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including those required by the Securities and Exchange Commission and the New York Stock Exchange. Topics covered include, but are not limited to, conflicts of interest, confidentiality of information, and compliance with laws and regulations. The code of business conduct and ethics, as amended and restated, is available at the corporate governance section of our website atwww.onelibertyproperties.com and a copy may be obtained, without charge, by writing to us at 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021, Attention: Secretary. During 2008,2009, there were no amendments to the code of business conduct and ethics and no waivers of the provisions of the code of business conduct and ethics with respect to any of our directors, officers, employees, agents or consultants. We will post any amendments to, or waivers of, our code of business conduct and ethics, as amended and restated, on our website.

Risk Oversight

        Management is responsible for the day-to-day management of risks we face. Our board of directors has overall responsibility for overseeing risk management with a focus on the more significant risks facing us. Our audit committee oversees risk policies and processes related to our financial statements, financial reporting processes and liquidity risks, our compensation committee oversees risks relating to renumeration of our officers, and our nominating and corporate governance committee oversees corporate governance risks.

        At each quarterly meeting of the audit committee, a portion of the meeting is devoted to reviewing tenant credit risks, issues related to tenant matters and property operations which might have a material adverse impact on current or future operations, the status of issues previously considered by the audit committee with respect to tenant matters or property operations, liquidity risks, compliance with debt covenants, management of debt maturities and, as required, the audit committee reviews risks arising from related party transactions. In addition, at each meeting of the audit committee, the chief financial officer of the company, as well as the independent accounting firm performing the independent audit function on behalf of the company, report to the committee with respect to compliance by our employees with our internal control policies in order to ascertain that no failures of a material nature have occurred. This process assists the audit committee in overseeing the risks related to our financial statements and the financial reporting process.

        At each meeting of the board of directors, a portion of the meeting is dedicated to reviewing and discussing significant risk issues reviewed by the audit committee.

        Our compensation committee monitors risks associated with our compensation structure. The compensation committee does not believe that the compensation programs which are in place give rise to any risk that is reasonably likely to have a material adverse effect on us.

        In order to protect against the risk of losing important corporate documents and materials in a disaster, we send backup tapes on a daily basis to an off-site storage facility.

Leadership Structure

        Our company is led by Fredric H. Gould, chairman of our board, and Patrick J. Callan, Jr., president and chief executive officer. Although the board of directors has not established a policy on whether the role of the chairman and chief executive officer should be separated, in December 2007, the board determined to have two different people hold these positions. As a result, Fredric H. Gould, who was serving as both the chairman of the board and chief executive officer, remained chairman of the board, but relinquished his title as chief executive officer effective January 1, 2008, and Patrick J. Callan, Jr., who had been serving as our president, was appointed chief executive officer effective as of January 1, 2008. The board of directors believes this is the most appropriate structure at this time because it makes the best use of the abilities of Mr. Fredric H. Gould and Mr. Callan.

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Non-Management Directors Executive Sessions

        In accordance with New York Stock Exchange Listing Standards, our non-management directors meet at regularly scheduled executive sessions without management. Non-management directors are all those directors who are neither officers or employees of ours. The board of directors does not designate a "Lead Director" or a single director to preside at executive sessions. The person who presides over executive sessions of non-management directors is a committee chairman and the director who presides over executive sessions is rotated, to the extent practicable, among the chairs of the board's committees.

Committees of the Board of Directors

Audit Committee

        Our audit committee has been established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. Our board of directors has adopted an audit committee charter delineating the composition and responsibilities of the audit committee.

        The audit committee charter requires that the audit committee be comprised of at least three members, all of whom are independent directors and at least one of whom is an "audit committee financial expert." Our board of directors has determined that allAll of the members of our audit committee arewere independent forunder the purposes of Section 10A(m)(3)applicable provision of the Securities Exchange Act of 1934, as amended, and Section 303.01 of the Listed Company Manual of the New York Stock Exchange that allListing Standards during their service on audit committee. All members of the audit committee are financially literate and that James J. Burns, the audit committee's financial expert, qualifies as an "audit committee financial expert," as that term is defined in Item 401(h) of Regulation S-K promulgated pursuant to theapplicable Securities and Exchange Act of 1934, as amended.Commission rules.

        The audit committee is responsible for assisting the board in overseeing (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm's qualifications and independence, (iv) the performance of the independent registered public accounting firm, (v) the performance of the accounting firm performing our internal control audit function, and (vi) the preparation of the audit committee report required by the Securities and Exchange Commission for inclusion in this proxy statement. The audit committee met five times during 2008.is also responsible for the selection and engagement of our independent registered public accounting firm. The audit committee held four meetings and conducted business on one occasion by unanimous written consent in 2009.

Compensation Committee

        The compensation committee which ischarter requires that the compensation committee be comprised of at least three members, all of whom are independent directors,directors. All of the members of our compensation committee were independent during their service on the compensation committee. The compensation committee held twothree meetings in 2008.2009. The compensation committee recommends the base salary, annual bonus and stock incentive awards to our full-time officers and to our board of directors and recommends awards under the One Liberty Properties, Inc. 2003 Incentive Plan and 2009 Incentive Plan (if approved by stockholders at the annual meeting) to officers, directors, employees and consultants. The committee willmay also establish performance goals and performance cycles ifpursuant to the One Liberty Properties, Inc. 2009 Incentive Plan is approved by stockholders (see "One Liberty Properties, Inc. 2009 Incentive Plan, Proposal 2").Plan. The compensation committee administers the One Liberty Properties, Inc. 2009 Incentive Plans.Plan.

Nominating and Corporate Governance Committee

        The nominating and corporate governance committee which ischarter requires that the nominating and corporate governance committee be comprised of at least three directors, all of whom are independent directors,directors. All of the members of the nominating and corporate governance committee were independent during their service on the nominating and corporate governance committee. The nominating and corporate governance committee held one meeting and conducted business on one occasion by unanimous written consent in 2008.2009. The responsibilities of the nominating and corporate governance committee include

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recommending a slate of directors for election to the board of directors

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at the annual stockholders' meeting, recommending committee assignments to the board of directors, identification and recommendation of candidates to fill vacancies on the board of directors between annual stockholder meetings, proposing, monitoring and recommending changes to the company's corporate governance guidelines and overseeing the evaluation of the board of directors and its effectiveness.

Director Qualifications

        The board believes that it should be comprised of directors with varied, complementary backgrounds, and that directors should, at a minimum, have business experience which is relevant to our business. Our nominating and corporate governance committee has not adopted a formal diversity policy in connection with the consideration of director nominations or the selection of nominees. It considers the personal and professional attributes and the business experience of each director candidate to promote diversity of expertise that may be useful to us. Directorsand experience among our directors. Additionally, directors should also possess the highest personal and professional ethics in order to perform their duties properly, and should be willing and able to devote the required amount of time to our business.

        When considering candidates for director, the nominating and corporate governance committee will take into account a number of factors, including the following:

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Independence from management;



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Whether the candidate has relevant business experience;



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Judgment, skill, integrity and reputation;



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Financial and accounting background, to enable the nominating and corporate governance committee to determine whether the candidate would be suitable for audit committee membership;



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Executive compensation background, to enable the nominating and corporate governance committee to determine whether the candidate would be suitable for compensation committee membership; and



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The size and composition of the existing board.

        The nominating and corporate governance committee will consider candidates for director suggested by stockholders applying the criteria for candidates described above and considering the additional information referred to below. Stockholders wishing to suggest a candidate for director should write to our Secretary and include:

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A statement that the writer is a stockholder and is proposing a candidate for consideration by the nominating and corporate governance committee;



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The name of and contact information of the candidate;



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A detailed statement of the candidate's business and educational experience;experience and an explanation of the reasons why the stockholder believes the candidate is qualified for service on our board of directors;



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Information regarding each of the factors listed above sufficient to enable the nominating and corporate governance committee to evaluate the candidate;



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A statement detailing any relationship between the candidate and any of our competitors;

        The audit committee has concluded that the provision of non-audit services listed above is compatible with maintaining the independence of Ernst & Young LLP.

Pre-Approval Policy for Audit and Non-Audit Services

        The audit committee must pre-approve all audit and non-audit services involving our independent registered public accounting firm.

        In addition to the audit work necessary for us to file required reports under the Securities Exchange Act of 1934, as amended (i.e., quarterly reports on Form 10-Q and annual reports on Form 10-K), our independent registered public accounting firm may perform non-audit services, other than those prohibited by the Sarbanes-Oxley Act of 2002, provided they are approved by the audit committee. The audit committee approved all audit and non-audit services performed by our independent registered public accounting firm in 20082009 and 2007.2008.

Approval Process

        Annually, the audit committee reviews and approves the audit scope concerning the audit of our consolidated financial statements for that year, including the proposed audit fee associated with the audit and services in connection with our compliance with Section 404 of the Sarbanes-Oxley Act of 2002. The audit committee may, at the time it approvesreviews the audit scope or subsequently thereafter, approve the provision of tax related non-audit services and the maximum expenditure which may be incurred for such tax services for such year. Any fees for the audit in excess of those approved and any fees for tax related services in excess of the maximum established by the audit committee must receive the approval of the audit committee.

        Proposals for any other non-audit services to be performed by the independent registered public accounting firm must be approved by the audit committee.

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REPORT OF THE AUDIT COMMITTEE

        The audit committee of the board of directors is comprised of three independent directors and operates under a written charter adopted by the board of directors. The audit committee reviews the charter on an annual basis. The board of directors has reviewed Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, and the New York Stock Exchange listing standards definition of independence for audit committee members and has determined that each member of the audit committee is independent.was independent during his service on the committee.

        The role of the audit committee is appointed by the board of directorsto select and engage our independent registered public accounting firm and to oversee and monitor, among other things, theour financial reporting process, the independence and performance of the independent registered public accounting firm and the functioning of our internal controls. It is the responsibility of management to prepare financial statements in accordance with generally accepted accounting principles and of the independent registered public accounting firm to perform an independent audit of the financial statements and to express an opinion on the conformity of those financial statements with generally accepted accounting principles.

        The audit committee met on fivefour occasions and conducted business on one occasion by unanimous written consent in 2008.2009. In performing its functions, the audit committee met and held discussions with management, the independent registered public accounting firm and the accounting firm performing the internal control audit function on the company's behalf. The audit committee discussed with the independent registered public accounting firm the overall scope and plan for its activities and reviewed with the accounting firm performing the internal control audit function its work plan and the overall scope and plans for their respectiveof its activities.

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        Management represented to the audit committee that the year end consolidated financial statements were prepared in accordance with generally accepted accounting principles. The audit committee reviewed and discussed the year end consolidated financial statements with management and the independent registered public accounting firm. The audit committee also discussed ourthe company's internal control procedures and their evaluation of ourthe internal controls with management, the independent registered public accounting firm and the accounting firm performing the internal control audit function. The audit committee also reviewed with management the process used for the certifications under the Sarbanes-Oxley Act of 2002 of the company's filings with the Securities and Exchange Commission. The audit committee met to review the unaudited quarterly financial statements prior to filing each Form 10-Q with the Securities and Exchange Commission and reviewed each quarterly earnings press release prior to public release. The audit committee discussed with the independent registered public accounting firm matters required to be discussed by the statement on Auditing Standards No. 61, as amended (Communication with Audit Committee).

        The audit committee discussed with the independent registered public accounting firm, the registered public accounting firm's independence from usthe company and management, and received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). Further, the audit committee reviewed and approved the independent registered public accounting firm's fees, both for performing audit and non-audit services, and considered whether the provision of non-audit services by the independent registered public accounting firm was compatible with maintaining the independent registered public accounting firm's independence and concluded that it was compatible.

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        Based on the reviews and discussions referred to above, the audit committee recommended that the audited financial statements for the year ended December 31, 20082009 be included in the company's Annual Report on Form 10-K for the year ended December 31, 20082009 for filing with the Securities and Exchange Commission.

        The audit committee approved the retention of Ernst & Young LLP as independent registered public accounting firm for the fiscal year ended December 31, 20092010 after reviewing the firm's performance in 20082009 and its independence from us and management.

        The audit committee also reviewed the annual payment made by the company to Majestic Property Management Corp. under the compensation and services agreement, renegotiatedacted on behalf of the independent directors in negotiating the amount of such annual payment and other compensation under such agreement with certain of the company's part-time executive officers and reviewed its findings and conclusions with respect to such payment and other compensation with the company's compensation committee.

Charles Biederman (Chairman)
James J. Burns
Joseph A. DeLuca

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

        This compensation discussion and analysis describes our compensation objectives, policies and decisions as applied to our executive officers in 2008.2009. This discussion and analysis focuses on the information contained in the compensation tables that follow this discussion and analysis, but also describes our historic compensation structure for our executive officers to enhance an understanding of our executive compensation disclosure. Our compensation committee oversees our compensation program, recommends the compensation of officers employed by us on a full-time basis to our board of directors for its approval, approves the annual fee paid by us to the chairman of our board, and approves the annual fees paid by us pursuant to a compensation and services agreement to Majestic Property Management Corp., an affiliated entity (hereinafter "Majestic")Majestic), which results in the payment by Majestic of compensation to our part-time officers, including Fredric H. Gould, Matthew J. Gould and David W. Kalish.Kalish and Mark H. Lundy. Majestic is wholly-owned by Fredric H. Gould, the chairman of our board.

        Historically, including in 2008, weWe have had two categories of officers: (i) officers who devote their full business time to our affairs, and (ii) officers who devote their business time to us on a part-time basis. The officers who devote their full business time to our affairs are compensated directly and solely by us. Prior to 2007, the basic compensation (base salary, bonus, if any, and perquisites) of certain of our part-time officers, who perform primarily engage in legal and accounting servicesactivities on our behalf, was allocated to us and other affiliated entities pursuant to a shared services agreement and certain officers (including officers who did not allocate any of their compensation to us and officers whose compensation was allocated to us) received compensation from Majestic, whose gross revenues includeincluded fees paid by us for services performed on our behalf by Majestic (property management, sales and lease consulting and brokerage services, mortgage brokerage services and construction supervisory services, among other services provided). All of our full-time and part-time officers and other employees, including employees of affiliated companies who perform services for us on a part-time basis, receive annual restricted stock awards approved by the compensation committee and the board of directors.

        In 2006, in connection with a review of our allocation methods and our related party transactions, with affiliated entities, our audit committee recommended to our compensation committee and board of directors a change in the manner in which compensation is paid to those officers (and employees) who perform services for us on a part-time basis, including legal and accounting services, as well as a change in the manner in which any affiliated entity, primarily Majestic, is compensated for services performed on our behalf. The services provided by Majestic to us includedinclude billing and collection of rent and additional rent and property management services, property acquisition review and analysis, troubled tenant evaluations,default issues, sales and lease consulting and brokerage services, consulting services in respect to mortgage financings and construction supervisory services. The audit committee recommended changes toin the manner in which compensation is paid to part-time officers and employees and the manner in which Majestic is compensated for services performed on our behalf because, in its view, the changes would simplify our compensation structure, limit the need for the audit committee, the internal auditor and the independent auditor to review the allocations and limit potential conflict issues which may arise as a result of related party transactions. The audit committee, the compensation committee and the board of directors were of the opinion that it was desirable for us to maintain the services of those officers who perform services for us on a part-time basis, as well as the services of Majestic, which performs necessary services on our behalf.

        In order to effectuate our audit committee's recommendation, we entered into an agreement with Majestic, effective as of January 1, 2007, under which Majestic assumed our obligations to make payments under the shared services agreement and agreed to provide to us the services of all executive, administrative, legal, accounting and clerical personnel that had previously been utilized by us on a part-time basis and for which we paid, as reimbursement, an allocated portion of the payroll expenses of such personnel in accordance with a shared services agreement. Since Majestic now provides such

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personnel for us, we no longer incur any allocated payroll expense and the payroll expenses of such executives and part-time employees is allocated to Majestic. Under the terms of the agreement, Majestic also agreed to continue to provide to us the property management services, property acquisition, sales and lease consulting and brokerage services, consulting services in respect to mortgage financings, and construction supervisory services that it provided to us in the past and we, therefore, do not incur any fees or expenses for such services, except for the annual fee referred to below. As consideration for providing the services of such personnel to us, and for providing property management services, property acquisition, sales and lease consulting and brokerage services, consulting services in respect to mortgage financings and construction supervisory services, we agreed to pay to Majestic a fee of $2,025,000 for 2008.2009. Majestic may earn a profit from payments under the agreement. Majestic credits against the fee due to it any management or other fees received by it from any of our joint ventures (except for fees paid by the tenant-in-common on a property located in Los Angeles, CA). In addition, under the agreement, we agreed to pay compensation to the chairman of our board of $250,000 per annum and to make an additional payment to Majestic of $175,000 in 20082009 for our share of all direct office expenses, including rent, telephone, computer services, internet usage, supplies etc., previously allocated under the shared services agreement and since 2007 allocated to Majestic. The annual payments made by us to Majestic are to be reviewed and renegotiatednegotiated by our audit committee and Majestic annually and at other times as may be determined by our audit committee.

        For the year ended December 31, 2008,2009, our named executive officers are Patrick J. Callan, Jr., president (chief executive officer effective January 1, 2008) and Lawrence G. Ricketts, Jr., executive vice president (chief operating officer effective January 1, 2008), both of whom devote their full time to our affairs, and Fredric H. Gould, chairman of our board (chief(and chief executive officer throughfrom July 2005 to December 31, 2007), David W. Kalish, senior vice president and chief financial officer, and Matthew J. Gould,Mark H. Lundy, a senior vice president and secretary, who devote time to our affairs on a part-time basis.

Objectives of our Compensation Program

        The overriding objective of our compensation program for full-time officers is to ensure that the total compensation paid to such officers is fair, reasonable and competitive. The compensation committee believes that relying on this principal will permit us to both retain and motivate our officers. With respect to our part-time officers, the compensation committee must be satisfied that such officers provide us with sufficient time and attention to fully meet our needs and fully perform their duties on our behalf. The compensation committee has considered this issue and is of the opinion that our part-time officers perform valuable services on our behalf, devote sufficient time and attention to our business needs, are able to fully meet our needs and that this arrangement does not adversely affect their ability to perform their duties effectively on our behalf. The compensation committee is of the opinion that our part-time officers perform valuable services on our behalf, are not distracted by their activities on behalf of affiliated entities and the performance of activities on behalf of affiliated entities does not adversely affect their ability to perform duties effectively on our behalf. The compensation committee is also of the opinion that utilizing the services of various senior officers with diverse skills on a part-time basis enables us to benefit from a greater degree of executive experience and competence than an organization of our size could otherwise afford.

        We have historically experienced an extremely low level of officer and employee turnover. Fredric H. Gould, Matthew J. Gould and David W. Kalish and Mark H. Lundy each has been an officer with us for over 1820 years and Lawrence G. Ricketts, Jr. has been employed by us for approximately 10 years. Patrick J. Callan, Jr. has been a member of our board of directors for seven years, and has been our president for in excess ofover three years and our chief executive officer for over two years.

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Compensation Setting Process

Full-time Officers

        Our compensation committee refers to the compensation survey prepared for the National Association of Real Estate Investment Trusts (NAREIT) to understand the base salary, bonus, long-term incentives and total compensation paid by other REITs to their officers to assist it in

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providing a fair, reasonable and competitive compensation package to our full-time officers. Although there are many REITs engaged in acquiring and managing real estate portfolios, there are few equity REITs which have a market capitalization comparable to ours. As a result, the NAREIT compensation survey, although informative, does not provide information which is directly applicable to us. Accordingly, weWe determine compensation for our full-time officers, including our full-time named executive officers, on a case-by-case basis. In addition, from time to timebasis and our compensation decisions are subjective. Our compensation committee retainshas retained an independent compensation consultant to provide the committee with an analysis of the compensation paid to our executive officers in comparison to a selected peer group (see "Compensation Consultant" below). We have not to date utilized performance targets. However, the committee has commenced the process for establishing performance goals for the grant of performance based awards which willfor senior executives and has decided to initially allocate 200,000 shares from the One Liberty Properties Inc. 2009 Incentive Plan to such program, expects to use both a return on capital and total shareholder return metric, and provide for a seven-year vesting period. The performance based awards should be made in 2009granted prior to be effective in 2010.calendar year end.

        In determining compensation for 2008,2009, the recommendations of Fredric H. Gould, chairman of our board, (formerly chief executive officer), played a significant role in the compensation-setting process since, as the chairman of the board, he was aware of each officer's duties and responsibilities and was most qualified to assess the level of each officer's performance. The chairman of our board, prior to making recommendations to the compensation committee concerning each full-time officer's compensation, consulted with certainother senior executive officers. During the process, they considered our overall performance for the immediately preceding fiscal year, including rental income, funds from operations, net income, and cash distributionsdividends paid to stockholders.stockholders and performance of our common stock were taken into consideration. None of these measures of performance was given more weight than any other and they were used to provide an overall view of our performance for the preceding year. The chairman of the board and other senior officers also assessed each individual's performance in such year, which assessment was highly subjective. Positively impacting the compensation decisions with respect to our full-time named executive officers for 20082009 was the recognition of certain corporate accomplishments in 2007, including increasesincrease in rental income and fundsrevenues from operations.2007 to 2008. Also taken into consideration was the fact that, although we hadthere was a decline in net income year over year,in 2008 compared to 2007, the decline was due primarily to gainsimpairment charges recorded at December 31, 2008 with respect to four former Circuit City properties and one additional property due in 2006 onlarge measure to the disposition of real estate by unconsolidated joint ventures, offset by mortgage prepayment premiums required as part of these sales.national economic recession. During this process, the chairman of our board proposed to the compensation committee with respect to each full-time named executive officer, a base salary for the 20082009 calendar year, a bonus applicable to the 20072008 calendar year (paid in 2008) and the number of shares of restricted stock to be awarded to each individual full-time named executive officer. At its annual compensation committee meeting, the compensation committee reviewed these recommendations. The compensation committee has discretion to accept, reject or modify the recommendations. The final decision by the compensation committee on compensation matters related to all officers was reported to the board of directors, which approved the actions of the committee.

Part-time Officers

        We believe that utilizing part-time officers pursuant to the shared services agreement through December 31, 2006, and, since January 1, 2007 pursuant to the compensation and services agreement, enables us to benefit from access to, and the services of, a group of senior officers with experience and knowledge in real estate ownership, operations and management and finance, legal, accounting and tax matters that an organization our size could not otherwise afford. Our chairman, in consultation with certain of our part-time senior officers, determines the total annual base compensation, bonus, if any, and perquisites to be paid by all parties to the shared services agreement to our part-time officers.

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        Pursuant to the compensation and services agreement, Majestic assumed our obligations under the shared services agreement, and agreed to provide to us the services of all affiliated executive, administrative, legal, accounting and clerical personnel that we previously used on a part-time basis. For 2007, 2008 and 2008,2009, the portion of our part-time officers' compensation which washad been allocated

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to us in prior years pursuant to thea shared services agreement, and would have been allocated to us in 2007, 2008 and 20082009 if the compensation and services agreement was not in effect, was allocated to Majestic. The terms of the compensation and services agreement, werewas negotiated by our audit committee, approved by our compensation committee and our board of directors and the agreement was effective as of January 1, 2007. For 2006, the audit committee reviewed the amount of compensation of part-time officers allocated to us to determine if the allocation process was performed in accordance with the shared services agreement, and the compensation committee reviewed the reasonableness of the compensation allocated to us. For 2006, the audit committee, as a result of inquiries of the testing procedures of the independent registered public accounting firm and the accounting firm performing our internal audit function determined that each part-time officer's compensation was properly allocated to us in accordance with the shared services agreement. The annual fee paid to Majestic in 2008 and 2007 under the compensation and services agreement was negotiated for each year by theour audit committee and management of Majestic and approved by our compensation committee and our board of directors. Our part-time officers, including our chairman, receive compensation from other business enterprises, most of which are owned or controlled by our chairman. The compensation committee was advisedis aware of the total compensation received by each part-time officer from Majesticreceipt and other affiliated entities in 2008 and 2007.amount of such compensation.

Compensation Consultant

        In October 2008, our compensation committee engaged an independent compensation consultant, FPL Associates L.P., a nationally recognized compensation consulting firm specializing in the real estate industry. In January, 2010, FPL Associates L.P. was retained again by the compensation committee to update certain of the information previously provided. FPL Associates L.P. has no relationship with us or any of our affiliates, except that it was also retained in 2008 and 2009 as the independent compensation consultant for BRT Realty Trust, which may be deemed an affiliate of ours. The primary purpose of the initial engagement in October 2008 was for the compensation consultant to conduct a comprehensive benchmarking analysis for our senior executives, to enable our compensation committee to determine if the compensation of our senior executive officers is fair and reasonable and to assist our compensation committee in making any necessary adjustments to the compensation components. The purpose of the January, 2010 retention was for the compensation consultant reviewedto update the compensation of seven ofbenchmarking analysis for our seniorpresident and chief executive officers, includingofficer and our named executive officers other than Matthew J. Gould. Matthew J. Gould was not included in the compensation consultant's study since none of his basic compensation (salary or bonus) is paid by us or allocated to Majestic. (Matthew J. Gould participates in distributions made by Majestic—see "Summary Compensation Table"vice president and "Certain Relationships and Related Transactions.")chief operating officer.

        Prior to commencing its benchmarking analysis, the compensation consultant and management discussed and agreed upon a methodology for determining the comparative peer groups. Based upon such discussions it was determined to use two peer groups as follows:

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A Full-Time Peer Group; to be used for executives who dedicate all, or substantially all, of their business time to our affairs. The Full Time Peer Group includes public REITs active in the net lease space; public real estate companies comparable in size to us (measured by market and total capitalization); and/or public real estate companies located in New York. The Full Time Peer Group selected for benchmarking purposes consists of eleven public real estate companies with a market capitalization which is generally larger than our capitalization. The compensation consultant noted in its report to the compensation committee that none of the specific peer group companies are a perfect match to us, due to our small size position among our most direct peers.



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A Shared Peer Group; to be used for executives who dedicate a portion of their business time to our affairs and who also dedicate time to affiliated companies (primarily BRT Realty Trust, a

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public company engaged in mortgage originations).companies. The Shared Peer Group exude similar characteristics as described for the Full Time Peer Group and includeincludes public REITs focused on the debt side of the real estate business and consists of six public equity REITs and six public debt REITs that are comparable to us in terms of focus, size and/or geographic location. The market capitalization of the peer group companies is generally larger than our capitalization.




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The following is the full-time peer group companies used by the consultant:

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The following is the shared peer group companies used by the consultant:

        The compensation consultant, in its initial report, used the 25^th percentile as the market comparison in its conclusions because of our relatively smaller size compared to the peer group companies. The compensation consultant also used a plus/minus 15% threshold to define "in line" (competitive) with the market. Based on its benchmarking analysis, the compensation consultant advised that in 2008: (i) the compensation paid by us to Patrick J. Callan, Jr., our president and chief executive officer, is slightly above the 25^th percentile, (ii) the compensation paid by us to Lawrence G. Ricketts, Jr., our executive vice president and chief operating officer, is in line with or slightly below the 25^th percentile, (iii) the compensation of part-time senior executives (including Fredric H. Gould, chairman of the board, and David W. Kalish, a senior vice president and chief financial officer)officer and Mark H. Lundy, senior vice president and secretary) paid by us or allocated to Majestic is below the 25^th percentile, (iv) the total compensation paid to Fredric H. Gould (including all compensation paid by affiliated companies which includes three operating entities and two service companies), and the total compensation paid to part-time senior executives (including David W. Kalish and Mark H. Lundy) by us and such affiliated operating and service companies (including David W. Kalish) is above the 25^th percentile and (v) the equity awards we provide to all of our officers are a smaller portion of total compensation compared to our peers.

        Since the total compensation of part-time named executive officers declined in 2009, as compared to 2008, the compensation committee did not deem it necessary to engage a compensation consultant to update its benchmarking analysis for its part-time executive officers. However, it did deem it appropriate to go through the process as it relates to our full-time senior executives to determine if the compensation paid to them in 2009 was fair and reasonable and to further determine if any adjustments were necessary. In updating the benchmarking analysis for our president and chief executive officer and our executive vice president and chief operating officer, the consultant utilized a consistent methodology from a position matching and company matching perspective as that contained in its initial analysis. In reviewing the compensation paid to our president and chief executive officer and to our executive vice president and chief operating officer in 2009, the consultant focused on the 25^th percentile and the median as the appropriate market range. The consultant concluded that on an absolute compensation basis, and considering the "market range" used by it, the two senior full-time executives' compensation appears to be generally "in line" with market. The compensation consultant further advised the compensation committee that the compensation mix of the company is weighted more heavily toward cash compensation compared to market and the long-term incentive mix lags the market. The consultant noted, that it understood that equity pay has historically been limited to mitigate dilution issues and it understands that the Compensation Committee is in the process of creating a long-term performance based equity program, which it fully supports.

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        The benchmarking analysis performed by the compensation consultant for the compensation committee and the compensation consultants use of the 25^th percentile and the median as the market comparison in its findings is used by the compensation committee as a guide in its review and determination of base salaries, annual cash bonuses and restricted stock awards and is only one input in the compensation process. The company's performance, both on an absolute basis and in comparison to its direct and indirect competition (taking into account economic and general business conditions), and each executive's performance, tenure and experience is taken into consideration in arriving at the executive's compensation, which may result in whether the executive is paid below, at, or above the percentile used by the compensation consultant in its market comparison.

Components of Executive Compensation

Full-time Officers

        The principal elements of our compensation program for our full-time officers are:

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base salary;



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annual bonus;



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long-term equity incentive in the form of restricted stock; and



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special benefits and perquisites.

        Additional benefits and perquisites which are provided to our full-time executive officers consist of:

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additional disability insurance;



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an automobile allowance; and

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automobile maintenance and repairs.

        Base salary and annual bonus are cash-based, while long-term incentives consist of restricted stock awards. In determining compensation, the compensation committee does not have a specific allocation goal between cash and equity-based compensation.

Part-time Officers

        In 2008,2009, except for the $250,000 annual compensation we paid to the chairman of our board pursuant to the compensation and services agreement, the only form of direct compensation we provided to our part-time officers was the granting of long-term equity incentives in the form of restricted stock awards. For services rendered to us, our part-time officers are compensated by Majestic, which was paid a fee of $2,025,000 (including $6,000$12,000 paid by one of our joint venture partners, but excluding $175,000 as reimbursement for our share of direct office expenses) in 20082009 pursuant to the compensation and services agreement. The compensation committee was advised of the amount allocated by each part-time officer to Majestic for service rendered on our behalf and the total compensation received by each part-time officer in 20082009 from Majestic and other affiliated companies.

Base Salary

        Base salary is the basic, least variable form of compensation for the job an officer performs and provides each officer with a guaranteed monthly income.

        Full-time Officers:    Base salaries of full-time officers are targeted to be competitive with the salaries paid to officers at other REITs with a market capitalization similar to ours. Any increase in base salary is determined on a case by case basis, is not based upon a structured formula and is based upon, among other considerations (i) our performance in the preceding fiscal year, (ii) such officer's current base salary, (iii) amounts paid by peer group companies for officers performing substantially

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