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 June 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 filer
            xNon-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
August 3, 2010, the registrant had 11,483,427 shares of common stock
outstanding.





Part I –
FINANCIAL INFORMATION


Item
1.    Financial
Statements





ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(Amounts
in Thousands, Except Per Share Data)





June 30,
                      
                      
                      December 31,2010
                      
                      
                      2009(Unaudited)AssetsReal
      estate investments, at costLand
                      
                      $
                      109,811
                      
                      
                      $
                      87,782Buildings
      and improvements
                      
                      
                      314,750
                      
                      
                      
                      303,945424,561
                      
                      
                      
                      391,727Less
      accumulated depreciation
                      
                      
                      51,017
                      
                      
                      
                      46,989373,544
                      
                      
                      
                      344,738Property
      held for sale
                      
                      
                      942
                      
                      
                      
                      955Investment
      in unconsolidated joint ventures
                      
                      
                      5,968
                      
                      
                      
                      5,839Cash
      and cash equivalents
                      
                      
                      18,482
                      
                      
                      
                      28,036Available-for-sale
      securities (including treasury bills of $3,999 in 2009)
                      
                      
                      729
                      
                      
                      
                      6,762Unbilled
      rent receivable
                      
                      
                      11,586
                      
                      
                      
                      10,706Unamortized
      intangible lease assets
                      
                      
                      7,829
                      
                      
                      
                      7,157Escrow,
      deposits and other assets and receivables
                      
                      
                      3,927
                      
                      
                      
                      2,471Investment
      in BRT Realty Trust at market (related party)
                      
                      
                      219
                      
                      
                      
                      189Unamortized
      deferred financing costs
                      
                      
                      2,209
                      
                      
                      
                      1,833Total
      assets
                      
                      $
                      425,435
                      
                      
                      $
                      408,686Liabilities
      and Stockholders’ EquityLiabilities:Mortgages
      payable
                      
                      $
                      205,816
                      
                      
                      $
                      190,518Line
      of credit
                      
                      
                      27,000
                      
                      
                      
                      27,000Dividends
      payable
                      
                      
                      3,436
                      
                      
                      
                      2,456Accrued
      expenses and other liabilities
                      
                      
                      4,040
                      
                      
                      
                      3,757Unamortized
      intangible lease liabilities
                      
                      
                      4,986
                      
                      
                      
                      4,827Total
      liabilities
                      
                      
                      245,278
                      
                      
                      
                      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;11,131
      and 10,879 shares issued and outstanding
                      
                      
                      11,131
                      
                      
                      
                      10,879Paid-in
      capital
                      
                      
                      145,640
                      
                      
                      
                      143,272Accumulated
      other comprehensive (loss) income
                      
                      
                      (348
                      )
                      
                      
                      191Accumulated
      undistributed net income
                      
                      
                      23,734
                      
                      
                      
                      25,786Total
      stockholders’ equity
                      
                      
                      180,157
                      
                      
                      
                      180,128Total
      liabilities and stockholders’ equity
                      
                      $
                      425,435
                      
                      
                      $
                      408,686





See
accompanying notes to consolidated financial statements.


2


ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF INCOME


(Amounts
in Thousands, Except Per Share Data)


(Unaudited)





Three
      Months Ended
                          June 30,
                        
                        
                        Six
      Months Ended
                          June 30,2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Revenues:Rental
      income
                        
                        $
                        10,642
                        
                        
                        $
                        9,706
                        
                        
                        $
                        20,717
                        
                        
                        $
                        19,506Lease
      termination fee
                        
                        
                        -
                        
                        
                        
                        1,784
                        
                        
                        
                        -
                        
                        
                        
                        1,784Total
      revenues
                        
                        
                        10,642
                        
                        
                        
                        11,490
                        
                        
                        
                        20,717
                        
                        
                        
                        21,290Operating
      expenses:Depreciation
      and amortization
                        
                        
                        2,151
                        
                        
                        
                        2,154
                        
                        
                        
                        4,279
                        
                        
                        
                        4,270General
      and administrative (including $647, $547, $1,194 and $1,094, respectively,
      to related party)
                        
                        
                        1,913
                        
                        
                        
                        1,602
                        
                        
                        
                        3,566
                        
                        
                        
                        3,252Real
      estate acquisition costs
                        
                        
                        168
                        
                        
                        
                        -
                        
                        
                        
                        514
                        
                        
                        
                        -Real
      estate expenses
                        
                        
                        485
                        
                        
                        
                        145
                        
                        
                        
                        665
                        
                        
                        
                        303Leasehold
      rent
                        
                        
                        77
                        
                        
                        
                        77
                        
                        
                        
                        154
                        
                        
                        
                        154Total
      operating expenses
                        
                        
                        4,794
                        
                        
                        
                        3,978
                        
                        
                        
                        9,178
                        
                        
                        
                        7,979Operating
      income
                        
                        
                        5,848
                        
                        
                        
                        7,512
                        
                        
                        
                        11,539
                        
                        
                        
                        13,311Other
      income and expenses:Equity
      in earnings of unconsolidated jointventures
                        
                        
                        128
                        
                        
                        
                        149
                        
                        
                        
                        253
                        
                        
                        
                        308Gain
      on disposition of real estate held byunconsolidated
      joint venture
                        
                        
                        107
                        
                        
                        
                        -
                        
                        
                        
                        107
                        
                        
                        
                        -Other
      income, including realized gain onsale
      of available-for-sale securities andinterest
      income
                        
                        
                        174
                        
                        
                        
                        179
                        
                        
                        
                        225
                        
                        
                        
                        207Interest:Expense
                        
                        
                        (3,745
                        )
                        
                        
                        (3,424
                        )
                        
                        
                        (7,067
                        )
                        
                        
                        (6,850
                        )Amortization
      of deferred financing costs
                        
                        
                        (150
                        )
                        
                        
                        (146
                        )
                        
                        
                        (292
                        )
                        
                        
                        (402
                        )Income
      from continuing operations
                        
                        
                        2,362
                        
                        
                        
                        4,270
                        
                        
                        
                        4,765
                        
                        
                        
                        6,574Discontinued
      operations:Income
      from operations
                        
                        
                        37
                        
                        
                        
                        173
                        
                        
                        
                        55
                        
                        
                        
                        751Impairment
      charge on property sold at a loss
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (229
                        )Income
      from discontinued operations
                        
                        
                        37
                        
                        
                        
                        173
                        
                        
                        
                        55
                        
                        
                        
                        522Net
      income
                        
                        $
                        2,399
                        
                        
                        $
                        4,443
                        
                        
                        $
                        4,820
                        
                        
                        $
                        7,096Weighted
      average number of common sharesoutstanding:Basic
                        
                        
                        11,453
                        
                        
                        
                        10,488
                        
                        
                        
                        11,424
                        
                        
                        
                        10,327Diluted
                        
                        
                        11,453
                        
                        
                        
                        10,751
                        
                        
                        
                        11,453
                        
                        
                        
                        10,515





Continued
on next page


3





ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF INCOME


(Amounts
in Thousands, Except Per Share Data)


(Unaudited)
(Continued)





Three
      Months Ended
                                          June 30,
                                        
                                        
                                        Six
      Months Ended
                                          June 30,2010
                                        
                                        
                                        2009
                                        
                                        
                                        2010
                                        
                                        
                                        2009Net
      income per common share – basic:Income
      from continuing operations
                                        
                                        $
                                        .21
                                        
                                        
                                        $
                                        .41
                                        
                                        
                                        $
                                        .42
                                        
                                        
                                        $
                                        .64Income
      from discontinued operations
                                        
                                        
                                        -
                                        
                                        
                                        
                                        .01
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        .05Net
      income per common share
                                        
                                        $
                                        .21
                                        
                                        
                                        $
                                        .42
                                        
                                        
                                        $
                                        .42
                                        
                                        
                                        $
                                        .69Net
      income per common share – diluted:Income
      from continuing operations
                                        
                                        $
                                        .21
                                        
                                        
                                        $
                                        .40
                                        
                                        
                                        $
                                        .42
                                        
                                        
                                        $
                                        .63Income
      from discontinued operations
                                        
                                        
                                        -
                                        
                                        
                                        
                                        .01
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        .04Net
      income per common share
                                        
                                        $
                                        .21
                                        
                                        
                                        $
                                        .41
                                        
                                        
                                        $
                                        .42
                                        
                                        
                                        $
                                        .67Cash
      distribution declared per share of commonstock
                                        
                                        $
                                        .30
                                        
                                        
                                        $
                                        .02
                                        
                                        
                                        $
                                        .60
                                        
                                        
                                        $
                                        .04Stock
      distribution declared per share of commonstock
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        .20
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        .40





See
accompanying notes to consolidated financial statements.


4


ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


AND
COMPREHENSIVE INCOME


For the
six month period ended June 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 onavailable-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
      - $.60 per share
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (6,872
              )
              
              
              (6,872
              )Issuance
      of stock for stock dividend obligation at
                December
      31, 2009
              
              
              216
              
              
              
              1,944
              
              
              
              -
              
              
              
              -
              
              
              
              2,160Restricted
      stock vesting
              
              
              36
              
              
              
              (36
              )Compensation
      expense – restricted stock
              
              
              -
              
              
              
              460
              
              
              
              -
              
              
              
              -
              
              
              
              460Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,820
              
              
              
              4,820Other
      comprehensive income -Net
      unrealized loss onavailable-for-sale
      securities
              
              
              -
              
              
              
              -
              
              
              
              (133
              )
              
              
              -
              
              
              
              (133
              )Net
      unrealized loss on derivative instrument
              
              
              -
              
              
              
              -
              
              
              
              (406
              )
              
              
              -
              
              
              
              (406
              )Comprehensive
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,281Balances,
      June 30, 2010
              
              $
              11,131
              
              
              $
              145,640
              
              
              $
              (348
              )
              
              $
              23,734
              
              
              $
              180,157





See
accompanying notes to consolidated financial statements.


5





ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Amounts
in Thousands)


(Unaudited)





Six Months Ended
                          June 30,2010
                        
                        
                        2009Cash
      flows from operating activities:Net
      income
                        
                        $
                        4,820
                        
                        
                        $
                        7,096Adjustments
      to reconcile net income to net cash providedby operating
      activities:Gain
      on sale of available-for-sale securities
                        
                        
                        (129
                        )
                        
                        
                        -Impairment
      charge on property sold at a loss
                        
                        
                        -
                        
                        
                        
                        229Increase
      in rental income from straight-lining of rent
                        
                        
                        (880
                        )
                        
                        
                        (565
                        )Decrease
      in rental income resulting from bad debt expense
                        
                        
                        79
                        
                        
                        
                        343Increase
      in rental income from amortization of intangiblesrelating to
      leases
                        
                        
                        10
                        
                        
                        
                        37Amortization
      of restricted stock expense
                        
                        
                        460
                        
                        
                        
                        411Gain
      on disposition of real estate held by unconsolidated joint
      venture
                        
                        
                        (107
                        )
                        
                        
                        -Equity
      in earnings of unconsolidated joint ventures
                        
                        
                        (253
                        )
                        
                        
                        (308
                        )Distributions
      of earnings from unconsolidated joint ventures
                        
                        
                        209
                        
                        
                        
                        265Depreciation
      and amortization
                        
                        
                        4,291
                        
                        
                        
                        4,691Amortization
      of financing costs
                        
                        
                        292
                        
                        
                        
                        451Changes
      in assets and liabilities:Decrease
      (increase) in escrow, deposits, other assets and
    receivables
                        
                        
                        89
                        
                        
                        
                        (554
                        )Decrease
      in accrued expenses and other liabilities
                        
                        
                        (1
                        )
                        
                        
                        (474
                        )Net
      cash provided by operating activities
                        
                        
                        8,880
                        
                        
                        
                        11,622Cash
      flows from investing activities:Purchase
      of real estate and improvements
                        
                        
                        (15,936
                        )
                        
                        
                        (431
                        )Net
      proceeds from sale of real estate
                        
                        
                        -
                        
                        
                        
                        1,764Investment
      in unconsolidated joint ventures
                        
                        
                        -
                        
                        
                        
                        (7
                        )Distributions
      of return of capital from unconsolidated joint ventures
                        
                        
                        22
                        
                        
                        
                        45Prepaid
      tenant improvement allowance
                        
                        
                        (1,750
                        )
                        
                        
                        -Net
      proceeds from sale of available-for-sale securities
                        
                        
                        5,997
                        
                        
                        
                        -Purchase
      of available-for-sale securities
                        
                        
                        -
                        
                        
                        
                        (1,869
                        )Net
      cash used in investing activities
                        
                        
                        (11,667
                        )
                        
                        
                        (498
                        )Cash
      flows from financing activities:Repayment
      of mortgages payable
                        
                        
                        (5,154
                        )
                        
                        
                        (2,931
                        )Proceeds
      from mortgage financings
                        
                        
                        3,000
                        
                        
                        
                        2,559Payment
      of financing costs, including mortgage assumption fees
                        
                        
                        (882
                        )
                        
                        
                        (209
                        )Cash
      distributions - common stock
                        
                        
                        (3,683
                        )
                        
                        
                        (2,463
                        )Repurchase
      of common stock
                        
                        
                        -
                        
                        
                        
                        (717
                        )Expenses
      associated with stock issuance
                        
                        
                        (48
                        )
                        
                        
                        (91
                        )Net
      cash used in financing activities
                        
                        
                        (6,767
                        )
                        
                        
                        (3,852
                        )Net
      (decrease) increase in cash and cash equivalents
                        
                        
                        (9,554
                        )
                        
                        
                        7,272Cash
      and cash equivalents at beginning of period
                        
                        
                        28,036
                        
                        
                        
                        10,947Cash
      and cash equivalents at end of period
                        
                        $
                        18,482
                        
                        
                        $
                        18,219





Continued
on next page


6


ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Amounts
in Thousands)


(Unaudited)
(Continued)




Six
      Months Ended
                      June 30,2010
                    
                    
                    2009Supplemental
      disclosures of cash flow information:Cash
      paid for interest
                    
                    $
                    6,783
                    
                    
                    $
                    7,838Supplemental
      schedule of non-cash investing and financing activities:Common
      stock dividend – portion paid in shares of Company’s common
      stock
                    
                    
                    2,209
                    
                    
                    
                    2,004Assumption
      of mortgage payable in connection with purchase of real
    estate
                    
                    
                    17,654
                    
                    
                    
                    -Purchase
      accounting allocation – intangible lease assets
                    
                    
                    1,121
                    
                    
                    
                    -Purchase
      accounting allocation – intangible lease liabilities
                    
                    
                    365
                    
                    
                    
                    -Reclassification
      of real estate owned to property held for sale
                    
                    
                    942
                    
                    
                    
                    -Additions
      to real estate included in other liabilities
                    
                    
                    -
                    
                    
                    
                    98





See
accompanying notes to consolidated financial statements.


7


One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements  (Unaudited)


June 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 June 30, 2010, OLP owned 74 properties, two of which
are vacant, one of which is held for sale and one of which is a 50% tenancy in
common interest.  OLP’s joint ventures owned a total of four
properties. The 78 properties are located in 28 states.





Note 2 -
Basis of
Preparation





The
accompanying interim unaudited consolidated financial statements as of June 30,
2010 and 2009 and for the six and three months ended June 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 six and three months ended June 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. Additionally,
as a group, the holders of the equity at risk have power through voting rights
to direct the activities of the venture. As a result, none of the Company’s
joint ventures are variable interest entities.  In addition, although
the Company is the managing member, it does not exercise substantial operating
control over these entities, and therefore the entities are not
consolidated.  These investments are recorded initially at cost, as
investments in unconsolidated joint ventures, and subsequently adjusted for
their share of equity in earnings, cash contributions and
distributions.  None of the joint venture debt is recourse to the
Company.





Certain
amounts reported in previous consolidated financial statements have been
reclassified in the accompanying consolidated financial statements to conform to
the current year’s presentation, primarily to reclassify the assets of one
property which was sold in July 2010 to property held for sale at June 30, 2010
and December 31, 2009 and to reclassify the operations of this property to
discontinued operations for the six and three months ended June 30, 2010 and
2009.  In addition, the operations of two properties that were sold in
October 2009 were reclassified to discontinued operations for the six and three
months ended June 30, 2009.


8


One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


June 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
six and three months ended June 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, which includes unvested restricted stock
during each period.





Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts exercisable for, or convertible into, common stock
were exercised or converted or resulted in the issuance of common stock that
shared in the earnings of the Company.  The weighted average number of
common shares outstanding used for the diluted earnings per share calculations
includes the impact of common stock issued in connection with the dividends paid
in April, July and October 2009 and January 2010, as of the dividend declaration
date, as the shares were contingently issuable as of that date.  Such
stock dividends were included in basic EPS as of the issuance date. There were
no options outstanding to purchase shares of common stock or other contracts
exercisable for, or convertible into, common stock during the six and three
months ended June 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 approximately 36% equity interest, sold its only property for a
consideration of $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 June 30, 2010 and December 31, 2009, the Company’s
equity investment in unconsolidated joint ventures totaled $5,968,000 and
$5,839,000, respectively. The Company recorded equity in earnings of $253,000
and $308,000 for the six months ended June 30, 2010 and 2009, respectively, and
$128,000 and $149,000 for the three months ended June 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,
additional allowances may be required.  At June 30, 2010 and December
31, 2009, the balance in allowance for doubtful accounts was $531,000 and
$472,000, respectively, recorded as a reduction to accounts receivable. The
Company records bad debt expense as a reduction of rental income. For the six
and three months ended June 30, 2010, the Company recorded bad debt expense of
$79,000 and $17,000, respectively, and $343,000 and $220,000,
respectively,  for the six and three months ended June 30,
2009.  For the six months ended June 30, 2010 and 2009,
$2,000, and $58,000, respectively, of such bad debt expense was recorded in
discontinued operations.




9




One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


June 30,
2010 (Continued)





Note 6 -
Real Estate
Acquisitions and Disposition





On
February 24, 2010, the Company acquired a community shopping center located in
Pennsylvania, for a purchase price of $23,500,000, before closing costs. The
center is 99% occupied, leased to ten separate tenants and approximately 68% of
its 2010 contractual base rent is from ground leases. The Company paid the
purchase price by assuming an existing first mortgage encumbering the property
of approximately $17,700,000 and the balance was paid in cash.  The
mortgage, which matures in May 2014, bears interest at 5.67% per
annum.  The Company incurred third party real estate acquisition costs
of $349,000 during the six months ended June 30, 2010 relating to this property
which is included in the accompanying consolidated statements of
income.





On April
28, 2010, the Company acquired a retail property in Pennsylvania, leased by a
single tenant pursuant to a long term net lease.  The purchase price
of approximately $1,313,000, including $300,000 of contracted building
improvements, was paid in cash.





On June
30, 2010, the Company acquired a retail property in Missouri, leased by a single
tenant pursuant to a long term net lease.  The purchase price of
$8,950,000 was paid in cash.





As a
result of these 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, respectively. 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 in April and June 2010; therefore they are preliminary and subject to
change.





On July
14, 2010, the Company sold a property, which was vacant as of July 1, 2010, to
an unrelated party for net consideration of approximately $1,100,000 and will
realize a gain of approximately $147,000 in the nine and three months ended
September 30, 2010.





Note 7 -
Discontinued
Operations





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


10


One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


June 30,
2010 (Continued)





Note 7 -
Discontinued
Operations (Continued)





Three
      Months Ended
                    June 30,
                  
                  
                  Six
      Months Ended
                    June 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Rental
      income, including $400 lease termination fee in the
                    six
      monthsended
      June 30, 2009
                  
                  $
                  52
                  
                  
                  $
                  834
                  
                  
                  $
                  79
                  
                  
                  $
                  2,192Depreciation
      and amortization
                  
                  
                  6
                  
                  
                  
                  198
                  
                  
                  
                  12
                  
                  
                  
                  457Real
      estate expenses
                  
                  
                  9
                  
                  
                  
                  137
                  
                  
                  
                  12
                  
                  
                  
                  246Interest
      expense
                  
                  
                  -
                  
                  
                  
                  326
                  
                  
                  
                  -
                  
                  
                  
                  738Total
      expenses
                  
                  
                  15
                  
                  
                  
                  661
                  
                  
                  
                  24
                  
                  
                  
                  1,441Income
      from operations
                  
                  
                  37
                  
                  
                  
                  173
                  
                  
                  
                  55
                  
                  
                  
                  751Impairment
      charge on property sold at a loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (229
                  )Income
      from discontinued operations
                  
                  $
                  37
                  
                  
                  $
                  173
                  
                  
                  $
                  55
                  
                  
                  $
                  522





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




Note 8 -
Common Stock Dividend
Distribution





On June
14, 2010, the Board of Directors declared a quarterly cash dividend on the
Company’s common stock of $.30 per share totaling $3,436,000, which was paid on
July 7, 2010 to stockholders of record as of June 28, 2010.





Note 9 -
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 0% 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 suspension.


11


One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


June 30,
2010 (Continued)




Note 10 -
Comprehensive
Income





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


Three
      Months Ended
                    June 30,
                  
                  
                  Six
      Months Ended
                    June 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Net
      income
                  
                  $
                  2,399
                  
                  
                  $
                  4,443
                  
                  
                  $
                  4,820
                  
                  
                  $
                  7,096Other
      comprehensive income -Net
      unrealized (loss) gain on available-for-sale securities
                  
                  
                  (206
                  )
                  
                  
                  46
                  
                  
                  
                  (133
                  )
                  
                  
                  8Net
      unrealized (loss) gain on derivative instruments
                  
                  
                  (277
                  )
                  
                  
                  407
                  
                  
                  
                  (406
                  )
                  
                  
                  223Comprehensive
      income
                  
                  $
                  1,916
                  
                  
                  $
                  4,896
                  
                  
                  $
                  4,281
                  
                  
                  $
                  7,327





Accumulated
other comprehensive (loss) income includes an accumulated net unrealized loss on
available-for-sale securities of $22,000, 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 $295,000 resulting in a total cumulative net
loss of $348,000 at June 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 11 -
Stock Based
Compensation





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





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





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


12


One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


June 30,
2010 (Continued)





Note 11 -
Stock Based
Compensation (Continued)





Three
      Months Ended
                      June 30,
                    
                    
                    Six
      Months Ended
                      June 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Restricted
      share grants
                    
                    $
                    -
                    
                    
                    $
                    102,750
                    
                    
                    $
                    -
                    
                    
                    $
                    102,750Average
      per share grant price
                    
                    $
                    -
                    
                    
                    $
                    6.09
                    
                    
                    $
                    -
                    
                    
                    $
                    6.09Recorded
      as deferred compensation
                    
                    $
                    -
                    
                    
                    $
                    626,000
                    
                    
                    $
                    -
                    
                    
                    $
                    626,000Total
      charge to operations, all outstanding restricted grants
                    
                    $
                    210,000
                    
                    
                    $
                    194,000
                    
                    
                    $
                    460,000
                    
                    
                    $
                    411,000Non-vested
      shares:Non-vested
      beginning of period
                    
                    
                    357,925
                    
                    
                    
                    213,625
                    
                    
                    
                    357,925
                    
                    
                    
                    213,625Grants
                    
                    
                    -
                    
                    
                    
                    102,750
                    
                    
                    
                    -
                    
                    
                    
                    102,750Vested
      during period
                    
                    
                    (36,050
                    )
                    
                    
                    (30,675
                    )
                    
                    
                    (36,050
                    )
                    
                    
                    (30,675
                    )Forfeitures
                    
                    
                    -
                    
                    
                    
                    (50
                    )
                    
                    
                    -
                    
                    
                    
                    (50
                    )Non-vested
      end of period
                    
                    
                    321,875
                    
                    
                    
                    285,650
                    
                    
                    
                    321,875
                    
                    
                    
                    285,650





Through
June 30, 2010, a total of 274,950 and 143,100 shares were issued pursuant to the
Company’s 2003 and 2009 Incentive Plans, respectively, and 456,900 shares remain
available for grant under the 2009 Plan.  Approximately $2,088,000
remains as deferred compensation and will be charged to expense over the
remaining respective vesting periods. The weighted average vesting period is
approximately 3 years.  As of June 30, 2010 there were no options
outstanding under the 2009 and 2003 Incentive Plans.





Note 12 -
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 will be amortized over the term of the facility.  At June
30, 2010, there was $27,000,000 outstanding under the facility and at August 5,
2010 there was $25,300,000 outstanding under the facility.





Note 13 -
Mortgages
Payable





A
mortgage loan, with a principal balance of $4,482,000 at June 30, 2010, matured
on March 1, 2010. The Company paid off the loan balance in full on July 30,
2010.


13





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


June
30, 2010 (Continued)





Note
13 - Mortgages Payable
(Continued)





A
mortgage loan, with a principal balance of $8,910,000 at June 30, 2010, matured
on April 1, 2010. While continuing to pay monthly principal and interest, the
Company has been in negotiations with representatives of the lender to
restructure the loan.  It is anticipated that the restructuring will
include an extension of the maturity date and a principal paydown.





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 June 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 $9,703,000 and $9,832,000 at June
30, 2010 and December 31, 2009, respectively.  In addition, at June
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 June 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:





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





Mortgages
payable: At June 30, 2010, the $207,780,000 estimated fair value of the
Company's mortgages payable is more than their carrying value by approximately
$1,964,000, assuming a blended market interest rate of 6% based on a five year
weighted average remaining term of the mortgages.


14





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


June 30,
2010 (Continued)





Note 15 -
Fair Value of
Financial Instruments (Continued)





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




The fair
values of the Company’s financial instruments were determined using the
following inputs as of June 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:Corporate
      debt security
                            
                            $
                            354
                            
                            
                            January 15, 2012
                            
                            
                            $
                            -
                            
                            
                            $
                            354Equity
      securities
                            
                            
                            594
                            
                            
                            
                            -
                            
                            
                            
                            594
                            
                            
                            
                            -Financial
      liabilities:Derivative
      financial instrument
                            
                            
                            295
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            295


15





One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


June 30,
2010 (Continued)





Note 15 -
Fair Value of
Financial Instruments (Continued)





Available-for-sale
securities





The
Company’s available-for-sale securities have a total amortized cost of
$970,000.  At June 30, 2010, unrealized gains on such securities were
$123,000 and unrealized losses were $145,000. The aggregate net unrealized loss
of $22,000 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.





In June
2010, the Company sold two corporate bonds for total gross proceeds of
$2,007,000. The amortized cost of these bonds was $1,878,000 and was determined
using specific identification.  Accordingly, the Company recognized a
total gain of $129,000 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 June 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 June 30, 2010, the Company has assessed
the significance of the impact of the credit valuation adjustments on the
overall valuation of its derivative position and has determined that the credit
valuation adjustments are not significant to the overall valuation of its
derivative.  As a result, the Company has determined that its
derivative valuation is classified in Level 2 of the fair value
hierarchy.





Note 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 amaterial
effect on the Company’s consolidated financial condition, results of operations,
or cash flows.


16


One
Liberty Properties, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements (Unaudited)


June 30,
2010 (Continued)





Note 16 -
New Accounting
Pronouncements (Continued)




In
January 2010 the FASB issued Accounting Standards Update 2010-06, Fair Value
Measurements and Disclosures, Improving Disclosures about Fair Value
Measurements (“ASU 2010-06”).  ASU 2010-06 requires a number of additional
disclosures regarding fair value measurements, including the amount of transfers
between Level 1 and 2 of the fair value hierarchy, the reasons for transfers in
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. ASU 2010-06 was effective January 1,
2010, except for the disclosures about purchases, sales, issuances and
settlements in the roll forward of activity in Level 3 fair value measurements.
 Those disclosures are
effective for the Company on January 1, 2011 and early adoption is permitted.
 There were no transfers between Level 1 and 2 of the fair value hierarchy
during the six and three months ended June 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





See Note
6 for a discussion of the sale of one property in July 2010.





On July
30, 2010, the Company acquired three Wendy’s Old Fashioned Hamburger fast food
restaurant locations in Pennsylvania in a sale/leaseback
transaction.  All three properties are subject to one long term net
lease.  The purchase price of approximately $3.84 million was paid in
cash.




17




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





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 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 June
30, 2010, we owned 74 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 78 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 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.  Periodic contractual rental increases provide
reliable increases in future rent payments, while rent increases based on the
consumer price index provide protection against
inflation.  Historically, long-term leases have made it easier for us
to obtain longer-term, fixed-rate mortgage financing with principal
amortization, thereby moderating the interest rate risk associated with
financing or refinancing our property portfolio by reducing the outstanding
principal balance over time.  Although we regard long-term leases as
an important element of our acquisition strategy, we may acquire a property that
is subject to a short-term lease when we believe the property represents a good
opportunity for recurring income and residual value.





18




We are a
party to a credit agreement, as amended, with VNB New York Corp., Bank Leumi,
USA, Manufacturers and Traders Trust Company and Israel Discount Bank of New
York, for a maximum amount of $40 million, under which $27 million was
outstanding at June 30, 2010 and $25.3 million was outstanding at August 5,
2010.





Results of
Operations





Comparison of Six and Three
Months Ended June 30, 2010 and 2009





Revenues





Rental
income increased by $1.2 million, or 6.2%, to $20.7 million for the six months
ended June 30, 2010 from $19.5 million for the six months ended June 30, 2009.
For the three months ended June 30, 2010, rental income increased by $936,000,
or 9.6%, to $10.6 million from $9.7 million for the three months ended June 30,
2009.  The increase in rental income is primarily due to rental
revenues of $965,000 and $767,000 earned during the six and three months ended
June 30, 2010, respectively, primarily from the community shopping center we
acquired in February 2010, of which $266,000 results from real estate tax and
expense reimbursements from tenants.  There were also increases in
rental income at several of our other properties due primarily to lease
revisions. The increases in rental income were offset by a decrease in rental
income from one property for which we received a lease termination fee in the
prior year, referred to below.





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





General
and administrative expenses increased by $314,000, or 9.7%, and $311,000, or
19.4%, to $3,566,000 and $1,913,000 for the six and three months ended June 30,
2010, respectively. The increases result substantially from a $200,000 annual
increase in the compensation and services agreement, of which $100,000 of the
increase was recorded in the six and three months ended June 30, 2010, and from
a $138,000 expense incurred in the same periods related to professional fees
incurred for financing activities.





During
the six and three months ended June 30, 2010, we incurred $514,000 and $168,000,
respectively, of property acquisition expenses.  For the six months
ended June 30, 2010, $349,000 of such expenses related to the purchase of the
community shopping center which was acquired in February 2010, $77,000 related
to the purchase of two properties during the three months ended June 30, 2010
and $88,000 related to the contemplated purchase of a number of properties which
are currently under contract.  There were no property acquisition
expenses in the six and three months ended June 30, 2009.





Real
estate expenses increased by $362,000, or 120%, and $340,000, or 235%, to
$665,000 and $485,000 for the six and three months ended June 30, 2010,
respectively, of which $287,000 and $283,000, respectively, results from real
estate taxes and expenses at the 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 six and
three months ended June 30, 2010 also includes an increase in repairs,
maintenance and other operating expenses at several other
properties.





19




Other
Income and Expenses





Equity in
earnings of unconsolidated joint ventures decreased by $55,000, or 17.9%, and
$21,000, or 14.1%, to $253,000 and $128,000 for the six and three months ended
June 30, 2010.   The decrease is due primarily to decreases of
$50,000 and $25,000 in rental income at one of our joint venture
properties.  There was also a decrease in income from a joint venture
due to the sale of its only property on April 30, 2010.  We recognized a net gain
of $107,000 on the sale of this property in the six and three months ended June
30, 2010.  There was no comparable gain in the six and three months
ended June 30, 2009.





Interest
expense increased by $217,000, or 3.2%, and $321,000, or 9.4%, to $7.1 million
and $3.7 million for the six and three months ended June 30, 2010, from $6.9
million and $3.4 million for the six and three months ended June 30, 2009. This
increase resulted from interest expense of $364,000 and $264,000 in the six and
three months ended June 30, 2010, respectively, on a mortgage assumed in
connection with the purchase of the community shopping center in February 2010.
In addition, interest expense relating to our line of credit increased by
$172,000 and $209,000 during the six and three months ended June 30, 2010 due to
an increase in the interest rate charged under the amended and restated credit
line agreement effective April 1, 2010. Interest expense from fixed rate
mortgages placed on a property in March 2009 and a property in March 2010 also
contributed to the increase in interest expense. 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 from the
monthly principal amortization of other mortgages.





Amortization
of deferred financing costs decreased by $110,000, or 27.4%, to $292,000 for the
six months ended June 30, 2010 due primarily to accelerated amortization of
deferred financing costs of $118,000 relating to a mortgage loan that was
refinanced during the six months ended June 30, 2009.





Discontinued
Operations





Income
from operations included in discontinued operations was $55,000 and $37,000 for
the six and three months ended June 30, 2010 and includes the operations of one
of our properties which was sold on July 14, 2010 and is treated as held for
sale at June 30, 2010. For the six and three months ended June 30, 2009, income
from operations included in discontinued operations was $751,000 and $173,000
and includes the operations of eight properties, five of which were conveyed to
the mortgagee in July 2009 and three of which were sold during the year ended
December 31, 2009.   Included in such income is a $400,000 lease
termination payment we received in March 2009 from a retail tenant that had been
paying its rent on a current basis, but had vacated the property in 2006. In
March 2009, we sold this property and recorded an impairment charge of $229,000
to recognize the loss on the sale.





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 June 30, 2010 was approximately $32.2 million, including $18.5 million of
cash and cash equivalents, $948,000 of available-for-sale securities and $13
million of available borrowings under our revolving credit
facility.  Our available liquidity at August 5, 2010 was approximately
$25.6 million, including $10 million of cash and cash equivalents, $933,000 of
available-for-sale securities and $14.7 million of available borrowings under
our revolving credit facility.





20




Liquidity
and Financing





We expect
to meet (i) our operating cash requirements (including dividend payments) with
cash flow generated from operations and (ii) our capital requirements with cash
flow from operations, and, to the extent required, from cash and cash
equivalents, the sale of our marketable securities, drawing on our credit line
and mortgaging our unencumbered income producing real estate.  At June
30, 2010, our unencumbered income producing real estate had an aggregate
carrying value, before accumulated depreciation, of $87 million.





At June 30, 2010,
excluding mortgages payable of our unconsolidated joint ventures, we had 36
outstanding mortgages payable secured by 52 properties, aggregating
approximately $205.8 million in principal amount. These mortgages are primarily
secured by first liens on individual real estate investments with an aggregate
carrying value of approximately $337 million, before accumulated depreciation.
The mortgages bear interest at fixed rates ranging from 5.44% to 8.8%, and
mature between 2010 and 2037.





A
mortgage loan, with a principal balance of $4,482,000 at June 30, 2010, matured
on March 1, 2010. The Company paid off the loan balance in full on July 30,
2010. A mortgage loan, with a principal balance of $8,910,000 at June 30, 2010,
matured on April 1, 2010. The Company has been in negotiations with
representatives of the lender to restructure the loan. It is anticipated that
the restructuring will include an extension of the maturity date and a principal
paydown.





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), 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





On May
26, 2010, we 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 Manufacturers and Traders Trust Company, which
amends and restates its prior credit facility.  The facility is
guaranteed by our subsidiaries that own unencumbered properties and is secured
by the outstanding stock of subsidiary entities.  As of June 30 and
August 5, 2010, there was $27 million and $25.3 million, respectively,
outstanding under the facility.





The
Second Amended and Restated Loan Agreement provides for borrowings on a
revolving basis of up to $40 million and matures on 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.




21




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
June 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 June 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
$348,000.  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
$435,000.  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 June
30, 2010, 90 day LIBOR plus 3% was approximately 3.5%, 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 June 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 June
30, 2010that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.


22


Part II –
OTHER INFORMATION





Item
5.  Other
Information





On June
14, 2010, the Board of Directors approved and we and Majestic Property
Management Corp. agreed, that effective as of January 1, 2010, the annual fee
payable to Majestic pursuant to the Compensation and Services Agreement (the
“Agreement”) would be
increased by $200,000 to $2,225,000, which determination was made in accordance
with the terms of the Agreement.  Majestic is wholly owned by our
Chairman of the Board, Fredric H. Gould, and certain of our executive officers
are officers of, and receive compensation from, Majestic.





Item
6.  Exhibits





Exhibit
      10.1
                
                Determination
      Pursuant to the Compensation and Services Agreement.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.


23


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)August 6, 2010
                          
                          
                          /s/ Patrick J. Callan,
  Jr.Date
                          
                          
                          Patrick
      J. Callan, Jr.President
      and Chief Executive Officer(principal
      executive
officer)





August 6, 2010
                    
                    
                    /s/ David W. KalishDate
                    
                    
                    David
      W. KalishSenior
      Vice President andChief
      Financial Officer(principal
      financial
officer)


24