GTJ REIT, INC. - Annual Report: 2012 (Form 10-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number: 0001368757

GTJ REIT, INC.
(Exact name of registrant as specified in its charter)

(516) 881-3535
(Registrant's telephone number, including area code)

                Securities registered pursuant to Section 12(g) of the Act: NONE

                Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

                Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

                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 ý    No o

                Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 ý    No o

                Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes o    No ý

                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. (Check one):

                Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

                State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked priced of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter: N/A

                Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date: As of March 25, 2013, there were 13,648,084 shares of common stock issued and outstanding.

GTJ REIT, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2012
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PART I

FORWARD-LOOKING STATEMENTS

              Certain information included in this Annual Report contains or may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Historical results and trends should not be taken as indicative of future operations. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," "prospects," or similar expressions. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions generally and the real estate market specifically; legislative or regulatory changes, including changes to laws governing the taxation of real estate investment trusts ("REITs"); availability of capital; interest rates; our ability to service our debt; competition; supply and demand for operating properties in our current and proposed market areas; generally accepted accounting principles; and policies and guidelines applicable to REITs; and litigation. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Although we believe the assumptions underlying the forward-looking statements, and the forward-looking statements themselves, are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that these forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved. The forward-looking statements are made as of the date of this Annual Report, and the Registrant assumes no obligation to update the forward-looking statements or to update the reasons actual results could differ from those projected in such forward-looking statements.

ITEM 1.    BUSINESS

Introduction

              The use of the words "we", "us", or "our" refers to GTJ REIT, Inc., a Maryland corporation, and its subsidiaries, except where the context otherwise requires.

              We are a real estate investment trust ("REIT") which, as of the date of this report, owns and operates a total of 32 commercial properties in New York, New Jersey, and Connecticut. We were incorporated in Maryland on June 23, 2006 to engage in any lawful act or activity including, without limitation, qualifying as a REIT, under Sections 856 through 860, or any successor sections of the Internal Revenue Code of 1986, as amended (the "Code"), for which corporations may be organized under Maryland General Corporation Law. We have focused primarily on the ownership and management of commercial real estate located in New York City metropolitan areas. In addition, we provided, through our taxable REIT subsidiaries, outdoor maintenance and shelter cleaning services to outdoor advertising companies and government agencies in New York, New Jersey, Arizona, and California, as well as electrical construction services to a broad range of commercial, industrial, institutional, and governmental customers in New York, and operated and managed a parking garage facility located in New York City. Most of these operations have been discontinued, and we are continuing our focus on our real estate-related businesses.

              On March 29, 2007, we commenced operations upon the completion of the Reorganization described below. Effective July 1, 2007, we elected to be treated as a REIT under the Code, and elected December 31^st as our fiscal year end. Additionally, in connection with the Tax Relief Extension Act of 1999, we are permitted to participate in activities outside the normal operations of the REIT so long as these activities are conducted in entities which elect to be treated as taxable subsidiaries under the Code subject to certain limitations.

              On July 24, 2006, we entered into an Agreement and Plan of Merger (the "Agreement") with Triboro Coach Corp., a New York corporation ("Triboro"); Jamaica Central Railways, Inc., a New York corporation ("Jamaica"); Green Bus Lines, Inc., a New York corporation ("Green" and together with Triboro and Jamaica, collectively referred to as the "Bus Companies" and each referred to as a "Bus Company"); Triboro Acquisition, Inc., a New York corporation ("Triboro Acquisition"); Jamaica Acquisition, Inc., a New York corporation ("Jamaica Acquisition"); and Green Acquisition, Inc., a New York corporation ("Green Acquisition" and together with Jamaica Acquisition and Triboro Acquisition collectively

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referred to as the "Acquisition Subsidiaries" and each referred to as an "Acquisition Subsidiary"). The transactions contemplated under the Agreement closed on March 29, 2007. The effect of the merger transactions was to complete a reorganization ("Reorganization") of the ownership of the Bus Companies into GTJ REIT, Inc. (the "Company") with the surviving entities of the merger of the Bus Companies and the Acquisition Subsidiaries becoming wholly-owned subsidiaries and the former shareholders of the Bus Companies becoming stockholders in the Company. Under the Reorganization approximately 10,000,000 shares of our common stock were distributed to the former shareholders of Green, Triboro, and Jamaica in exchange for their shares in the Bus Companies.

              At the time of the Reorganization, the Bus Companies, including their subsidiaries, owned a total of six rentable parcels of real property, four of which are currently leased to the City of New York on a triple-net basis, one of which is currently leased to a commercial tenant on a triple net basis, and one of which is leased to various tenants. There is an additional property of negligible size which is not rentable. At December 31, 2012, we owned seven properties containing a total of approximately 561,000 square feet of leasable area.

              Prior to the Reorganization, the Bus Companies and their subsidiaries, collectively, operated a group of outdoor maintenance businesses and the discontinued paratransit business, which was acquired as part of the Reorganization. Additionally, we have an insurance subsidiary, which used to insure the former bus company operations, in which we are in the process of transferring the assets and liabilities to a liquidating trust. In 2009, we expanded our operations to include electrical construction services, and in 2010, began operating and managing a parking garage facility.

              On July 25, 2011, our Board of Directors (the "Board") voted to divest substantially all of our taxable REIT subsidiaries. Although the parking garage operations were not divested at this time, the Board subsequently voted to divest the operations on November 7, 2011. Following the completion of the divestiture, our plan is to continue focusing on the growth and expansion of our real estate operations.

              On November 15, 2011, in accordance with our lease, we gave notice to our landlord of our intention to terminate our parking garage lease early, and on February 1, 2012, we exited the parking garage business.

              On December 27, 2011, MetroClean Express Corp. ("MetroClean") and Shelter Clean Inc. ("Shelter Clean") entered into an asset purchase agreement with Triangle Services, Inc. (the "Purchaser") for the sale of substantially all of the assets and business of MetroClean and Shelter Clean to the Purchaser. On January 12, 2012, the sale was completed. Additionally, on January 12, 2012, Shelter Clean of Arizona, Inc. entered into a certain Bill of Sale and Assignment and Assumption Agreement for the sale of certain assets and the business of Shelter Clean of Arizona, Inc. to a wholly-owned subsidiary of the Purchaser.

              On January 17, 2013, we and our wholly-owned subsidiaries GTJ GP, LLC (the "General Partner") and GTJ Realty, LP (the "UPREIT") (collectively, "the Company"), and Wu/Lighthouse Portfolio, LLC ("Wu/Lighthouse Portfolio"), Jeffrey Wu ("Wu"), the Wu Family 2012 Gift Trust (the "Wu Trust"), Paul Cooper ("P. Cooper"), Louis Sheinker ("L. Sheinker"), Jerome Cooper ("J. Cooper"), Jeffrey Ravetz ("J. Ravetz") and Sarah Ravetz ("S. Ravetz"), and together with Wu/Lighthouse Portfolio, Wu, the Wu Trust, P. Cooper, L. Sheinker, J. Cooper, J. Ravetz and S. Ravetz collectively hereinafter referred to as "Sellers"), entered into a certain contribution agreement effective as of January 1, 2013 (the "Contribution Agreement") pursuant to which the UPREIT acquired all of the Sellers' outstanding ownership interests in 25 commercial properties located in New York, New Jersey and Connecticut (the "Acquired Properties").

              In consideration of the acquisition of the Acquired Properties, the UPREIT issued to the Sellers limited partnership units of the UPREIT such that immediately following closing, we beneficially owned 66.71% of the outstanding partnership units of the UPREIT and the Sellers (other than Wu/Lighthouse Portfolio) collectively received 33.29% of the partnership units therein.

              The General Partner is the general partner of the UPREIT (through its 1% general partnership interest in the UPREIT) and as a result thereof, we, through our ownership of General Partner, will exercise managerial control over the properties, business and operations of the UPREIT. The UPREIT is authorized to issue common limited partnership units, Class A limited partnership units and Class B limited partnership units. While all limited partnership units have the same economic rights, holders of the UPREIT's Class B limited partnership units have no voting rights. We hold Class A limited partnership units.

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Description of REIT Business

              Our REIT business consists of the acquisition, ownership, and management of real properties. At December 31, 2012, we owned seven parcels of real property, each of which are described in further detail in the "Portfolio of Real Properties" section. As a result of the January 17, 2013 acquisition discussed above, we currently own a total of 32 properties, including our seven previously-owned properties. We intend to further expand our real property portfolio beyond these 32 parcels.

              Investing in Real Properties

              We seek to acquire quality real properties at favorable prices. We believe that quality tenants seek well-managed properties that offer superior and dependable services, particularly in competitive markets. We believe that a critical success factor in property acquisition lies in possessing the flexibility to move quickly when an opportunity presents itself.

              We intend to acquire fee ownership of real properties, but may also enter into joint venture arrangements. We seek to maximize current and long-term net income and the value of our assets. Our policy is to acquire assets where we believe opportunities exist for reasonable investment returns.

              Decisions relating to the purchase or sale of properties are made by our Board of Directors. Our Board of Directors is responsible for monitoring the administrative procedures, investment operations, and performance of our Company to ensure our policies are carried out. Our Board of Directors oversees our investment policies to determine that our policies are in the best interests of our stockholders. Stockholders have no voting rights with respect to implementing our investment objectives and policies, all of which are the responsibility of our Board of Directors and may be changed at any time.

              Types of Investments

              We intend to invest primarily in quality commercial real properties. To the extent it is in the interests of our stockholders, we will seek to invest in a diversified portfolio of real properties within our geographic area that will satisfy our primary investment objectives of providing our stockholders with stable cash flow, preservation of capital, and growth of income and principal, without taking undue risk. Because a significant factor in the valuation of income-producing real property is the potential for future income, we anticipate that the majority of properties we acquire will have both the potential for growth in value and the ability to provide cash distributions to stockholders.

              We intend to acquire properties with financing from mortgage or other debt or may acquire properties subject to existing indebtedness. We may also acquire properties for shares of our common stock. We do not intend to incur aggregate indebtedness in excess of 75% of the gross fair value of our real properties. Fair value will be determined by an independent certified appraiser or in a similar manner as the fair determination at the time of purchase satisfactory to our Board of Directors.

              Considerations Related to Potential Real Property Acquisitions

              The following are some of the material considerations which we evaluate in relation to potential acquisitions of real property:

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geographic location and type of property;



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construction quality and condition;



•

potential for capital appreciation;



•

the general credit quality of current and potential tenants;



•

the potential for rent increases;



•

the interest rate environment;



•

potential for economic growth in the tax and regulatory environment of the community in which the property is located;

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•

potential for expanding the physical layout of the property;



•

occupancy and demand by tenants for properties of a similar type in the same geographic vicinity;



•

prospects for liquidity through sale, financing, or refinancing of the property;



•

competition from existing properties and the potential for the construction of new properties in the area; and



•

treatment under applicable federal, state, and local tax and other laws and regulations.

              We will not acquire any real property until we obtain an environmental assessment for each property and are satisfied with the environmental status of the property.

              In determining whether to acquire a particular parcel of real property, we may obtain an option on such property. Typically, the amount paid for an option, if any, is surrendered if the real property is not acquired. In the event that the real property is acquired, the amount paid for the option, if any, is typically credited against the purchase price of the real property.

              In acquiring real properties, we will be subject to risks, including:

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changes in general economic or local conditions;



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changes in supply of or demand for similar competing properties in an area;



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changes in interest rates and availability of permanent mortgage funds which may render the sale of a property difficult or unattractive;



•

changes in tax, real estate, environmental, and zoning laws;



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periods of high interest rates and tight money supply which may make the sale of properties more difficult;



•

tenant turnover; and



•

general overbuilding or excess supply in the market area.

              For a more detailed description of risks relating to our real estate business, see Item 1A—"Risk Factors."

              We anticipate that the purchase price of properties we acquire will vary depending on a number of factors, including size and location. In addition, our operating costs will vary based on the amount of debt we incur in connection with financing the acquisition. We may not be able to purchase a diverse portfolio of real properties unless we find sources of financing. It is difficult to predict the actual number of properties that we will acquire because the purchase prices of properties vary widely and our investment in each will vary based on the amount and cost of debt financing we use.

              Real Property Acquisition Process

              We intend to acquire real properties using newly-formed or existing subsidiaries which are wholly-owned by the UPREIT. In addition to fee simple interests, we may acquire long-term ground leases. Other methods of acquiring real property may be used when advantageous. For example, we may acquire properties through a joint venture, limited partnership, or the acquisition of substantially all of the interests of an entity that in turn owns a parcel of real property.

              We may commit to acquire real properties subject to completion of construction in accordance with terms and conditions specified by our Board of Directors. In such cases, we will be obligated to acquire the real property at the completion of construction, provided that (i) the construction conforms to definitive plans, specifications, and costs approved by us in advance and embodied in the construction contract, and (ii) an agreed upon percentage of the real property is leased beforehand. We would receive a certificate of an architect, engineer, or other appropriate party, stating that the real property complies with all plans and specifications. Our intent is not to assume development risk.

              If remodeling is required prior to the acquisition of a real property, we would anticipate paying a negotiated maximum amount either upon completion or in installments commencing prior to completion. Such amount would be based on the estimated cost of the remodeling. In such instances, we would also have the right to review the seller's books during and following completion of the remodeling to verify actual costs. In the event of substantial disparity between estimated and actual costs, an adjustment in purchase price may be negotiated.

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              We are not specifically limited in the number or size of real properties we may acquire. The number and mix of properties we may acquire will depend upon real estate and market conditions and other circumstances existing at the time we are acquiring our real properties.

              Joint Ventures

              We may invest in general partnership, limited partnership (such as the UPREIT), and joint venture arrangements with other real estate investors. There is a potential risk that we or a joint venture partner will be unable to agree on a matter material to the joint venture and we may not control the decision. Furthermore, we cannot guarantee that we will have sufficient financial resources to exercise any right of first refusal that may be part of a partnership or joint venture agreement.

              Our Policies With Respect to Borrowing

              We presently anticipate that we will borrow funds to acquire real properties. We may later refinance or increase mortgage indebtedness by obtaining additional loans secured by selected properties. We anticipate that aggregate borrowings, both secured and unsecured, will not exceed 75% of our real property fair value. Our Board of Directors reviews our aggregate borrowings to ensure that such borrowings are reasonable in relation to our assets. We may also incur indebtedness to finance improvements to properties and, if necessary, for working capital needs, or to meet the distribution requirements applicable to us under the Code.

              When incurring secured debt, we will seek to incur nonrecourse indebtedness, which means that the lenders' rights in the event of our default generally will be limited to foreclosure on the property that secured the obligation, however, we may have to accept recourse financing, where we remain liable for any shortfall between the debt and the proceeds of sale of the mortgaged real property. If we incur mortgage indebtedness, we will endeavor to obtain level payment financing, meaning that the amount of debt service payable would be substantially the same each year, however, we acknowledge that some mortgages are likely to provide for one large payment, and therefore, we may incur floating or adjustable rate financing depending on market conditions and when our Board of Directors determines it to be in our best interest.

              Sale or Other Disposition of Our Real Property

              Our Board of Directors determines whether a particular real property should be sold or otherwise disposed of after consideration of the relevant factors, including performance or projected performance of the property and market conditions, with a view toward achieving our principal investment objectives including maximizing capital appreciation and the effect on our obligations under existing agreements, including the Tax Protection Agreement entered into as part of the January 2013 transaction with the Sellers. We cannot guarantee that our investment objectives will be realized.

              When appropriate, we may structure the sale of a real property as a "like-kind exchange" under the federal income tax laws so that we may acquire qualifying like-kind replacement property meeting our investment objectives without recognizing taxable gain on the sale. Furthermore, our general policy will be to reinvest in additional real properties proceeds from the sale, financing, refinancing, or other disposition of our real properties that represent our initial investment in such real property or, secondarily, to use such proceeds for the maintenance and repair of existing properties or to increase our reserves for such purposes. The objective of reinvesting such portion of the sale, financing, and refinancing proceeds is to increase the total value of real estate assets that we own, and the cash flow derived from such assets to pay distributions to our stockholders.

              Despite this policy, our Board of Directors may distribute to our stockholders all or a portion of the proceeds from the sale, financing, refinancing, or other disposition of real properties. In determining whether any of such proceeds should be distributed to our stockholders, our Board of Directors considers, among other factors, the desirability of real properties available for purchase, real estate market conditions, and compliance with the REIT distribution requirements.

              In connection with a sale of a property, our preference will be to obtain an all-cash sale price. However, we may accept a purchase money obligation secured by a mortgage on the property as partial payment. There are no limitations or restrictions on our taking such purchase money obligations. The terms of payment upon sale will be affected by custom in the area in which the property being sold is located and the then economic conditions. To the extent we receive notes, securities, or other property instead of cash from sales, such proceeds, other than any interest payable on such proceeds,

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will not be included in net sale proceeds available for distribution until and to the extent the notes or other property are actually paid, sold, refinanced, or otherwise disposed of. Thus, the distribution of the proceeds of a sale to stockholders may be delayed until such time. In such cases, we will receive payments in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years.

              A real property may be sold before the end of the planned holding period if:

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in the judgment of our Board of Directors, the value of a property may decline;



•

an opportunity has arisen to acquire or improve other properties;



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we can increase cash flow through the disposition of the property; or



•

in the judgment of our Board of Directors, the sale of the property is otherwise in our best interest.

              The determination of whether a particular property should be sold or otherwise disposed of will be made after consideration of the relevant factors, including prevailing economic conditions, with a view to achieving maximum capital appreciation. We cannot assure you that this objective will be realized. The selling price of a property will be determined in large part by the amount of rent payable under the lease. If a tenant has a repurchase option at a formula price or if operating expenses increase without a commensurate increase in rent under our gross leases, we may be limited in realizing any appreciation. In connection with our sales of properties, we may lend the purchaser all or a portion of the purchase price. In these instances, our taxable income may exceed the cash received in the sale. The terms of payment will be affected by custom in the area in which the property being sold is located and the then prevailing economic conditions.

              Presently, we do not intend to sell any of the real properties we acquired from the Bus Companies for a period of ten years after we made our REIT election, which ends, July, 2017. Under the Code, if real property acquired from the Bus Companies is sold within such ten year period, we would be taxed on the gain from the sale, as if such real property were in the hands of the Bus Companies, and a subsequent distribution of any of the profits would be taxed to the stockholder as a dividend. This would subject the proceeds of such sale to double taxation meaning taxation both at the corporate and stockholder level. In addition, if we sell any of the 25 properties we acquired in the January 2013 transaction described above during the next seven years, we may be required to pay the Sellers certain monies as set forth in the Tax Protection Agreement.

              Purchases of Leases

              To the extent consistent with our REIT status, we may acquire long-term ground leases or master leases for real property which we could then sublet as determined by our Board of Directors.

              Making Loans and Investments in Mortgages

              We do not plan to make loans to other entities or persons unless secured by mortgages, however, we may advance funds to our own subsidiaries. We will not make or invest in mortgage loans unless we obtain an appraisal concerning the underlying property from a certified independent appraiser. In addition to the appraisal, we will obtain a customary lender's title insurance policy or commitment as to the priority of the mortgage or condition of the title.

              We will not make or invest in mortgage loans on any one property if the aggregate amount of all mortgage loans outstanding on the property, including the loans of our company, would exceed an amount equal to 75% of the fair market value of the property, unless we find substantial justification due to the presence of other underwriting criteria.

              Investment in Securities

              We do not intend to invest in equity securities of another entity, other than a directly or indirectly wholly-owned subsidiary, unless our Board of Directors approves the investment as part of a real property investment. We may purchase our own securities if the Board of Directors determines such purchase to be in our best interest. In the future, we may acquire some, all, or substantially all of the securities or assets of other REITs or similar entities where that investment would be consistent with our investment policies and REIT qualification requirements. There are no limitations on the amount or percentage of our total assets that may be invested in any one issuer, other than those imposed by the gross income and asset tests that we must satisfy to qualify as a REIT. We do not intend on purchasing securities that would

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require us to register as an "investment company" under the Investment Company Act of 1940, however, if we did purchase such securities, we would seek to divest the securities before any registration would be required.

              Changes in Our Investment Objectives

              Subject to the limitations in our charter, our bylaws, and the Maryland General Corporation Law, our business and policies will be controlled by our Board of Directors. Our Board of Directors has the right to establish policies concerning investments and the right, power, and obligation to monitor our procedures, investment operations, and performance of our company. Thus, stockholders must be aware that the Board of Directors, acting consistently with our organizational documents, applicable law, and their fiduciary obligations, may elect to modify our objectives and policies from time to time.

              Distribution Policy

              We cannot assure you that we will make distributions. In order to continue to qualify as a REIT for federal income tax purposes, we are required to, among other things, distribute at least 90% of our REIT taxable income, other than net capital gains, each taxable year. Our policy is to make such distributions on a quarterly basis. We will seek to avoid, to the extent possible, the fluctuations in distributions that might result if distribution payments were based solely on actual cash received during the distribution period. To implement this policy, we may use cash received during prior periods or cash received subsequent to the distribution period and prior to the payment date for such distribution payment, to pay annualized distributions consistent with the distribution level established from time to time by our Board of Directors. Our ability to maintain this policy will depend upon, among other things, the availability of cash and applicable requirements for qualification as a REIT under the Code. Therefore, we cannot guarantee that there will be cash available to pay distributions or that distributions will not fluctuate. If cash available for distribution is insufficient to pay distributions to our stockholders, we may distribute payment in the form of shares of our common stock or obtain the necessary funds by borrowing, issuing new securities, or selling assets. These methods of obtaining funds could affect future distributions by increasing operating costs.

              To the extent that distributions to our stockholders are made out of our current or accumulated earnings and profits, such distributions would be taxable as ordinary income. To the extent that our distributions exceed our current and accumulated earnings and profits, such amounts will constitute a return of capital to our stockholders for federal income tax purposes, to the extent of their basis in their stock, and any amount in excess of their stock basis would constitute capital gains.

              One Time Earnings and Profits Distribution

              On August 20, 2007, our Board of Directors declared a one time special distribution of accumulated earnings and profits on our common stock of $6.40 per share, payable in cash and in common stock. For the purposes of the special distribution, our common stock was valued at $11.14 per share. The special distribution totaled approximately $62.1 million. Each stockholder elected to receive cash or stock, or a combination of both. As of December 31, 2012, we distributed approximately $19.9 million in cash and 3,775,400 shares of common stock (with a value of approximately $42.1 million) to our stockholders in connection with the special distribution.

Portfolio of Real Properties

              The following represents our portfolio of real properties we owned as of December 31, 2012:

              165-25 147^th Avenue.    165-25 147^th A venue, Jamaica, New York (the "147^th Avenue Property") is owned in fee simple. The 147^th Avenue Property consists of a 151,068 square foot industrial building located on 6.567 acres. The 147^th Avenue Property is comprised of three parcels. The main parcel contains an entire block which is bordered by Rockaway Boulevard to the South, 167^th Street to the North, 146^th Avenue to the West and 147^th Avenue to the East. A second parcel is located on the SE corner of 147^th Avenue and 167^th Street and a third parcel is located on the NE corner of 147^th Avenue and 167^th Street. The real property is leased to New York City as a bus depot for an initial term of 21 years, expiring December 2026, with a first year rent of approximately $2.8 million which rent escalates to a 21^st year rent of approximately $4.1 million. Rent continues to escalate during the following two 14 year extension terms.

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              49-19 Rockaway Beach Boulevard.    49-19 Rockaway Beach Boulevard, Queens, New York (the "Rockaway Beach Property") is owned in fee simple. The Rockaway Beach Property consists of a 28,790 square foot industrial building on 3.026 acres. The Rockaway Beach Property is located on both the North and South side of Rockaway Beach Boulevard. One parcel is located on the South side of Rockaway Beach Boulevard between Beach 47^th and Beach 49^th Street. This parcel is developed with a 28,790 square foot industrial building. The second parcel which is comprised of six contiguous tax lots is located on the North side of Rockaway Beach Boulevard between Beach 49^th Street and Beach 50^th Street. The Rockaway Beach property has been leased to New York City as a bus depot for an initial term of 21 years, expiring December 2026, with a first year rent of approximately $0.6 million escalating over the term to a 21^st year rent of approximately $0.9 million. The rent escalates during the following two 14 year extension terms.

              85-01 24^th Avenue.    85-01 24^th Avenue, East Elmhurst, New York (the "24^th Avenue Property") is owned in fee simple. The 24^th Avenue Property consists of a 118,430 square foot industrial building on 6.432 acres. The 24^thAvenue Property is located on the block front bordered by 23^rd Avenue to the North, 24^th Avenue to the South, 85^th Street to the West and 87^th Street to the East in East Elmhurst, New York. The 24^th Avenue Property has been leased to New York City as a bus depot for an initial term of 21 years, expiring December 2026, with a first year rent of approximately $2.6 million escalating during the term to a 21^st year rent of approximately $3.8 million. The rent escalates during the two 14 year extension terms.

              114-15 Guy Brewer Boulevard.    114-15 Guy Brewer Boulevard, Jamaica, New York (the "Guy Brewer Property") is owned in fee simple. The Guy Brewer Property consists of a 75,800 square foot industrial building on 4.616 acres. The Guy Brewer Property is located on the NE corner of 115^th Avenue and Guy Brewer Boulevard in Jamaica, New York. The Guy Brewer Property has been leased to New York City as a bus depot for an initial term of 21 years, expiring December 2026, with a first year rent of approximately $1.5 million escalating to a 21^st year rent of approximately $2.2 million. Escalations continue during the following two 14 year renewal terms.

              612 Wortman Avenue.    612 Wortman Avenue, Brooklyn, New York (the "Wortman Avenue Property") is owned in fee simple. The Wortman Avenue Property consists of an industrial building of 27,250 square feet located on 10.389 acres. The Wortman Avenue Property is located along the entire block front surrounded by Wortman Avenue to the North, Cozine Avenue to the South, Fountain Avenue to the East and Montauk Avenue to the West. An additional parcel made up of three tax lots is located along the entire block front bordered by Cozine Avenue, Milford Avenue, Flatlands Avenue, and Logan Street. The Wortman Avenue Property was primarily leased to Varsity Bus Co., Inc ("Varsity") from 2003 through 2012. Under the lease, Varsity leased 238,182 square feet of outdoor parking and approximately 16,928 square feet of indoor maintenance and office space for $311,800 per year, increasing by the cost of living index from September 2006 to August 2010, when the term ended. In December 2009, Varsity executed one of the extension options under the lease through August 2015. Rent for the first year under the extension, which began on September 1, 2010, was approximately $833,000 and was subject to increase in accordance with the lease agreement for the remaining four years. In addition, Varsity also paid a 60% share of utility and building maintenance costs. On July 2, 2012, we entered into a surrender agreement ("the Surrender Agreement") with Varsity related to early termination of their existing lease. As consideration for terminating their existing lease early, Varsity agreed to pay us a sum of approximately $0.4 million payable in six equal installments with the last payment being on or before December 14, 2012. As of December 31, 2012, Varsity defaulted on payment of two of the monthly installments totaling approximately $0.1 million. As a result of this, a notice of default was sent to Varsity, and we are currently pursuing full payment of amount owed. In addition, on September 30, 2012, we entered into a rental agreement with Stanley Brettschneider ("Licensee"), to use certain land consisting of approximately 15,000 square feet at our Wortman Avenue Property, solely for the purpose of bus parking. Per the terms of the rental agreement, the Licensee is to pay a monthly rental fee of approximately $9,000 due on the first day of each month during the term of the rental agreement, which commenced October 1, 2012 and terminated on November 30, 2012. Subsequent to the termination of the rental agreement, the Licensee continued to use the land for the purpose of bus parking throughout December 2012 in which the Licensee incurred an additional sum of approximately $18,000. Currently, we are actively marketing the property in order to secure a lease with a new tenant. The balance of the Wortman Avenue Property has been occupied by various tenants.

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              23-85 87^th Street.    23-85 87^th Street, East Elmhurst, New York (the "87^th Street Property") is owned in fee simple. The 87^th Street Property consists of a 52,020 square foot industrial building on 7.016 acres. The 87^th Street Property is located on the block front bordered by 23^rd Avenue to the North, 24^th Avenue to the South, 87^th Street to the West and 89^th Street to the East in East Elmhurst, New York. The 87^th Street Property is leased to Avis Rent-A-Car Systems, Inc. as an automobile leasing and maintenance depot under a lease dated October 31, 2003 with a term ending October 31, 2023, with a base rent of approximately $1.8 million per year. For the sixth, eleventh, and sixteenth years, the base rent will be increased by the greater of 105% of the immediately preceding base rent or the cumulative cost of living index increase for the preceding five years but not in excess of 115% of the immediately preceding base rent. The initial base rent had been reduced to approximately $1.5 million per year until the property was rezoned (which occurred in 2008). As a result of the rezoning, the base rent was increased to approximately $1.8 million per year plus an adjustment tied into the increase in the CPI pursuant to the lease as noted above.

              8 Farm Springs Road.    8 Farm Springs Road, Farmington, Connecticut (the "Farm Springs Property") is owned in fee simple. The Farm Springs Property consists of a 107,654 square foot office building on approximately 10.53 acres. The Farm Springs Property had been leased to the Hartford Insurance Company ("the Hartford") as an office building for a term of 10 years with an annual rent of approximately $2.2 million escalating to approximately $2.3 million in 2012. The Farm Springs Property lease with the Hartford expired in August of 2012, and on June 6, 2012, we entered into a lease agreement with United Technologies Corporation ("United Technologies") in which United Technologies would lease 107,654 square feet of office space and the adjacent parking structure beginning September 1, 2012. The initial term will expire 15 years after the commencement date. United Technologies has the option to extend the initial term by either: (i) a one year option and then three successive five year options with base rent increasing by the Consumer Price Index ("CPI") during the three successive five year options and fixed at the same base rent as the fifteenth year of the Lease during the one year option, or (ii) three successive five year options with base rent increasing by CPI. United Technologies has certain rights to the first offer to purchase the Premises in the event Farm Springs sells the Premises in a "one-off" sale. The base annual rent for the Premises will begin 12 months from the lease commencement. The base annual rent for the Premises will range from approximately $1.4 million during the first year to $1.8 million for the fifteenth year of the Lease. During the first seven years of the lease, base annual rental income will increase at a fixed rate of 2%. After the seventh year of the Lease, base annual rent will increase based upon CPI with a minimum increase of 1% and a maximum increase of 3%. In addition to the base rent, United Technologies will be responsible for property maintenance and payment of operating expenses, including utilities and real estate taxes subject to limited exceptions, as defined, which will be the our responsibility.

              On January 17, 2013, we entered into a certain contribution agreement with Wu/Lighthouse Portfolio, LLC effective as of January 1, 2013 in which we acquired all outstanding ownership interests of a portfolio consisting of 25

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commercial properties located in New York, New Jersey and Connecticut. As a result of this acquisition we currently own a total of 32 properties, including our seven previously-owned properties. The 25 acquired properties are listed below:

              Renovations and Improvements

              At December 31, 2012, our real properties, except for the 87^th Street Property, Wortman Avenue Property, and the Farm Springs Property, are used as bus depots. As part of our Farm Springs' lease agreement with United Technologies, we paid United Technologies a sum of approximately $3.8 million to be applied toward various costs, including, but not limited to, telecom/data cabling, architectural, engineering, consulting, relocating, and permitting/filing fees. All work is being performed by United Technologies. We have no significant plans or obligations to renovate or further develop any of our real properties.

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Financing Arrangements

              Aviva Loan Agreement

              On February 22, 2013 (the "Closing Date"), Farm Springs Road, LLC ("Farm Springs"), wholly owned-subsidiary of the UPREIT, and Aviva Life and Annuity Company ("Aviva") entered into a Open-End First Mortgage Deed, Security Agreement and Fixture Filing (the "Agreement"), as well as a promissory note (the "Note"). Pursuant to the Agreement and Note, Farm Springs borrowed fifteen million dollars ($15,000,000) (the "Proceeds") from Aviva, at an interest rate of three percent (3%) per annum. Pursuant to the Note, Farm Springs shall pay interest only in the amount of thirty seven thousand five hundred dollars ($37,500) in fifty nine (59) consecutive installments from April 1, 2013 until February 1, 2018. On March 1, 2018, Farm Springs shall make a final payment of the entire remaining balance of the Proceeds, in addition to any unpaid interest. In addition, Farm Springs executed a Reserve Agreement dated as of the Closing Date, whereby Farm Springs provided additional collateral to Aviva of two hundred twenty-five thousand dollars ($225,000). Ten million seventy thousand nine hundred ten dollars ($10,070,910) from the Proceeds was used to satisfy in full the our obligations to M&T Bank relating to a prior mortgage on the Property including the release of the guaranty given by the Company to M&T Bank. The remaining Proceeds will be used for general working capital and other corporate purposes and partner distributions.

              For the purposes of securing the Proceeds, Farm Springs has granted Aviva a security interest in 8 Farm Springs Road, Farmington, Connecticut. Such security interest includes, but is not limited to, all rents, insurance claims and all fixtures relating to such Property. The obligations under the Agreement are guaranteed by GTJ Realty, L.P., pursuant to the terms of that certain Guaranty entered into by GTJ Realty, L.P. and Aviva.

              Secured Revolving Credit Facility

              On August 26, 2011, we entered into a certain credit agreement ("the Credit Agreement") with Manufacturers and Traders Trust Company ("M&T"). The Credit Agreement provides for, among other things, a $10 million revolving credit facility (the "Revolver"). The Revolver is available to us to be used for Permitted Acquisitions (as defined in the Credit Agreement) and for general working capital and other corporate purposes. The Credit Agreement requires that we satisfy certain financial covenants, including: (i) minimum Net Worth, (ii) Fixed Charge Coverage Ratio, (iii) Leverage Ratio and (iv) Liquidity all as defined in the Credit Agreement, and other usual and customary restrictions and covenants, as defined. As a condition to M&T entering into the Credit Agreement, we agreed to indemnify M&T against certain claims pursuant to that certain Environmental Compliance and Indemnification Agreement, dated as of August 26, 2011.

              The obligations under the Revolver are guaranteed by Farm Springs Road, LLC, our wholly-owned subsidiary ("Farm Springs"). The guaranty of Farm Springs is secured by a first priority mortgage lien and security interest on real property owned by Farm Springs and located at 8 Farm Springs Road, Farmington, Connecticut, as more specifically described in that certain Open-End Mortgage Agreement, dated as of August 26, 2011, and that certain General Assignment of Rents, dated as of August 26, 2011, by and between M&T and us. The maturity date for the Revolver is August 26, 2014. Borrowings under the Revolver bear interest, at the borrower's option, at either: (i) the M&T's prime rate plus 2.0% or (ii) the London Interbank Offered Rate ("LIBOR") plus 3.5% which is subject to a minimum rate of 4.0%.

              As part of the Credit agreement, we are obligated to comply with certain financial and nonfinancial covenants. As of December 31, 2012, we were in compliance with all financial and nonfinancial covenants.

              As of December 31, 2012, we had $5.0 million outstanding under the Credit Agreement. Our obligations under the Credit Agreement were satisfied in full on February 22, 2013.

              Hartford Loan Agreement

              On July 1, 2010, two of our indirect subsidiaries, 165-25 147th Avenue, LLC and 85-01 24th Avenue, LLC (collectively, the "Borrower") entered into a Fixed Rate Term Loan Agreement (the "Hartford Loan Agreement") with Hartford Life Insurance Company, Hartford Life and Accident Insurance Company and Hartford Life and Annuity Insurance Company (collectively, the "Lenders") pursuant to which the Lenders made a term loan to Borrower in the aggregate principal amount of $45,500,000 (the "Loan"). The Loan was evidenced by certain promissory notes, executed simultaneously therewith, payable to the order of (i) Hartford Life Insurance Company in the stated amount of $25,000,000;

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(b) Hartford Life and Accident Insurance Company in the stated principal amount of $10,500,000; and (c) Hartford Life and Annuity Insurance Company in the stated principal amount of $10,000,000 (collectively, the "Notes"). The proceeds from the Loan were used to satisfy in full our obligations under the ING Loan Agreement.

              The obligations under the Hartford Loan Agreement are secured by, among other things, a first priority mortgage lien and security interest on certain (a) improved real estate commonly known as 165-25 147th Avenue, Laurelton, Queens, New York and 85-01 24th Avenue, East Elmhurst, Queens, New York (collectively, the "Real Estate"), and (b) personal property and other rights of the Borrower, all as more specifically described in that certain Consolidated, Amended and Restated Mortgage, Security Agreement and Fixture Filing dated as of July 1, 2010 (the "Mortgage") and that certain Assignment of Leases and Rents dated as of July 1, 2010 among the Lenders and the Borrower, and other ancillary documents. The outstanding principal balance of the Loan shall bear interest at the fixed rate of 5.05% per annum. The Borrower is required to make monthly payments of interest only in the amount of $191,479. The principal is payable on the maturity date, July 1, 2017.

              Competitive Position of Our Real Properties

              We believe our real properties located in New York, New Jersey, and Connecticut, are in a favorable competitive position, since i) there are not many sites in Queens, Brooklyn, and New York that are suitable as bus depots or for the mass parking of automobiles and ii) since our properties are located where many corporate executives reside, offering very short commutation times for such persons, is close to major highways, and has substantial parking.

              Insurance Coverage

              Our real properties are covered under an umbrella liability insurance policy. We believe that our insurance is adequate in amount and coverage.

              Occupancy

              With the exception of the Wortman Avenue Property, our real properties are fully occupied. New York City is the sole tenant of four of the real properties, (147^th Avenue Property, Rockaway Beach Property, 24^th Avenue Property, and Guy Brewer Property), Avis Rent-A-Car is the sole tenant of the fifth real property (87^th Street Property), United Technologies Corporation is the sole tenant of the sixth real property (Farm Springs Property), and various tenants occupy a portion of the seventh real property (Wortman Avenue Property) and the remainder is available for lease. The loss of these above-mentioned tenants or their inability to pay rent could have a material adverse effect on our business and results of operation.

              Depreciation

              The following table provides information on tax depreciation of our real properties at December 31, 2012:

              Environmental Matters

              During 2012, our real property, except for the Farm Springs Property, has had activity regarding removal and replacement of underground storage tanks. Upon removal of the old tanks, any soil found to be unacceptable was thermally

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treated off site to burn off contaminants. Fresh soil was brought in to replace earth which had been removed. There are still some levels of contamination at the sites, and groundwater monitoring programs have been put into place at certain locations. In July 2006, we had entered into an informal agreement with the New York State Department of Environmental Conservation ("NYSDEC") whereby we had committed to a three-year remedial investigation and feasibility study (the "Study") for all site locations. We concluded that the estimated cost range to perform full remediation on all site locations would be between approximately $1.4 million to $2.6 million. While management believes that the amount of the Study and related remediation is likely to fall within the estimated cost range, no amount within that range can be determined to be the better estimate. Therefore, management believes that recognition of the low-range estimate is appropriate. In May 2008, we received an updated draft of the remedial and investigation feasibility study and recorded an additional accrual of approximately $0.9 million for additional remediation costs.

              As of December 31, 2012 and 2011, we have recorded a liability of approximately $0.1 million and $0.2 million, respectively, related to the Study as disclosed in the engineering report. Presently, we are not aware of any claims or remediation requirements from any local, state, or federal government agencies. Each of our properties, except for the Farm Springs Property, is still used as transit depots, including maintenance of vehicles. Our tenants are responsible for environmental conditions which occur during their tenancies, based on the terms of their respective leases.

              Competition for Additional Real Properties and Tenants

              Our real property operations are subject to normal competition with other investors to acquire real property and to profitably manage such real property. Numerous other REITs, banks, insurance companies, and pension funds, as well as corporate and individual developers and owners of real estate, compete with us in seeking properties for acquisition and for tenants. Many of these competitors have significantly greater financial resources than us. Since our real properties, with the exception of the Wortman Avenue Property, are leased under long-term lease arrangements that are not due to expire in the next twelve months, we do not currently face any immediate competitive re-leasing pressures. While Varsity Bus terminated their lease early at our Wortman Avenue Property, we are currently actively marketing the property in order to secure a lease with a new tenant.

              Employees

              At December 31, 2012, we have six employees involved on a full time or part time basis with respect to our REIT operations. We believe that our relationship with our employees is good.

Discontinued Outdoor Maintenance Operations

              We, through our wholly-owned subsidiary, Shelter Express Corp., operated a group of outdoor maintenance, shelter cleaning, and electrical contracting businesses, as well as a parking garage facility. On July 25, 2011, our Board voted to divest substantially all of our taxable REIT subsidiaries (outdoor maintenance, shelter cleaning, and electrical contracting businesses). Although our parking garage operations were not divested at this time, our Board subsequently voted to divest the operations on November 11, 2011. These taxable REIT subsidiaries were taxed as corporations. The majority of these operations were based in the New York metropolitan area, with additional operations based in the Los Angeles, California and Phoenix, Arizona metropolitan areas. This group also included a number of other subsidiaries which are inactive and have little or no assets. The significant subsidiaries are described below.

New York Metropolitan Area Operations

              Our operations in the New York metropolitan area included MetroClean Express Corp. ("MetroClean"), Shelter Express Corp. ("Shelter Express"), Shelter Electric Maintenance Corp. ("Shelter Electric"), and Shelter Parking Corp. ("Shelter Parking").

              Shelter Express

              Shelter Express is currently a holding company of the taxable REIT subsidiaries. In July 2008, Shelter Express entered into a two year agreement with the Metropolitan Transit Authority Bus Company ("MTABC"), originally expiring in July 2010, granting a non-transferable license to the MTABC to use our payroll, human resource, dispatch, procurement,

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inventory, and shop management systems for certain bus depots. Under the agreement, Shelter Express was to provide all necessary personnel, support, consulting, and maintenance services to the MTABC. In July 2010, the MTABC executed a six month extension option, and in December 2010, executed another six month extension option which expired in July 2011.

              MetroClean

              MetroClean was founded in 1998 and was comprised of two major divisions, the outdoor advertising service division and the traffic control services division.

              The outdoor advertising service division provided services to outdoor advertising agencies for which we installed and maintained bus shelters, urban panels, banners, murals, kiosks, automated pay toilets, video screens, and information centers. The work provided under these contracts was for the installation and maintenance of these structures, as well as the posting of advertisements in our customers' illuminated and non-illuminated display boxes.

              The traffic control services division provided operation support to engineering and construction companies for which it protected road crews working on highways and roadways. With the use of safety barriers and vehicles equipped with protectors and attenuators, our crews secured work areas to allow contractors to conduct their services. Other aspects of this division included installation of concrete barriers that provided protection and security on highways and buildings. In addition, this division owned and offered for lease bucket trucks, light towers, cargo vans, back-up trucks, display boards, arrow boards, concrete barriers, wooden barriers, man-lifts, and under bridge inspection units.

              On December 27, 2011, MetroClean entered into an asset purchase agreement with Triangle Services, Inc. (the "Purchaser") for the sale of substantially all of the assets and business of MetroClean to the Purchaser. On January 12, 2012, the sale was completed.

              Shelter Electric

              Shelter Electric is a licensed electrical contractor which provides support services for the activities of MetroClean Express and electrical contracting services to other customers. Services include electrification of bus shelters in Westchester County, New York, wall hangings in malls and various outdoor kiosks, and furniture, and urban panels. In addition, it provides electrical construction services to a broad range of commercial, industrial, institutional and governmental customers in New York. We are currently in the process of completing all work that we are obligated to perform under our pre-existing contracts, however, we are not obtaining any additional contracts.

              As previously disclosed, on December 20, 2012, Shelter Express entered into a share purchase agreement with Manisha Patel for the sale of all of the issued and outstanding stock of Shelter Electric. It is expected that the sale will be completed in the beginning of the second quarter of 2013.

              Shelter Parking

              On August 13, 2010, the Company formed Shelter Parking, a New York corporation, to operate and manage parking facilities in the New York tri-state area. On September 30, 2010, Shelter Parking, through its wholly owned subsidiary, Shelter Parking Brevard, LLC, entered into a fifteen year lease agreement to operate a parking garage facility located at 245 East 54^th Street. On November 15, 2011, in accordance with our lease term, we gave notice to our landlord of our intention to terminate our lease early, and on February 1, 2012, we exited the parking business.

Los Angeles Metropolitan Area Operations

              Shelter Clean, Inc. was established in 2000 and was based in Los Angeles, California. Shelter Clean, Inc. provided support services for outdoor furniture advertisements to advertising agencies as well as engaged in the installation, maintenance, posting, repair and cleaning of bus shelters, kiosks and other related structures where additional displays are located. As part of its services, Shelter Clean, Inc. provided its customers with site selection and marking, permit acquisition and execution, sub-contractor liaison, assembly and installation, record keeping, cost analysis, and inventory control. Services also included cleaning, trash containment, damage repair, graffiti removal, glass replacement, lighting repair, and repainting. Shelter Clean Inc.'s major contracts were with CBS Outdoor, JC DeCaux Outdoor, Van Wagner Outdoor, Orange County Transit Authority, and the City of Los Angeles Department of Transportation.

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              On December 27, 2011, Shelter Clean Inc. entered into an asset purchase agreement with Triangle Services, Inc. (the "Purchaser") for the sale of substantially all of the assets and business of Shelter Clean Inc. to the Purchaser. On January 12, 2012, the sale was completed.

Phoenix Area Operations

              On May 1, 2006, Shelter Clean of Arizona commenced outdoor maintenance operations in Phoenix, Arizona. Shelter Clean of Arizona provided bus shelter maintenance services primarily for the City of Phoenix as well as other services for the adjoining City of Glendale. On January 12, 2012, Shelter Clean of Arizona, Inc. entered into a certain Bill of Sale and Assignment and Assumption Agreement for the sale of certain assets and the business of Shelter Clean of Arizona, Inc. to a wholly-owned subsidiary of the Purchaser.

Employees

              As of December 31, 2012, we had nine employees who were employed at GTJ REIT, Inc. and Shelter Express collectively, and 17 employees who were employed at Shelter Electric who are part of discontinued operations. We consider our relations with our employees to be good.

Litigation

              Our businesses are presently not parties to any litigation except litigation in the ordinary course of their business.

Our Compliance with Governmental Regulations

              Many laws and government regulations are applicable to our Company and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.

              Costs of Compliance with the Americans with Disabilities Act

              Under the Americans with Disabilities Act of 1990, or ADA, all public accommodations must meet federal requirements for access and use by disabled persons. Although we believe that we are in substantial compliance with present requirements of the ADA, none of our properties have been audited, nor have investigations of our properties been conducted to determine compliance. Therefore, we may incur additional costs in connection with the ADA. There are also federal, state, and local laws which also may require modifications to our properties or restrict our ability to renovate our properties. We cannot predict the cost of compliance with the ADA or other legislation. If we incur substantial costs to comply with the ADA or any other legislation, our financial condition, results of operations, cash flow, and ability to satisfy our debt service obligations and pay liquidating distributions could be adversely affected.

              Costs of Government Environmental Regulation and Private Litigation

              Environmental laws and regulations hold us liable for the costs of removal or remediation of certain hazardous or toxic substances which may be on our properties. These laws could impose liability without regard to whether we are responsible for the presence or release of the hazardous materials. Government investigations and remediation actions may have substantial costs and the presence of hazardous substances on a property could result in personal injury or similar claims by private plaintiffs. Various laws also impose liability on persons who arrange for the disposal or treatment of hazardous or toxic substances for the cost of removal or remediation of hazardous substances at the disposal or treatment facility. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. As the owner and operator of our properties, it is possible that we may have to arrange for the disposal or treatment of hazardous or toxic substances.

              Use of Hazardous Substances by Some of Our Tenants

              Some of our tenants may handle hazardous or toxic substances and wastes on our properties as part of their routine operations. Environmental laws and regulations subject these tenants, and potentially us, to liability resulting from such activities. We require the tenants, in their respective leases, to comply with these environmental laws and regulations and to

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indemnify us for any related liabilities. We are unaware of any material noncompliance, liability, or claim relating to hazardous or toxic substances or petroleum products in connection with any of our properties.

              Other Federal, State, and Local Regulations

              Our properties are subject to various federal, state, and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these various requirements, we may incur governmental fines or private damage awards. Although we believe that our properties are currently in material compliance with all of these regulatory requirements, we do not know whether existing requirements will change or whether future requirements will require us to make significant unanticipated expenditures that will adversely affect our ability to make liquidating distributions to our stockholders. We believe, based in part on engineering reports which we generally obtain at the time we acquire the properties, that all of our properties comply in all material respects with current regulations. However, if we were required to make significant expenditures under applicable regulations, our financial condition, results of operations, cash flow, and ability to satisfy our debt service obligations and to pay liquidating distributions could be adversely affected.

              Insurance Regulations

              The provisions of the Insurance Law of the Cayman Islands require our insurance operations to maintain a minimum net worth of $120,000. At December 31, 2012 and 2011, we were not in compliance with the minimum net worth requirement. A meeting was held with the Cayman Islands Monetary Authority ("CIMA") on March 23, 2011, at which time we informed CIMA of our intention to transfer the insurance balances into a New York based liquidating trust and dissolve our Cayman Islands based insurance operations once the transfer is complete. As of December 31, 2012, we are in the process of transferring the insurance balances into a liquidating trust.

              Divestiture

              In connection with the completion of the divestiture of our taxable REIT subsidiaries, we may be subject to certain liabilities including union wages, benefits, and severance. On January 27, 2012, we received a notice from Local Union No. 3's counsel asserting a severance liability of approximately $0.1 million for those employees terminated in connection with the divestiture. An arbitration hearing was held May 2, 2012 in which the arbitrator ruled in favor of Local Union No. 3 in the amount of approximately $0.1 million. On July 13, 2012, we paid the full amount of the settlement.

              On February 16, 2012, we received a notice from the Joint Industry Board of the Electrical Industry claiming a pension withdrawal liability in the amount of $1.5 million in connection with the divestiture. During the three months ended September 30, 2012, we determined the liability was probable and as a result, we accrued $1.5 million in other liabilities on our consolidated balance sheet. The liability will be paid in installments of approximately $8,000 per month over a twenty year term. As of December 31, 2012, we have made eleven installment payments.

ITEM 1A.    RISK FACTORS

              You should carefully consider the specific factors listed below, together with the cautionary statement under the caption "Cautionary Statement Regarding Forward Looking Statements" and the other information included in this Report on Form 10-K. If any of the following significant risk factors set forth below actually occur, our business, financial condition, or results of operation could be materially adversely affected and the value of our common stock could decline.

Risks Related to our Organization and Structure

Our failure to qualify as a REIT would subject us to corporate level income tax, which would materially impact funds available for distribution.

              We intend to operate in a manner so as to qualify as a REIT. Qualifying as a REIT will require us to meet several tests regarding the nature of our assets and income on an ongoing basis. A number of the tests established to qualify as a REIT for tax purposes are factually dependent. Therefore, while we intend to qualify as a REIT, it may not be possible at this time to assess our ability to satisfy these various tests on a continuing basis. Additionally, we cannot guarantee that we will in fact qualify as a REIT or remain qualified as a REIT.

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              If we fail to qualify as a REIT in any year, we would be required to pay federal income tax on our net income. In order to pay this tax, we may need to borrow money or sell assets. Our payment of income tax would substantially decrease the amount of cash available to be distributed to our stockholders. In addition, we would no longer be required to distribute substantially all of our taxable income to our stockholders. Unless our failure to qualify as a REIT is excused under relief provisions of the federal income tax laws, we could not re-elect REIT status until the fifth calendar year following the year in which we failed to qualify.

              In addition, even if we qualify as a REIT in any year, we would still be subject to federal taxation on certain types of income. For example, we would be subject to federal income taxation on the net income earned by our taxable REIT subsidiaries which consist of our corporate subsidiaries with respect to which elections are made to treat the same as separate, taxable subsidiaries, presently including our electrical contracting business.

Real Property Business, Investment, Diversification, and Environmental Risks

Financing of our real property could lead to loss of the real property if there is a default.

              The growth and diversification of our real property business is expected to be financed by borrowed funds. We may borrow sums up to 75% of the value of our real property portfolio. Such loans may result in substantial interest charges which can materially reduce distributions to our stockholders. The documentation related to such loans is expected to contain covenants regulating the manner in which we may conduct our businesses and may restrict us from pursuing opportunities which could be beneficial to our stockholders. In addition, if we are unable to meet our payment or other obligations to our lenders, we risk loss of some or all of our real property portfolio.

We depend upon our tenants to pay rent in a timely manner, and their inability or refusal to pay rent could impact our ability to pay our indebtedness, leading to possible defaults, and reduce cash available for distribution to our stockholders.

              Our real property, particularly those we may purchase in the future, will be subject to varying degrees of risk that generally arise from such ownership. The underlying value of our properties and the ability to make distributions to you depend upon the ability of the tenants of our properties to generate enough income to pay their rents in a timely manner. Their inability or unwillingness to do so may be impacted by employment and other constraints on their finances, including debts, purchases and other factors. Additionally, the ability of commercial tenants of commercial properties would depend upon their ability to generate income in excess of their operating expenses to make their lease payments to us. Changes beyond our control may adversely affect our tenants' ability to make lease payments and consequently would substantially reduce our income from operations and our ability to meet our debt service requirements and make distributions to you. These changes include, among others, the following:

•

changes in national, regional, or local economic conditions;



•

changes in local market conditions; and



•

changes in federal, state, or local regulations and controls affecting rents, prices of goods, interest rates, fuel, and energy consumption.

              Due to these changes or others, tenants may be unable to make their lease payments. A default by a tenant, the failure of a tenant's guarantor to fulfill its obligations, or other premature termination of a lease could, depending upon the size of the leased premises and our ability to successfully find a substitute tenant, have a materially adverse effect on our revenues and the value of our common stock or our cash available for distribution to our stockholders.

              If we are unable to find tenants for our properties, particularly those we may purchase in the future, or find replacement tenants when leases expire and are not renewed by the tenants, our revenues and cash available for distribution to our stockholders will be substantially reduced.

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We may not be able to diversify our real property portfolio due to the number and size of our competitors.

              Competition may adversely affect acquisition of properties and leasing operations. We compete for the purchase of commercial property with many entities, including other REITs, some of which are publicly traded. Many of our competitors have substantially greater financial recourses than ours. In addition, our competitors may be willing to accept lower returns on their investments. If our competitors prevent us from buying the properties that we have targeted for acquisition, we may not be able to meet our property acquisition and development goals. We may incur costs on unsuccessful acquisitions that we will not be able to recover.

              If our competitors offer space at rental rates below our current rates or the market rates, we may lose current or potential tenants to other properties in our markets. Additionally, we may need to reduce rental rates below our current rates or offer free rental periods in order to retain tenants upon expiration of their leases or to attract new tenants. As a result, our results of operations and cash flow may be adversely affected.

Lack of diversification and liquidity of real estate will make it difficult for us to sell underperforming properties or recover our investment in one or more properties.

              Our business is subject to risks associated with investment primarily in real property. Real property investments are relatively illiquid. Our ability to vary our portfolio in response to changes in economic and other conditions will be limited. We cannot assure you that we will be able to dispose of a property when we want or need to. Consequently, the sale price for any property we may purchase in the future may not recoup or exceed the amount of our investment.

Our real property portfolio currently includes six real properties which have been, and continue to be, used as a bus depot or automobile facility and has certain environmental conditions resulting in continuing exposure to environmental liabilities.

              Generally our real properties have had activity relating to removal and replacement of underground storage tanks and soil removal; however, there are still some levels of contamination at the sites for which groundwater monitoring programs have been put into place. In addition, our properties are being used as transit depots including the maintenance of vehicles which may expose us to additional environmental liabilities. We cannot assess what further liability may arise from these factors.

Discovery of previously undetected environmentally hazardous conditions at our real properties would result in additional expenses, resulting in a decrease in our cash flows and the return on your shares of common stock.

              Under various federal, state, and local environmental laws, ordinances, and regulations, a current or previous real property owner or operator may be liable for the cost to remove or remediate hazardous or toxic substances on, under, or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous substances, including asbestos-containing materials into the air. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against claims of liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could reduce the amounts available for distribution to you.

A number of risks to which our real properties may be exposed may not be covered by insurance, which could result in losses which are uninsured.

              We could suffer a loss due to the cost to repair any damage to properties that are not insured or are underinsured. There are types of losses, generally of a catastrophic nature, such as losses due to terrorism, wars, earthquakes, or acts of

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God that are either uninsurable or not economically insurable. Generally, we will not obtain insurance for hurricanes, earthquakes, floods, or other acts of God unless required by a lender or we determine that such insurance is necessary and may be obtained on a cost-effective basis. If such a catastrophic event were to occur, or cause the destruction of one or more of our properties, we could lose both our invested capital and anticipated profits from such property.

You may not receive any distributions from the sale of one of our properties, or not receive such distributions in a timely manner, because we may have to provide financing to the purchaser of such property, resulting in an inability or delay of distributions to stockholders.

              If we sell a property, you may experience a delay before receiving your share of the proceeds of such liquidation. In a forced or voluntary liquidation, we may sell our properties either subject to or upon the assumption of any then outstanding mortgage debt or, alternatively, may provide financing to purchasers. We may take a purchase money obligation secured by a mortgage as partial payment. To the extent we receive promissory notes or other property instead of cash from sales, such proceeds, other than any interest payable on those proceeds, will not be available for distribution until the promissory notes or other property are actually paid, sold, refinanced or otherwise disposed of. In many cases, we will receive initial down payments in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years. Therefore, you may experience a delay in the distribution of the proceeds of a sale until such time.

Electrical Contracting Business Risk

Our electrical contracting business depends largely on profitable contracts and performance.

              We provide electrical contracting services to various customers. The loss of any of our larger customers would have a material adverse effect on our business. In addition, these businesses have required significant capital and may require significant additional capital in the future. In addition to the risks related to additional investment, the capital may have to be funded by borrowing or asset sales. We have also publicly disclosed our intention to divest our taxable REIT subsidiaries, including our electrical contracting business. While we presently are in contract to sell our electrical contracting business to a third-party, we may incur substantial costs associated with the completion of our remaining contracts and winding up this business.

In connection with the completion of the divestiture of our electrical contracting business we may be subject to certain liabilities including union wages, benefits, severance, and pension withdrawal.

              The possibility exists that we will incur additional liabilities as a result of the sale of our electrical contracting business. Such costs include union wages, benefits, severance, and pension withdrawal. The extent to which we may potentially owe will not be reasonably estimable until the after the sale has been completed. As a result, our results of operations and cash flow may be adversely affected.

Risks Related to Possible Conflicts of Interest

Our officers and directors may have other interests which may conflict with their duties to us and our stockholders, and which may have adverse effects on the interests of us and our stockholders.

              Our officers and directors may have other interests which could conflict with their duties to us and our stockholders, and which may have adverse effects on the interests of us and our stockholders. For example, certain of such persons may have interests in other real estate related ventures and may have to determine how to allocate an opportunity between us and such other ventures. Also, such persons may have to decide on whether we should purchase or dispose of real property from or to an entity with which they are related, or conduct other transactions, and if so, the terms thereof. Such determinations may either benefit us or be detrimental to us. Our officers and directors are expected to behave in a fair manner toward us, and we require that potential conflicts be brought to the attention of our Board of Directors and that determinations will be made by a majority of directors who have no interest in the transaction. As of this time, only three officers and directors conduct a real property business apart from his activities with us. These individuals are Paul A.

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Cooper, our Chief Executive Officer and director, Louis Sheinker, our President, Chief Operating Officer, and director, and Jeffrey Wu, who is a member of our Board of Directors.

Risks Related to our Common Stock

The absence of a public market for our common stock will make it difficult for a stockholder to sell shares, which may have to be held for an indefinite period.

              Prospective stockholders should understand that our common stock is illiquid, as there is currently no public market, and they must be prepared to hold their shares of common stock for an indefinite length of time. We have no current plans to cause our common stock to be listed on any securities exchange or quoted on any market system or in any established market either immediately or at any definite time in the future. While our Board of Directors may attempt to cause our common stock to be listed or quoted in the future, there can be no assurance that this event will occur. Accordingly, stockholders will find it difficult to resell their shares of common stock. Thus, our common stock should be considered a long-term investment. In addition, there are restrictions on the transfer of our common stock. In order to qualify as a REIT, our shares must be beneficially owned by 100 or more persons at all times and no more than 50% of the value of our issued and outstanding shares may be owned directly or indirectly by five or fewer individuals and certain entities at all times. Our charter provides that no person may own more than 9.9% of the issued and outstanding shares of our common stock. Any attempted ownership of our shares that would result in a violation of one or more of these limits will result in such shares being transferred to an "excess share trust" so that such shares will be disposed of in a manner consistent with the REIT ownership requirements. In addition, any attempted transfer of our shares that would cause us to be beneficially owned by less than 100 persons will be void ab initio (i.e., the attempted transfer will be considered to never have occurred).

Our stockholder' interests may be diluted by issuances under our 2007 Incentive Award Plan and other common stock or preferred stock issuances, which could result in lower returns to our stockholders.

              We have adopted the 2007 Incentive Award Plan, under which 1,000,000 shares of common stock are reserved for issuance, and under which we may grant stock options, restricted stock, and other performance awards to our officers, employees, consultants, and independent directors. The effect of these grants, including the subsequent exercise of stock options, could be to dilute the value of the stockholders' investments.

              In addition, our Board of Directors is authorized, without stockholder approval, to cause us to issue additional shares of our common stock, or shares of preferred stock on which it can set the terms, and to raise capital through the issuance of options, warrants and other rights, on terms and for consideration as the Board of Directors in its sole discretion may determine, subject to certain restrictions in our charter in the instance of options and warrants. Any such issuance such as which may result from the January 2013 transaction described above, could result in dilution to stockholders. The Board of Directors may, in its sole discretion, authorize us to issue common stock or other interests or our securities to persons from whom we purchase real property or other assets, as part or all of the purchase price. The Board of Directors, in its sole discretion, may determine the value of any common stock or other equity or debt securities issued in consideration of property or services provided, or to be provided, to us.

Federal Income Tax and Regulatory Requirements

The requirement to distribute at least 90% of our taxable REIT income may require us to incur debt, sell assets, or issue additional securities for cash, which would increase the risks associated with your investment.

              In order to qualify as a REIT, we must distribute annually to our stockholders at least 90% of our net income, other than any capital gains. To the extent that we distribute at least 90% but less than 100% of our net income in a calendar year, we will incur no federal corporate income tax on our distributed net income, but will incur a federal corporate income tax on any undistributed amounts. In addition, we will incur a 4% nondeductible excise tax if the actual amount we distribute to our stockholders in a calendar year is less than a minimum amount specified under federal income tax law. We intend to distribute at least 90% of our net income to our stockholders each year so that we will satisfy the distribution requirement

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and avoid the 4% excise tax. However, we could be required to include earnings in our taxable income before we actually receive the related cash. That timing difference could require us to borrow funds or raise additional capital to meet the distribution requirement and avoid corporate income tax and the 4% excise tax in a particular year. In the event that we don't distribute 100% of our net income, we will be subject to taxation at the REIT level on the amount of undistributed net income and to the extent we distribute such amount, you will be subject to taxation on it at the stockholder level.

              The minimum distribution requirements for REIT's may require us to borrow, sell assets, or issue additional securities for cash to make required distributions, which would increase the risks associated with your investment in our company.

              Under existing tax law, we would be taxed at the corporate level if, within 10 years of our election to be taxed as a REIT, we sell any real property acquired in the Reorganization in a taxable transaction. For that reason, we presently intend to hold such real property for at least 10 years from our election to be taxed as a REIT. This policy would eliminate a sale as a way to obtain liquidity and would prevent a sale which would otherwise be made to take advantage of favorable market conditions. As part of the January 17, 2013 acquisition of the Wu/Lighthouse Portfolio, LLC properties, we agreed to refrain from, directly or indirectly, making any sale, transfer, exchange or other disposition of the 25 acquired properties for a period of seven years following the closing date.

We are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and furnish a report on our internal control over financial reporting.

              We are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 which requires us to assess and attest to the effectiveness of our internal control over financial reporting. As of December 31, 2012, our independent registered public accounting firm is not required to opine as to the adequacy of our assessment and effectiveness of our internal control over financial reporting. If any deficiencies or material weaknesses exist as a result of our assessment of our internal controls over financial reporting, our financial statements may be materially adversely affected.

Acquisition Risks

Our inability to identify or find funding for acquisitions could prevent us from diversification or growth and could adversely impact the value of an investment in us.

              We may not be able to identify or obtain financing to acquire additional real properties. We are required to distribute at least 90% of our net income, excluding net capital gains, to our stockholders in each taxable year, and thus our ability to retain internally generated cash is very limited. Accordingly, our ability to acquire properties or to make capital improvements to or remodel properties will depend on our ability to obtain debt financing from third parties or the sellers of properties.

              If mortgage debt is unavailable at reasonable rates, we may not be able to finance the purchase of additional properties. If we place mortgage debt on our current properties, we will run the risk of being unable to refinance the additional properties when the loans become due, or of being unable to refinance on favorable terms. If interest rates are higher when we refinance the properties, our income would be reduced. We may be unable to refinance properties. If any of these events occurs, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to our stockholders and may hinder our ability to raise more capital.

We have incurred and plan to incur mortgage and other indebtedness, which could result in material damage to our business if there is a default.

              Significant borrowings by us will increase the risks of owning shares of our company. If there is a shortfall between the cash flow generated by our properties and the cash flow needed to service our indebtedness, then the amount available for distributions to our stockholders will be reduced or eliminated. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of your investment. If any mortgages

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or other indebtedness contain cross-collateralization or cross-default provisions, a default on a single loan could affect multiple properties.

              Additionally, when providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property, merge with another company, or discontinue insurance coverage. These or other limitations may limit our flexibility and our ability to achieve our operating plans. Our failure to meet such restrictions and covenants could result in an event of default under our line of credit and result in the foreclosure of some or all of our properties.

Investing in properties through joint ventures creates a risk of loss to us as a result of the possible inaction or misconduct of a joint venture partner.

              Joint venture investments may involve risks not present in a direct acquisition, including, for example:

•

the risk that our co-venturer or partner in an investment might become bankrupt;



•

the risk that such co-venturer or partner may at any time have economic or business interests or goals which are inconsistent with our business interests or goals; or



•

the risk that such co-venturer or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives, such as selling a property at a time when it would have adverse consequences for our stockholders.

              Actions by such a co-venturer or partner might have the result of subjecting the applicable property to liabilities in excess of those otherwise contemplated and may have the effect of reducing our cash available for distribution. It also may be difficult for us to sell our interest in any such joint venture or partnership in such property.

Borrowings May Increase Our Business Risks

Income distributions may cause us to borrow, resulting in borrowing costs and risk of defaults.

              We are required to distribute at least 90% of our taxable net income, excluding net capital gains to our stockholders in each taxable year. However, depending on the size of our operations, we will require a minimum amount of capital to fund our daily operations. In addition, we may require working capital for our electrical contracting business. We may have to obtain financing from either affiliated or unaffiliated sources to meet such cash needs. This financing may not be available to us on acceptable terms or at all, which could adversely affect our operations and decrease the value of your investment in our company.

As we incur indebtedness which may be needed for operations, we increase expenses which could result in a decrease in cash available for distribution to our stockholders.

              The risk associated with ownership of our common stock depends upon, among other factors, the amount of debt we incur. We have incurred and intend to incur additional indebtedness in connection with our acquisition of properties. We may also borrow for the purpose of maintaining our operations or funding our working capital needs. Lenders may require restrictions on future borrowings, distributions, and operating policies. We also may incur indebtedness if necessary to satisfy the federal income tax requirement that we distribute at least 90% of our taxable net income, excluding net capital gains, to our stockholders in each taxable year. Borrowing increases our business risks.

              Debt service decreases cash available for distribution since we will be responsible for retiring the debt and paying the attendant interest. In the event the fair market value of our properties was to increase, we could incur more debt without a commensurate increase in cash flow to service the debt. In addition, our Board of Directors can change our policy relating to the incurrence of debt at any time without stockholder approval.

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Prolonged disruptions in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us and the market price of our common stock.

              Global stock and credit markets have recently experienced significant price volatility, dislocations, and liquidity disruptions, which have caused market prices of many stocks to fluctuate substantially and the spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and, in certain cases, have resulted in the unavailability of certain types of financing. If these conditions persist, lending institutions may be forced to exit markets such as repurchase lending, become insolvent or further tighten their lending standards, or increase the amount of equity capital required to obtain financing, and in such event, could make it more difficult for us to obtain financing on favorable terms or at all. Our profitability will be adversely affected if we are unable to obtain cost-effective financing for our investments. A prolonged downturn in the stock or credit markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan accordingly. In addition, these factors may make it more difficult for our borrowers to repay our loans as they may experience difficulties in selling assets, increased costs of financing, or obtaining financing at all. These events in the stock and credit markets may also make it more difficult or unlikely for us to raise capital through the issuance of our common stock or preferred stock. These disruptions in the financial markets also may have a material adverse effect on the market value of our common stock and other adverse effects on us or the economy generally.

We have incurred and will incur indebtedness secured by our properties, which may subject our properties to foreclosure in the event of a default.

              Incurring mortgage indebtedness increases the risk of possible loss. Most of our borrowings to acquire properties would be secured by mortgages on our properties. If we default on our secured indebtedness, the lender may foreclose and we could lose our entire investment in the properties securing such loan, which would adversely affect distributions to stockholders. For federal tax purposes, any such foreclosure would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage and, if the outstanding balance of the debt secured by the mortgage exceeds the basis of the property to our company, there could be taxable income upon a foreclosure. Such taxes would be payable by us if the sale was of our current real properties and took place within 10 years after our REIT election. To the extent lenders require our company to cross-collateralize our properties, or our loan agreements contain cross-default provisions, a default under a single loan agreement could subject multiple properties to foreclosure. In addition, the foreclosure of certain of our properties may trigger additional liabilities for us, such as payments which may be required pursuant to the Tax Protection Agreement.

Increases in interest rates will increase the amount of our debt service and increased interest payments will adversely affect our ability to make cash distributions to our stockholders.

              A change in economic conditions which results in higher interest rates would increase debt service requirements on variable rate debt and could reduce the amounts available for distribution to you as a stockholder. A change in economic conditions could cause the terms on which borrowings become available to be unfavorable. In such circumstances, if we are in need of capital to repay indebtedness in accordance with its terms or otherwise, we could be required to liquidate one or more of our investments in properties at times which may not permit realization of the maximum return on such investments.

Difficulty obtaining permanent financing would limit the possible growth in our real property operations.

              The United States is presently experiencing a significant reduction in available credit. When we acquire real property using a revolving credit facility, we plan to refinance the same with permanent mortgage lending on the real property. If due to a lending contraction we are unable to find such financing with terms acceptable to us, we would be unable to restore the borrowings made under a revolving credit facility and we would be limited in further acquirements of real property.

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Our Ability to Change Policies Without a Stockholder Vote

Our policies, including the limits on debt, may be changed or eliminated by our Board of Directors at any time without a vote of our stockholders.

              Our policies, including policies intended to protect our stockholders and the policies described in this annual report with respect to acquisitions, financing, limitations on debt, and investment limitations, have been determined by our Board of Directors and can be changed at any time without a vote of our stockholders or notice to you as a stockholder if our Board of Directors so determines in the exercise of its duties.

Possible Adverse Consequences of Limits on Ownership and Transfer of our Shares

The limitation on ownership of our stock in our charter will prevent you from acquiring more than 9.9% of our common stock and may force you to sell common stock back to us.

              Our charter limits the beneficial and constructive ownership of our capital stock by any single stockholder to 9.9% of the number of outstanding shares of each class or series of our stock including our common stock. We refer to these limitations as the ownership limits. Our charter also prohibits the beneficial or constructive ownership of our capital stock by any stockholder that would result in (1) our capital stock being beneficially owned by fewer than 100 persons, (2) five or fewer individuals, including natural persons, private foundations, specified employee benefit plans and trusts, and charitable trusts, owning more than 50% of our capital stock, applying broad attribution rules imposed by the federal tax laws, (3) our company otherwise failing to qualify as a REIT for federal tax purposes. In addition, any attempted transfer of our capital stock that would result in the Company being beneficially owned by less than 100 persons will be void ab initio (i.e., such transfer will be considered to never have happened). If you acquire shares in excess of the ownership limits or in violation of the ownership limitations, we:

•

will consider the transfer (in whole or part) to be null and void;



•

will not reflect the transaction on our books;



•

may institute legal action to enjoin the transaction;



•

will not pay dividends or other distributions to you with respect to those excess shares;



•

will not recognize your voting rights for those excess shares; and



•

will consider the excess shares held in trust for the benefit of a charitable beneficiary.

              If such shares are transferred to a trust for the benefit of a charitable beneficiary, you will be paid for such excess shares a price per share equal to the lesser of the price you paid or the "market price" of our stock. Unless shares of our common stock are then traded on a national securities exchange or quoted on a national market system, the market price of such shares will be a price determined by our Board of Directors in good faith. If shares of our common stock are traded on a national securities exchange or quoted on a national market system, the market price will be the average of the last sales prices or the average of the last bid and ask prices for the date of determination.

              If you acquire our common stock in violation of the ownership limits or the restrictions on transfer described above:

•

you may lose your power to dispose of the stock;



•

you may not recognize profit from the sale of such stock if the "market price" of the stock increases; and



•

you may incur a loss from the sale of such stock if the "market price" decreases.

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Anti-takeover Provisions Related to Us

Our Stockholder Rights Agreement is designed to discourage takeover attempts without approval of our Board of Directors, which could discourage a potential takeover bid and the related payment to our stockholders.

              The Stockholder Rights Agreement provides that a right is deemed to be issued and outstanding in conjunction with each outstanding share of our common stock. If any person or group, as defined in the agreement, acquires more than 15% of our outstanding common stock without the approval of our Board of Directors, each holder of a right, other than such 15% or more holder(s), will be entitled to purchase 1000^th of a share of our Series A preferred stock for $50.00 which is convertible into our common stock at one-half of the market value of our common stock, or to purchase, for each right, $50.00 of our common stock at one-half of the market value. The effect of this provision is to materially dilute the holdings of such 15% or more holders and substantially increase the cost of acquiring a controlling interest in us. These types of provisions generally inhibit tender offers or other purchases of a controlling interest in a company such as ours.

Limitations on share ownership and transfer may deter a sale of our company in which you could profit.

              The limits on ownership and transfer of our equity securities in our charter may have the effect of delaying, deferring, or preventing a transaction or a change in control of our company that might involve a premium price for your common stock. The ownership limits and restrictions on transferability will continue to apply until our Board of Directors determines that it is no longer in our best interest to continue to qualify as a REIT.

Our ability to issue preferred stock with terms fixed by the Board of Directors may include a preference in distributions superior to our common stock and also may deter or prevent a sale of our company in which a stockholder could otherwise profit.

              Our ability to issue preferred stock and other securities without your approval also could deter or prevent someone from acquiring our company. Our charter authorizes our Board of Directors to issue up to ten million shares of preferred stock. Our Board of Directors may establish the preferences and rights, including a preference in distributions superior to our common stockholders, of any issued preferred stock designed to prevent, or with the effect of preventing, someone from acquiring control of our company.

Maryland anti-takeover statute restrictions may deter others from seeking to acquire our company in a transaction in which a stockholder could profit.

              Maryland law contains many provisions, such as the business combination statute and the control share acquisition statute, that are designed to prevent, or have the effect of preventing, someone from acquiring control of our company without approval of our Board of Directors. Our bylaws exempt our company from the control share acquisition statute (which eliminates voting rights for certain levels of shares that could exercise control over us) and our Board of Directors has adopted a resolution opting out of the business combination statute (which prohibits a merger or consolidation of us and a 10% stockholder for a period of time) with respect to affiliates of our company. However, if the bylaw provisions exempting our company from the control share acquisition statute or the board resolution opting out of the business combination statute were repealed by the Board of Directors, in its sole discretion, these provisions of Maryland Law could delay or prevent offers to acquire our company and increase the difficulty of consummating any such offers.

Because of our staggered Board of Directors, opposition candidates would have to be elected in two separate years to constitute a majority of the Board of Directors, which may deter a change of control from which a stockholder could profit.

              We presently have ten members of our Board of Directors. Each director has or will have a three year term, and only approximately one-third of the directors will stand for election each year. Accordingly, in order to change a majority of our Board of Directors, a third party would have to wage a successful proxy contest in two successive years, which is a situation that may deter proxy contests.

Certain provisions of our charter make stockholder action more difficult, which could deter changes beneficial to our stockholders.

              We have certain provisions in our charter and bylaws that require super-majority voting and regulate the opportunity to nominate directors and to bring proposals to a vote by the stockholders.

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ITEM 1B.    UNRESOLVED STAFF COMMENTS

              None.

ITEM 2.    PROPERTIES

Portfolio of Real Estate Investments

              The following table sets forth information relating to each of our real estate investments in addition to the specific mortgages encumbering the properties:

              For additional information about our portfolio of real estate investments, see Item 1—Business-Portfolio of Real Properties.

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              On January 17, 2013, we entered into a certain contribution agreement with Wu/Lighthouse Portfolio, LLC effective as of January 1, 2013 in which we acquired all outstanding ownership interests of a portfolio consisting of 25 commercial properties located in New York, New Jersey and Connecticut. As a result of this acquisition we currently own a total of 32 properties, including our seven previously-owned properties as of the date of this report. The 25 acquired properties are listed below:

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Insurance

              We believe that we have property and liability insurance with reputable, commercially rated companies. We also believe that our insurance policies contain commercially reasonable deductibles and limits, adequate to cover our properties. We expect to maintain this type of insurance coverage and to obtain similar coverage with respect to any additional properties we acquire in the near future. Further, we have title insurance relating to our properties in an aggregate amount that we believe to be adequate.

Regulations

              Our real properties, as well as any other real properties that we may acquire in the future, are subject to various federal, state, and local laws, ordinances, and regulations. They include, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution, and indirect environmental impacts such as increased motor vehicle activity. We believe that we have all permits and approvals necessary under current law to operate our properties.

Real Property Used By Us in Our Businesses

              The real properties used by us at December 31, 2012, for the day to day conduct of our businesses are as follows (all of which are leased):

ITEM 3.    LEGAL PROCEEDINGS

              We are involved in several lawsuits and other disputes which arose in the ordinary course of business; however, management believes that these matters will not have a material adverse effect, individually or in the aggregate, on our financial position or results of operations.

ITEM 4.    MINE SAFETY DISCLOSURES

              Not applicable.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Common Equity

              Currently, there is no public market for our common stock, and we do not expect a market to develop in the near future. We have no current plans to cause our common stock to be listed on any securities exchange or quoted on any market system in any established market either immediately or at any definite time in the future. Therefore, it is likely that a stockholder may not be able to sell such stockholder's common stock at a time or price acceptable to the stockholder.

Outstanding Common Stock and Holders

              As of March 25, 2013, we had 13,648,084 shares issued and outstanding, held by approximately 450 shareholders of record.

Distributions

              Our Board of Directors has declared and paid cash dividends on a quarterly basis. On March 21, 2013, our Board of Directors declared a special distribution of $0.0934 per share of common stock, payable with respect to the year ended December 31, 2012, to stockholders of record at the close of business on March 31, 2013 which is payable on or about April 15, 2013. On March 21, 2013, our Board of Directors also declared a quarterly cash dividend of $0.08 per share of common stock, payable with respect to the first quarter ended March 31, 2013 to common stockholders of record as of the close of business on March 31, 2013 payable on or about April 15, 2013. The following table shows the declaration dates and the amounts distributed per share for the years ended December 31, 2012 and 2011:

              Although we intend to continue to declare and pay quarterly dividends, no assurances can be made as to the amounts of any future payments. The declaration of any future dividends is within the discretion of the Board of Directors and will be dependent upon, among other things, our earnings, financial condition and capital requirements, as well as any other factors deemed relevant by the Board of Directors. Two principal factors in determining the amounts of distributions are (i) the requirement Code that a REIT distribute to shareholders at least 90% of its REIT taxable income, and (ii) the amount of available cash.

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Equity Compensation Plan Information

              On June 11, 2007, the Board of Directors approved the Company's 2007 Incentive Award Plan (the "Plan"). The effective date of the Plan was June 11, 2007, subject to stockholder approval. The stockholders of the Company approved the Plan on February 7, 2008. The aggregate number of shares of common stock which may be awarded under the Plan is 1,000,000 shares. These shares were registered on September 23, 2010. See Item 11 and Footnote 10 of this Report Form 10-K for additional information regarding the Plan.

              The following information is provided as of December 31, 2012 with respect to compensation plans, including individual compensation arrangements, under which our equity securities are authorized for issuance:

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

              We did not have a plan for the purchase of any shares of our common stock, and did not purchase any of the same during the year ended December 31, 2012.

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ITEM 6.    SELECTED FINANCIAL DATA

              The following tables present selected historical consolidated financial information for the periods indicated. The selected historical consolidated financial information presented below under the captions "Balance Sheet Data", "Operating Data", "Per Share Data", and "Other Data" have been derived from our audited consolidated financial statements and include all adjustments, which management considers necessary for a fair presentation of the historical consolidated financial statements for such period. In addition, since the information presented below is only a summary and does not provide all of the information contained in our historical consolidated financial statements, including the related notes, you should read it in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical consolidated financial statements, including the related notes, for information regarding business acquisitions, discontinued operations, critical accounting policies, and items affecting comparability of the amounts below.

Selected Financial Data
(in thousands, except per share data)

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

              The following discussions contain forward-looking statements that involve numerous risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements as a result of these risks and uncertainties, including those set forth in this report under "Forward-Looking Statements" and under "Risk Factors." You should read the following discussion in conjunction with "Selected Financial Data" and our consolidated financial statements and notes appearing elsewhere in this filing. Past performance is not a guarantee of future results.

Executive Summary

              We are a fully integrated, self-administered and self-managed REIT, engaged in the acquisition, ownership, and management of real properties. As of December 31, 2012, we owned seven rentable parcels of real property, four of which are leased to the City of New York, two of which are leased to commercial tenants (five on a triple net basis), and one of which a portion is leased to various tenants. There is an additional property of negligible size which is not rentable. Additionally, in connection with the Tax Relief Extension Act of 1999 ("RMA"), we are permitted to participate in activities outside the normal operations of the REIT so long as these activities are conducted in entities which elect to be treated as taxable subsidiaries under the Internal Revenue Code, as amended (the "Code"), subject to certain limitations. In addition, we owned a group of outdoor maintenance businesses, an electrical contracting business, and a parking garage business, which are presented as part of discontinued operations on our statements of (loss) income. On December 27, 2011, we entered into an asset purchase agreement to sell the assets and business of the outdoor maintenance businesses and on January 12, 2012, the sale was completed. On February 1, 2012, we exited the parking business. On January 17, 2013, we entered into a certain contribution agreement with Wu/Lighthouse Portfolio, LLC effective as of January 1, 2013 in which we acquired all outstanding ownership interests of a portfolio consisting of 25 commercial properties located in New York, New Jersey and Connecticut. As a result of this acquisition we currently own a total of 32 properties, including our seven previously-owned properties.

              We continue to seek opportunities to acquire stabilized properties. To the extent it is in the interests of our stockholders, we will seek to invest in a diversified portfolio of real properties within our geographic area that will satisfy our primary investment objectives of providing our stockholders with stable cash flow, preservation of capital and growth of income and principal without taking undue risk. Because a significant factor in the valuation of income-producing property is the potential for future income, we anticipate that the majority of properties that we will acquire will have both the potential for growth in value and provide for cash distributions to stockholders.

Critical Accounting Policies

              Management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that could affect the reported amounts in our consolidated financial statements. Actual results could differ from these estimates. A summary of our significant accounting policies is presented in Note 1 of the "Notes to Consolidated Financial Statements" set forth in Item 8 hereof. Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements included in this report. Certain of the accounting policies used in the preparation of these consolidated financial statements are particularly important for an understanding of the financial position and results of operations presented in the historical consolidated financial statements included in this report and require the application of significant judgment by management and, as a result, are subject to a degree of uncertainty.

              Revenue Recognition—Real Estate Operations:

              We recognize revenue in accordance with ASC No. 840-20-25, which requires that revenue be recognized on a straight-line basis over the term of the lease unless another systematic and rational basis is more representative of the time pattern in which the use benefit is derived from the leased property. In those instances in which we fund tenant improvements and the improvements are deemed to be owned by us, revenue recognition will commence when the

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improvements are substantially completed and possession or control of the space is turned over to the tenant. When we determine that the tenant allowances are lease incentives, we commence revenue recognition when possession or control of the space is turned over to the tenant for tenant work to begin. The properties are being leased to tenants under operating leases. Minimum rental income is recognized on a straight-line basis over the term of the lease.

              Property operating expense recoveries from tenants of common area maintenance, real estate, and other recoverable costs are recognized in the period the related expenses are incurred.

              Revenue Recognition—Electrical Contracting Operations:

              We recognize revenues from long-term construction contracts on the percentage-of-completion method in accordance with ASC No. 605-35. Percentage-of-completion is measured principally by the percentage of costs incurred to date for each contract to the estimated total costs for such contract at completion. Contract costs include all direct costs related to the performance and completion of the contracts. Estimated losses on the long term construction contracts are recognized in the period in which such losses are determined. Revenues are presented as part of discontinued operations in the consolidated statements of (loss) income.

              Accounts Receivable:

              Accounts receivable consist of trade receivables recorded at the original invoice amounts, less an estimated allowance for uncollectible accounts. Trade credit is generally extended on a short-term basis; thus trade receivables generally do not bear interest. Trade receivables are periodically evaluated for collectability based on past credit histories with customers and their current financial conditions. Changes in the estimated collectability of trade receivables are recorded in the results of operations for the period in which the estimate is revised. Trade receivables that are deemed uncollectible are offset against the allowance for uncollectible accounts. We generally do not require collateral for trade receivables. We recorded an impairment charge of approximately $0.1 million against accounts receivable and wrote off approximately $0.1 million of notes receivable as of December 31, 2012.

              Real Estate Investments:

              Real estate assets are stated at cost, less accumulated depreciation and amortization. All costs related to the improvement or replacement of real estate properties are capitalized. Additions, renovations, and improvements that enhance and/or extend the useful life of a property are also capitalized. Expenditures for ordinary maintenance, repairs, and improvements, that do not materially prolong the normal useful life of an asset are charged to operations as incurred.

              Upon the acquisition of real estate properties, the fair values of the real estate purchased are allocated to the acquired tangible assets (consisting of land, buildings, and building improvements) and identified intangible assets and liabilities (consisting of above-market and below-market leases and in-place leases) in accordance with ASC No. 805. We utilize methods similar to those used by independent appraisers in estimating the fair value of acquired assets and liabilities. The fair value of the tangible assets of an acquired property considers the value of the property "as-if-vacant." The fair value reflects the depreciated replacement cost of the asset. In allocating purchase price to identified intangible assets and liabilities of an acquired property, the value of above-market and below-market leases are estimated based on the differences between (i) contractual rentals and the estimated market rents over the applicable lease term discounted back to the date of acquisition utilizing a discount rate adjusted for the credit risk associated with the respective tenants and (ii) the estimated cost of acquiring such leases giving effect to our history of providing tenant improvements and paying leasing commissions, offset by a vacancy period during which such space would be leased. The aggregate value of in-place leases is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fair value of the property "as-if-vacant," determined as set forth above.

              Above and below market leases acquired are recorded at their fair values. The capitalized above-market lease values are amortized as a reduction of rental revenue over the remaining term of the respective leases and the capitalized below-market lease values are amortized as an increase to rental revenue over the remaining term of the respective leases. The value of in-place leases is based on our evaluation of the specific characteristics of each tenant's lease. Factors considered include estimates of carrying costs during expected lease-up periods, current market conditions, and costs to execute similar leases. The value of in-place leases are amortized over the remaining term of the respective leases. If a

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tenant vacates its space prior to its contractual expiration date, any unamortized balance of the related intangible asset is expensed.

              Asset Impairment:

              We apply the guidance in ASC No. 360-10-05, to recognize and measure impairment of long-lived assets. Management reviews each real estate investment for impairment whenever events or circumstances indicate that the carrying value of a real estate investment may not be recoverable. The review of recoverability is based on an estimate of the undiscounted future cash flows that are expected to result from the real estate investment's use and eventual disposition. Such cash flow analyses consider factors such as expected future operating income, trends and prospects, as well as the effects of leasing demand, competition, and other factors. If an impairment event exists due to the projected inability to recover the carrying value of a real estate investment, an impairment loss is recorded to the extent that the carrying value exceeds estimated fair value. Management is required to make subjective assessments as to whether there are impairments in the value of its real estate properties. These assessments can have a direct impact on net income, because an impairment loss is recognized in the period that the assessment is made. Management has determined that there were no indicators of impairment at December 31, 2012.

              When impairment indicators are present, investments in affiliated companies are reviewed for impairment by comparing their fair values to their respective carrying amounts. We make our estimate of fair value by considering certain factors including discounted cash flow analyses. If the fair value of the investment has dropped below the carrying amount, management considers several factors when determining whether an other-than-temporary decline in market value has occurred, including the length of the time and the extent to which the fair value has been below cost, the financial condition and near-term prospects of the affiliated company, and other factors influencing the fair market value, such as general market conditions. Management has determined that there were no indicators of impairment at December 31, 2012.

              Discontinued Operations:

              The consolidated financial statements present the operations of our outdoor maintenance, shelter cleaning, electrical contracting, and parking operations as discontinued operations in accordance with ASC 205-20-55 for all periods presented.

              Fair Value Measurements:

              We determine fair value in accordance with ASC No. 820-10-05 for financial assets and liabilities. ASC No. 820-10-05 defines fair value, provides guidance for measuring fair value, and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements.

              Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments' complexity.

              Assets and liabilities disclosed at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by ASC No. 820-10-35 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

•

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.



•

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument's anticipated life. Level 2 inputs include quoted market prices in markets that are not active for an identical or similar asset or liability, and quoted market prices in active markets for a similar asset or liability.

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•

Level 3—Inputs reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. These valuations are based on significant unobservable inputs that require a considerable amount of judgment and assumptions. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

              Determining which category an asset or liability falls within the hierarchy requires significant judgment and we evaluate its hierarchy disclosures each quarter.

              At December 31, 2012, we measured certain financial assets at fair value on a recurring basis, including available-for-sale securities. In accordance with ASC No. 820-10-35, the fair value of our available-for-sale securities were based on current market quotes received from financial sources that trade such securities.

              Income Taxes:

              We are organized and conduct our operations to qualify as a REIT for federal income tax purposes. Accordingly, we will generally not be subject to federal income taxation on that portion of our distributed income that qualifies as REIT taxable income, to the extent that we distribute at least 90% of our taxable income to our stockholders and comply with certain other requirements as defined under Section 856 through 860 of the Code.

              We also participate in certain activities conducted by entities which elected to be treated as taxable subsidiaries under the Code. As such we are subject to federal, state, and local taxes on the income from these activities.

              We account for income taxes under the asset and liability method, as required by the provisions of ASC No. 740-10-30. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We provide a valuation allowance for deferred tax assets for which we do not consider realization of such assets to be more likely than not.

              Investment in Equity Affiliates:

              We invested in a joint venture that was formed to perform electrical contracting services. This investment is recorded under the equity method of accounting. We record our share of the net income and losses from the underlying operations and any other-than-temporary impairment on these investments as part of discontinued operations on the consolidated statements of (loss) income.

              Variable Interest Entities:

              We account for variable interest entities ("VIEs") in accordance with ASC No. 810-10-50. A VIE is defined as an entity in which equity investors (i) do not have the characteristics of a controlling financial interest, and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, which is defined as the party that (i) has the power to control the activities that impact the VIE's economic performance and (ii) has the right to receive the majority of expected returns or the obligation to absorb the majority of expected losses that could be material to the VIE.

              As of December 31, 2012, we have one investment which was made to a VIE entity with a net carrying amount of $0.5 million, which is included in assets of discontinued operations on the consolidated balance sheet. For the VIE identified, we are not the primary beneficiary, and as such, the VIE is not consolidated in our financial statements. We account for this investment under the equity method.

              Stock-Based Compensation:

              We have a stock-based compensation plan, which is described in Note 10. We account for stock based compensation in accordance with ASC No. 718-30-30, which establishes accounting for stock-based awards exchanged for employee services. Under the provisions of ASC No. 718-10-35, share-based compensation cost is measured at the grant date, based on the fair value of the award, and the expense is recognized in earnings at the grant date (for the portion that vests immediately) or ratably over the respective vesting periods.

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Results of Operations

              The following results of operations pertain to GTJ REIT, Inc. for the years ended December 31, 2012, 2011, and 2010.

Year Ended December 31, 2012 vs. Year Ended December 31, 2011

              The following table sets forth our results of operations for the years indicated (in thousands):

Property Rental Revenues

              Property rentals revenue increased $0.1 million, or 1%, to $13.6 million for the year ended December 31, 2012 from $13.5 million for the year ended December 31, 2011. This increase is primarily attributable to new tenants with leases that began in the second and third quarters of 2012 partially offset by a decrease in revenue due to the early termination of the Varsity lease.

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Tenant Reimbursements

              Tenant reimbursements decreased $0.1 million, or 23%, to $0.3 million for the year ended December 31, 2012 from $0.4 million for the year ended December 31, 2011. This decrease is primarily attributable to the early termination of the Varsity lease in the third quarter of 2012.

Other Revenue

              Other revenue decreased $0.3 million, or 94%, to $18,000 for the year ended December 31, 2012 from $318,000 for the year ended December 31, 2011. This decrease is primarily attributable to the decrease in revenue from the termination of the Metropolitan Transit Authority Bus Company contract which terminated in June 2011.

Operating Expenses

              Operating expenses increased $1.0 million, or 10%, to $11.1 million for the year ended December 31, 2012 from $10.1 million for the year ended December 31, 2011. This increase is primarily attributable to consulting and legal fees relating to the divestiture of our taxable REIT subsidiaries and professional fees and expenses related to potential real estate acquisitions, an increase in stock compensation expense associated with the grant of restricted shares in 2012, and severance costs related to the divestiture.

Other Income (Expense)

              Other income (expense) increased $0.6 million, or 23%, to ($3.2) million for the year ended December 31, 2012 from ($2.6) million for the year ended December 31, 2011. This increase is primarily attributable to the pension withdrawal expenses incurred in 2012 of approximately $1.5 million offset by income received from the former tenant at our Farm Springs property of $0.6 million as a result of incidental property damages during the term of the lease.

Provision For Income Taxes

              The provision for income taxes represents federal, state, and local taxes on income of the taxable REIT subsidiaries.

Loss from Operations of Discontinued Operations, net of income taxes

              Loss from discontinued operations, net of taxes reflects the operating results, accruals, allowances, and asset write offs of our taxable REIT subsidiaries (outdoor maintenance, shelter cleaning, electrical contracting, and parking operations), and paratransit businesses.

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Year Ended December 31, 2011 vs. Year Ended December 31, 2010

              The following table sets forth our results of operations for the years indicated (in thousands):