UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC   20549





FORM
10-Q





x           Quarterly
Report Pursuant to Section 13 or 15(d) of the


Securities
Exchange Act of 1934





For the
quarterly period ended March 31, 2010





OR





 ̈           Transition
Report Pursuant to Section 13 or 15(d) of the


Securities
Exchange Act of 1934





Commission
File Number 001-09279





ONE LIBERTY PROPERTIES,
INC.


(Exact
name of registrant as specified in its charter)





MARYLAND
                13-3147497(State
      or other jurisdiction of
                (I.R.S.
      employerincorporation or organization)
                identification
      number)





60 Cutter Mill Road, Great Neck, New
      York
              11021(Address
      of principal executive offices)
              (Zip
      code)





(516)
466-3100


(Registrant’s
telephone number, including area code)





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 website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).





Yes   ̈          No ̈





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





Large
      accelerated filer  ̈
                    Accelerated
      filerxNon-accelerated
      filer   ̈
                    (Do not check if a smaller
      reporting company)
                    Smaller
      reporting company  ̈





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes  ̈      No     x





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.





As of May
5, 2010, the registrant had 11,453,162 shares of common stock
outstanding.







Part I –
FINANCIAL INFORMATION


Item
1.    Financial
Statements





ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(Amounts
in Thousands, Except Per Share Data)





March 31,
                          2010
                        
                        
                        December 31,
                          2009(Unaudited)AssetsReal
      estate investments, at costLand
                        
                        $
                        104,222
                        
                        
                        $
                        88,050Buildings
      and improvements
                        
                        
                        309,756
                        
                        
                        
                        305,017413,978
                        
                        
                        
                        393,067Less
      accumulated depreciation
                        
                        
                        49,389
                        
                        
                        
                        47,374364,589
                        
                        
                        
                        345,693Investment
      in unconsolidated joint ventures
                        
                        
                        5,864
                        
                        
                        
                        5,839Cash
      and cash equivalents
                        
                        
                        25,341
                        
                        
                        
                        28,036Available-for-sale
      securities (including treasury bills of
                          $2,000
      and $3,999)
                        
                        
                        4,779
                        
                        
                        
                        6,762Unbilled
      rent receivable
                        
                        
                        11,137
                        
                        
                        
                        10,706Unamortized
      intangible lease assets
                        
                        
                        9,580
                        
                        
                        
                        7,157Escrow,
      deposits and other assets and receivables
                        
                        
                        3,791
                        
                        
                        
                        2,471Investment
      in BRT Realty Trust at market (related party)
                        
                        
                        245
                        
                        
                        
                        189Unamortized
      deferred financing costs
                        
                        
                        1,837
                        
                        
                        
                        1,833Total
      assets
                        
                        $
                        427,163
                        
                        
                        $
                        408,686Liabilities
      and Stockholders’ EquityLiabilities:Mortgages
      payable
                        
                        $
                        207,182
                        
                        
                        $
                        190,518Line
      of credit
                        
                        
                        27,000
                        
                        
                        
                        27,000Dividends
      payable
                        
                        
                        3,436
                        
                        
                        
                        2,456Accrued
      expenses and other liabilities
                        
                        
                        3,340
                        
                        
                        
                        3,757Unamortized
      intangible lease liabilities
                        
                        
                        4,724
                        
                        
                        
                        4,827Total
      liabilities
                        
                        
                        245,682
                        
                        
                        
                        228,558Commitments
      and contingencies
                        
                        
                        -
                        
                        
                        
                        -Stockholders’
      equity:Preferred
      stock, $1 par value; 12,500 shares authorized; none issued
                        
                        
                        -
                        
                        
                        
                        -Common
      stock, $1 par value; 25,000 shares authorized;11,095
      and 10,879 shares issued and outstanding
                        
                        
                        11,095
                        
                        
                        
                        10,879Paid-in
      capital
                        
                        
                        145,480
                        
                        
                        
                        143,272Accumulated
      other comprehensive income
                        
                        
                        135
                        
                        
                        
                        191Accumulated
      undistributed net income
                        
                        
                        24,771
                        
                        
                        
                        25,786Total
      stockholders’ equity
                        
                        
                        181,481
                        
                        
                        
                        180,128Total
      liabilities and stockholders’ equity
                        
                        $
                        427,163
                        
                        
                        $
                        408,686





See
accompanying notes to consolidated financial statements.


2


ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF INCOME


(Amounts
in Thousands, Except Per Share Data)


(Unaudited)





Three
      Months Ended
                                March 31,2010
                              
                              
                              2009Revenues:Rental
      income
                              
                              $
                              10,103
                              
                              
                              $
                              9,841Operating
      expenses:Depreciation
      and amortization
                              
                              
                              2,135
                              
                              
                              
                              2,123General
      and administrative (including $547 in both periods to related
      party)
                              
                              
                              1,653
                              
                              
                              
                              1,649Property
      acquisition costs
                              
                              
                              346
                              
                              
                              
                              -Real
      estate expenses
                              
                              
                              182
                              
                              
                              
                              159Leasehold
      rent
                              
                              
                              77
                              
                              
                              
                              77Total
      operating expenses
                              
                              
                              4,393
                              
                              
                              
                              4,008Operating
      income
                              
                              
                              5,710
                              
                              
                              
                              5,833Other
      income and expenses:Equity
      in earnings of unconsolidated joint ventures
                              
                              
                              124
                              
                              
                              
                              160Interest
      and other income
                              
                              
                              51
                              
                              
                              
                              28Interest:Expense
                              
                              
                              (3,322
                              )
                              
                              
                              (3,427
                              )Amortization
      of deferred financing costs
                              
                              
                              (142
                              )
                              
                              
                              (256
                              )Income
      from continuing operations
                              
                              
                              2,421
                              
                              
                              
                              2,338Discontinued
      operations:Income
      from operations
                              
                              
                              -
                              
                              
                              
                              544Impairment
      charge on property sold at a loss
                              
                              
                              -
                              
                              
                              
                              (229
                              )Income
      from discontinued operations
                              
                              
                              -
                              
                              
                              
                              315Net
      income
                              
                              $
                              2,421
                              
                              
                              $
                              2,653Weighted
      average number of common shares outstanding:Basic
                              
                              
                              11,395
                              
                              
                              
                              10,165Diluted
                              
                              
                              11,453
                              
                              
                              
                              10,276Net
      income per common share – basic and diluted:Income
      from continuing operations
                              
                              $
                              .21
                              
                              
                              $
                              .23Income
      from discontinued operations
                              
                              
                              -
                              
                              
                              
                              .03Net
      income per common share
                              
                              $
                              .21
                              
                              
                              $
                              .26Cash
      distribution declared per share of common stock
                              
                              $
                              .30
                              
                              
                              $
                              .02Stock
      distribution declared per share of common stock
                              
                              $
                              -
                              
                              
                              $
                              .20





See
accompanying notes to consolidated financial statements.


3


ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY





For the
three month period ended March 31, 2010 (Unaudited)


and the
year ended December 31, 2009


(Amounts
in Thousands)





Common
                Stock
              
              
              Paid-in
                Capital
              
              
              Accumulated
                Other
                Comprehensive
                Income
      (Loss)
              
              
              Accumulated
                Undistributed
                Net
      Income
              
              
              TotalBalances,
      January 1, 2009
              
              $
              9,962
              
              
              $
              138,688
              
              
              $
              (239
              )
              
              $
              15,564
              
              
              $
              163,975Distributions
      – common stockCash
      - $.08 per share
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (948
              )
              
              
              (948
              )Stock
      - $.80 per share
              
              
              1,160
              
              
              
              4,955
              
              
              
              -
              
              
              
              (8,471
              )
              
              
              (2,356
              )Repurchase
      of common stock
              
              
              (268
              )
              
              
              (1,148
              )
              
              
              -
              
              
              
              -
              
              
              
              (1,416
              )Retirement
      of common stock
              
              
              (6
              )
              
              
              (45
              )
              
              
              
              
              
              
              
              
              
              
              (51
              )Restricted
      stock vesting
              
              
              31
              
              
              
              (31
              )
              
              
              -
              
              
              
              -
              
              
              
              -Compensation
      expense –restricted
      stock
              
              
              -
              
              
              
              853
              
              
              
              -
              
              
              
              -
              
              
              
              853Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              19,641
              
              
              
              19,641Other
      comprehensive income –Net
      unrealized gain onavailable-for-sale
      securities
              
              
              -
              
              
              
              -
              
              
              
              319
              
              
              
              -
              
              
              
              319Net
      unrealized gain on derivativeinstruments
              
              
              -
              
              
              
              -
              
              
              
              111
              
              
              
              -
              
              
              
              111Comprehensive
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              20,071Balances,
      December 31, 2009
              
              
              10,879
              
              
              
              143,272
              
              
              
              191
              
              
              
              25,786
              
              
              
              180,128Distributions
      –  common stockCash
      - $.30 per share
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (3,436
              )
              
              
              (3,436
              )Issuance
      of stock for stock dividend obligation at
                December
      31, 2009
              
              
              216
              
              
              
              1,958
              
              
              
              -
              
              
              
              -
              
              
              
              2,174Compensation
      expense –restricted stock
              
              
              -
              
              
              
              250
              
              
              
              -
              
              
              
              -
              
              
              
              250Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,421
              
              
              
              2,421Other
      comprehensive income -Net
      unrealized gain onavailable-for-sale
      securities
              
              
              -
              
              
              
              -
              
              
              
              73
              
              
              
              -
              
              
              
              73Net
      unrealized loss onderivative
      instrument
              
              
              -
              
              
              
              -
              
              
              
              (129
              )
              
              
              -
              
              
              
              (129
              )Comprehensive
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,365Balances,
      March 31, 2010
              
              $
              11,095
              
              
              $
              145,480
              
              
              $
              135
              
              
              $
              24,771
              
              
              $
              181,481





See
accompanying notes to consolidated financial statements.


4


ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Amounts
in Thousands)


(Unaudited)





Three Months Ended
                  March 31,2010
                
                
                2009Cash
      flows from operating activities:Net
      income
                
                $
                2,421
                
                
                $
                2,653Adjustments
      to reconcile net income to net cash provided by operating
      activities:Impairment
      charge on property sold at a loss
                
                
                -
                
                
                
                229Increase
      in rental income from straight-lining of rent
                
                
                (431
                )
                
                
                (237
                )Decrease
      in rental income resulting from bad debt expense
                
                
                62
                
                
                
                123(Decrease)
      increase in rental income from amortization of intangibles relating to
      leases
                
                
                (3
                )
                
                
                24Amortization
      of restricted stock expense
                
                
                250
                
                
                
                217Equity
      in earnings of unconsolidated joint ventures
                
                
                (124
                )
                
                
                (160
                )Distributions
      of earnings from unconsolidated joint ventures
                
                
                100
                
                
                
                135Depreciation
      and amortization
                
                
                2,135
                
                
                
                2,376Amortization
      of financing costs
                
                
                142
                
                
                
                281Changes
      in assets and liabilities:Decrease
      (increase) in escrow, deposits, other assets and
    receivables
                
                
                249
                
                
                
                (412
                )Decrease
      in accrued expenses and other liabilities
                
                
                (436
                )
                
                
                (521
                )Net
      cash provided by operating activities
                
                
                4,365
                
                
                
                4,708Cash
      flows from investing activities:Purchase
      of real estate and improvements
                
                
                (5,890
                )
                
                
                (4
                )Net
      proceeds from sale of real estate
                
                
                -
                
                
                
                1,764Investment
      in unconsolidated joint ventures
                
                
                -
                
                
                
                (3
                )Distributions
      of return of capital from unconsolidated joint ventures
                
                
                4
                
                
                
                32Prepaid
      tenant improvement allowance
                
                
                (1,750
                )
                
                
                -Net
      proceeds from sale of available-for-sale securities
                
                
                1,994
                
                
                
                -Net
      cash (used in) provided by investing activities
                
                
                (5,642
                )
                
                
                1,789Cash
      flows from financing activities:Repayment
      of mortgages payable
                
                
                (3,776
                )
                
                
                (1,543
                )Proceeds
      from mortgage financings
                
                
                3,000
                
                
                
                2,559Payment
      of financing costs, including mortgage assumption fees
                
                
                (360
                )
                
                
                (194
                )Cash
      distributions - common stock
                
                
                (247
                )
                
                
                (2,239
                )Repurchase
      of common stock
                
                
                -
                
                
                
                (143
                )Expenses
      associated with stock issuance
                
                
                (35
                )
                
                
                -Net
      cash used in financing activities
                
                
                (1,418
                )
                
                
                (1,560
                )Net
      (decrease) increase in cash and cash equivalents
                
                
                (2,695
                )
                
                
                4,937Cash
      and cash equivalents at beginning of period
                
                
                28,036
                
                
                
                10,947Cash
      and cash equivalents at end of period
                
                $
                25,341
                
                
                $
                15,884Supplemental
      disclosures of cash flow information:Cash
      paid during the period for interest
                
                $
                3,246
                
                
                $
                4,188Supplemental
      schedule of non-cash investing and financing activities:Common
      stock dividend – portion paid in shares of Company’s common
      stock
                
                
                2,209
                
                
                
                -Assumption
      of mortgage payable in connection with purchase of real
    estate
                
                
                17,654
                
                
                
                -Purchase
      accounting allocation – intangible lease assets
                
                
                2,633
                
                
                
                -





See
accompanying notes to consolidated financial statements.


5


One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements  (Unaudited)


March 31,
2010





Note 1 -
Organization and
Background





One
Liberty Properties, Inc. (“OLP”) was incorporated in 1982 in the state of
Maryland.  OLP is a self-administered and self-managed real estate
investment trust (“REIT”).  OLP acquires, owns and manages a
geographically diversified portfolio of retail, including furniture and office
supply stores, industrial, office, flex, health and fitness and other
properties, a substantial portion of which are under long-term net
leases.  As of March 31, 2010, OLP owned 72 properties, one of which
is vacant, and one of which is a 50% tenancy in common
interest.  OLP’s joint ventures owned a total of five properties. The
77 properties are located in 27 states.





Note 2 -
Basis of
Preparation





The
accompanying interim unaudited consolidated financial statements as of March 31,
2010 and 2009 and for the three months ended March 31, 2010 and 2009 reflect all
normal recurring adjustments which are, in the opinion of management, necessary
for a fair presentation of the results for such interim periods. The results of
operations for the three months ended March 31, 2010 are not necessarily
indicative of the results for the full year.





The
preparation of the financial statements in conformity with generally accepted
accounting pinciples requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying
notes.  Actual results could differ from those estimates.





The
consolidated financial statements include the accounts and operations of OLP and
its wholly-owned subsidiaries (collectively, the “Company”). Material
intercompany items and transactions have been eliminated. The Company accounts
for its investments in unconsolidated joint ventures under the equity method of
accounting. All investments in joint ventures have sufficient equity at risk to
permit the entity to finance its activities without additional subordinated
financial support. Additionally, as a group, the holders of the equity at risk
have power through voting rights to direct the activities of the venture. As a
result, none of the Company’s joint ventures are variable interest entities. In
addition, although the Company is the managing member, it does not exercise
substantial operating control over these entities, and therefore the entities
are not consolidated. These investments are recorded initially at cost, as
investments in unconsolidated joint ventures, and subsequently adjusted for
their share of equity in earnings, cash contributions and distributions. None of
the joint venture debt is recourse to the Company.





Certain
amounts reported in previous consolidated financial statements have been
reclassified in the accompanying consolidated financial statements to conform to
the current year’s presentation, primarily to reclassify the operations of two
properties that were sold in October 2009 to discontinued operations for the
three months ended March 31, 2009. In addition, the operations of five
properties that were formerly leased to Circuit City Stores, Inc. and conveyed
in July 2009 to the mortgagee by deeds-in-lieu of foreclosure were reclassified
to discontinued operations for the three months ended March 31,
2009.





These
statements should be read in conjunction with the consolidated financial
statements and related notes which are included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2009.


6


One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements  (Unaudited)


March 31,
2010 (Continued)





Note 3 -
Earnings Per Common
Share





For the
three months ended March 31, 2010 and 2009, basic earnings per share was
determined by dividing net income for each period by the weighted average number
of shares of common stock outstanding, which includes unvested restricted stock
during each period.





Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts exercisable for, or convertible into, common stock
were exercised or converted or resulted in the issuance of common stock that
shared in the earnings of the Company.  The weighted average number of
common shares outstanding used for the diluted earnings per share calculations
includes the impact of common stock issued in connection with the dividends paid
in April, July and October 2009 and January 2010, as of the dividend declaration
date, as the shares were contingently issuable as of that date.  Such
stock dividends were included in basic EPS as of the issuance date. There were
no options outstanding to purchase shares of common stock or other contracts
exercisable for, or convertible into, common stock during the three months ended
March 31, 2010 and 2009.





Note 4 -
Investment in
Unconsolidated Joint Ventures





The
Company’s five unconsolidated joint ventures each own and operate one
property.  At March 31, 2010 and December 31, 2009, the Company’s
equity investment in unconsolidated joint ventures totaled $5,864,000 and
$5,839,000, respectively. The Company recorded equity in earnings of $124,000
and $160,000 for the three months ended March 31, 2010 and 2009,
respectively.





Note 5 -
Allowance for Doubtful
Accounts





The
Company maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of its tenants to make required rent
payments.  If the financial condition of a specific tenant were to
deteriorate, resulting in an impairment of its ability to make payments,
additional allowances may be required.  At March 31, 2010 and December
31, 2009, the balance in allowance for doubtful accounts was $514,000 and
$472,000, respectively, recorded as a reduction to accounts receivable. The
Company records bad debt expense as a reduction of rental income. For the three
months ended March 31, 2010 and 2009, the Company recorded bad debt expense of
$62,000 and $123,000, respectively, of which $58,000 was recorded in
discontinued operations for the three months ended March 31,
2009.  There were no discontinued operations in the three months ended
March 31, 2010.





Note 6 -
Property
Acquisition





On
February 24, 2010, the Company acquired a community shopping center located in
Pennsylvania, for a purchase price of $23,500,000, before closing costs. The
center is 99% occupied, leased to ten separate tenants and approximately 68% of
its 2010 contractual base rent is from ground leases. The Company paid the
purchase price by assuming an existing first mortgage encumbering the property
of approximately $17,700,000 and the balance of the purchase price was paid in
cash.  The mortgage, which matures in May 2014, bears interest at 5.67% per
annum.  The Company incurred third party property acquisition costs of
$333,000 during the three months ended March 31, 2010 relating to this
property.


7





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements  (Unaudited)


March 31,
2010  (Continued)





Note 6 -
Property Acquisition
(Continued)





As a
result of this purchase, the Company recorded deferred intangible lease assets
of $2,633,000, representing the value of the acquired above market leases and
assumed origination costs. The assumed mortgage was determined to be at market.
The Company assesses the fair value of the lease intangibles and the assumed
mortgage based on estimated cash flow projections that utilize appropriate
discount rates and available market information. Such inputs are Level 3 of the
fair value hierarchy. The Company is currently in the process of finalizing the
purchase price allocation, including the value of the assumed mortgage for this
property, therefore it is preliminary and subject to change.





Note 7 -
Discontinued
Operations





The
following is a summary of income from discontinued operations applicable to the
three properties sold in 2009 and the five properties (formerly leased to
Circuit City Stores, Inc.) that were conveyed to the mortgagee by deeds-in-lieu
of foreclosure in July 2009 (amounts in thousands):





Three Months Ended
                            March 31, 2009Rental
      income, including $400 lease termination fee
                          
                          $
                          1,317Depreciation
      and amortization
                          
                          
                          253Real
      estate expenses
                          
                          
                          109Interest
      expense
                          
                          
                          411Total
      expenses
                          
                          
                          773Income
      from operations
                          
                          
                          544Impairment
      charge on property sold at a loss
                          
                          
                          (229
                          )Income
      from discontinued operations
                          
                          $
                          315





In
February 2009, the Company entered into a lease termination agreement with a
retail tenant of a Texas property that had been paying its rent on a current
basis, but had vacated the property in 2006. Pursuant to the agreement, the
tenant paid the Company $400,000 as consideration for the lease
termination.  On March 5, 2009, the Company sold this property to an
unrelated party for $1,900,000 and recorded an impairment charge of $229,000 to
recognize the loss. This is in addition to an impairment charge of $752,000
taken in a prior year.





There
were no discontinued operations for the three months ended March 31,
2010.


8





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements  (Unaudited)


March 31,
2010  (Continued)




Note 8 -
Common Stock Dividend
Distributions





On March
9, 2010, the Board of Directors declared a quarterly dividend on the Company’s
common stock of $.30 per share payable in cash on April 6, 2010 to stockholders
of record as of March 26, 2010.





Note 9 -
Comprehensive
Income





Comprehensive
income for the three months ended March 31, 2010 and 2009 is as follows (amounts
in thousands):


Three Months Ended
                          March 31,2010
                        
                        
                        2009Net
      income
                        
                        $
                        2,421
                        
                        
                        $
                        2,653Other
      comprehensive income -Net
      unrealized gain (loss) on available-for-sale securities
                        
                        
                        73
                        
                        
                        
                        (38
                        )Net
      unrealized loss on derivative instruments
                        
                        
                        (129
                        )
                        
                        
                        (184
                        )Comprehensive
      income
                        
                        $
                        2,365
                        
                        
                        $
                        2,431





Accumulated
other comprehensive income includes an accumulated net unrealized gain on
available-for-sale securities of $181,000, an unrealized loss on
available-for-sale securities in a joint venture of $28,000 and a net unrealized
loss on derivative instruments of $18,000 resulting in a total cumulative net
gain of $135,000 at March 31, 2010.  At December 31, 2009, accumulated
other comprehensive income was comprised of a net accumulated unrealized gain on
available-for-sale securities of $112,000, an unrealized loss on
available-for-sale securities in a joint venture of $32,000 and a net unrealized
gain on derivative instruments of $111,000.





Note 10 -
Stock Based
Compensation





The
Company’s 2009 Stock Incentive Plan (the “2009 Incentive Plan”), approved by the
Company’s stockholders in June 2009, permits the Company to grant stock options,
restricted stock and/or performance-based awards to its employees, officers,
directors and consultants.  The maximum number of shares of the
Company’s common stock that may be issued pursuant to the 2009 Incentive Plan is
600,000.





The
Company’s 2003 Stock Incentive Plan (the “2003 Incentive Plan”), approved by the
Company’s stockholders in June 2003, permitted the Company to grant stock
options and restricted stock to its employees, officers, directors and
consultants.  The maximum number of shares of the Company’s common
stock that was allowed to be issued pursuant to the 2003 Incentive Plan was
275,000.


9





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements  (Unaudited)


March 31,
2010  (Continued)





Note 10 -
Stock Based
Compensation (Continued)





The
restricted stock grants are recorded based on the market value of the common
stock on the date of the grant and substantially all restricted stock awards
made to date provide for vesting upon the fifth anniversary of the date of grant
and under certain circumstances may vest earlier. For accounting purposes, the
restricted stock is not included in the outstanding shares shown on the balance
sheet until they vest, however dividends are paid on the unvested
shares.  The value of such grants is initially deferred and charged to
general and administrative expense over the respective vesting
periods.


Three
      Months Ended
                    March 31,2010
                  
                  
                  2009Restricted
      share grants
                  
                  
                  -
                  
                  
                  
                  -Average
      per share grant price
                  
                  $
                  -
                  
                  
                  $
                  -Recorded
      as deferred compensation
                  
                  $
                  -
                  
                  
                  $
                  -Total
      charge to operations, all outstanding restricted grants
                  
                  $
                  250,000
                  
                  
                  $
                  217,000Non-vested
      shares:Non-vested
      beginning of period
                  
                  
                  357,925
                  
                  
                  
                  213,625Grants
                  
                  
                  -
                  
                  
                  
                  -Vested
      during period
                  
                  
                  -
                  
                  
                  
                  -Forfeitures
                  
                  
                  -
                  
                  
                  
                  -Non-vested
      end of period
                  
                  
                  357,925
                  
                  
                  
                  213,625





Through
March 31, 2010, a total of 274,950 and 143,100 shares were issued pursuant to
the Company’s 2003 and 2009 Stock Incentive Plans, respectively, of which
456,900 shares remain available for grant under the 2009
Plan.  Approximately $2,298,000 remains as deferred compensation and
will be charged to expense over the remaining respective vesting periods. The
weighted average vesting period is approximately 2.89 years.  As of
March 31, 2010 and 2009, there were no options outstanding under the 2009 and
2003 Incentive Plans.





Note 11 -
Line of
Credit





The
Company’s $62,500,000 revolving credit facility (“Existing Facility”) with VNB
New York Corp., Bank Leumi USA, Israel Discount Bank of New York and
Manufacturer’s & Trader’s Trust Company, matured on March 31,
2010.  The Company has negotiated a Second Amended and Restated Loan
Agreement, to be dated as of March 31, 2010, with the same bank
group.  The documents to consummate the Second Amended and Restated
Loan Agreement have been substantially finalized.


10




One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements  (Unaudited)


March 31,
2010  (Continued)





Note 11 -
Line of Credit
(Continued)




The
Second Amended and Restated Loan Agreement, as drafted, reduces the Company’s
permitted borrowings from $62,500,000 to $40,000,000, extends the expiration
date of the credit facility to March 31, 2012 and increases the interest rate
from the lower of LIBOR plus 2.15% or the
respective bank’s prime rate on funds borrowed plus an unused facility fee of 1⁄4%
per annum to the greater of 90 day LIBOR plus 3% or 6% per annum plus an unused
facility fee of 1⁄4% per annum. Upon closing, the Company will pay the banks a
$400,000 commitment fee. There is $27,000,000 outstanding under the existing
facility. Until all parties have executed the Second Amended and Restated Loan
Agreement, the Existing Facility remains in place but we are not permitted
to draw down any additional funds.





Note 12 -
Mortgages
Payable





Two
mortgage loans aggregating $13.4 million in principal amount matured and remain
outstanding at May 5, 2010.   The Company is currently in
negotiations with the lenders or their representatives to extend both of these
loans.





Note 13 -
Derivative Financial
Instruments





The
Company’s primary objective in using derivatives is to add stability to interest
expense and to manage its exposure to interest rate movements. To accomplish
this objective, the Company primarily uses interest rate swaps as part of its
interest rate risk management strategy. At March 31, 2010 and December 31, 2009,
the Company had one qualifying interest rate swap outstanding, which was entered
into in March 2009, with notional values of $9,769,000 and $9,832,000 at March
31, 2010 and December 31, 2009, respectively. In addition, at March 31, 2009,
the Company had one non-qualifying interest rate swap outstanding which was
subsequently designated as a qualifying cash flow hedge at April 1, 2009. The
Company terminated the interest rate swap and the loan agreement on this
interest rate swap in October 2009 due to the sale of the mortgaged property.
The Company does not use derivatives for trading or speculative purposes. The
derivative financial instruments had no material effect on the Company’s
financial statements as of and for the three months ended March 31, 2010 or
March 31, 2009.





The
derivative agreement in existence at March 31, 2010 provides that if the wholly
owned subsidiary of the Company which is a party to the agreement defaults or is
capable of being declared in default on any of its indebtedness, then a default
can be declared on such subsidiary’s derivative obligation. In addition, the
Company (but not any of its subsidiaries) is a credit support provider and a
party to the derivative agreement and if there is a default by the Company on
any of its indebtedness, a default can be declared on the derivative obligation
under the agreement to which the Company is a party.


11


One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements  (Unaudited)


March 31,
2010  (Continued)





Note 14 -
Fair Value of
Financial Instruments





Financial Instruments Not
Measured at Fair Value





The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments for which adjustments to measure at fair value
are not reported:





Cash and
cash equivalents:  The carrying amounts reported in the balance sheet
for these instruments approximate their fair values.





Mortgages
payable: At March 31, 2010, the $209,062,000 estimated fair value of the
Company's mortgages payable is more than their carrying value by approximately
$1,880,000, assuming a blended market interest rate of 6% based on a five year
weighted average remaining term of the mortgages.





Line of
credit: At March 31, 2010, the fair value of the Company's line of credit equals
its carrying value since it matured on March 31, 2010.





The fair
value of the Company’s mortgages and line of credit was estimated using other
observable inputs such as available market information and discounted cash flow
analysis based on borrowing rates the Company believes it could obtain with
similar terms and maturities.





Considerable
judgment is necessary to interpret market data and develop estimated fair
value.  The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value
amounts.





Financial Instruments
Measured at Fair Value





The
Company accounts for fair value measurements based on the assumptions that
market participants would use in pricing the asset or liability.  As a
basis for considering market participant assumptions in fair value measurements,
a fair value hierarchy distinguishes between market participant assumptions
based on market data obtained from sources independent of the reporting entity
and the reporting entity’s own assumptions about market participant
assumptions.  In accordance with the fair value hierarchy, Level 1
assets/liabilities are valued based on quoted prices for identical instruments
in active markets, Level 2 assets/liabilities are valued based on quoted prices
in active markets for similar instruments, on quoted prices in less active or
inactive markets, or on other “observable” market inputs and Level 3
assets/liabilities are valued based significantly on “unobservable” market
inputs.  The Company does not currently own any financial instruments
that are classified as Level 3.


12





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements  (Unaudited)


March 31,
2010  (Continued)





Note 14 -
Fair Value of
Financial Instruments (Continued)





The fair
values of the Company’s financial instruments were determined using the
following inputs as of March 31, 2010 (amounts in thousands):




Fair Value
                            Measurements
                            Using Fair Value
                            HierarchyCarrying
                            and Fair
                            Value
                          
                          
                          Maturity
                            Date
                          
                          
                          Level 1
                          
                          
                          Level 2Financial assets:Available-for-sale
      securities:Corporate
      debt security
                          
                          $
                          1,409
                          
                          
                          January 15, 2012
                          
                          
                          $
                          -
                          
                          
                          $
                          1,409Corporate
      debt security
                          
                          
                          996
                          
                          
                          February
      15, 2037
                          
                          
                          
                          -
                          
                          
                          
                          996Equity
      securities
                          
                          
                          619
                          
                          
                          -
                          
                          
                          
                          619
                          
                          
                          
                          -Treasury
      bill
                          
                          
                          2,000
                          
                          
                          May
      6, 2010
                          
                          
                          
                          2,000
                          
                          
                          
                          -Financial liabilities:Derivative
      financial instrument
                          
                          
                          18
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          18





Available-for-sale
securities





The
Company’s available-for-sale securities have a total amortized cost of
$4,843,000.  At March 31, 2010, unrealized gains on such securities
were $331,000 and unrealized losses were $150,000. The aggregate net unrealized
gain of $181,000 is included in accumulated other comprehensive income on the
balance sheet.  Fair values are approximated on current market quotes
from financial sources that track such securities. All of the available-for-sale
securities in an unrealized loss position are equity securities and amounts are
not considered to be other than temporary impairment because the Company expects
the value of these securities to recover and plans on holding them until at
least such recovery.





Derivative financial
instrument





Fair
values are approximated using widely accepted valuation techniques including
discounted cash flow analysis on the expected cash flows of the derivative. This
analysis reflects the contractual terms of the derivative, including the period
to maturity, and uses observable market-based inputs, including interest rate
curves, foreign exchange rates, and implied volatilities.  At March
31, 2010 and December 31, 2009, this derivative is included in other liabilities
and other assets, respectively, on the consolidated balance
sheet.


13





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements  (Unaudited)


March 31,
2010  (Continued)





Note 14 -
Fair Value of
Financial Instruments (Continued)




Although the Company has
determined that the majority of the inputs used to value its derivative fall
within Level 2 of the fair value hierarchy, the credit valuation adjustments
associated with it utilize Level 3 inputs, such as estimates of current credit
spreads to evaluate the likelihood of default by itself and its
counterparty.  However, as of March 31, 2010, the Company has assessed
the significance of the impact of the credit valuation adjustments on the
overall valuation
of its derivative position and has determined that the credit valuation
adjustments are not significant to the overall valuation of its
derivative.  As a result, the Company has determined that its
derivative valuation is classified in Level 2 of the fair value
hierarchy.





Note 15 -
New Accounting
Pronouncements





The FASB
issued updated consolidation accounting guidance for determining whether an
entity is a variable interest entity, or VIE, and requires the performance of a
qualitative rather than a quantitative analysis to determine the primary
beneficiary of a VIE. The updated guidance requires
an entity to consolidate a VIE if it has (i) the power to direct the activities
that most significantly impact the entity’s economic performance and (ii) the
obligation to absorb losses of the VIE or the right to receive benefits from the
VIE that could be significant to the VIE.  The updated guidance was
effective for the Company on January 1, 2010.  The Company has reevaluated
the accounting for all investments and noted that none represent variable
interest entities in accordance with the updated consolidation guidance.
 The adoption did not have amaterial
effect on the Company’s consolidated financial condition, results of operations,
or cash flows.





In
January 2010 the FASB issued Accounting Standards Update 2010-06, Fair Value
Measurements and Disclosures, Improving Disclosures about Fair Value
Measurements (“ASU 2010-06”).  ASU 2010-06 requires a number of additional
disclosures regarding fair value measurements, including the amount of transfers
between Level 1 and 2 of the fair value hierarchy, the reasons for transfers in
our out of Level 3 of the fair value hierarchy and activity for recurring Level
3 measures.  In addition, the amendments clarify certain existing
disclosure requirements related to the level at which fair value disclosures
should be disaggregated and the requirement to provide disclosures about the
valuation techniques and inputs used in determining the fair value of assets or
liabilities classified as Level 2 or 3. ASU 2010-06 was effective January 1,
2010, except for the disclosures about purchases, sales, issuances and
settlements in the roll forward of activity in Level 3 fair value measurements. Those
disclosures are effective for the Company on January 1, 2011 and early adoption
is permitted.





Note 16 -
Subsequent
Events





Subsequent
events have been evaluated and there were no significant events relative to our
consolidated financial statements as of March 31, 2010 that warrant additional
disclosure.


14





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





Forward-Looking
Statements





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





Overview





We are a
self-administered and self-managed real estate investment trust, or REIT. We
primarily own real estate that we net lease to tenants.  As of March
31, 2010, we owned 72 properties, one of which is a 50% tenancy in common
interest, and participated in five joint ventures which owned a total of five
properties.  These 77 properties are located in 27
states.





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





We seek
to acquire properties throughout the United States that have locations,
demographics and other investment attributes that we believe to be
attractive.  We believe that long-term leases provide a predictable
income stream over the term of the lease, making fluctuations in market rental
rates and in real estate values less significant to achieving our overall
investment objectives.  Our goal is to acquire properties that are
subject to long-term net or ground leases that include periodic contractual
rental increases.  Periodic contractual rental increases provide
reliable increases in future rent payments, while rent increases based on the
consumer price index provide protection against
inflation.  Historically, long-term leases have made it easier for us
to obtain longer-term, fixed-rate mortgage financing with principal
amortization, thereby moderating the interest rate risk associated with
financing or refinancing our property portfolio by reducing the outstanding
principal balance over time.  Although we regard long-term leases as
an important element of our acquisition strategy, we may acquire a property that
is subject to a short-term lease when we believe the property represents a good
opportunity for recurring income and residual value.


15


We are a
party to a credit agreement, as amended, with VNB New York Corp., Bank Leumi,
USA, Manufacturers and Traders Trust Company and Israel Discount Bank of New
York, for a maximum amount of $62.5 million, under which $27 million is
currently outstanding. This credit facility matured on March 31,
2010.   We have negotiated a Second Amended and Restated Loan
Agreement with our current lenders that reduces permitted borrowings from $62.5
million to $40 million.  The documents to consummate the Second
Amended and Restated Loan Agreement have been substantially
finalized. However, there can be no assurance that the transaction will be
consummated.





Results of
Operations





Comparison of Three Months
Ended March 31, 2010 and 2009





Revenues





Rental
income increased by $262,000, or 2.7%, to $10.1 million for the three months
ended March 31, 2010 from $9.8 million for the three months ended March 31,
2009. The increase in rental income is primarily due to rental revenues of
$198,000 earned during the three months ended March 31, 2010 on a neighborhood
shopping center we acquired on February 24, 2010.





Operating
Expenses





During
the three months ended March 31, 2010, we incurred $346,000 of property
acquisition expenses, of which $333,000 resulted from the purchase of the
neighborhood shopping center acquired on February 24, 2010 and $13,000 was in
connection with the purchase of a property which is currently under
contract.





Real
estate expenses increased by $23,000, or 14.5%, to $182,000 for the three months
ended March 31, 2010, resulting primarily from real estate taxes for one of our
properties which was leased to Hollywood Entertainment Corp. Hollywood
Entertainment Corp. filed for protection under Federal bankruptcy laws in
February 2010 and rejected its lease with us during the three months ended March
31, 2010.





Other
Income and Expenses





Equity in
earnings of unconsolidated joint ventures decreased by $36,000, or 22.5%, to
$124,000 for the three months ended March 31, 2010 from $160,000 for the three
months ended March 31, 2009.  The decrease results primarily from a
$27,000 decrease in rental income at one of our joint venture
properties.  Also contributing to the decrease is our share of
expenses incurred in connection with the possible sale or re-renting of a
property where the lease expired April 30, 2010.





Interest
and other income increased by $23,000, or 82.1%, to $51,000 for the three months
ended March 31, 2010 resulting primarily from interest earned on our investment
in REIT bonds.





Interest
expense decreased by $105,000, or 3.1%, to $3.3 million for the three months
ended March 31, 2010, from $3.4 million for the three months ended March 31,
2009. This decrease resulted from the payoff in full of three mortgage loans
between July 2009 and January 2010, as well as from the monthly principal
amortization of other mortgages.  In addition, interest expense
relating to our line of credit decreased by $36,000 during the three months
ended March 31, 2010 due to a decrease in interest rates. These decreases were
offset by interest expense on a mortgage assumed in connection with the purchase
of a property in February 2010, as well as from fixed rate mortgages placed on
two properties in March 2009 and March 2010.


16


Amortization
of deferred financing costs decreased by $114,000, or 44.5%, to $142,000 for the
three months ended March 31, 2010.  The decrease results primarily
from accelerated amortization of deferred financing costs of $118,000 relating
to a mortgage loan that was refinanced during the three months ended March 31,
2009.





Discontinued
Operations





Income
from operations included in discontinued operations was $544,000 for the three
months ended March 31, 2009 and includes the operations of eight of our
properties, five of which were conveyed to the mortgagee in July 2009 and three
of which were sold during the year ended December 31,
2009.   Included in such income is a $400,000 lease termination
payment we received in March 2009 from a retail tenant that had been paying its
rent on a current basis, but had vacated the property in 2006. In March 2009, we
sold this property and recorded an impairment charge of $229,000 to recognize
the loss on the sale.  There were no discontinued operations in the
three months ended March 31, 2010.





Liquidity and Capital
Resources





Our
capital sources include income from our operating activities, cash and cash
equivalents, available-for-sale securities, borrowings under a revolving credit
facility, refinancing existing mortgage loans and obtaining mortgage loans
secured by our unencumbered properties.  Our available liquidity at
March 31, 2010 was approximately $30 million, including $25 million of cash and
cash equivalents and $5 million of available-for-sale securities.





Liquidity
and Financing





We expect
to meet all of our capital needs and dividend payments with cash flow generated
by our operating activities, primarily, rental income.  To the extent
that cash provided by our operations is not adequate to cover all of our capital
needs (which we do not anticipate), we will be required to use our available
cash and cash equivalents and/or sell our marketable securities to pay our
capital needs. In addition, at March 31, 2010, we owned unencumbered income
producing real estate with an aggregate carrying value, before accumulated
depreciation, of $78 million, which we may seek to finance if we determine we
need additional liquidity.





At March 31, 2010,
excluding mortgages payable of our unconsolidated joint ventures, we had 36
outstanding mortgages payable secured by 52 properties, aggregating
approximately $207 million in principal amount. These mortgages are primarily
secured by first liens on individual real estate investments with an aggregate
carrying value of approximately $336 million, before accumulated depreciation.
The mortgages bear interest at fixed rates ranging from 5.44% to 8.8%, and
mature between 2010 and 2037.





Two
mortgage loans aggregating $13.4 million in principal amount matured and remain
outstanding at May 5, 2010.   We are currently in negotiations
with the lenders or their representatives to extend both of these
loans.  Additionally, one mortgage loan, with an outstanding principal
amount of $1.6 million, has been, since October, 2009, callable on ninety days
notice by the mortgagee.  Such mortgage has not been
called.


17





We
continually seek to refinance existing mortgage loans on terms we deem
acceptable, in order to generate additional liquidity.  Additionally,
in the normal course of our business, we sell properties when we determine that
it is in our best interests, which also generates additional liquidity. Further,
since each of our encumbered properties is subject to a non-recourse mortgage
(with standard carve outs), if our in-house evaluation of the market value of
such property is substantially less than the principal balance outstanding on
the mortgage loan, if we cannot negotiate a reduction in the principal balance,
we may determine to convey such property to the mortgagee in order to terminate
our mortgage obligations, including payment of interest, principal and real
estate taxes, with respect to such property.





Credit Facility





We are a
party to a credit agreement, as amended, with VNB New York Corp., Bank Leumi,
USA, Manufacturers and Traders Trust Company and Israel Discount Bank of New
York which matured on March 31, 2010.  Borrowings under the facility
bear interest at the lower of LIBOR plus 2.15% or the bank’s prime rate and
there is an unused facility fee of 1⁄4% per annum.  The facility is
guaranteed by our subsidiaries that own unencumbered properties and is secured
by the outstanding stock of subsidiary entities.  As of March 31, 2010
and May 5, 2010, there was $27 million outstanding under the
facility.





We have
negotiated a Second Amended and Restated Loan Agreement with our lending
syndicate to be dated as of March 31, 2010 and the documents have been
substantially finalized. The Second Amended and Restated Loan Agreement will
reduce the permitted borrowings from $62.5 million to $40 million, extend the
expiration date from March 31, 2010 to March 31, 2012, increase the interest
rate from the lower of LIBOR plus 2.15% or the bank’s prime rate to 90 day LIBOR
plus 3%, with a minimum interest rate of 6% per annum.  Until the
Second Amended and Restated Loan Agreement is executed, our lending syndicate
has advised us that our current credit facility will remain in place, but we
will not be permitted to draw down any additional funds.  Although, we
are highly confident that the Second Amended and Restated Loan Agreement will be
consummated, there can be no assurance that it will be consummated and our
lending syndicate may demand prompt re-payment of the $27 million outstanding
under the existing credit facility. If that occurs, we expect to have sufficient
liquidity available to us to fully repay the $27 million outstanding. However,
if we are unable to fully repay the $27 million outstanding from our cash and
cash equivalents and available-for-sale securities and we have been unable to
(i) obtain a new credit facility, (ii) secure adequate funds by refinancing
existing mortgages and/or mortgaging unencumbered properties, or (iii) unable to
raise funds by other means (whether by equity or debt offerings or securing
short term financing, etc.), we may be required to sell certain of our
properties at prices we may deem inadequate in order to secure funds to repay
all amounts outstanding under our existing credit facility.





Typically,
we utilize funds from a credit facility to acquire a property and, thereafter
secure long term, fixed rate mortgage debt on such property. We apply the
proceeds from the mortgage loan to repay borrowings under the credit facility,
thus providing us with the ability to re-borrow under the credit facility for
the acquisition of additional properties.  As a result, in order to
grow our business, it is important to have a credit facility in place in order
for us to pursue an active acquisition program.  If we are unable to
consummate the Second Amended and Restated Loan Agreement or obtain a new credit
facility, then unless we can raise additional equity or long term debt, of which
there is no assurance, we will be significantly constrained in our ability to
acquire properties.  In addition, in the current credit environment,
borrowers are limited in their ability to obtain mortgage
financing.  If we continue to be limited in obtaining mortgage
financing (either for acquisitions or with respect to our properties), it will
also adversely affect our ability to acquire additional
properties.  Accordingly, our long term liquidity is dependent (i)
upon our ability to consummate the Second Amended and Restated Loan Agreement or
obtain a new credit facility, (ii) the increased availability of long term,
institutional mortgage financing, or (iii) our ability to raise additional
equity or long term debt.


18


Distribution
Policy





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





Item
3.  Quantitative and Qualitative
Disclosures About Market Risk





Our
primary market risk exposure is the effect of changes in interest rates on the
interest cost of draws on our revolving variable rate credit facility and the
effect of changes in the fair value of our interest rate swap
agreement.  Interest rates are highly sensitive to many factors,
including governmental monetary and tax policies, domestic and international
economic and political considerations and other factors beyond our
control.





As of
March 31,
2010, we had one interest rate swap agreement outstanding that was
entered into March 2009.  The fair value of our interest rate swap is
dependent upon existing market interest rates and swap spreads, which change
over time.  At March 31, 2010, if there had been a 1% increase in
forward interest rates, the fair market value of the interest rate swap and net
unrealized loss on derivative instruments would have decreased by approximately
$373,000.  If there had been a 1% decrease in forward interest rates,
the fair market value of the interest rate swap and net unrealized loss on
derivative instruments would have increased by approximately
$432,000.  These changes would not have any impact on our net income
or cash.





We
utilize interest rate swaps to limit interest rate risk.  Derivatives
are used for hedging purposes rather than speculation.  We do not
enter into interest rate swaps for trading purposes.





In
connection with our mortgage debt (excluding our mortgage subject to the
interest swap agreement), it bears interest at fixed rates, and accordingly, the
effect of changes in interest rates would not impact the amount of interest
expense that we incur under these mortgages.  Our credit facility is a
revolving variable rate facility which is sensitive to interest
rates.  Under current market conditions, we do not believe that our
risk of material potential losses in future earnings, fair values and/or cash
flows from near-term changes in market rates that we consider reasonably
possible is material.


19





We
assessed the market risk for our revolving variable rate credit facility and
believe that a 1% increase in interest rates would cause a decrease in annual
net income of $270,000 and a 1% decrease would cause an increase in annual net
income of $270,000 based on the $27 million outstanding on our credit facility
at March 31,
2010.





Item
4.  Controls
and Procedures





As
required under Rules 13a-15 (e) and 15d-15 (e) under the Securities Exchange Act
of 1934, as amended, we carried out an evaluation under the supervision and with
the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934).  Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures as of March 31, 2010are
effective.





There
were no changes in our internal control over financial reporting (as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934) during the three
months ended March
31, 2010that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.





Part II –
OTHER INFORMATION





Item
6.  Exhibits





Exhibit 31.1
                      Certification
      of President and Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002. (Filed with this Form
10-Q.)Exhibit 31.2
                      Certification
      of Senior Vice President and Chief Financial Officer pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002. (Filed with this Form
      10-Q.)Exhibit 32.1
                      Certification
      of President and Chief Executive Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002. (Filed with this Form
10-Q.)Exhibit 32.2
                      Certification
      of Senior Vice President and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002. (Filed with this Form
      10-Q.)


20


ONE
LIBERTY PROPERTIES, INC.


SIGNATURES





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








One Liberty Properties,
Inc.(Registrant)May 7, 2010
                          /s/ Patrick J. Callan,
      Jr.Date
                          Patrick
      J. Callan, Jr.President
      and Chief Executive Officer(principal
      executive officer)May 7, 2010
                          /s/ David W. KalishDate
                          David
      W. KalishSenior
      Vice President andChief
      Financial Officer(principal
      financial officer)


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