One Liberty Properties is a Real Estate Investment Trust (REIT) that acquires, owns and manages a portfolio of retail (including furniture and office supply stores), industrial, office, flex, health and fitness and other properties, a substantial portion of which are under long-term leases. The company makes money by collecting rents from its 84 properties. Key to the company's profitability is the weighted average of remaining term of leases, which is currently around 9.2 years, and ten years for the leases at properties owned by our joint ventures. Because rents come from a wide variety of sectors, macroeconomic factors will highly determine the tenant quality and their ability to pay to OLP.
Operating performance is highly dependent on two factors for OLP, acquisition strategies and the procurement of long-term leases. In particular to the latter, long-term leases provide a predictable income stream over the term of the lease, making fluctuations in market rental rates and in real estate values less significant.
Furniture is traditionally a high fixed cost and illiquid business. Roughly 14% of OLP's contract rent revenues come from retail in the furniture sector. Because furniture purchases are not considered an everyday necessity, individual customers only purchase furniture when the need comes about, typically when buying a new house. With a weakened U.S. Housing Market, furniture sales will also decline. Unfortunately, traditional brick-and-mortar stores must keep its stores open daily and incurs costs for sales, management, rent, and utilities disregarding customer inflow. The tenant's profitability therefore is highly important to OLP and is sensitive to changes in these macroeconomic factors.
Roughly 60% of OLP's revenues come from retail. As retail tenants face increasing competition from online retailers, traditional brick-and-mortar tenants have chosen to either diversify their business line to online access or completely to online. This decrease in demand for rental properties pushes downward pressure to rent prices, which directly negatively influences OLP's top-line.
OLP competes with other REITs operating primarily in the retail space, such as: