of the Company, to provide incentive
compensation.  The 2005 Plan is administered by the Compensation and
Pension Committees of the Company’s Board of Directors, which have the
authority, among other things, to determine the terms and conditions of any
award under the 2005 Plan (including the vesting schedule applicable to the
award, if any).  The Board of Directors may at any time amend, suspend
or terminate the 2005 Plan.  The 2005 Plan will terminate on June 15,
2015, unless terminated earlier by the Board of Directors.





In 2008
and 2009, stock granted to directors was fully vested upon the grant
date.  Stock granted to officers and employees are vesting at rates
ranging from 20%-50% year.  Notwithstanding the vesting schedule, the
officers and employees are entitled to receive all distributions on the total
number of shares granted.  Shares granted under the 2005 Plan are
issued at market value on the date of the grant.  The following is a
summary of the Company’s activity for the 2005 Plan in 2008 and
2009:


82





Class BMarket
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      CommonValue at
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      Stock - Par
                                                      
                                                      
                                                      AdditionalDate of
                                                      
                                                      Shares
                                                      
                                                      
                                                      Date of
                                                      
                                                      
                                                      Vested
                                                      
                                                      
                                                      Unvested
                                                      
                                                      
                                                      Value $.10
                                                      
                                                      
                                                      Paid-in
                                                      
                                                      
                                                      Directors'
                                                      
                                                      
                                                      SalaryIssuance
                                                      
                                                      Issued
                                                      
                                                      
                                                      Grant
                                                      
                                                      
                                                      Shares
                                                      
                                                      
                                                      Shares
                                                      
                                                      
                                                      Per Share
                                                      
                                                      
                                                      Capital
                                                      
                                                      
                                                      Fees
                                                      
                                                      
                                                      ExpenseActivity
      for 2008Unvested
      shares as of  December 31, 200732,800
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      13,500
                                                      
                                                      
                                                      
                                                      19,300
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      $
                                                      82,565
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      $
                                                      82,565Shares
      issued in 2008Jan.,
      2008
                                                      
                                                      
                                                      3,000
                                                      
                                                      
                                                      $
                                                      5.92
                                                      
                                                      
                                                      
                                                      3,000
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      $
                                                      300
                                                      
                                                      
                                                      
                                                      17,460
                                                      
                                                      
                                                      $
                                                      17,76035,800
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      16,500
                                                      
                                                      
                                                      
                                                      19,300
                                                      
                                                      
                                                      $
                                                      300
                                                      
                                                      
                                                      $
                                                      100,025
                                                      
                                                      
                                                      $
                                                      17,760
                                                      
                                                      
                                                      $
                                                      82,565Activity
      for 2009Unvested
      shares as of  December 31, 200819,300
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      8,500
                                                      
                                                      
                                                      
                                                      10,800
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      $
                                                      45,365
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      $
                                                      45,365Shares
      issued in 2009Jan.,
      2009
                                                      
                                                      
                                                      3,000
                                                      
                                                      
                                                      
                                                      1.61
                                                      
                                                      
                                                      
                                                      3,000
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      $
                                                      300
                                                      
                                                      
                                                      
                                                      4,530
                                                      
                                                      
                                                      $
                                                      4,83022,300
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      11,500
                                                      
                                                      
                                                      
                                                      10,800
                                                      
                                                      
                                                      $
                                                      300
                                                      
                                                      
                                                      $
                                                      49,895
                                                      
                                                      
                                                      $
                                                      4,830
                                                      
                                                      
                                                      $
                                                      45,365




83


15.
            CONTRACTUAL
      PENSION AND POSTRETIREMENT BENEFITS





Presidential
has employment contracts with several active and retired officers and
employees.  These contracts provide for annual pension benefits and
other postretirement benefits such as health care benefits.  The
pension benefits generally provide for annual payments in specified amounts for
each participant for life, commencing three years after retirement, with an
annual adjustment for an increase in the consumer price index.  The
Company accrues on an actuarial basis the estimated costs of these benefits
during the years the employee provides services.  Periodic benefit
costs are reflected in general and administrative expenses.  The
contractual benefit plans are not funded.  The Company uses a December
31 measurement date for the contractual benefit plans.


84


CONTRACTUAL
PENSION AND POSTRETIREMENT BENEFITS




The
following tables summarize the actuarial costs of the contractual pension and
postretirement benefits:





Contractual
      Pension Benefit
                  
                  
                  Contractual
      Postretirement BenefitsYear
      Ended December 31,
                  
                  
                  Year
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Components
      of net periodic benefit cost:Service
      cost
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  1,622
                  
                  
                  $
                  2,072Interest
      cost
                  
                  
                  82,863
                  
                  
                  
                  77,525
                  
                  
                  
                  26,802
                  
                  
                  
                  37,781Amortization
      of prior service cost
                  
                  
                  (30,921
                  )
                  
                  
                  (46,376
                  )
                  
                  
                  3,702
                  
                  
                  
                  3,702Amortization
      of actuarial (gain) loss
                  
                  
                  140,293
                  
                  
                  
                  -
                  
                  
                  
                  (32,774
                  )
                  
                  
                  (2,524
                  )Net
      periodic benefit cost
                  
                  $
                  192,235
                  
                  
                  $
                  31,149
                  
                  
                  $
                  (648
                  )
                  
                  $
                  41,031





The
recorded contractual pension and postretirement benefits liability of $927,882
at December 31, 2009 is comprised of $524,854  for pension benefits
and $403,028 for postretirement benefits.  At December 31, 2009, the
accumulated pension  benefit liability and accumulated other
comprehensive loss reflected a large gain as a result of the death of a
participant in 2009.  The accumulated pension and postretirement
benefit obligations and recorded liabilities, none of which has been funded,
were as follows:





Contractual
      Pension Benefit
                        
                        
                        Contractual
      Postretirement BenefitsDecember
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008Change
      in benefit obligation:Benefit
      obligation at beginning of year
                        
                        $
                        1,367,646
                        
                        
                        $
                        1,409,448
                        
                        
                        $
                        440,458
                        
                        
                        $
                        759,960Service
      cost
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,622
                        
                        
                        
                        2,072Interest
      cost
                        
                        
                        82,863
                        
                        
                        
                        77,525
                        
                        
                        
                        26,802
                        
                        
                        
                        37,781Actuarial
      (gain) loss
                        
                        
                        (852,352
                        )
                        
                        
                        97,333
                        
                        
                        
                        (46,644
                        )
                        
                        
                        (328,613
                        )Benefits
      paid
                        
                        
                        (73,303
                        )
                        
                        
                        (216,660
                        )
                        
                        
                        (19,210
                        )
                        
                        
                        (30,742
                        )Benefit
      obligation at end of year
                        
                        $
                        524,854
                        
                        
                        $
                        1,367,646
                        
                        
                        $
                        403,028
                        
                        
                        $
                        440,458Change
      in plan assets:Employer
      contributions
                        
                        $
                        73,303
                        
                        
                        $
                        216,660
                        
                        
                        $
                        19,210
                        
                        
                        $
                        30,742Benefits
      paid
                        
                        
                        (73,303
                        )
                        
                        
                        (216,660
                        )
                        
                        
                        (19,210
                        )
                        
                        
                        (30,742
                        )Fair
      value of plan assets at end of year
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -Funded
      status
                        
                        $
                        (524,854
                        )
                        
                        $
                        (1,367,646
                        )
                        
                        $
                        (403,028
                        )
                        
                        $
                        (440,458
                        )Net
      amount recognized in the consolidated balance sheet:Accrued
      benefit liability
                        
                        $
                        (524,854
                        )
                        
                        $
                        (1,367,646
                        )
                        
                        $
                        (403,028
                        )
                        
                        $
                        (440,458
                        )Amounts
      recognized in accumulated other comprehensive loss:Net
      actuarial (gain) loss
                        
                        $
                        (762,351
                        )
                        
                        $
                        230,294
                        
                        
                        $
                        (46,644
                        )
                        
                        $
                        (328,613
                        )Prior
      service cost
                        
                        
                        -
                        
                        
                        
                        (30,921
                        )
                        
                        
                        -
                        
                        
                        
                        -Amortization
      of unrecognized amounts
                        
                        
                        N/A
                        
                        
                        
                        N/A
                        
                        
                        
                        29,072
                        
                        
                        
                        (1,178
                        )$
                        (762,351
                        )
                        
                        $
                        199,373
                        
                        
                        $
                        (17,572
                        )
                        
                        $
                        (329,791
                        )


85





Contractual
      Pension Benefit
                                                                                                                
                                                                                                                
                                                                                                                Contractual
      Postretirement BenefitsYear
      Ended December 31,
                                                                                                                
                                                                                                                
                                                                                                                Year
      Ended December 31,2009
                                                                                                                
                                                                                                                
                                                                                                                2008
                                                                                                                
                                                                                                                
                                                                                                                2009
                                                                                                                
                                                                                                                
                                                                                                                2008Additional
      disclosure items for the plans at December 31,2009
                                                                                                                
                                                                                                                
                                                                                                                2008
                                                                                                                
                                                                                                                
                                                                                                                2009
                                                                                                                
                                                                                                                
                                                                                                                2008Accumulated
      benefit obligation
                                                                                                                
                                                                                                                $
                                                                                                                524,854
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                1,367,646
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                403,028
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                440,458Projected
      benefit obligation
                                                                                                                
                                                                                                                
                                                                                                                524,854
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                1,367,646
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                403,028
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                440,458Fair
      value of plan assets
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/AIncrease
      (decrease) in minimum liability included in other comprehensive income or
      loss
                                                                                                                
                                                                                                                $
                                                                                                                (961,724
                                                                                                                )
                                                                                                                
                                                                                                                $
                                                                                                                143,709
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/AUnrecognized
      amounts and amortization amounts following year:2009
                                                                                                                
                                                                                                                
                                                                                                                2008
                                                                                                                
                                                                                                                
                                                                                                                2009
                                                                                                                
                                                                                                                
                                                                                                                2008Unrecognized
      amounts:Prior
      year service cost
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                8,293
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                11,995Net
      actuarial (gain) loss
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                (200,096
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (186,226
                                                                                                                )Total
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                (191,803
                                                                                                                )
                                                                                                                
                                                                                                                $
                                                                                                                (174,231
                                                                                                                )Amortization
      amounts in the following year (estimate):
                                                                                                                
                                                                                                                2009
                                                                                                                
                                                                                                                
                                                                                                                2008
                                                                                                                
                                                                                                                
                                                                                                                2009
                                                                                                                
                                                                                                                
                                                                                                                2008Prior
      year service cost
                                                                                                                
                                                                                                                $
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                (30,921
                                                                                                                )
                                                                                                                
                                                                                                                $
                                                                                                                3,702
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                3,702Net
      actuarial (gain) loss
                                                                                                                
                                                                                                                
                                                                                                                (47,324
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                56,117
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                (35,197
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (29,683
                                                                                                                )Total
                                                                                                                
                                                                                                                $
                                                                                                                (47,324
                                                                                                                )
                                                                                                                
                                                                                                                $
                                                                                                                25,196
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                (31,495
                                                                                                                )
                                                                                                                
                                                                                                                $
                                                                                                                (25,981
                                                                                                                )Weighted-average
      assumptions used to determine benefit obligations at  December
      31:2009
                                                                                                                
                                                                                                                
                                                                                                                2008
                                                                                                                
                                                                                                                
                                                                                                                2009
                                                                                                                
                                                                                                                
                                                                                                                2008Discount
      rate
                                                                                                                
                                                                                                                
                                                                                                                5.74
                                                                                                                %
                                                                                                                
                                                                                                                
                                                                                                                6.24
                                                                                                                %
                                                                                                                
                                                                                                                
                                                                                                                5.58
                                                                                                                %
                                                                                                                
                                                                                                                
                                                                                                                6.36
                                                                                                                %Expected
      return on plan assets
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/ARate
      of compensation increase
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/AWeighted-average
      assumptions used to determine the net periodic benefit costs for year
      ended December 31,2009
                                                                                                                
                                                                                                                
                                                                                                                2008
                                                                                                                
                                                                                                                
                                                                                                                2009
                                                                                                                
                                                                                                                
                                                                                                                2008Discount
      rate
                                                                                                                
                                                                                                                
                                                                                                                6.24
                                                                                                                %
                                                                                                                
                                                                                                                
                                                                                                                6.00
                                                                                                                %
                                                                                                                
                                                                                                                
                                                                                                                6.36
                                                                                                                %
                                                                                                                
                                                                                                                
                                                                                                                6.06
                                                                                                                %Expected
      return on plan assets
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/ARate
      of compensation increase
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                N/A





The
assumed health care cost trend rate at December 31, 2009 was 8.5% for medical
and 10% for prescription drugs and 9% for medical and 11% for prescription drugs
at December 31, 2008.  The trend rate decreases gradually each
successive year until it reaches 5% by the year 2017.




Assumed
health care cost trend rates have a significant effect on the amounts reported
for the postretirement benefits plan. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:





1-Percentage-
                
                
                1-Percentage-Point Increase
                
                
                Point DecreaseEffect
      on total service and interest cost components
                
                $
                2,361
                
                
                $
                (2,065
                )Effect
      on postretirement benefit obligation
                
                $
                36,213
                
                
                $
                (31,662
                )


86


All
measures of the accumulated postretirement benefit obligation and the net
periodic postretirement benefit cost included in this footnote do not reflect
the effect of the Medicare Prescription Drug Improvement and Modernization Act
of 2003.  As a result of contractual commitments for benefits under
the plan, there will be no impact on plan benefits, costs or obligations from
this legislation.





Cash
Flows





The
contractual pension and postretirement benefit plans are non-funded plans and
employer contributions equal benefit payments.  The Company estimates
that the contractual payments for 2010 will be as follows:





Contractual
      pension benefit payments
                  
                  $
                  -Contractual
      postretirement benefit payments
                  
                  
                  16,138





Estimated
Future Benefit Payments





The
following benefit payments (including expected future service and net of
employee contributions) are expected to be paid:





Year Ending
                  
                  Contractual
                  
                  
                  ContractualDecember 31,
                  
                  Pension Benefit
                  
                  
                  Postretirement Benefits2010
                  
                  $
                  -
                  
                  
                  $
                  16,1382011
                  
                  
                  -
                  
                  
                  
                  13,6572012
                  
                  
                  -
                  
                  
                  
                  11,3362013
                  
                  
                  -
                  
                  
                  
                  83,3372014
                  
                  
                  -
                  
                  
                  
                  7,3622015
      – 2019
                  
                  
                  379,295
                  
                  
                  
                  161,385





16.
            DEFINED
      BENEFIT PLAN





The
Company has a noncontributory defined benefit pension plan, which covers
substantially all of its employees.  The plan provides monthly
retirement benefits commencing at age 65.  The monthly benefit is
equal to the sum of (1) 7.15% of average monthly compensation multiplied by the
total number of plan years of service (up to a maximum of 10 years), plus (2)
..62% of such average monthly compensation in excess of one-twelfth of covered
compensation multiplied by the total number of plan years of service (up to a
maximum of 10 years).  The Company makes annual contributions that
meet the minimum funding requirements and the maximum contribution limitations
under the Internal Revenue Code.  Effective February 28, 2009, the
Company has “frozen” or suspended future benefit accruals under the
plan.


87


Periodic
pension costs are reflected in general and administrative expenses.





Year Ended December 31,2009
                
                
                2008Components
      of net periodic benefit cost:Service
      cost
                
                $
                26,262
                
                
                $
                237,655Interest
      cost
                
                
                509,710
                
                
                
                487,628Expected
      return on plan assets
                
                
                (427,856
                )
                
                
                (573,055
                )Amortization
      of prior service cost
                
                
                12,616
                
                
                
                12,616Amortization
      of accumulated loss
                
                
                252,732
                
                
                
                18,477Curtailment
      loss
                
                
                68,126
                
                
                
                -Net
      periodic benefit cost
                
                $
                441,590
                
                
                $
                183,321





The
following sets forth the plan’s funded status and amount recognized in the
Company’s consolidated balance sheets:





December 31,2009
                
                
                2008Change
      in benefit obligation:Benefit
      obligation at beginning of year
                
                $
                8,168,816
                
                
                $
                7,860,349Service
      cost
                
                
                26,262
                
                
                
                237,655Interest
      cost
                
                
                509,710
                
                
                
                487,628Actuarial
      loss (gain)
                
                
                1,738,287
                
                
                
                (332,272
                )Benefits
      paid
                
                
                (308,478
                )
                
                
                (84,544
                )Curtailments
                
                
                (677,787
                )
                
                -Benefit
      obligation at end of year
                
                $
                9,456,810
                
                
                $
                8,168,816Change
      in plan assets:Fair
      value of plan assets at beginning of year
                
                $
                5,915,677
                
                
                $
                8,232,291Actual
      return on plan assets
                
                
                988,171
                
                
                
                (2,232,070
                )Employer
      contributions
                
                
                903,918
                
                
                
                -Benefits
      paid
                
                
                (308,478
                )
                
                
                (84,544
                )Fair
      value of plan assets at end of year
                
                $
                7,499,288
                
                
                $
                5,915,677Funded
      status
                
                $
                (1,957,522
                )
                
                $
                (2,253,139
                )Net
      amount recognized in the consolidated balance sheet:Defined
      benefit plan liability
                
                $
                (1,957,522
                )
                
                $
                (2,253,139
                )Amounts
      recognized in accumulated other comprehensive loss:Net
      loss
                
                $
                3,739,084
                
                
                $
                3,491,631Prior
      service cost
                
                
                -
                
                
                
                80,742$
                3,739,084
                
                
                $
                3,572,373




88


Additional
disclosure items for the plan at December 31:





2009
                  
                  
                  2008Accumulated
      benefit obligation
                  
                  $
                  9,456,810
                  
                  
                  $
                  8,136,123Projected
      benefit obligation
                  
                  
                  9,456,810
                  
                  
                  
                  8,168,816Fair
      value of plan assets
                  
                  
                  7,499,288
                  
                  
                  
                  5,915,677Increase
      in minimum liability in accumulated other comprehensive
    loss
                  
                  
                  166,711
                  
                  
                  
                  2,441,760





The
estimated net loss that will be amortized from accumulated other comprehensive
loss into net periodic cost over the next year is $291,486.





Assumptions





Weighted-average
assumptions used to determine benefit obligations at





December 31,2009
                  
                  
                  2008Discount
      rate
                  
                  
                  5.52
                  %
                  
                  
                  6.37
                  %Rate
      of compensation increase
                  
                  
                  5.00
                  %
                  
                  
                  5.00
                  %





Weighted-average
assumptions used to determine net periodic benefit costs for year
ended





December 31,2009
                  
                  
                  2008Discount
      rate
                  
                  
                  6.37
                  %
                  
                  
                  6.24
                  %Expected
      return on plan assets
                  
                  
                  7.00
                  %
                  
                  
                  7.00
                  %Rate
      of compensation increase
                  
                  
                  5.00
                  %
                  
                  
                  5.00
                  %





The
Company periodically reviews its assumptions for the rate of return on the
plan’s assets.  The assumptions are based primarily on the long-term
historical performance of the assets of the plan.  Differences in the
rates of return in the near term are recognized as gains or losses in the period
that they occur.





The Fair
Value Measurements and Disclosure Topic of the ASC require the categorization of
financial assets and liabilities, based on the inputs to the valuation
technique, into a three-level fair value hierarchy.  The fair value
hierarchy gives the highest priority to the quoted prices in active markets for
identical assets and liabilities and lowest priority to unobservable
inputs.  The various values of the Fair Value Measurements and
Disclosure Topic of the ASC fair value hierarchy are described as
follows:





Level
      1 –
              Financial
      assets and liabilities whose values are based on unadjusted quoted market
      prices for identical assets and liabilities in an active market that the
      Company has the ability to access.Level
      2 –
              Financial
      assets and liabilities whose values are based on quoted prices in markets
      that are not active or model inputs that are observable for substantially
      the full term of the asset or liability.Level
      3 –
              Financial
      assets and liabilities whose values are based on prices or valuation
      techniques that require inputs that are both unobservable and significant
      to the overall fair value
measurement.




89


The fair
value hierarchy of the Plan Assets are as follows:





December 31,2009
                  
                  
                  2008Cash
      and cash equivalents
                  
                  Level
      1
                  
                  $
                  264,149
                  
                  
                  $
                  256,861Securities
      available for sale
                  
                  Level
      1
                  
                  
                  6,649,275
                  
                  
                  
                  5,168,885Professionally
      managed futures contracts portfolio
                  
                  Level
      2
                  
                  
                  585,864
                  
                  
                  
                  489,931Total
      plan assets
                  
                  
                  
                  $
                  7,499,288
                  
                  
                  $
                  5,915,677





The
plan’s weighted-average allocations at December 31, by asset category are as
follows:





December 31,2009
                    
                    
                    2008Equities
                    
                    
                    45
                    %
                    
                    
                    49
                    %Fixed
      income
                    
                    
                    43
                    %
                    
                    
                    39
                    %Professionally
      managed futures contracts portfolio
                    
                    
                    8
                    %
                    
                    
                    8
                    %Cash
      and money market funds
                    
                    
                    4
                    %
                    
                    
                    4
                    %Total
                    
                    
                    100
                    %
                    
                    
                    100
                    %





The
Company has consistently applied what it believes to be an appropriate
investment strategy for the defined benefit plan.





The
Company invests primarily in a) equities of listed corporations, b) fixed income
funds consisting of corporate bonds, United States treasury bonds and government
mortgage backed securities, c) a professionally managed futures contract
portfolio and d) cash and money market funds.





The
expected long-term rate of return assumption is consistent with the “building
block” approach.  Under this method, historical investment returns for
each major asset category are applied to the expected future investment
allocation in that category as a percentage of total plan assets, and a weighted
average is determined.





Cash
Flows





The
Company’s funding policy for the plan is based on contributions that comply with
the minimum and maximum amounts required by law.  The Company is
required to make a contribution of approximately $100,000 for the 2010
year.





Estimated
Future Benefit Payments





The
following benefit payments are expected to be paid:


90





Year EndingDecember 31,
                  
                  Pension Benefits2010
                  
                  $
                  883,4452011
                  
                  
                  925,3682012
                  
                  
                  762,6402013
                  
                  
                  746,6342014
                  
                  
                  729,2592015
      – 2019
                  
                  
                  3,332,517





17.
            ACCUMULATED
      OTHER COMPREHENSIVE LOSS





The
components of accumulated other comprehensive loss are as follows:





December 31,
                        
                        
                        December 31,2009
                        
                        
                        2008Defined
      benefit plan liability
                        
                        $
                        (3,739,084
                        )
                        
                        $
                        (3,572,373
                        )Contractual
      postretirement benefits liability
                        
                        
                        191,804
                        
                        
                        
                        174,232Minimum
      contractual pension benefit liability
                        
                        
                        762,351
                        
                        
                        
                        (199,373
                        )Net
      unrealized (loss) gain on securities available for sale
                        
                        
                        (14,535
                        )
                        
                        
                        7,637Total
      accumulated other comprehensive loss
                        
                        $
                        (2,799,464
                        )
                        
                        $
                        (3,589,877
                        )





18.
            GENERAL
      AND ADMINISTRATIVE EXPENSES





General
and administrative expenses include the following:





Year
      EndedDecember
      31,2009
                  
                  
                  2008Interest
      expense (credit)(1)
                  
                  $
                  -
                  
                  
                  $
                  (817,580
                  )Other
      general and administrative expenses
                  
                  
                  3,596,737
                  
                  
                  3,543,051Net
      expense
                  
                  $
                  3,596,737
                  
                  
                  $
                  2,725,471





(1) As
previously discussed in Note 9, in 2008, the tax years related to the interest
expense accrual for uncertain tax positions had expired and the Company reversed
the $965,106 interest accrual.  Such reversal reduced general and
administrative expenses by $817,580 for the year ended December 31,
2008.





19.
            OTHER
      INCOME (LOSS)





In the
fourth quarter of 2009, the Company recognized $185,000 of other income from the
sale of an easement at its Mapletree Industrial Center property in Palmer,
Massachusetts.


91


In the
fourth quarter of 2008, the Company wrote off its $1,000,000 investment in
Broadway Partners Feeder Fund A II, a blind pool of investment capital sponsored
by Broadway Real Estate Partners, LLC, due to the decline in value of the fund’s
investment portfolio.  The Company accounted for this investment under
the cost method.





20.
            PROFIT
      SHARING PLAN





Fourth
Floor Management Corp., a 100% owned subsidiary of Presidential Realty
Corporation that manages the Company’s properties, has a profit sharing plan
which covers substantially all of its employees.  The plan provides
for annual contributions up to a maximum of 5% of the employees annual
compensation.  The Company made a $9,250 contribution to the plan in
March, 2010 for the 2009 plan year and a $9,420 contribution to the plan in
March, 2009 for the 2008 plan year.  Contributions are charged to
general and administrative expense.





21.
            RELATED
      PARTY TRANSACTIONS





The
Company holds two nonrecourse notes receivable from Ivy, relating to loans made
to Ivy in connection with Ivy’s former cooperative conversion
business.





The notes
have an aggregate outstanding principal balance of $4,770,050 at December 31,
2009.  These notes were received by the Company in 1991 for
nonrecourse loans that had been previously written off by the
Company.  Accordingly, these notes were recorded at zero except for a
$155,584 portion of the notes that was adequately secured and which was repaid
in 2002.  In 1996, the Company and Ivy agreed that the only payments
required under the terms of the note would be in an amount equal to 25% of the
operating cash flow (after provision for certain reserves) of Scorpio
Entertainment, Inc. (“Scorpio”), a company owned by two of the owners of Ivy to
carry on theatrical productions.  The Company received interest
payments on these notes of zero and $146,750 during 2009 and 2008,
respectively.  The Company does not expect to recover any material
principal amounts on these notes; amounts received from Scorpio will be applied
to unpaid, unaccrued interest and recognized as income when
received.  At December 31, 2009, the unpaid and unaccrued interest was
$3,677,702.  The outstanding loans to Ivy at December 31, 2009 are
current in accordance with their modified terms.





The loans
to Ivy were subject to various settlement agreements and modifications in
previous years.  Ivy is owned by three officers of the Company, who
also hold beneficial ownership of an aggregate of approximately 51% of the
outstanding shares of Class A common stock of the Company, which class of stock
is entitled to elect two-thirds of the Board of Directors of the
Company.  Because of the relationship between the owners of Ivy and
the Company, all transactions with Ivy are negotiated on behalf of the Company,
and subject to approval, by a committee of three members of the Board of
Directors with no affiliations with the owners of Ivy.





22.
            ESTIMATED
      FAIR VALUE OF FINANCIAL INSTRUMENTS





Estimated
fair values of the Company’s financial instruments as of December 31, 2009 and
2008 have been determined using available market information and various
valuation estimation methodologies.  Considerable judgment is required
to interpret the effects on fair value of such items as future expected loss
experience, current economic conditions, risk characteristics of various
financial instruments and other factors.  The estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.  Also, the use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair values.


92


The
following table summarizes the estimated fair values of financial
instruments:





December 31, 2009
                  
                  
                  December 31, 2008(Amounts in thousands)Net
                  
                  
                  Estimated
                  
                  
                  Net
                  
                  
                  EstimatedCarrying
                  
                  
                  Fair
                  
                  
                  Carrying
                  
                  
                  FairValue (1)
                  
                  
                  Value
                  
                  
                  Value (1)
                  
                  
                  ValueAssets:Cash
      and cash equivalents
                  
                  $
                  785
                  
                  
                  $
                  785
                  
                  
                  $
                  5,985
                  
                  
                  $
                  5,985Securities
      available for sale
                  
                  
                  3,614
                  
                  
                  
                  3,614
                  
                  
                  
                  10
                  
                  
                  
                  10Notes
      receivable
                  
                  
                  2,881
                  
                  
                  
                  2,973
                  
                  
                  
                  2,249
                  
                  
                  
                  2,366Liabilities:Mortgage
      debt
                  
                  
                  14,970
                  
                  
                  
                  20,239
                  
                  
                  
                  16,392
                  
                  
                  
                  19,484





(1)
            Net
      carrying value is net of discounts where
  applicable.





The fair
value estimates presented above are based on pertinent information available to
management as of December 31, 2009 and 2008.  Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued since
December 31, 2009 and, therefore, current estimates of fair value may differ
significantly from the amounts presented above.





Fair
value methods and assumptions are as follows:





Cash and
Cash Equivalents – The estimated fair value approximates carrying value, due to
the short maturity of these investments.





Securities
Available for Sale – The fair value of securities available for sale was
determined to be Level 1 financial assets within the valuation hierarchy
established by the ASC Fair Value Measurements and Disclosures Topic, and is
based on current market quotes received from financial sources that trade such
securities.





Notes
Receivable – The fair value of notes receivable has been estimated by
discounting projected cash flows using current rates for similar notes
receivable.





Mortgage
Debt – The fair value of mortgage debt has been estimated by discounting
projected cash flows using current rates for similar debt.





23.
            FUTURE
      MINIMUM ANNUAL BASE RENTS





Future
minimum annual base rental revenue for the next five years for commercial real
estate owned at December 31, 2009, and subject to non-cancelable operating
leases is as follows:


93





Year
      Ending December 31,2010
                  
                  $
                  2,991,7112011
                  
                  
                  1,817,9932012
                  
                  
                  1,045,8682013
                  
                  
                  755,4632014
                  
                  
                  155,511Thereafter
                  
                  
                  696,602Total
                  
                  $
                  7,463,148





The above
table assumes that all leases which expire are not renewed and tenant renewal
options are not exercised, therefore neither renewal rentals nor rentals from
replacement tenants are included.  The above table does not reflect
the annual base rental revenue for residential apartments owned, as the leases
for residential apartment units are usually for one year terms.





24.
            QUARTERLY
      FINANCIAL INFORMATION – ATTRIBUTABLE TO PRESIDENTIAL REALTY CORPORATION
      (UNAUDITED)


(Amounts
in thousands, except earnings per common share)





Earnings (Loss)Year
                    
                    
                    
                    
                    
                    
                    
                    PerEnded
                    
                    
                    
                    
                    Net
                    
                    
                    CommonDecember 31
                    
                    Revenues (1)
                    
                    
                    Income (Loss)
                    
                    
                    Share (2)2009First
                    
                    $
                    1,382
                    
                    
                    $
                    789
                    
                    
                    $
                    0.23Second
                    
                    
                    1,459
                    
                    
                    
                    4,439
                    (3)
                    
                    
                    1.31
                    (3)Third
                    
                    
                    1,321
                    
                    
                    
                    (1,186
                    )
                    
                    
                    (0.35
                    )Fourth
                    
                    
                    1,350
                    
                    
                    
                    (1,058
                    )
                    
                    
                    (0.31
                    )2008First
                    
                    $
                    1,589
                    
                    
                    $
                    (919
                    )
                    
                    $
                    (0.23
                    )Second
                    
                    
                    1,547
                    
                    
                    
                    (627
                    )
                    
                    
                    (0.16
                    )Third
                    
                    
                    1,595
                    
                    
                    
                    3,183
                    (4)
                    
                    
                    0.91
                    (4)Fourth
                    
                    
                    1,301
                    
                    
                    
                    (2,663
                    )(5)
                    
                    
                    (0.78
                    )(5)





(1)
            Amounts
      have been adjusted to give effect to the reclassification from revenues to
      discontinued operations for those properties that have been designated as
      held for sale or sold.





(2)
            Earnings
      (loss) per common share are computed independently for each of the
      quarters presented.  Therefore, the sum of quarterly earnings
      per share may not equal the total computed for the
  year.





(3)
            Net
      income for the second quarter of 2009 includes $3,208,336 for the gain on
      sale of the Crown Court Apartments and $2,279,279 for the additional gain
      on settlement of joint venture
loans.





(4)
            Net
      income for the third quarter of 2008 includes $2,807,272 for the gain on
      sale of the Towne House Apartments and $965,106 for the reversal of the
      interest expense accrual.





(5)
            Net
      loss for the fourth quarter of 2008 includes $1,000,000 for the write-off
      of other investments and a $987,602 increase in the loss from joint
      ventures.




94