One Liberty (OLP) Q2 Revenue Rises 12%

Key Points

• Revenue (GAAP) missed analyst expectations but still rose 12.3% year-over-year to $24.5 million.

• Higher interest expense weighed on net income, which declined to $8.4 million (GAAP), with EPS dropping 13.3% year-over-year.

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One Liberty Properties (NYSE:OLP), a real estate investment trust focusing on commercial properties, especially in the industrial sector, released its financial results for the second quarter, reported on August 5, 2025. However, revenue (GAAP), although up from the prior year, missed consensus projections by 2.08% at $24.479 million. Overall, the period showed growth in underlying rent from its industrial-focused portfolio, even as rising debt costs constricted profitability on a net income basis.

Source: Analyst estimates for the quarter provided by FactSet.

Business Model and Recent Strategic Focus

One Liberty Properties owns and manages a portfolio of commercial real estate focused heavily on industrial properties such as warehouses and logistics centers. It generates most of its revenue from long-term net leases, where tenants cover operating costs, creating predictable income for shareholders. The company manages 105 properties across the United States, with industrial properties comprising 74% of its base rent mix for FY2025.

In the past two years, the company's strategy has centered on selling non-industrial assets and acquiring industrial buildings with long-term leases featuring annual rent increases. This move aims to deliver stable, inflation-resistant income while reducing exposure to volatile retail markets. Key factors for its ongoing success now include lease management, tenant diversity, disciplined acquisitions, and careful management of financial leverage.

Quarterly Highlights and Underlying Developments

The period saw notable shifts in earnings metrics. Funds from Operations (FFO), which investors use to gauge real estate profitability by adding back property depreciation and gains from sales, rose 4.7% per share to $0.45 (as reported on a NAREIT-defined non-GAAP basis). Adjusted Funds from Operations, a measure that goes further by excluding one-time and non-cash items, edged up 2.1% per share to $0.49. These improvements resulted from higher rental income and the net impact of acquisitions and dispositions.

Rental income, net, climbed to $24.5 million, up 12.3% from the prior year. The increase was driven by the net impact of acquisitions and dispositions, with a lesser contribution from lease amendments, extensions, and new lease activity. The company noted that a large portion of its lease portfolio includes annual rent increases or are tied to inflation measures, which reduces risk of flatlining rental growth.

However, gains on asset sales—a key contributor to net income—were lower than the prior year at $6.5 million, compared with a $7.4 million gain in Q2 2024, which helped explain the drop in reported net income and GAAP earnings per share. Operating expenses also rose, driven by higher real estate costs and increased depreciation linked to recent acquisitions. Interest expense increased sharply, rising to $5.8 million from $4.8 million, reflecting both a higher debt load and higher average borrowing rates as the company funded acquisitions with new mortgage debt.

The company continued its pivot toward purely industrial assets. During Q2 2025, it agreed to acquire a new 210,600 square foot industrial facility in Blythewood, South Carolina for $24.0 million, with base annual rent of $1.5 million and annual rent increases of 3.5%. Year-to-date through Q2 2025, total acquisitions have exceeded $112 million, further shifting One Liberty Properties toward an industrial-income mix while reducing exposure to retail tenancies. The company sold three non-industrial assets in Q2 2025, generating $6.5 million in gains, and expects future property sales in Colorado and Oregon to contribute additional one-time gains in the second half of the year.

Product Portfolio and Segment Performance

The company’s product focus is on leased industrial buildings—such as logistics warehouses and fulfillment centers—leased under long-term agreements. These assets benefit from rising e-commerce and logistics demand, and many leases include rent increases of 3% to 4% per year. Recent acquisitions include properties in Alabama, Kansas, and South Carolina, with leases to major corporate tenants and built-in annual rent growth.

The trend toward higher occupancy continued, with the company reporting an occupancy rate of 99.2% as of December 31, 2024. Key industrial tenants include national names such as FedEx, Amazon, and Ferguson, each comprising a single-digit share of total annual rental income, thus mitigating the risk associated with any single lease. Retail asset exposure is being steadily reduced, with proceeds from recent retail property sales used for acquisitions and to repay mortgage debt.

Outlook and Investor Considerations

Management did not provide explicit forward financial guidance for the full year in the second quarter report. However, it confirmed that the Blythewood, South Carolina industrial acquisition is expected to close by the end of Q3 2025, contributing $1.5 million in annual base rent with 3.5% annual increases. OLP anticipates recognizing gains of $2.9 million (before giving effect to the minority interest’s $641,000 share) and $2.5 million from upcoming asset sales in Q3 2025, which could bolster future net income and cash flow.

Looking ahead, investors will want to monitor the company’s balance between acquiring new properties and managing its rising interest expenses. The company has liquidity available through a $100.0 million undrawn credit facility as of August 1, 2025. However, as property acquisitions have recently been funded by mortgage debt at higher rates (with recent mortgages bearing interest rates of 5.77% to 6.12%), interest expense could remain a source of margin pressure. Lease renewals, tenant diversification, and the pace of industrial acquisitions will all play central roles in shaping results over coming quarters.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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