Executive Summary / Key Takeaways

• One Liberty Properties (OLP) is strategically transforming its portfolio, shifting from a diversified asset base to a primary focus on industrial properties, which now account for approximately 80% of its annual base rent. This pivot capitalizes on robust market tailwinds in the industrial sector.
• The company demonstrated solid financial performance in the first nine months of 2025, with rental income increasing by 9% and Adjusted Funds From Operations (AFFO) growing by 2.9%, underscoring the effectiveness of its acquisition and capital recycling strategy.
• OLP maintains a strong liquidity position of $109.40 million as of October 31, 2025, enabling continued strategic acquisitions and debt management, despite a rising interest rate environment.
• The company's net lease model and high occupancy rate of 98.20% provide a stable income stream and a competitive advantage, mitigating operational risks and supporting its attractive dividend yield.
• While lacking proprietary technological differentiators, OLP's strategic alignment with broader technological trends, such as e-commerce and data center growth, positions its industrial portfolio for sustained relevance and demand.

The Industrial Imperative: A Strategic Transformation

One Liberty Properties, Inc. (OLP), a self-administered and self-managed real estate investment trust incorporated in Maryland in 1982, has historically managed a geographically diversified portfolio of industrial and retail properties. The company's foundational business model centers on acquiring, owning, and managing these income-producing assets, primarily through long-term net leases where tenants are responsible for property-level expenses like real estate taxes, insurance, and maintenance. This structure provides a stable and predictable revenue stream, a cornerstone of OLP's operational philosophy.

In recent years, OLP has embarked on a significant strategic transformation, actively rebalancing its portfolio with a pronounced shift towards industrial properties. This pivot is a direct response to evolving market dynamics and aims to capitalize on the robust tailwinds driving demand in the industrial sector. As of September 30, 2025, industrial properties constitute the largest portion of OLP's portfolio, comprising 61 of its 98 properties and generating approximately 79.60% of its 2026 estimated Annual Base Rent (ABR). This strategic focus positions OLP to benefit from the ongoing expansion of e-commerce, supply chain reconfigurations, and the increasing need for logistics and distribution centers.

Operational Excellence Through Net Leases

OLP's operational strength is deeply rooted in its net lease business model. This approach transfers the majority of property operating expenses, including real estate taxes, insurance, and routine maintenance, directly to the tenants. This structure significantly reduces OLP's exposure to fluctuating operating costs and contributes to more predictable cash flows, a critical attribute for a REIT. The company's high occupancy rate, approximately 98.20% as of September 30, 2025, further underscores the desirability of its properties and the effectiveness of its leasing strategies.

The company actively manages its real property portfolio risk through diversification across locations, tenants, scheduled lease expirations, mortgage maturities, and lenders. This multi-faceted risk management approach, combined with its net lease model, provides a resilient operational framework. OLP also mitigates interest rate exposure by ensuring substantially all its mortgage debt either bears fixed rates or is subject to interest rate swaps.

Financial Performance: A Growth Trajectory

OLP's strategic shift and operational model have translated into solid financial performance. For the nine months ended September 30, 2025, total revenues increased by 8.70% to $72.486 million, up from $66.707 million in the corresponding period of 2024. This growth was primarily driven by a 9% increase in net rental income, which reached $72.420 million. The company's focus on acquisitions contributed significantly, with rental income from properties acquired since January 1, 2024, increasing by $7.715 million for the nine months ended September 30, 2025.

Profitability metrics highlight OLP's efficiency. The company reported a TTM Gross Profit Margin of 79.55%, an Operating Profit Margin of 53.25%, and an EBITDA Margin of 80.37%. Net income attributable to One Liberty Properties, Inc. for the nine months ended September 30, 2025, was $23.064 million, an increase from $19.885 million in the prior year. Funds From Operations (FFO) applicable to common stock saw a modest increase of 1.2% to $28.325 million, while Adjusted Funds From Operations (AFFO) applicable to common stock grew by 2.9% to $31.203 million for the same nine-month period. These figures demonstrate the company's ability to generate consistent earnings and cash flow, crucial for a REIT.

Capital Allocation and Liquidity

OLP maintains a robust liquidity position to support its growth initiatives. As of October 31, 2025, the company reported available liquidity of $109.40 million, comprising $9.40 million in cash and cash equivalents and up to $100 million available under its credit facility. This liquidity is critical for funding ongoing acquisitions and managing its debt obligations.

The company actively recycles capital through strategic property sales. For the nine months ended September 30, 2025, OLP generated a net gain of $16.712 million from the sale of real estate, with gross sales totaling $49.461 million. Notably, subsequent to the quarter-end, the sale of The Vue Apartments in Beachwood, Ohio, on November 4, 2025, is expected to yield approximately $16.40 million in net proceeds. Additionally, OLP anticipates receiving $1.30 million in November 2025 from a litigation settlement related to this property. These proceeds are earmarked for funding new acquisitions, including the proposed Pittsburgh Portfolio, and for general working capital purposes.

OLP's debt structure is predominantly fixed-rate or hedged with interest rate swaps, limiting its exposure to interest rate fluctuations. As of September 30, 2025, the company had $463.10 million in outstanding mortgages payable, with a weighted average interest rate of 4.79% and a weighted average remaining term to maturity of 6 years. While the company intends to refinance, extend, or pay off maturing mortgages, it anticipates that mortgage interest expense will increase due to current comparable mortgage interest rates generally being higher than the weighted average interest rate on maturing debt through 2027. For instance, new mortgages obtained in the nine months ended September 30, 2025, had a weighted average interest rate of 6.11%.

Competitive Landscape: Positioning for Advantage

One Liberty Properties operates within a competitive REIT landscape, facing rivals that range from highly specialized industrial giants to broadly diversified players. Key direct competitors include Prologis (PLD), Realty Income (O), and W. P. Carey (WPC), each with distinct market positions.

Prologis, a dominant industrial-focused REIT, leverages its global scale and expertise in logistics and warehousing. While Prologis exhibits stronger revenue growth and profitability due to its specialized focus and economies of scale, OLP's more diversified portfolio across industrial, retail, and other property types offers a broader risk mitigation strategy. OLP's net lease model, which shifts operational burdens to tenants, provides a stable income stream that can be more resilient across varied economic conditions compared to a singular industrial focus.

Realty Income, known for its retail-centric, single-tenant net lease properties, shares OLP's reliance on the net lease structure. However, OLP's broader property diversification, including a significant industrial component, provides greater adaptability to market shifts beyond the retail sector, where Realty Income is more concentrated. While Realty Income may demonstrate superior efficiency and investor appeal through its dividend-focused strategy, OLP's diversified approach aims for balanced risk management and consistent returns.

W. P. Carey, another diversified REIT with international exposure, also utilizes sale-leaseback arrangements. OLP's primarily domestic focus and streamlined U.S.-centric net lease model offer simpler operational execution and potentially lower overhead costs compared to W. P. Carey's global complexities. While W. P. Carey benefits from global diversification, OLP's strength lies in its focused adaptability within the U.S. market.

OLP's competitive advantage stems from its diversified portfolio, which provides resilience by spreading risk across sectors, and its net lease structure, which results in lower operational costs. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, OLP's strategic shift to industrial properties aligns with favorable market trends, suggesting an enhanced competitive standing in this growing segment. The broader market trend of diversified REITs trading at a discount to their underlying asset values, as noted by analysts, suggests a potential mispricing opportunity for investors in companies like OLP.

Technological Adaptation in a Dynamic Market

One Liberty Properties does not explicitly detail proprietary technological differentiators or significant internal R&D initiatives. However, the company's strategic pivot towards industrial properties is a direct response to and alignment with broader technological and economic trends reshaping the real estate landscape. The rise of e-commerce, the reconfiguration of global supply chains, and the increasing demand for data centers driven by advancements in artificial intelligence are profoundly impacting the industrial real estate sector.

By focusing on industrial assets, OLP is strategically positioning itself to benefit from these macro-level technological shifts. Industrial properties, particularly logistics and warehousing facilities, are critical infrastructure for the digital economy. The "so what" for investors is that OLP's strategic asset allocation enhances the long-term relevance and demand for its portfolio, even without proprietary technology. This strategic adaptation to market-driven technological changes can contribute to sustained rental income growth and property value appreciation, forming a crucial part of its competitive moat in a rapidly evolving industry.

Outlook and Growth Drivers

OLP's outlook is characterized by continued strategic acquisitions and capital recycling, aimed at strengthening its industrial portfolio. The company has provided concrete guidance for upcoming transactions. The retail property in Port Clinton, Ohio, is anticipated to be sold during the fourth quarter of 2025, with estimated net proceeds of approximately $500,000 and a gain of $200,000. The recently sold Beachwood, Ohio property generated approximately $16.40 million in net proceeds, supplemented by an expected $1.30 million from a litigation settlement in November 2025.

These proceeds are slated to fund further industrial acquisitions, including the proposed Pittsburgh Portfolio. This six-building, multi-tenant industrial property in Sewickley, Pennsylvania, is expected to be acquired for $53.50 million during the fourth quarter of 2025, with an estimated annual base rent of $3.40 million and annual increases ranging from 2% to 3%. Additionally, the single-tenant industrial property acquired in Oakdale, Minnesota, on October 30, 2025, for $23.0 million, is estimated to generate annual base rent of $1.50 million with 4% annual increases. These acquisitions are expected to bolster OLP's rental income and reinforce its industrial focus.

Management anticipates that mortgage interest expense will increase as the company refinances mortgages maturing through 2027, given that current comparable interest rates are generally higher than the weighted average rates on these maturing loans. This will be a key factor influencing future earnings and the amount required for REIT distributions.

Risks and Mitigations

While OLP's strategic direction is compelling, several risks warrant investor attention. The volatile economic environment, including the potential impact of tariffs and trade wars, could adversely affect cash flow and profitability, particularly for seaport-based industrial/warehouse properties. Tenant financial failures or defaults, as exemplified by a restaurant tenant filing for bankruptcy in April 2025, could lead to vacancies and impact rental income.

Interest rate volatility poses a continuous challenge, as higher refinancing rates could increase interest expense and potentially reduce earnings. OLP mitigates this through its fixed-rate debt and interest rate swap agreements, which limit exposure to fluctuating rates on substantially all its variable rate mortgages. The company also actively monitors tenant financial conditions and has a history of selling properties with unsatisfactory tenant credit. Changes in governmental laws and regulations, including the complex provisions of the "One Big Beautiful Bill Act" (OBBBA) enacted in July 2025, could also impact the company's tax structure and operations. OLP's diversification strategy across locations, tenants, and lease expirations serves as a fundamental mitigation against many of these risks.

Conclusion

One Liberty Properties is undergoing a significant and well-executed strategic transformation, pivoting its portfolio towards the resilient and growing industrial real estate sector. This deliberate shift, supported by a robust capital recycling program and targeted acquisitions, positions OLP to capture favorable market tailwinds driven by e-commerce and evolving supply chain dynamics. The company's net lease model and high occupancy rate provide a stable foundation for consistent rental income and cash flow, underpinning its attractive dividend yield.

While OLP may not possess proprietary technological differentiators, its strategic alignment with broader technological trends impacting industrial real estate demonstrates a forward-thinking approach to asset allocation. Despite the challenges of a rising interest rate environment and general economic volatility, OLP's strong liquidity, proactive debt management, and diversified risk mitigation strategies suggest a compelling investment thesis for discerning investors seeking stable returns and growth within the REIT sector. The successful integration of its recent and planned industrial acquisitions will be paramount in realizing the full potential of this strategic evolution.