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 September 30, 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
November 2, 2010, the registrant had 11,533,381 shares of common stock
outstanding.







One
Liberty Properties Inc. and Subsidiaries


Table of
Contents





Page No.Part I - Financial InformationItem
1.
                                                Financial StatementsConsolidated
      Balance Sheets –September
      30, 2010 and December 31, 2009
                                                4Consolidated
      Statements of Income –Three
      and nine months ended September 30, 2010 and 2009
                                                5Consolidated
      Statement of Stockholders’ Equity –Nine
      months ended September 30, 2010
                                                7Consolidated
      Statements of Cash Flows –Nine
      months ended September 30, 2010 and 2009
                                                8Notes to Consolidated Financial
    Statements
                                                10Item
2.
                                                Management’s
      Discussion and Analysis of Financial Condition andResults
      of Operations
                                                21Item
3.
                                                Quantitative and Qualitative Disclosures About Market
      Risk
                                                27Item
4.
                                                Controls and Procedures
                                                27Part II – Other InformationItem 6.
                                                Exhibits
                                                28Signatures
                                                29Ex 31.1Ex 31.2Ex 32.1Ex 32.2




3




Part I – FINANCIAL INFORMATION


Item 1.Financial
Statements





ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


(Amounts
in Thousands, Except Per Share Data)





September 30,
                                    
                                    
                                    December 31,2010
                                    
                                    
                                    2009(Unaudited)AssetsReal
      estate investments, at costLand
                                    
                                    $
                                    111,124
                                    
                                    
                                    $
                                    87,070Buildings
      and improvements
                                    
                                    
                                    317,943
                                    
                                    
                                    
                                    301,100429,067
                                    
                                    
                                    
                                    388,170Less
      accumulated depreciation
                                    
                                    
                                    52,349
                                    
                                    
                                    
                                    46,286376,718
                                    
                                    
                                    
                                    341,884Properties
      held for sale
                                    
                                    
                                    -
                                    
                                    
                                    
                                    3,809Investment
      in unconsolidated joint ventures
                                    
                                    
                                    4,967
                                    
                                    
                                    
                                    5,839Cash
      and cash equivalents
                                    
                                    
                                    7,800
                                    
                                    
                                    
                                    28,036Available-for-sale
      securities (including treasury bills of $3,999 in 2009)
                                    
                                    
                                    407
                                    
                                    
                                    
                                    6,762Unbilled
      rent receivable
                                    
                                    
                                    11,849
                                    
                                    
                                    
                                    10,706Unamortized
      intangible lease assets
                                    
                                    
                                    7,565
                                    
                                    
                                    
                                    7,157Escrow,
      deposits and other assets and receivables
                                    
                                    
                                    5,183
                                    
                                    
                                    
                                    2,471Investment
      in BRT Realty Trust at market (related party)
                                    
                                    
                                    237
                                    
                                    
                                    
                                    189Unamortized
      deferred financing costs
                                    
                                    
                                    2,189
                                    
                                    
                                    
                                    1,833Total
      assets
                                    
                                    $
                                    416,915
                                    
                                    
                                    $
                                    408,686Liabilities
      and Stockholders’ EquityLiabilities:Mortgages
      payable
                                    
                                    $
                                    196,205
                                    
                                    
                                    $
                                    190,518Line
      of credit
                                    
                                    
                                    27,800
                                    
                                    
                                    
                                    27,000Dividends
      payable
                                    
                                    
                                    3,445
                                    
                                    
                                    
                                    2,456Accrued
      expenses and other liabilities
                                    
                                    
                                    4,618
                                    
                                    
                                    
                                    3,757Unamortized
      intangible lease liabilities
                                    
                                    
                                    4,873
                                    
                                    
                                    
                                    4,827Total
      liabilities
                                    
                                    
                                    236,941
                                    
                                    
                                    
                                    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;11,161and 10,879
      shares issued and outstanding
                                    
                                    
                                    11,161
                                    
                                    
                                    
                                    10,879Paid-in
      capital
                                    
                                    
                                    146,193
                                    
                                    
                                    
                                    143,272Accumulated
      other comprehensive (loss) income
                                    
                                    
                                    (515
                                    )
                                    
                                    
                                    191Accumulated
      undistributed net income
                                    
                                    
                                    23,135
                                    
                                    
                                    
                                    25,786Total
      stockholders’ equity
                                    
                                    
                                    179,974
                                    
                                    
                                    
                                    180,128Total
      liabilities and stockholders’ equity
                                    
                                    $
                                    416,915
                                    
                                    
                                    $
                                    408,686





See
accompanying notes to consolidated financial statements.


4


ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF INCOME


(Amounts
in Thousands, Except Per Share Data)


(Unaudited)





Three Months Ended
                          September 30,
                        
                        
                        Nine Months Ended
                          September 30,2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Revenues:Rental
      income
                        
                        $
                        10,688
                        
                        
                        $
                        9,453
                        
                        
                        $
                        31,212
                        
                        
                        $
                        28,754Lease
      termination fee
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,784Total
      revenues
                        
                        
                        10,688
                        
                        
                        
                        9,453
                        
                        
                        
                        31,212
                        
                        
                        
                        30,538Operating
      expenses:Depreciation
      and amortization
                        
                        
                        2,197
                        
                        
                        
                        2,100
                        
                        
                        
                        6,440
                        
                        
                        
                        6,334General
      and administrative (including $597, $547, $1,791 and $1,641, respectively,
      to related party)
                        
                        
                        1,695
                        
                        
                        
                        1,643
                        
                        
                        
                        5,261
                        
                        
                        
                        4,895Real
      estate acquisition costs
                        
                        
                        224
                        
                        
                        
                        -
                        
                        
                        
                        738
                        
                        
                        
                        -Real
      estate expenses
                        
                        
                        246
                        
                        
                        
                        173
                        
                        
                        
                        912
                        
                        
                        
                        477Leasehold
      rent
                        
                        
                        77
                        
                        
                        
                        77
                        
                        
                        
                        231
                        
                        
                        
                        231Total
      operating expenses
                        
                        
                        4,439
                        
                        
                        
                        3,993
                        
                        
                        
                        13,582
                        
                        
                        
                        11,937Operating
      income
                        
                        
                        6,249
                        
                        
                        
                        5,460
                        
                        
                        
                        17,630
                        
                        
                        
                        18,601Other
      income and expenses:Equity
      in earnings of unconsolidated jointventures
                        
                        
                        101
                        
                        
                        
                        140
                        
                        
                        
                        354
                        
                        
                        
                        449Gain
      on disposition of real estate held byunconsolidated
      joint venture
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        107
                        
                        
                        
                        -Other
      income, including realized gain on sale of available-for-sale securities
                          and interest income
                        
                        
                        40
                        
                        
                        
                        85
                        
                        
                        
                        265
                        
                        
                        
                        292Interest:Expense
                        
                        
                        (3,658
                        )
                        
                        
                        (3,355
                        )
                        
                        
                        (10,639
                        )
                        
                        
                        (10,118
                        )Amortization
      of deferred financing costs
                        
                        
                        (160
                        )
                        
                        
                        (182
                        )
                        
                        
                        (452
                        )
                        
                        
                        (582
                        )Income
      from continuing operations
                        
                        
                        2,572
                        
                        
                        
                        2,148
                        
                        
                        
                        7,265
                        
                        
                        
                        8,642Discontinued
      operations:Income
      from operations
                        
                        
                        39
                        
                        
                        
                        395
                        
                        
                        
                        165
                        
                        
                        
                        1,226Net
      gain on sales of real estate
                        
                        
                        235
                        
                        
                        
                        -
                        
                        
                        
                        235
                        
                        
                        
                        -Gain
      on troubled mortgage restructuring, as a result of conveyance to
      mortgagee
                        
                        
                        -
                        
                        
                        
                        897
                        
                        
                        
                        -
                        
                        
                        
                        897Impairment
      charge on property sold at a loss
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (229
                        )Income
      from discontinued operations
                        
                        
                        274
                        
                        
                        
                        1,292
                        
                        
                        
                        400
                        
                        
                        
                        1,894Net
      income
                        
                        $
                        2,846
                        
                        
                        $
                        3,440
                        
                        
                        $
                        7,665
                        
                        
                        $
                        10,536Weighted
      average number of common sharesoutstanding:Basic
                        
                        
                        11,481
                        
                        
                        
                        10,837
                        
                        
                        
                        11,443
                        
                        
                        
                        10,499Diluted
                        
                        
                        11,518
                        
                        
                        
                        10,974
                        
                        
                        
                        11,475
                        
                        
                        
                        10,670





Continued
on next page


5





ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF INCOME


(Amounts
in Thousands, Except Per Share Data)


(Unaudited)
(Continued)





Three Months Ended
                                  September 30,
                                
                                
                                Nine Months Ended
                                  September 30,2010
                                
                                
                                2009
                                
                                
                                2010
                                
                                
                                2009Net
      income per common share – basic:Income
      from continuing operations
                                
                                $
                                .23
                                
                                
                                $
                                .20
                                
                                
                                $
                                .63
                                
                                
                                $
                                .82Income
      from discontinued operations
                                
                                
                                .02
                                
                                
                                
                                .12
                                
                                
                                
                                .04
                                
                                
                                
                                .18Net
      income per common share
                                
                                $
                                .25
                                
                                
                                $
                                .32
                                
                                
                                $
                                .67
                                
                                
                                $
                                1.00Net
      income per common share – diluted:Income
      from continuing operations
                                
                                $
                                .23
                                
                                
                                $
                                .19
                                
                                
                                $
                                .63
                                
                                
                                $
                                .81Income
      from discontinued operations
                                
                                
                                .02
                                
                                
                                
                                .12
                                
                                
                                
                                .04
                                
                                
                                
                                .18Net
      income per common share
                                
                                $
                                .25
                                
                                
                                $
                                .31
                                
                                
                                $
                                .67
                                
                                
                                $
                                .99Cash
      distribution declared per share of common stock
                                
                                $
                                .30
                                
                                
                                $
                                .02
                                
                                
                                $
                                .90
                                
                                
                                $
                                .06Stock
      distribution declared per share of common stock
                                
                                $
                                -
                                
                                
                                $
                                .20
                                
                                
                                $
                                -
                                
                                
                                $
                                .60





See
accompanying notes to consolidated financial statements.


6


ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


AND
COMPREHENSIVE INCOME


For the
nine month period ended September 30, 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 on available-for-sale securities
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  319
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  319Net
      unrealized gain on derivative instruments
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  111
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  111Comprehensive
      income
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  20,071Balances,
      December 31, 2009
                                  
                                  
                                  10,879
                                  
                                  
                                  
                                  143,272
                                  
                                  
                                  
                                  191
                                  
                                  
                                  
                                  25,786
                                  
                                  
                                  
                                  180,128Distributions
      –  common stockCash
      - $.90 per share
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (10,316
                                  )
                                  
                                  
                                  (10,316
                                  )Issuance
      of stock for stock dividend obligation at December 31,
2009
                                  
                                  
                                  216
                                  
                                  
                                  
                                  1,888
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2,104Restricted
      stock vesting
                                  
                                  
                                  36
                                  
                                  
                                  
                                  (36
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Shares
      issued through dividend reinvestment plan
                                  
                                  
                                  30
                                  
                                  
                                  
                                  396
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  426Compensation
      expense – restricted stock
                                  
                                  
                                  -
                                  
                                  
                                  
                                  673
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  673Net
      income
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  7,665
                                  
                                  
                                  
                                  7,665Other
      comprehensive income -Net
      unrealized loss on available-for-sale securities
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (107
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (107
                                  )Net
      unrealized loss on derivative instrument
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (599
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (599
                                  )Comprehensive
      income
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  6,959Balances,
      September 30, 2010
                                  
                                  $
                                  11,161
                                  
                                  
                                  $
                                  146,193
                                  
                                  
                                  $
                                  (515
                                  )
                                  
                                  $
                                  23,135
                                  
                                  
                                  $
                                  179,974




See
accompanying notes to consolidated financial statements.




7





ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


(Amounts
in Thousands)


(Unaudited)





Nine Months Ended
                          September 30,2010
                        
                        
                        2009Cash
      flows from operating activities:Net
      income
                        
                        $
                        7,665
                        
                        
                        $
                        10,536Adjustments
      to reconcile net income to net cash provided by operating
      activities:Gain
      on troubled mortgage restructuring, as a result of conveyance to
      mortgagee
                        
                        
                        -
                        
                        
                        
                        (897
                        )Gain
      on sale of available-for-sale securities
                        
                        
                        (149
                        )
                        
                        
                        -Gain
      on sale of real estate
                        
                        
                        (235
                        )
                        
                        
                        -Impairment
      charge on property sold at a loss
                        
                        
                        -
                        
                        
                        
                        229Increase
      in rental income from straight-lining of rent
                        
                        
                        (1,292
                        )
                        
                        
                        (810
                        )Decrease
      in rental income resulting from bad debt expense
                        
                        
                        93
                        
                        
                        
                        475Decrease
      in rental income from amortization of intangibles relating to
      leases
                        
                        
                        17
                        
                        
                        
                        31Amortization
      of restricted stock expense
                        
                        
                        673
                        
                        
                        
                        633Gain
      on disposition of real estate held by unconsolidated joint
      venture
                        
                        
                        (107
                        )
                        
                        
                        -Equity
      in earnings of unconsolidated joint ventures
                        
                        
                        (354
                        )
                        
                        
                        (449
                        )Distributions
      of earnings from unconsolidated joint ventures
                        
                        
                        530
                        
                        
                        
                        365Depreciation
      and amortization
                        
                        
                        6,497
                        
                        
                        
                        6,893Amortization
      of financing costs
                        
                        
                        452
                        
                        
                        
                        653Changes
      in assets and liabilities:Increase
      in escrow, deposits, other assets and receivables
                        
                        
                        (1,198
                        )
                        
                        
                        (282
                        )Increase
      (decrease) in accrued expenses and other liabilities
                        
                        
                        397
                        
                        
                        
                        (428
                        )Net
      cash provided by operating activities
                        
                        
                        12,989
                        
                        
                        
                        16,949Cash
      flows from investing activities:Purchase
      of real estate and improvements
                        
                        
                        (23,964
                        )
                        
                        
                        (492
                        )Net
      proceeds from sale of real estate
                        
                        
                        4,137
                        
                        
                        
                        1,764Investment
      in unconsolidated joint ventures
                        
                        
                        (150
                        )
                        
                        
                        (7
                        )Distributions
      of return of capital from unconsolidated joint ventures
                        
                        
                        953
                        
                        
                        
                        57Prepaid
      tenant improvement allowance
                        
                        
                        (1,750
                        )
                        
                        
                        -Net
      proceeds from sale of available-for-sale securities
                        
                        
                        6,345
                        
                        
                        
                        -Purchase
      of available-for-sale securities
                        
                        
                        -
                        
                        
                        
                        (8,684
                        )Net
      cash used in investing activities
                        
                        
                        (14,429
                        )
                        
                        
                        (7,362
                        )Cash
      flows from financing activities:Regular
      amortization payments of mortgages payable
                        
                        
                        (4,090
                        )
                        
                        
                        (4,327
                        )Repayment
      of mortgages payable
                        
                        
                        (10,687
                        )
                        
                        
                        (3,678
                        )Proceeds
      from mortgage financings
                        
                        
                        3,000
                        
                        
                        
                        2,559Proceeds
      from bank line of credit
                        
                        
                        16,300
                        
                        
                        
                        -Repayment
      on bank line of credit
                        
                        
                        (15,500
                        )
                        
                        
                        -Issuance
      of shares through dividend reinvestment plan
                        
                        
                        426
                        
                        
                        
                        -Payment
      of financing costs, including mortgage assumption fees
                        
                        
                        (1,022
                        )
                        
                        
                        (208
                        )Cash
      distributions - common stock
                        
                        
                        (7,119
                        )
                        
                        
                        (2,698
                        )Repurchase
      of common stock
                        
                        
                        -
                        
                        
                        
                        (1,416
                        )Expenses
      associated with stock issuance
                        
                        
                        (104
                        )
                        
                        
                        (127
                        )Net
      cash used in financing activities
                        
                        
                        (18,796
                        )
                        
                        
                        (9,895
                        )Net
      decrease in cash and cash equivalents
                        
                        
                        (20,236
                        )
                        
                        
                        (308
                        )Cash
      and cash equivalents at beginning of period
                        
                        
                        28,036
                        
                        
                        
                        10,947Cash
      and cash equivalents at end of period
                        
                        $
                        7,800
                        
                        
                        $
                        10,639





Continued
on next page


8


ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Amounts
in Thousands)


(Unaudited)
(Continued)





Nine Months Ended
                  September 30,2010
                
                
                2009Supplemental
      disclosures of cash flow information:Cash
      paid for interest
                
                $
                10,654
                
                
                $
                11,654Supplemental
      schedule of non-cash investing and financing activities:Common
      stock dividend – portion paid in shares of Company’s common
      stock
                
                
                2,209
                
                
                
                4,103Assumption
      of mortgage payable in connection with purchase of real
    estate
                
                
                17,654
                
                
                
                -Purchase
      accounting allocation – intangible lease assets
                
                
                1,078
                
                
                
                -Purchase
      accounting allocation – intangible lease liabilities
                
                
                357
                
                
                
                -Reclassification
      of real estate owned to properties held for sale
                
                
                -
                
                
                
                23,732Reclassification
      of assets related to properties held for sale
                
                
                -
                
                
                
                1,824Reclassification
      of mortgages payable to mortgages payable – properties held for
      sale
                
                
                -
                
                
                
                9,069Mortgage
      debt extinguished upon conveyance of properties to mortgagee by
      deeds-in-lieu of foreclosure
                
                
                -
                
                
                
                8,706Properties
      conveyed to mortgagee
                
                
                -
                
                
                
                8,075Liabilities
      extinguished upon transfer to mortgagee
                
                
                -
                
                
                
                543





See
accompanying notes to consolidated financial statements.


9


One Liberty Properties, Inc. and Subsidiaries


Notes to Consolidated Financial Statements
(Unaudited)


September
30, 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 September 30, 2010, OLP owned 79 properties, two of
which are vacant and one of which is a 50% tenancy in common
interest.  OLP’s joint ventures owned a total of four properties. The
83 properties are located in 28 states.





Note 2 -
Basis of
Preparation





The
accompanying interim unaudited consolidated financial statements as of September
30, 2010 and for the three and nine months ended September 30, 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 and nine months ended September
30, 2010 are not necessarily indicative of the results for the full
year.





The
preparation of the financial statements in conformity with generally accepted
accounting principles 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 and, 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 two properties which
were sold during the three months ended September 30, 2010 to properties held
for sale at December 31, 2009 and to reclassify the operations of these
properties to discontinued operations for the three and nine months ended
September 30, 2010 and 2009.


10


One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


September
30, 2010 (Continued)




Note 2 -
Basis of Preparation
(Continued)





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.





Note 3 -
Earnings Per Common
Share





For the
three and nine months ended September 30, 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. This includes the unvested
restricted stock during each period, as the restricted stock is entitled to
receive dividends and is therefore considered a participating
security.  Excluded from the basic weighted average number of common
shares outstanding are the restricted stock units awarded under the
Pay-for-Performance program described in Note 13 as these units are not
participating securities.





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 earnings per share as of the issuance
date. The diluted weighted average number of common shares also includes the
restricted stock units awarded under the Pay-for-Performance Program described
in Note 13, as of the date of grant. There were no options outstanding to
purchase shares of common stock or other contracts exercisable for, or
convertible into, common stock during the three and nine months ended September
30, 2010 and 2009.





Note 4 -
Investment in
Unconsolidated Joint Ventures





On April
30, 2010, one of the Company’s unconsolidated joint ventures, in which the
Company holds an approximate 36% equity interest, sold its only property for
$3,200,000, net of closing costs. The sale resulted in a gain to the Company of
$107,000.





The
Company’s remaining four unconsolidated joint ventures each own and operate one
property.  At September 30, 2010 and December 31, 2009, the Company’s
equity investment in unconsolidated joint ventures totaled $4,967,000 and
$5,839,000, respectively. The Company recorded equity in earnings (exclusive of
gain on sale) of $354,000 and $449,000 for the nine months ended September 30,
2010 and 2009, respectively, and $101,000 and $140,000 for the three months
ended September 30, 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,
additionalallowances
may be required.  At September 30, 2010 and December 31, 2009, the
balance in allowance for doubtful accounts was $545,000 and $472,000,
respectively, recorded as areduction
to accounts receivable. The Company records bad debt expense as a reduction of
rental income. For the three and nine months ended September 30, 2010, the
Company recorded bad debt expense of $14,000 and $93,000, respectively, and for
the three and nine months ended September 30, 2009, $132,000 and $475,000,
respectively.  For the nine months ended September 30, 2010 and 2009,
$2,000, and $58,000, respectively, of such bad debt expense was recorded in
discontinued operations.  There was no bad debt expense recorded in
discontinued operations for the three months ended September 30, 2010 and
2009.


11





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


September
30, 2010 (Continued)




Note 6 -
Real Estate
Acquisitions and Dispositions





The
following chart details the Company’s real estate acquisitions during the nine
months ended September 30, 2010. There were no acquisitions in the nine months
ended September 30, 2009.




Description of Property
                              
                              Date(s) Acquired
                              
                              Purchase
                                Price
                              
                              Terms of Payment and
                                Mortgage Information
                              
                              Third Party
                                Real Estate
                                Acquisition
                                Costs (a)Community
      shopping center,
                                Royersford,
      Pennsylvania
                              
                              February
      28, 2010
                              
                              $
                              23,500,000
                              
                              Cash
      and $17,700,000 mortgage assumption. Mortgage matures
                                May
      2014 with interest at 5.67% per annum.
                              
                              $
                              349,000Specialty
      retail property,
                                Monroeville,
      Pennsylvania
                              
                              April
      28, 2010
                              
                              $
                              1,313,000,
                                including
                                $300,000
      of
                                contracted
      building
                                improvements
                              
                              All
      cash
                              
                              $
                              49,000Retail
      department store property,
                                Kansas
      City, Missouri
                              
                              June
      30, 2010
                              
                              $
                              8,950,000
                              
                              All
      cash
                              
                              $
                              36,000Six
      fast food restaurant locations,
                                Pennsylvania
      (sale/leaseback transactions)
                              
                              July
      30, 2010 and
                                August
      31, 2010
                              
                              $
                              8,000,000
                              
                              All
      cash
                              
                              $
                              189,000





(a)
            Included
      in the accompanying consolidated statements of
  income.





All of
the properties purchased by the Company in 2010 are currently 100% occupied and,
except for the community shopping center, are each leased by a single tenant
pursuant to a long term net lease. The community shopping center is currently
leased to eleven separate tenants and a significant portion of the rental income
from this property is derived from ground leases.


12





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


September
30, 2010 (Continued)




Note 6 -
Real Estate
Acquisitions and Dispositions (Continued)




As a
result of the 2010 purchases, the Company recorded intangible lease assets of
$1,121,000 and intangible lease liabilities of $365,000, representing the value
of the acquired leases and origination costs.  As of September 30,
2010, the weighted average amortization period is 10.7 years for the intangible
lease assets and 25.3 years for the intangible lease liabilities. The assumed
mortgage was determined to be at market.  The Company assessed 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 in the fair value hierarchy. The
Company is currently in the process of finalizing the purchase price allocations
for the properties purchased since April 2010; therefore, they are preliminary
and subject to change.





During
the three months ended September 30, 2010, the Company sold to unrelated
parties, two properties in separate transactions, for an aggregate of
approximately $4,100,000, net of closing costs, and realized an aggregate gain
of $235,000 in the three and nine months ended September 30, 2010. One of the
properties was vacant as of July 1, 2010.





Note 7 -
Discontinued
Operations





The
following is a summary of income from discontinued operations applicable to two
properties sold in July 2010 and September 2010, three properties sold in 2009
and five properties (formerly leased to Circuit City Stores, Inc.) conveyed to
the mortgagee by deeds-in-lieu of foreclosure in July 2009 (amounts in
thousands):





Three Months Ended
                    September 30,
                  
                  
                  Nine Months Ended
                    September 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Rental
      income, including $400 lease termination fee in the nine months
                    ended September 30, 2009
                  
                  $
                  82
                  
                  
                  $
                  931
                  
                  
                  $
                  355
                  
                  
                  $
                  3,329Depreciation
      and amortization
                  
                  
                  9
                  
                  
                  
                  119
                  
                  
                  
                  57
                  
                  
                  
                  612Real
      estate expenses
                  
                  
                  (4
                  )
                  
                  
                  9
                  
                  
                  
                  8
                  
                  
                  
                  255Interest
      expense
                  
                  
                  38
                  
                  
                  
                  408
                  
                  
                  
                  125
                  
                  
                  
                  1,236Total
      expenses
                  
                  
                  43
                  
                  
                  
                  536
                  
                  
                  
                  190
                  
                  
                  
                  2,103Income
      from operations
                  
                  
                  39
                  
                  
                  
                  395
                  
                  
                  
                  165
                  
                  
                  
                  1,226Net
      gain on sales of real property
                  
                  
                  235
                  
                  
                  
                  -
                  
                  
                  
                  235
                  
                  
                  
                  -Impairment
      charge on property sold at a loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (229
                  )Gain
      on troubled mortgage restructuring, as a result of conveyance to
      mortgagee
                  
                  
                  -
                  
                  
                  
                  897
                  
                  
                  
                  -
                  
                  
                  
                  897Income
      from discontinued operations
                  
                  $
                  274
                  
                  
                  $
                  1,292
                  
                  
                  $
                  400
                  
                  
                  $
                  1,894


13





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


September
30, 2010 (Continued)




Note 7 -
Discontinued
Operations (Continued)





In March
2009, the Company sold a 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.  In July 2009, the Company recognized an $897,000 gain in
connection with the conveyance of five properties to the mortgagee by
deeds-in-lieu of foreclosure. These properties had formerly been leased to
Circuit City Stores, Inc. which filed for protection under federal bankruptcy
laws and rejected leases for these five properties.





Note 8 -
Line of
Credit





On May
26, 2010, the Company entered into a Second Amended and Restated Loan Agreement,
effective as of March 31, 2010, with VNB New York Corp., Bank Leumi USA, Israel
Discount Bank of New York and Manufacturer’s & Trader’s Trust Company, which
amends and restates its prior credit facility.  The Second Amended and
Restated Loan Agreement 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, increases the interest rate to the greater of (i) 90 day
LIBOR plus 3%, or (ii) 6% per annum, and provides for an unused facility fee of
1⁄4 % per annum. Upon closing, the Company paid the banks a $400,000 commitment
fee which is being amortized over the term of the facility.  At
September 30, 2010, there was $27,800,000 outstanding under the facility and at
November 4, 2010 there was $31,100,000 outstanding under the
facility.





Note 9 -
Mortgages
Payable





A
mortgage loan matured on March 1, 2010 and the principal balance of $4,482,000
was paid in full on July 30, 2010. Another mortgage loan matured on April 1,
2010 with a principal balance of approximately $8,900,000. Effective August 1,
2010, the mortgage loan was restructured including a principal pay down of
$2,800,000 and an extension of the maturity date to August 1,
2012.  The Company paid a fee of $120,000 which is being amortized to
interest expense over the life of the restructured loan.





Note 10 -
Common Stock Dividend
Distribution





On
September 14, 2010, the Board of Directors declared a quarterly cash dividend on
the Company’s common stock of $.30 per share totaling $3,445,000, which was paid
on October 6, 2010 to stockholders of record as of September 27,
2010.





Note 11 -
Dividend Reinvestment
Plan





In June
2010, the Company reinstated its Dividend Reinvestment Plan (the “Plan”) which
had been temporarily suspended in December 2008.  The Plan provides
stockholders with the opportunity to reinvest all, or a portion of, their cash
dividends paid on the Company’s common stock in additional shares of its common
stock, at a discount of up to 5% from the market price. The discount is
determined at the Company’s sole discretion.  The Company is currently
offering a 5% discount from market, the same discount which was in place at the
time of the suspension. The Company issued 30,265 common shares under the Plan
during the three months ended September 30, 2010.


14





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


September
30, 2010 (Continued)




Note 12 -
Comprehensive
Income





Comprehensive
income for the three and nine months ended September 30, 2010 and 2009 is as
follows (amounts in thousands):


Three Months Ended
                          September 30,
                        
                        
                        Nine Months Ended
                          September 30,2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Net
      income
                        
                        $
                        2,846
                        
                        
                        $
                        3,440
                        
                        
                        $
                        7,665
                        
                        
                        $
                        10,536Other
      comprehensive income -Net
      unrealized (loss) gain on available-for-sale securities
                        
                        
                        25
                        
                        
                        
                        283
                        
                        
                        
                        (107
                        )
                        
                        
                        290Net
      unrealized (loss) gain on derivative instruments
                        
                        
                        (193
                        )
                        
                        
                        (201
                        )
                        
                        
                        (599
                        )
                        
                        
                        22Comprehensive
      income
                        
                        $
                        2,678
                        
                        
                        $
                        3,522
                        
                        
                        $
                        6,959
                        
                        
                        $
                        10,848





Accumulated
other comprehensive (loss) income includes an accumulated net unrealized gain on
available-for-sale securities of $4,000, an unrealized loss on
available-for-sale securities in a joint venture of $31,000 and a net unrealized
loss on a derivative instrument of $488,000 resulting in a total cumulative net
loss of $515,000 at September 30, 2010.  At December 31, 2009,
accumulated other comprehensive income of $191,000 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 13 -
Stock Based
Compensation





The
Company’s 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.  A maximum of 600,000 shares of the Company’s common
stock is authorized for issuance pursuant to the 2009 Incentive
Plan.





The
Company’s 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.  A maximum of 275,000
shares of the Company’s common stock was authorized for issuance pursuant to the
2003 Incentive Plan.





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


15





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


September
30, 2010 (Continued)





Note 13 -
Stock Based
Compensation (Continued)





Three
      Months Ended
                                      September
      30,
                                    
                                    
                                    Nine
      Months Ended
                                      September
      30,2010
                                    
                                    
                                    2009
                                    
                                    
                                    2010
                                    
                                    
                                    2009Restricted
      share grants
                                    
                                    
                                    875
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    875
                                    
                                    
                                    
                                    102,750Average
      per share grant price
                                    
                                    $
                                    14.64
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    14.64
                                    
                                    
                                    $
                                    6.09Recorded
      as deferred compensation
                                    
                                    $
                                    13,000
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    13,000
                                    
                                    
                                    $
                                    626,000Total
      charge to operations, all outstanding restricted grants
                                    
                                    $
                                    213,000
                                    
                                    
                                    $
                                    221,000
                                    
                                    
                                    $
                                    673,000
                                    
                                    
                                    $
                                    633,000Non-vested
      shares:Non-vested
      beginning of period
                                    
                                    
                                    321,875
                                    
                                    
                                    
                                    285,650
                                    
                                    
                                    
                                    357,925
                                    
                                    
                                    
                                    213,625Grants
                                    
                                    
                                    875
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    875
                                    
                                    
                                    
                                    102,750Vested
      during period
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (36,050
                                    )
                                    
                                    
                                    (30,675
                                    )Forfeitures
                                    
                                    
                                    (1,810
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,810
                                    )
                                    
                                    
                                    (50
                                    )Non-vested
      end of period
                                    
                                    
                                    320,940
                                    
                                    
                                    
                                    285,650
                                    
                                    
                                    
                                    320,940
                                    
                                    
                                    
                                    285,650Average
      value of non-vested shares (based on grant price)
                                    
                                    $
                                    13.33
                                    
                                    
                                    $
                                    15.32
                                    
                                    
                                    $
                                    13.33
                                    
                                    
                                    $
                                    15.32Value
      of shares vested during the period (based on grant price)
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    687,000
                                    
                                    
                                    $
                                    602,000





On
September 14, 2010, the Board of Directors approved a Pay-For-Performance
Program under the Company’s 2009 Incentive Plan, and awarded 200,000 performance
share awards in the form of restricted stock units (the
“Units”).  Holders of Units are not entitled to dividends or to vote
the underlying shares until the Units vest and shares are issued.  If
the defined performance criteria are satisfied at June 30, 2017, one share of
the Company’s common stock will be issued for each Unit
outstanding.  The program allows for 100,000 Units to vest if the
average annual return on capital exceeds 10% and a pro-rata portion of 100,000
Units to vest if the average annual return on capital is between 8% and
10%.  The program allows 100,000 Units to vest if the average annual
total stockholder return exceeds 13% and a pro-rata portion of 100,000 Units to
vest if the average annual total stockholder return is between 10.25% and
13%.   In the event that the performance criteria are not
satisfied in whole or in part at June 30, 2017, the unvested Units will be
forfeited and no shares of the Company’s common stock will be issued for those
Units. For the awards which vest based on total stockholder return, a third
party appraiser prepared a Monte Carlo simulation pricing model to determine the
fair value. For the awards which vest based on return on capital, the fair value
is based on the market value on the date of grant.  Expense will not
be recognized on the Units which the Company does not expect to vest as a result
of service conditions or theCompany’s
performance expectations.  The average per Unit grant price of the
200,000 units granted is $11.74.  The total amount recorded as
deferred compensation for the three and nine months ended September 30, 2010 is
$608,000 and will be charged to general and administrative expense over the
approximate seven year vesting period. The deferred compensation is net of
certain forfeiture and performance assumptions (which will be re-evaluated
quarterly).


16




One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


September
30, 2010 (Continued)




Note 13 -
Stock Based
Compensation (Continued)





Through
September 30, 2010, a total of 274,125 and 342,990 restricted shares and
restricted stock units were issued pursuant to the Company’s 2003 and 2009
Incentive Plans, respectively. Under the 2009 Incentive Plan, 257,010 shares
remain available for grant. No additional shares may be granted under the 2003
Incentive Plan.  Approximately $2,496,000 remains as deferred
compensation and will be charged to expense over the remaining respective
vesting periods. The weighted average vesting period is approximately 4.3
years.  As of September 30, 2010, there were no options outstanding
under the 2009 and 2003 Incentive Plans.





Note 14 -
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 uses interest rate swaps as part of its interest
rate risk management strategy. At September 30, 2010 and December 31, 2009, the
Company had one qualifying interest rate swap outstanding, which was entered
into in March 2009, with a notional value of $9,636,000 and $9,832,000 at
September 30, 2010 and December 31, 2009, respectively.  In addition,
at September 30, 2009, the Company had one other qualifying interest rate swap
outstanding.  The Company terminated the interest rate swap and the
loan agreement on this interest rate swap in October 2009 upon the sale of the
mortgaged property.   The Company does not use derivatives for
trading or speculative purposes.





The
derivative agreement in existence at September 30, 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 this
derivative obligation under the agreement to which the Company is a
party.





Note 15 -
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:


17





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


September
30, 2010 (Continued)





Note 15 -
Fair Value of
Financial Instruments (Continued)





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





Mortgages
payable: At September 30, 2010, the $198,310,000 estimated fair value of the
Company's mortgages payable is more than their carrying value by approximately
$2,105,000, assuming a blended market interest rate of 6% based on a five year
weighted average remaining term of the mortgages.





Line of
credit: The $27,800,000 carrying amount of the Company's line of credit, entered
into on May 26, 2010, approximates its fair value at September 30,
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 measures the fair value of financial instruments 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.


18




One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


September
30, 2010 (Continued)




Note 15 -
Fair Value of
Financial Instruments (Continued)




The fair
values of the Company’s financial instruments were determined using the
following inputs as of September 30, 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:Equity
      securities
                      
                      $
                      644
                      
                      
                      
                      -
                      
                      
                      $
                      644
                      
                      
                      $
                      -Financial liabilities:Derivative
      financial instrument
                      
                      
                      488
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      488





Available-for-sale
securities





The
Company’s available-for-sale securities have a total cost of
$640,000.  At September 30, 2010, unrealized gains on such securities
were $120,000 and unrealized losses were $116,000. The aggregate net unrealized
gain of $4,000 is included in accumulated other comprehensive income on the
balance sheet.  Fair values are approximated based 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.





During
2010, the Company sold three corporate bonds for total gross proceeds of
$2,356,000 and recognized a total gain of $149,000 on the sales.





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
September 30, 2010 and December 31, 2009, this derivative is included in other
liabilities and other assets, respectively, on the consolidated balance
sheet.





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 September 30, 2010, the Company has
assessed the significance of the impact of the credit valuation adjustments on
the overallvaluation
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.


19





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


September
30, 2010 (Continued)




Note 16 -
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 a material 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 which 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 or 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. These required disclosures were effective January1, 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.
There were no transfers between Level 1 and 2 of the fair value hierarchy during
the three and nine months ended September 30, 2010. The adoption did not have a
material effect on the Company’s consolidated financial condition, results of
operations, or cash flows. See Note 15 for the related disclosures.





Note 17 -
Subsequent
Events





On
October 7, 2010, the Company purchased two adjacent properties in Connecticut.
The properties are comprised of a 47,174 square foot supermarket and an adjacent
parking lot situated on an aggregate of 3.72 acres. The total purchase price of
$20,550,000 was paid through the assumption of an existing $13,000,000 first
mortgage encumbering one of the properties and the balance was paid in cash,
including $7,300,000 borrowed from the Company’s line of credit. The mortgage
bears interest at 6.1% per annum and matures in May 2016.  Both
properties are leased to a single tenant pursuant to two separate, conterminous
long term net leases.  In connection with the purchase, the Company
incurred real estate acquisition costs of approximately $180,000, of which
$103,000 is included in the accompanying statement of operations for the three
and nine months ended September 30, 2010 and the balance will be included in the
December 31, 2010 period.


20




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
encouraged to review the risk factors included in our Annual Report on Form 10-K
for the year ended December 31, 2009 under the caption “Item 1A. Risk Factors”
for a discussion of certain factors which may cause actual results to differ
materially from current expectations and are cautioned not to place undue
reliance on any forward-looking statements.





Overview





We are a
self-administered and self-managed real estate investment trust, or REIT. We
primarily own real estate that we net lease to tenants.  As of
September 30, 2010, we owned 79 properties, one of which is a 50% tenancy in
common interest, and participated in four joint ventures which owned a total of
four properties.  These 83 properties are located in 28
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 face a
variety of risks and challenges in our business, including the possibility that
our tenants may not be able to pay their obligations owing under their leases
and, upon termination of tenant leases, we may not be able to re-lease our
properties on terms favorable to us or at all. We manage the risk of our real
property portfolio by diversifying among types of properties and industries,
tenant mix, geography, and lease expiration dates. We manage the risk of tenant
non-payments through a variety of approaches, each tailored to the applicable
situation.  Generally, based on our assessment of the credit risk
posed by a particular tenant and the tenant’s impact on our
portfolio, we monitor a tenant’s financial condition through one or more of the
following actions: reviewing tenant financial statements, obtaining other tenant
related financial information, regular contact with a tenant’s representative,
tenant credit checks and regular management reviews of our tenants and periodic
property visits.




21


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 in 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 or rent increases based on increases in the consumer price
index.  Periodic contractual rental increases provide reliable
increases in future rent payments and 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.





In 2010,
we acquired eleven properties for an aggregate purchase price of $62.3 million
and sold 2 properties for net proceeds of $4.1 million. While the uncertain
economic climate continues to present challenges (including concerns regarding
tenants’ ability to pay their lease obligations and the availability of
acceptable financing), we believe that there are attractive real property
acquisition opportunities, and we intend to continue to pursue such
opportunities.




Results of
Operations





The
following table sets forth a comparison of revenues and operating expenses of
continuing operations for the three and nine months ended September 30, 2010 and
2009 (dollars in thousands):




Three Months Ended September 30,
                  
                  
                  Nine Months Ended September 30,2010
                  
                  
                  2009
                  
                  
                  Difference
                  
                  
                  %
                    Change
                  
                  
                  2010
                  
                  
                  2009
                  
                  
                  Difference
                  
                  
                  %
                    ChangeRevenues:Rental
      income
                  
                  $
                  10,688
                  
                  
                  $
                  9,453
                  
                  
                  $
                  1,235
                  
                  
                  
                  13.1
                  %
                  
                  $
                  31,212
                  
                  
                  $
                  28,754
                  
                  
                  $
                  2,458
                  
                  
                  
                  8.5
                  %Lease
      termination fee
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,784
                  
                  
                  
                  (1,784
                  )
                  
                  
                  n/aTotal
      revenues
                  
                  
                  10,688
                  
                  
                  
                  9,453
                  
                  
                  
                  1,235
                  
                  
                  
                  13.1
                  %
                  
                  
                  31,212
                  
                  
                  
                  30,538
                  
                  
                  
                  674
                  
                  
                  
                  2.2
                  %Operating
      expenses:Depreciation
      and amortization
                  
                  
                  2,197
                  
                  
                  
                  2,100
                  
                  
                  
                  97
                  
                  
                  
                  4.6
                  %
                  
                  
                  6,440
                  
                  
                  
                  6,334
                  
                  
                  
                  106
                  
                  
                  
                  1.7
                  %General
      and administrative
                  
                  
                  1,695
                  
                  
                  
                  1,643
                  
                  
                  
                  52
                  
                  
                  
                  3.2
                  %
                  
                  
                  5,261
                  
                  
                  
                  4,895
                  
                  
                  
                  366
                  
                  
                  
                  7.5
                  %Real
      estate acquisition costs
                  
                  
                  224
                  
                  
                  
                  -
                  
                  
                  
                  224
                  
                  
                  
                  n/a
                  
                  
                  
                  738
                  
                  
                  
                  -
                  
                  
                  
                  738
                  
                  
                  
                  n/aReal
      estate expenses
                  
                  
                  246
                  
                  
                  
                  173
                  
                  
                  
                  73
                  
                  
                  
                  42.2
                  %
                  
                  
                  912
                  
                  
                  
                  477
                  
                  
                  
                  435
                  
                  
                  
                  91.2
                  %Leasehold
      rent
                  
                  
                  77
                  
                  
                  
                  77
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  231
                  
                  
                  
                  231
                  
                  
                  
                  -
                  
                  
                  -Total
      operating expenses
                  
                  
                  4,439
                  
                  
                  
                  3,993
                  
                  
                  
                  446
                  
                  
                  
                  11.2
                  %
                  
                  
                  13,582
                  
                  
                  
                  11,937
                  
                  
                  
                  1,645
                  
                  
                  
                  13.8
                  %Operating
      income
                  
                  $
                  6,249
                  
                  
                  $
                  5,460
                  
                  
                  $
                  789
                  
                  
                  
                  14.5
                  %
                  
                  $
                  17,630
                  
                  
                  $
                  18,601
                  
                  
                  $
                  (971
                  )
                  
                  
                  (5.2
                  )%





Revenues





The
increase in rental income is primarily due to $578,000 and $1.5 million earned
during the three and nine months ended September 30, 2010, respectively, from a
community shopping center we acquired in February 2010, of which $70,000 and
$336,000, respectively, represents real estate tax and expense reimbursements
from tenants.  The increase in rental income is also due to $311,000
and $338,000 earned during the three and nine months ended September 30, 2010,
respectively, from eight properties we purchased between April 2010 and August
2010.  There was also an increase in rental income due to lease
revisions.


22





In June
2009, we received a $1,905,000 lease termination payment from a retail tenant.
The lease termination fee was offset by the $121,000 write off of the entire
balance of the unbilled rent receivable and intangible lease asset related to
this property.  There was no comparable fee income in
2010.  This property was released effective November 9,
2009.





Operating
Expenses





A
significant component of the increases in general and administrative expenses
was the $200,000 increase in the annual fee payable pursuant to the compensation
and services agreement, of which $50,000 and $150,000 were recorded in the three
and nine months ended September 30, 2010, respectively.  The nine
months ended September 30, 2010 also includes a $138,000 expense related to
professional fees incurred for financing activities. There were also increases
in general and administrative expenses for the three and nine months ended
September 30, 2010 relating to payroll, restricted stock and directors’ fees,
none of which was material on an individual basis. The three and nine months
ended September 30, 2009 included litigation and related expenses of
 $70,000 and $126,000, respectively, which expenses were substantially
reduced in the corresponding 2010 periods and are not expected to
recur.





During
the three and nine months ended September 30, 2010, we incurred $224,000 and
$738,000, respectively, of real estate acquisition expenses.  For the
nine months ended September 30, 2010, $349,000 of such expenses related to the
purchase of a community shopping center acquired in February 2010, $274,000
related to the purchase of eight properties acquired between April 2010 and
August 2010 and $103,000 related to the purchase of two properties acquired in
October 2010.  Because we did not acquire any properties in 2009,
there were no property acquisition expenses in the corresponding period in the
prior year.





The
increase in real estate expenses in the three and nine months ended September
30, 2010 results primarily from $71,000 and $357,000, respectively, of real
estate taxes and expenses at a community shopping center acquired in February
2010.  The tenants at this property are contractually obligated to
reimburse us for a substantial portion of these expenses.  The three
and nine months ended September 30, 2010 also include increases in repairs,
maintenance and other operating expenses at several properties.


23




Other
Income and Expenses





The
following table sets forth a comparison of other income and expenses for the
three and nine months ended September 30, 2010 and 2009 (dollars in
thousands):




Three Months Ended September 30,
                                        
                                        Nine Months Ended September 30,2010
                                        
                                        
                                        2009
                                        
                                        
                                        Difference
                                        
                                        
                                        %
                                          Change
                                        
                                        
                                        2010
                                        
                                        
                                        2009
                                        
                                        
                                        Difference
                                        
                                        
                                        %
                                          ChangeOther
      income and expenses:Equity
      in earnings of  unconsolidated
    joint ventures
                                        
                                        $
                                        101
                                        
                                        
                                        $
                                        140
                                        
                                        
                                        $
                                        (39
                                        )
                                        
                                        
                                        (27.9
                                        )%
                                        
                                        $
                                        354
                                        
                                        
                                        $
                                        449
                                        
                                        
                                        $
                                        (95
                                        )
                                        
                                        
                                        (21.2
                                        )%Gain
      on disposition of realestate
      held by unconsolidated joint venture
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        107
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        107
                                        
                                        
                                        
                                        n/aOther
      income, including realized gain on sale of available-for-sale securities
      and interest income
                                        
                                        
                                        40
                                        
                                        
                                        
                                        85
                                        
                                        
                                        
                                        (45
                                        )
                                        
                                        
                                        (52.9
                                        )%
                                        
                                        
                                        265
                                        
                                        
                                        
                                        292
                                        
                                        
                                        
                                        (27
                                        )
                                        
                                        
                                        (9.2
                                        )%Interest:Expense
                                        
                                        
                                        (3,658
                                        )
                                        
                                        
                                        (3,355
                                        )
                                        
                                        
                                        (303
                                        )
                                        
                                        
                                        9.0
                                        %
                                        
                                        
                                        (10,639
                                        )
                                        
                                        
                                        (10,118
                                        )
                                        
                                        
                                        (521
                                        )
                                        
                                        
                                        5.1
                                        %Amortization
      of deferred financing costs
                                        
                                        
                                        (160
                                        )
                                        
                                        
                                        (182
                                        )
                                        
                                        
                                        22
                                        
                                        
                                        
                                        (12.1
                                        )%
                                        
                                        
                                        (452
                                        )
                                        
                                        
                                        (582
                                        )
                                        
                                        
                                        130
                                        
                                        
                                        
                                        (22.3
                                        )%




The
decrease in equity in earnings of unconsolidated joint ventures primarily
results from a decrease in income from a joint venture due to the sale of its
only property on April 30, 2010. The lease on this property expired April 30,
2010.





The
increase in interest expense is due to interest expense of $266,000 and $629,000
in the three and nine months ended September 30, 2010, respectively, on a
mortgage assumed in connection with the purchase in February 2010 of a community
shopping center. In addition, interest expense relating to our line of credit
increased by $212,000 and $384,000 during the three and nine months ended
September 30, 2010 due to the increase, effective April 1, 2010, in the interest
rate charged thereunder. Interest expense of $49,000 and $112,000 in the three
and nine months ended September 30, 2010, respectively, is attributable to a
refinanced mortgage. These increases in interest expense were partially offset
by the payoff in full of three mortgage loans aggregating $6.1 million between
July 2009 and January 2010, as well as the regular monthly principal
amortization of other mortgages.





The
decrease in amortization of deferred financing costs was primarily due to
accelerated amortization of deferred financing costs of $118,000 relating to a
mortgage loan that was refinanced during the nine months ended September 30,
2009.


24





Discontinued
Operations





The
following table sets forth a comparison of discontinued operations for the three
and nine months ended September 30, 2010 and 2009 (dollars in
thousands):





Three Months Ended September 30,
                      
                      
                      Nine Months Ended September 30,2010
                      
                      
                      2009
                      
                      
                      Difference
                      
                      
                      %
                        Change
                      
                      
                      2010
                      
                      
                      2009
                      
                      
                      Difference
                      
                      
                      %
                        ChangeDiscontinued
      operations:Income
      from operations
                      
                      $
                      39
                      
                      
                      $
                      395
                      
                      
                      $
                      (356
                      )
                      
                      
                      (90.1
                      )%
                      
                      $
                      165
                      
                      
                      $
                      1,226
                      
                      
                      $
                      (1,061
                      )
                      
                      
                      (86.5
                      )%Net
      gain on sales of real estate
                      
                      
                      235
                      
                      
                      
                      -
                      
                      
                      
                      235
                      
                      
                      
                      n/a
                      
                      
                      
                      235
                      
                      
                      
                      -
                      
                      
                      
                      235
                      
                      
                      
                      n/aGain
      on troubled mortgage restructuring, as a result of conveyance to
      mortgagee
                      
                      
                      -
                      
                      
                      
                      897
                      
                      
                      
                      (897
                      )
                      
                      
                      n/a
                      
                      
                      
                      -
                      
                      
                      
                      897
                      
                      
                      
                      (897
                      )
                      
                      
                      n/aImpairment
      charge on property sold at a loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      n/a
                      
                      
                      
                      -
                      
                      
                      
                      (229
                      )
                      
                      
                      229
                      
                      
                      
                      n/aIncome
      from discontinued operations
                      
                      $
                      274
                      
                      
                      $
                      1,292
                      
                      
                      $
                      (1,018
                      )
                      
                      
                      (78.8
                      )%
                      
                      $
                      400
                      
                      
                      $
                      1,894
                      
                      
                      $
                      (1,494
                      )
                      
                      
                      (78.9
                      )%





Discontinued
operations for the three and nine months ended September 30, 2010 includes the
results of operations and the gain on sale of two properties sold during the
three months ended September 30, 2010. For the three and nine months ended
September 30, 2009, discontinued operations includes the results of operations
of ten properties, five of which were conveyed by us to the mortgagee in July
2009, three of which were sold during the year ended December 31, 2009 and two
of which were sold during the three months ended September 30, 2010. Included in
income from discontinued operations in the nine months ended September 30, 2009
is a $400,000 lease termination payment from a retail tenant that had been
paying its rent on a current basis, but 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. The three and nine months ended September 30,
2009 also includes an $897,000 gain recognized in connection with the conveyance
of five of our properties to the mortgagee by deeds-in-lieu of foreclosure.
These properties had formerly been leased to Circuit City Stores Inc. which
filed for protection under federal bankruptcy laws and rejected the leases for
these five properties.





Liquidity and Capital
Resources




Our
capital sources include income from our operating activities, cash and cash
equivalents, available-for-sale securities, borrowings under our revolving
credit facility, refinancing existing mortgage loans and obtaining mortgage
loans secured by our unencumbered properties.  Our available liquidity
at September 30, 2010 was approximately $20.6 million, including $7.8 million of
cash and cash equivalents, $644,000 of available-for-sale securities and $12.2
million of available borrowings under our revolving credit facility. After
giving effect to the acquisition of a Whole Food’s facility and to the financing
of one property subsequent to September 30, 2010, our available liquidity at
November 4, 2010 was approximately $16.6 million, including $7 million of cash
and cash equivalents, $692,000 of available-for-sale securities and $8.9 million
of available borrowings under our revolving credit facility.


25


Liquidity
and Financing





We expect
to meet our operating cash requirements (including dividend payments) with cash
flow from operations. We will require additional long term financing, whether in
the form of equity or debt, to pursue our acquisition strategy.  In
furtherance thereof, we have filed a Registration Statement on Form S-3 to
facilitate access to the capital markets.  No assurance can be given
that financing will be available on terms acceptable to us and the failure to
obtain additional financing will limit our growth.





AtSeptember 30,
2010, excluding mortgages payable of our unconsolidated joint ventures,
we had 33 outstanding mortgages payable secured by 49 properties, aggregating
approximately $196.2 million in principal amount. These mortgages are primarily
secured by first liens on individual real estate investments with an aggregate
carrying value of approximately $326 million, before accumulated depreciation.
The mortgages bear interest at fixed rates ranging from 5.44% to 8.8%, and
mature between 2011 and 2037.





A
mortgage loan matured on March 1, 2010 and the principal balance of $4,482,000
was paid in full on July 30, 2010. Another mortgage loan matured on April 1,
2010 with a principal balance of approximately $8,900,000. Effective August 1,
2010, the mortgage loan was restructured including a principal pay down of
$2,800,000 and an extension of the maturity date to August 1, 2012. Monthly
interest only payments at the existing rate of 8.03% are required.





We 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 for, among other things, environmental liabilities, the sale, financing or
encumbrance of the property in violation of loan documents, damage to property
as a result of intentional misconduct or gross negligence, failure to pay valid
taxes and other claims which could create liens on property), we may determine,
if our in-house evaluation of the market value of such property is substantially
less than the principal balance outstanding on the mortgage loan and if we
cannot negotiate a reduction in the principal balance or other accommodations
with the lender, to convey such property to the mortgagee in order to terminate
our mortgage and other obligations with respect to such property.





Credit
Facility





We can
borrow, on a revolving basis, up to $40 million pursuant to a line of credit
facility which matures March 31, 2012.  Borrowings under the facility bear
interest at 90 day LIBOR plus 3%, with a minimum interest rate of 6% per annum
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 equity of subsidiary entities.  As of September 30 and November
4, 2010, there was $27.8 million and $31.1 million, respectively, outstanding
under the facility. We are in compliance with the covenants under this
facility.





Off-Balance
Sheet Arrangements





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


26





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
September 30,
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 September 30, 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
$323,000.  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
$424,000.  These changes would not have any impact on our net income
or cash.





From time
to time, 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.





Our
mortgage debt (excluding our mortgage subject to the interest swap agreement)
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.





We
assessed the market risk for our revolving variable rate credit facility and
believe that there is no foreseeable market risk because interest is charged at
the greater of (i) 90 day LIBOR plus 3% or (ii) 6% per annum.  At
September 30, 2010, 90 day LIBOR plus 3% was approximately 3.3%, therefore, a 1%
increase or decrease would not have any impact on our interest
expense.





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 September 30, 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 September 30, 2010that materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.


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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.Exhibit 31.2
                Certification
      of Senior Vice President and Chief Financial Officer pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002.Exhibit 32.1
                Certification
      of President and Chief Executive Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.Exhibit 32.2
                Certification
      of Senior Vice President and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002.


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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)November 5, 2010
                        /s/ Patrick J. Callan, Jr.Date
                        Patrick
      J. Callan, Jr.President
      and Chief Executive Officer(principal
      executive officer)November 5, 2010
                        /s/ David W. KalishDate
                        David
      W. KalishSenior
      Vice President andChief
      Financial Officer(principal
      financial officer)


29