PDL.A Presidential Realty Corp (Classa )

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

 Commission file number 1-8594
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 Delaware 13-1954619
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(State or other jurisdiction of (I.R.S. Employer
 incorporation or organization) Identification No.)

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 "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer
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Non-accelerated filer (Do not check if a smaller reporting company)
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Smaller reporting company x
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The number of shares outstanding of each of the registrant's classes of common stock as of August 10, 2009 was 442,533 shares of Class A common stock and 2,957,147 shares of Class B common stock.

Index to Form 10-Q

 For the Quarterly Period Ended
 June 30, 2009




Part I Financial Information (Unaudited)

 Item 1. Financial Statements
 Consolidated Balance Sheets (Unaudited)
 Consolidated Statements
 of Operations (Unaudited)
 Consolidated Statement
 of Stockholders' Equity (Unaudited)
 Consolidated Statements
 of Cash Flows (Unaudited)
 Notes to Consolidated
 Financial Statements (Unaudited)

 Item 2. Management's Discussion and Analysis
 of Financial Condition and Results
 of Operations

 Item 3. Quantitative and Qualitative Disclosures
 about Market Risk

 Item 4. Controls and Procedures


Part II Other Information

 Item 4. Submission of Matters to a Vote of
 Security Holders

 Item 6. Exhibits

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)



 June 30, December 31,
 2009 2008
 ---------------- -----------------
Assets

 Real estate (Note 2) $17,883,350 $17,686,971
 Less: accumulated depreciation 2,455,396 2,211,207
 ---------------- -----------------

 Net real estate 15,427,954 15,475,764
 Net mortgage portfolio (of which $731,360 in 2009
 and $119,274 in 2008 are due within one year) (Note 3) 2,852,880 2,249,203
 Investments in and advances to joint ventures (Note 4) 4,176,009 1,511,887
 Assets related to discontinued operations (Note 5) 30,819 391,479
 Prepaid expenses and deposits in escrow 1,111,371 1,113,437
 Other receivables (net of valuation allowance of
 $155,135 in 2009 and $106,183 in 2008) 430,300 462,479
 Cash and cash equivalents 1,698,735 5,984,550
 Securities available for sale (Note 6) 4,418,274 9,648
 Other assets 589,707 693,162
 ---------------- -----------------

Total Assets $30,736,049 $27,891,609
 ================ =================

Liabilities and Stockholders' Equity

 Liabilities:
 Mortgage debt (of which $1,422,644 in 2009 and
 $376,619 in 2008 are due within one year) $16,206,864 $16,392,285
 Liabilities related to discontinued operations (Note 5) - 2,078,971
 Contractual pension and postretirement benefits liabilities 1,786,749 1,808,104
 Defined benefit plan liability 2,529,721 2,253,139
 Accrued liabilities 2,133,361 2,000,365
 Accounts payable 323,415 524,718
 Other liabilities 480,972 695,300
 ---------------- -----------------

Total Liabilities 23,461,082 25,752,882
 ---------------- -----------------

 Stockholders' Equity:
 Common stock: par value $.10 per share
 June 30, 2009 December 31, 2008
 ---------------- -----------------
 Class A 47,894 47,894
 -----------
 Authorized: 700,000 700,000
 Issued: 478,940 478,940
 Treasury: 36,407 36,407

 Class B 352,755 352,455
 -----------
 Authorized: 10,000,000 10,000,000
 Issued: 3,527,547 3,524,547
 Treasury: 570,400 570,400

 Additional paid-in capital 4,613,949 4,586,738
 Retained earnings 9,098,575 3,870,905
 Accumulated other comprehensive loss (Note 9) (3,625,202) (3,589,877)
 Treasury stock (at cost) (3,129,388) (3,129,388)
 ---------------- -----------------

 Total Presidential Realty Corporation stockholders' equity 7,358,583 2,138,727
 Noncontrolling interest (Note 7) (83,616) -
 ---------------- -----------------

Total Stockholders' Equity 7,274,967 2,138,727
 ---------------- -----------------

Total Liabilities and Stockholders' Equity $30,736,049 $27,891,609
 ================ =================

 See notes to consolidated financial statements.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)





 THREE MONTHS ENDED JUNE 30,
 --------------------------------

 2009 2008
 ------------- ---------------
Revenues:
 Rental $1,360,825 $1,300,207
 Interest on mortgages - notes receivable 176,196 242,508
 Interest on mortgages - notes receivable - related parties - 92,000
 Other revenues 12,102 1,198
 ------------- ---------------

Total 1,549,123 1,635,913
 ------------- ---------------

Costs and Expenses:
 General and administrative 975,472 926,506
 Depreciation on non-rental property 10,483 9,169
 Rental property:
 Operating expenses 663,191 679,056
 Interest on mortgage debt 381,407 367,111
 Real estate taxes 111,868 109,654
 Depreciation on real estate 127,135 118,702
 Amortization of in-place lease values and mortgage costs 15,547 41,177
 ------------- ---------------

Total 2,285,103 2,251,375
 ------------- ---------------

Other Income (Loss):
 Investment income 17,831 16,086
 Equity in the loss from joint ventures (Note 4) (372,506) (95,604)
 Gain on settlement of joint venture loans (Notes 3 and 4) 2,279,289 -
 ------------- ---------------

Income (loss) from continuing operations 1,188,634 (694,980)
 ------------- ---------------

Discontinued Operations (Note 5):
 Income (loss) from discontinued operations (4,276) 67,577
 Net gain from sales of discontinued operations 3,208,336 -
 ------------- ---------------

Total income from discontinued operations 3,204,060 67,577
 ------------- ---------------

Net income (loss) 4,392,694 (627,403)

 Add: Net loss from noncontrolling interest (Note 7) 45,513 -
 ------------- ---------------

Net Income (Loss) attributable to Presidential Realty Corporation $4,438,207 ($627,403)
 ============= ===============


Earnings per Common Share attributable to Presidential
 Realty Corporation (basic and diluted) (Note 10):
 Income (loss) from continuing operations $0.36 ($0.18)
 ------------- ---------------

 Discontinued Operations:
 Income from discontinued operations - 0.02
 Net gain from sales of discontinued operations 0.95 -
 ------------- ---------------

 Total income from discontinued operations 0.95 0.02
 ------------- ---------------

 Net Income (Loss) per Common Share - basic $1.31 ($0.16)
 ============= ===============
 - diluted $1.31 ($0.16)
 ============= ===============

Cash Distributions per Common Share $ - $0.16
 ============= ===============

Weighted Average Number of Shares Outstanding - basic 3,380,380 3,878,734
 ============= ===============
 - diluted 3,399,680 3,878,734
 ============= ===============

Amounts attributable to Presidential Realty Corporation
 Common Shareholders:
Income (loss) from continuing operations $1,234,147 ($694,980)
Total income from discontinued operations 3,204,060 67,577
 ------------- ---------------
Net Income (Loss) $4,438,207 ($627,403)
 ============= ===============



See notes to consolidated financial statements.


PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)





 SIX MONTHS ENDED JUNE 30,
 --------------------------------

 2009 2008
 ------------- ---------------
Revenues:
 Rental $2,749,986 $2,654,696
 Interest on mortgages - notes receivable 247,382 528,564
 Interest on mortgages - notes receivable - related parties - 127,500
 Other revenues 23,614 2,436
 ------------- ---------------

Total 3,020,982 3,313,196
 ------------- ---------------

Costs and Expenses:
 General and administrative 1,882,890 1,935,927
 Depreciation on non-rental property 20,901 17,734
 Rental property:
 Operating expenses 1,377,909 1,365,976
 Interest on mortgage debt 758,853 702,676
 Real estate taxes 223,736 219,310
 Depreciation on real estate 251,065 223,498
 Amortization of in-place lease values and mortgage costs 34,273 99,689
 ------------- ---------------

Total 4,549,627 4,564,810
 ------------- ---------------

Other Income (Loss):
 Investment income 32,601 36,275
 Equity in the loss from joint ventures (Note 4) (585,878) (456,400)
 Gain on settlement of joint venture loans (Notes 3 and 4) 3,979,289 -
 ------------- ---------------

Income (loss) from continuing operations 1,897,367 (1,671,739)
 ------------- ---------------

Discontinued Operations (Note 5):
 Income from discontinued operations 38,351 125,678
 Net gain from sales of discontinued operations 3,208,336 -
 ------------- ---------------

Total income from discontinued operations 3,246,687 125,678
 ------------- ---------------

Net income (loss) 5,144,054 (1,546,061)

 Add: Net loss from noncontrolling interest (Note 7) 83,616 -
 ------------- ---------------

Net Income (Loss) attributable to Presidential Realty Corporation $5,227,670 ($1,546,061)
 ============= ===============


Earnings per Common Share attributable to Presidential
 Realty Corporation (basic and diluted) (Note 10):
 Income (loss) from continuing operations $0.59 ($0.43)
 ------------- ---------------

 Discontinued Operations:
 Income from discontinued operations 0.01 0.03
 Net gain from sales of discontinued operations 0.95 -
 ------------- ---------------

 Total income from discontinued operations 0.96 0.03
 ------------- ---------------

 Net Income (Loss) per Common Share - basic $1.55 ($0.40)
 ============= ===============
 - diluted $1.54 ($0.40)
 ============= ===============

Cash Distributions per Common Share $ - $0.32
 ============= ===============

Weighted Average Number of Shares Outstanding - basic 3,379,999 3,906,860
 ============= ===============
 - diluted 3,399,547 3,906,860
 ============= ===============

Amounts attributable to Presidential Realty Corporation
 Common Shareholders:
Income (loss) from continuing operations $1,980,983 ($1,671,739)
Total income from discontinued operations 3,246,687 125,678
 ------------- ---------------
Net Income (Loss) $5,227,670 ($1,546,061)
 ============= ===============



See notes to consolidated financial statements.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)

 Presidential Realty Corporation Stockholders
 -------------------------------------------------------
 Accumulated
 Additional Other Total
 Common Paid-in Retained Comprehensive Treasury Noncontrolling Comprehensive Stockholders'
 Stock Capital Earnings Loss Stock Interest Income Equity
 --------- ---------- ----------- ------------ --------- ---------- ------------ ------------
Balance at January 1, 2009 $400,349 $4,586,738 $3,870,905 ($3,589,877) ($3,129,388) $ - $2,138,727

Issuance and vesting of
 restricted stock 300 27,211 - - - - 27,511
Comprehensive income:
 Net income (loss) - - 5,227,670 - - (83,616) $5,144,054 5,144,054
 Other comprehensive
 income (loss) -
 Net unrealized loss on
 securities available
 for sale - - - (22,996) - - (22,996) (22,996)
 Adjustment for
 contractual
 postretirement benefits - - - (12,329) - - (12,329) (12,329)
 ------------
Comprehensive income 5,108,729
 Comprehensive loss
 attributable to
 noncontrolling interest 83,616
Comprehensive income
 attributable to
 Presidential Realty ------------
 Corporation $5,192,345
 ============

 -------- ---------- ----------- ------------ ------------ --------- ------------
Balance at June 30, 2009 $400,649 $4,613,949 $9,098,575 ($3,625,202) ($3,129,388) ($83,616) $7,274,967
 ======== ========== =========== ============ ============ ========= ============


See notes to consolidated financial statements.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


 SIX MONTHS ENDED JUNE 30,
 ----------------------------------------------

 2009 2008
 ----------------- ----------------
 Cash Flows from Operating Activities:
 Cash received from rental properties $2,850,839 $3,123,958
 Interest received 204,349 511,628
 Distributions received from joint ventures - 1,280,057
 Miscellaneous income 10,930 892
 Interest paid on rental property mortgage debt (645,562) (689,975)
 Cash disbursed for rental property operations (1,832,179) (1,937,443)
 Cash disbursed for general and administrative costs (1,644,512) (1,820,593)
 ----------------- ----------------

 Net cash (used in) provided by operating activities (1,056,135) 468,524
 ----------------- ----------------

 Cash Flows from Investing Activities:
 Payments received on notes receivable 96,306 2,798,273
 Proceeds from sales of properties 1,545,851 -
 Payments received on settlement of joint venture loans 65,289 -
 Payments disbursed for additions and improvements (293,576) (243,610)
 Purchase of securities available for sale (4,431,622) -
 ----------------- ----------------

 Net cash (used in) provided by investing activities (3,017,752) 2,554,663
 ----------------- ----------------

 Cash Flows from Financing Activities:
 Principal payments on mortgage debt (210,428) (218,512)
 Payments disbursed for mortgage costs (1,500) -
 Purchase of treasury stock - (1,398,972)
 Cash distributions on common stock - (1,230,889)
 ----------------- ----------------

 Net cash used in financing activities (211,928) (2,848,373)
 ----------------- ----------------


 Net (Decrease) Increase in Cash and Cash Equivalents (4,285,815) 174,814

 Cash and Cash Equivalents, Beginning of Period 5,984,550 2,343,497
 ----------------- ----------------

 Cash and Cash Equivalents, End of Period $1,698,735 $2,518,311
 ================= ================


 See notes to consolidated financial statements.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


 SIX MONTHS ENDED JUNE 30,
 ----------------------------------------------

 2009 2008
 ----------------- -----------------
Reconciliation of Net Income (Loss) to Net Cash
 (Used in) Provided by Operating Activities

Net Income (Loss) $5,144,054 ($1,546,061)
 ----------------- -----------------

Adjustments to reconcile net income (loss) to net
 cash (used in) provided by operating activities:
 Net gain from sales of discontinued operations (3,208,336) -
 Gain on settlement of joint venture loans (3,979,289) -
 Equity in the loss from joint ventures 585,878 456,400
 Depreciation and amortization 306,458 372,306
 Amortization of discount on mortgage payable - 48,254
 Net change in revenue related to acquired lease rights/obligations
 and deferred rent receivable (20,226) (38,626)
 Amortization of discounts on notes and fees (35,983) (143,681)
 Issuance of stock to directors and officers 25,096 50,160
 Distributions received from joint ventures - 1,280,057

 Changes in assets and liabilities:
 Decrease (increase) in other receivables 40,470 (71,395)
 Increase in accounts payable and accrued liabilities 230,730 13,387
 Increase (decrease) in other liabilities (185,133) 14,081
 Decrease in prepaid expenses, deposits in escrow
 and deferred charges 50,901 34,890
 Other (10,755) (1,248)
 ----------------- -----------------

Total adjustments (6,200,189) 2,014,585
 ----------------- -----------------

Net cash (used in) provided by operating activities ($1,056,135) $468,524
 ================= =================



SUPPLEMENTAL NONCASH DISCLOSURES:

 Fair value of assets received in settlement of notes
 receivable due from joint ventures:
 50% partnership interest in IATG Puerto Rico, LLC $3,250,000
 Note receivable 664,000
 -----------------
 $3,914,000
 =================

 Satisfaction of mortgage debt as a result of assumption of the
 mortgage debt by purchaser $2,053,964
 =================



See notes to consolidated financial statements.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)

Presidential Realty Corporation ("Presidential" or the "Company"), is operated as a self-administrated, self-managed Real Estate Investment Trust ("REIT"). The Company is engaged principally in the ownership of income producing real estate and in the holding of notes and mortgages secured by real estate or interests in real estate. Presidential operates in a single business segment, investments in real estate related assets.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Principles of Consolidation - The consolidated financial statements include the accounts of Presidential Realty Corporation and its wholly owned subsidiaries. Additionally, the consolidated financial statements include 100% of the account balances of PDL, Inc. and Associates Limited Co-Partnership (the "Hato Rey Partnership"). PDL, Inc. (a wholly owned subsidiary of Presidential and the general partner of the Hato Rey Partnership) and Presidential own an aggregate 60% general and limited partnership interest in the Hato Rey Partnership (see Note 7). All significant intercompany balances and transactions have been eliminated.

B. Net Income (Loss) Per Share - Basic net income (loss) per share data is computed by dividing net income (loss) by the weighted average number of shares of Class A and Class B common stock outstanding (excluding nonvested shares) during each period. Diluted net income per share is computed by dividing net income by the weighted average shares outstanding, including the dilutive effect, if any, of nonvested shares. See Note 10.

C. Basis of Presentation - The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. The results for such interim periods are not necessarily indicative of the results to be expected for the year. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the results for the respective periods have been reflected. These consolidated financial statements and accompanying notes should be read in conjunction with the Company's Form 10-K for the year ended December 31, 2008.

D. Management Estimates - In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated balance sheets and the reported amounts of income and expense for the reporting period. Actual results could differ from those estimates.

E. Securities Available for Sale - The Company's investments are in marketable equity and debt securities consisting of notes and bonds of agencies of the federal government and common stock of other REITS. Disposition of such securities may be appropriate for either liquidity management or in response to changing economic conditions, so they are classified as securities available for sale.

Securities available for sale are reported at fair value in accordance with Statement of Financial Accounting Standards ("SFAS") No. 157 "Fair Value Measurements". The valuation of securities available for sale was determined to be Level 1 financial assets within the valuation hierarchy established by SFAS No. 157, and is based on current market quotes received from financial sources that trade such securities. Unrealized gains and losses are reported as other comprehensive income in the consolidated statement of stockholders' equity until realized. The Company evaluates these investments for other-than-temporary declines in value, and, if such declines were other than temporary, the Company would record a loss on the investments. Gains and losses on sales of securities are determined using the specific identification method.

F. Discontinued Operations - The Company complies with the provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". This statement requires that the results of operations, including impairment, gains and losses related to the properties that have been sold or properties that are intended to be sold, be presented as discontinued operations in the statements of operations for all periods presented and the assets and liabilities of properties intended to be sold are to be separately classified on the balance sheet. Properties designated as held for sale are carried at the lower of cost or fair value less costs to sell and are not depreciated.

G. Equity Method - The Company accounts for its investments in joint ventures using the equity method of accounting.

H. Accounting for Uncertainty in Income Taxes - On January 1, 2007, the Company adopted the Financial Accounting Standards Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109" ("FIN 48"). If the Company's tax positions in relation to certain transactions were examined and were not ultimately upheld, the Company would be required to pay an income tax assessment and related interest. Alternatively, the Company could elect to pay a deficiency dividend in order to continue to qualify as a REIT and the related interest assessment to the taxing authorities.

I. Recent Accounting Pronouncements - In December, 2007, the FASB issued No. 141, (revised 2007) "Business Combinations" ("SFAS No. 141R"). SFAS No. 141R replaces SFAS No. 141, which the Company previously adopted. SFAS No. 141R revises the standards for accounting and reporting of business combinations. In summary, SFAS No. 141R requires the acquirer of a business combination to measure, at fair value, the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, with limited exceptions. SFAS No. 141R applies to all business combinations for which the acquisition date is on or after January 1, 2009. The adoption of this statement on January 1, 2009 did not have any effect on the Company's consolidated financial statements.

In December, 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements", which requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and noncontrolling interest. SFAS No. 160 became effective on January 1, 2009. The adoption of this statement resulted in additional disclosures in the Company's consolidated financial statements, including the reporting of a net loss attributable to a noncontrolling interest of $83,616 for the six months ended June 30, 2009.

In March, 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities". SFAS No. 161 changes the reporting requirements for derivative instruments and hedging activities under SFAS No. 133, "Accounting for Derivatives and Hedging Activities", by requiring enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments are accounted for under SFAS No. 133 and (c) the effect of derivative instruments and hedging activities on an entity's financial position, financial performance and cash flows. SFAS No. 161 became effective on January 1, 2009. The adoption of this statement on January 1, 2009 did not have any effect on the Company's consolidated financial statements.

In April, 2008, the FASB issued FASB Staff Position ("FSP") No. FAS 142-3, "Determination of the Useful Life of Intangible Assets". FSP No. FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, "Goodwill and Other Intangible Assets". The objective of FSP No. FAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R and GAAP. FSP FAS No. 142-3 became effective on January 1, 2009. The adoption of FSP FAS No. 142-3 on January 1, 2009 did not have a material effect on the Company's consolidated financial statements.

In June, 2008, the FASB issued FSP No. EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities". FSP No. EITF 03-6-1 affects entities which accrue non-returnable cash dividends on share-based payment awards during the awards' service period. The FASB concluded unvested share-based payment awards which are entitled to cash dividends, whether paid or unpaid, are participating securities any time the common shareholders receive dividends. Because the awards are considered participating securities, the issuing entity is required to apply the two-class method of computing basic and diluted earnings per share. FSP No. EITF 03-6-1 became effective on January 1, 2009. The adoption of FSP No. EITF 03-6-1 on January 1, 2009 did not have a material effect on the Company's consolidated financial statements.

In May, 2009, the FASB issued SFAS No. 165, "Subsequent Events". Although SFAS No. 165 does not significantly change current practice surrounding the disclosure of subsequent events, it provides guidance on management's assessment of subsequent events and the requirement to disclose the date through which subsequent events have been evaluated. SFAS No. 165 became effective on June 30, 2009. The Company has evaluated subsequent events through August 13, 2009, the date the consolidated financial statements were issued, for this Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.

In June, 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No. 46(R)". SFAS No. 167 modified the existing quantitative guidance used in determining the primary beneficiary of a variable interest entity ("VIE") by requiring entities to qualitatively assess whether an enterprise is a primary beneficiary, based on whether the entity has (i) power over the significant activities of the VIE, and (ii) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. SFAS No. 167 becomes effective for all new and existing VIEs on January 1, 2010. The adoption of SFAS No. 167 is expected to have no impact on the Company's consolidated financial statements.

In June, 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles - A Replacement of FASB Statement No. 162". SFAS No. 168 establishes the FASB Accounting Standards Codification (the "Codification") as the primary source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC are also sources of authoritative GAAP for SEC registrants. SFAS No. 168 and the Codification become effective on September 15, 2009. When effective, the Codification will supersede all existing non-SEC accounting and reporting standards and the FASB will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts. Instead, the FASB will issue Accounting Standards Updates, which will serve only to: (a) update the Codification; (b) provide background information about the guidance; and (c) provide the basis for conclusions on the change(s) in the Codification. The adoption of SFAS No. 168 and the Codification on September 15, 2009 will not have a material effect on the Company's consolidated financial statements.

2. REAL ESTATE

Real estate is comprised of the following:

 June 30, December 31,
 2009 2008
 ----------- ------------

Land $ 2,057,310 $ 2,059,856
Buildings 15,745,451 15,546,526
Furniture and equipment 80,589 80,589
 ----------- -----------
Total real estate $17,883,350 $17,686,971
 =========== ===========

3. MORTGAGE PORTFOLIO

The components of the net mortgage portfolio are as follows:

 June 30, December 31,
 2009 2008
 ----------- ------------

Notes receivable $2,944,064 $2,290,370
Less: Discounts 91,184 41,167
 ---------- ----------
Net mortgage portfolio $2,852,880 $2,249,203
 ========== ==========

At June 30, 2009, all of the notes in the Company's mortgage portfolio are current in accordance with their terms, as modified.

On March 31, 2009, the Company received repayment of its $75,000 loan receivable related to the sale of Cambridge Green in 2007.

On February 27, 2009, the Company completed a Settlement Agreement with The Lightstone Group ("Lightstone") and David Lichtenstein regarding various claims the Company had asserted against them. Under the terms of the Settlement Agreement, an affiliate of Lightstone, which is the debtor on an existing loan from the Company in the outstanding principal amount of $2,074,994, assumed $10,000,006 of indebtedness under the $9,500,000 mezzanine loan and the $8,600,000 mezzanine loan due from Lightstone. The total indebtedness was consolidated into a nonrecourse loan in the outstanding principal amount of $12,075,000 (the "Consolidated Note"). The Consolidated Note is secured by the ownership interests in entities owning nine apartment properties (1,056 apartment units) located in Virginia (which had previously secured the $2,074,994 indebtedness) and the ownership interests in entities owning nine additional apartment properties (931 apartment units) located in Virginia and North Carolina.

The carrying value of the $12,075,000 Consolidated Note on the Company's consolidated balance sheet is $2,074,994. This is the same carrying value of the $2,074,994 note that was on the Company's consolidated balance sheet prior to the consolidation of that note with the additional $10,000,006 indebtedness assumed by the affiliate of Lightstone pursuant to the Settlement Agreement. The $10,000,006 additional portion of the Consolidated Note was received in partial settlement of the $9,500,000 and $8,600,000 mezzanine loans held by the Company, which had a net carrying value of $0 on the Company's consolidated balance sheet at December 31, 2008. Accordingly, in 2009, there was no adjustment on the Company's consolidated balance sheet and no gain or loss was recorded on the Company's consolidated financial statements as a result of the receipt of the Consolidated Note.

The Consolidated Note accrues interest at the rate of 13% per annum and is due on February 1, 2012. All net cash flow from the eighteen apartment properties will be utilized to pay the interest accrued on the Consolidated Note and to the extent that there is not sufficient cash flow to pay all accrued interest, the unpaid interest will be deferred until the maturity of the Consolidated Note. The Company does not believe that there will be sufficient cash flow from the security for the Consolidated Note to pay all of the interest that is due on the note, the deferred interest that will be due at maturity and the $12,075,000 principal amount due at maturity.

However, the Company believes that the monthly interest due on the $2,074,994 portion of the note will be paid in accordance with the terms of the note and, as a result, the Company will accrue the interest on this portion of the note. For the six months ended June 30, 2009, the Company received the interest due on the $2,074,994 portion of the Note.

The interest due on the $10,000,006 portion of the note will be recorded in income on a cash basis as interest is received and the balance of the interest due on the $10,000,006 will be deferred and due at maturity of the note. For the six months ended June 30, 2009, the Company received $75,020 of interest payments and the unaccrued deferred interest was $372,758.

Under the terms of the Settlement Agreement, the Company also received a $750,000 non-interest bearing, nonrecourse note due on January 31, 2010, which is secured by a 25% ownership interest in IATG Puerto Rico, LLC ("IATG") (see Note 4). The Company's preliminary estimate of the fair value of the $750,000 note was based on the Company's preliminary estimate of the fair value of the underlying security.

In March, 2009, the Company had estimated the fair value of the $750,000 note to be $200,000 and the Company recorded the $200,000 note receivable on its consolidated balance sheet and recognized a gain on settlement of joint venture loans of $200,000 in its consolidated financial statements at March 31, 2009. Subsequently, the Company received an independent appraisal of the IATG property (see Note 4) and based upon that appraisal, the Company estimates the fair value of the $750,000 note to be $664,000 ($750,000 note receivable less a discount on the note receivable of $86,000). Accordingly, in June, 2009, the Company recorded an additional $464,000 for the note receivable on its consolidated balance sheet and recognized an additional gain of $464,000 on settlement of joint venture loans in its consolidated financial statements. In addition, for the period ended June 30, 2009, the Company recognized in interest income $30,104 of the amortization of discount recorded on the note receivable.

4. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES

At December 31, 2008, the Company had investments in and advances to four joint ventures which owned and operated nine shopping malls located in seven states. These investments in and advances to joint ventures were made to entities controlled by David Lichtenstein and Lightstone as follows:

Owning Entity Properties Owned
------------- ----------------

PRC Member LLC Martinsburg Mall
 Martinsburg, WV

Lightstone I Four Malls
 ----------
 Bradley Square Mall, Cleveland, TN
 Mount Berry Square Mall, Rome, GA
 Shenango Valley Mall, Hermitage, PA
 West Manchester Mall, York, PA

Lightstone II Shawnee/Brazos Malls
 --------------------
 Brazos Mall, Lake Jackson, TX
 Shawnee Mall, Shawnee, OK

Lightstone III Macon/Burlington Malls
 ----------------------
 Burlington Mall, Burlington, NC
 Macon Mall, Macon, GA

As a result of the February 27, 2009 Settlement Agreement, the Company assigned its interests in PRC Member LLC, Lightstone I and Lightstone III, which the Company believed had no value, to Lightstone and received, among other assets, a 50% interest in IATG described below. The Company now has investments in and advances to joint ventures in two entities that are controlled by David Lichtenstein and Lightstone. The Company accounts for these investments using the equity method.

The first investment is the Company's mezzanine loan in the amount of $7,835,000 to Lightstone II which is secured by ownership interests in the Shawnee Mall and the Brazos Mall properties ("Shawnee/Brazos Malls"). In connection with this loan, the Company received a 29% ownership interest in Lightstone II.

The loan was in good standing at December 31, 2008. However, the borrower failed to make the interest payments due on January 1, 2009 and in subsequent months and the Company's loan receivable is now in default. The first mortgage loan secured by the properties was due to mature in January of 2009 but was extended for one year until January of 2010. In connection with the extension, the holder of the first mortgage exercised its right (exercisable because the cash flow from the properties did not satisfy a required debt service coverage ratio) to retain all cash flow from the properties (after payment of all operating expenses but before payment of interest on the Company's mezzanine loan) as additional security for the repayment of the first mortgage loan. Lightstone II is attempting to sell the properties (which sale requires the consent of Presidential), but a sale will be difficult to accomplish under current market conditions and with only short term financing on the properties.

As part of the Settlement Agreement, the Company received a personal guaranty from Mr. Lichtenstein that the Company will receive all accrued interest on the Company's $7,835,000 mezzanine loan (relating to the Shawnee/Brazos Malls) through the date of repayment and $500,000 of the principal amount of the loan, which personal guaranty is limited to $500,000. As part of the settlement, the Company agreed to modify its right to receive repayment in full of the $7,835,000 loan before Mr. Lichtenstein receives any return on his capital contributions to the borrowing entity to the following extent: the Company will receive the first net proceeds of any sale or refinancing of the Shawnee/Brazos Malls in an amount equal to all accrued and unpaid interest and $2,000,000 of principal; Mr. Lichtenstein will receive the next $1,000,000 of any such net sale or refinancing proceeds; the Company will receive the next $1,000,000 of any such net proceeds and any additional net proceeds shall be paid 50% to the Company and 50% to Mr. Lichtenstein. Mr. Lichtenstein's guaranty is secured by his remaining interest in IATG, the entity that owns The Las Piedras Industrial Complex (see below).

The Company has agreed with Lightstone that it will not foreclose on its $7,835,000 mezzanine loan so long as the first mortgage on the Shawnee/Brazos Malls is not accelerated or due at maturity and the holder of the first mortgage is retaining funds from operations of the properties in an amount sufficient to pay the interest due on the mezzanine loan.

As part of the Settlement Agreement, the Company received a 50% ownership interest in IATG, the Lightstone affiliate that owns The Las Piedras Industrial Complex, an industrial property located in Las Piedras, Puerto Rico and consisting of approximately 68 acres of land and 380,800 square feet of rentable space contained in several buildings in the complex. The property is substantially vacant and the owners may attempt to sell the property. Lightstone has agreed to advance funds to pay any negative cash flow from the operations of the property until a sale can be accomplished and has agreed that if it does not do so, it will transfer its remaining 49% interest in the property to Presidential.

The Company's preliminary estimate of the fair value of its 50% ownership interest in IATG was $1,500,000 and in March, 2009, the Company recorded a $1,500,000 investment in joint ventures on its consolidated balance sheet and recognized a gain on settlement of joint venture loans of $1,500,000 in its consolidated financial statements.

The Company based the preliminary estimated fair value of its interest in the IATG property on information available to it at the time. During the quarter ended June 30, 2009, the Company obtained an independent appraisal of the property owned by IATG and based on the appraised value of $6,500,000, the Company has adjusted the preliminary estimate of the value of its 50% ownership interest in the IATG property from $1,500,000 to $3,250,000 on its consolidated financial statements. In the quarter ended June 30, 2009, the Company recorded an additional $1,750,000 investment in joint ventures on its consolidated balance sheet and recognized an additional $1,750,000 gain on the settlement of joint venture loans in its consolidated financial statements. While management believes that the $6,500,000 appraised value of the IATG property is a reasonable value, there can be no assurance that if and when the property is sold, it can be sold for its appraised value.

In summary, as a result of the Settlement Agreement, in 2009, the Company recorded assets of $3,914,000 on the Company's consolidated balance sheet (a $750,000 note receivable less an $86,000 discount on the note receivable and a $3,250,000 investment in joint ventures) and recorded a $3,914,000 gain on settlement of joint venture loans in its consolidated financial statements. The Company also received a net cash payment of $65,289 ($250,000 less expenses of $184,711), which was also recorded in gain on settlement of joint venture loans in its consolidated financial statements.

Activity in investments in and advances to joint ventures for the period ended June 30, 2009 is as follows:

 Equity
 in the
 Loss
 Balance at from Balance at
 December 31, Joint June 30,
 2008 Investments Ventures 2009
 ------------ ------------- --------- -----------

Shawnee/Brazos
 Malls (1) $1,511,887 $ - $(358,036) $1,153,851
IATG (2) - 3,250,000 (227,842) 3,022,158
 ----------- ---------- ---------- ----------
 $1,511,887 $3,250,000 $(585,878) $4,176,009
 ========== ========== ========= ==========

Equity in the income (loss) from joint ventures is as follows:

 Three Months Ended Six Months Ended
 June 30, June 30,
 2009 2008 2009 2008
 -------- --------- -------- ------

Shawnee/Brazos Malls (1) $(210,200) $(222,197) $(358,036) $(537,794)
IATG (2) (162,306) - (227,842) -
Martinsburg Mall (3) - 79,992 - 120,427
Four Malls (4) - 46,601 - (129,019)
Macon/Burlington Malls (5) - - - 89,986
 --------- --------- --------- ---------
 $(372,506) $ (95,604) $(585,878) $(456,400)
 ========= ========= ========= =========

(1) Interest income earned by the Company at the rate of 11% per annum on the outstanding $7,835,000 loan from the Company to Lightstone II is included in the calculation of the Company's share of the loss from joint ventures for the Shawnee/Brazos Malls.

(2) The fair value of the Company's 50% ownership interest in IATG is $3,250,000. The Company also recorded its 50% share of the loss from IATG for the four month period ended June 30, 2009.

(3) In 2007, the Company's basis of its investment in the Martinsburg Mall was reduced by distributions and losses to zero. Any subsequent distributions received from the Martinsburg Mall were recorded in income.

(4) Interest income earned by the Company at the rate of 11% per annum on the outstanding $8,600,000 loan from the Company to Lightstone I was included in the calculation of the Company's share of the income (loss) from joint ventures for the Four Malls. In the second quarter of 2008, the Company's basis of its investment in the Four Malls was reduced by distributions and losses to zero and, accordingly, the Company only recorded its share of the loss to the extent of its basis. Any subsequent distributions received from the Four Malls were recorded in income.

(5) In 2007, the Company's basis of its investment in the Macon/Burlington Malls was reduced by distributions and losses to zero. Any subsequent distributions received from the Macon/Burlington Malls were recorded in income.

The summary financial information for the Shawnee/Brazos Malls is as follows:

 June 30, December 31,
 2009 2008
 ------------- ------------
 (Amounts in thousands)
Condensed Balance Sheets
 Net real estate $60,826 $61,751
 In-place lease values and
 acquired lease rights 752 916
 Prepaid expenses and
 deposits in escrow 2,971 1,706
 Cash and cash equivalents 1,256 440
 Deferred financing costs 686 622
 Other assets 1,130 1,308
 ------- -------

 Total Assets $67,621 $66,743
 ======= =======

 Nonrecourse mortgage debt $39,061 $39,061
 Mezzanine notes payable 37,648 35,899
 Other liabilities 8,848 7,415
 ------- -------

 Total Liabilities 85,557 82,375
 Members' Deficit (17,936) (15,632)
 ------- -------
 Total Liabilities and
 Members' Deficit $67,621 $66,743
 ======= =======

 Three Months Ended Six Months Ended
 June 30, June 30,
 2009 2008 2009 2008
 -------- --------- -------- ------
 (Amounts in thousands)
Condensed Statements
 of Operations
 Revenues $ 2,472 $ 2,378 $ 5,034 $ 4,632
 Interest on
 mortgage debt
 and other debt (1,535) (1,457) (3,034) (2,964)
 Other expenses (1,447) (1,434) (2,796) (3,030)
 -------- -------- ------- --------
 Loss before
 depreciation
 and amortization (510) (513) (796) (1,362)

 Depreciation
 and amortization (748) (786) (1,499) (1,559)
 -------- -------- ------- --------

 Net Loss $(1,258) $ (1,299) $(2,295) $ (2,921)
 ======== ======== ======= ========

The summary financial information for IATG is as follows:

 June 30,
 2009
 ----------------------
 (Amounts in thousands)
Condensed Balance Sheets
 Net real estate $5,595
 Cash and cash equivalents 1
 Accounts receivable 53
 Deferred expenses 209
 ------

 Total Assets $5,858
 ======

 Note payable (1) $7,247
 Other liabilities 2,192
 ------

 Total Liabilities 9,439
 Members' Deficit (3,581)
 ------
 Total Liabilities and
 Members' Deficit $5,858
 ======

(1) The note payable is payable to an affiliate of Lightstone and payment thereof is subordinate to the Company's right to receive its share of any proceeds of a sale or refinancing.

 Three Months Ended Four Months Ended
 June 30, June 30,
 2009 2009
 ------------------ -----------------
 (Amounts in thousands)
Condensed Statements
 of Operations
 Revenues $ 245 $ 307
 Interest on note payable (214) (283)
 Other expenses (303) (409)
 ----- ------
 Loss before depreciation
 and amortization (272) (385)
 Depreciation and amortization (53) (71)
 ----- ------

 Net Loss $(325) $(456)
 ===== ======

The Lightstone Group is controlled by David Lichtenstein. At June 30, 2009, in addition to Presidential's investments of $4,176,009 in these joint ventures with entities controlled by Mr. Lichtenstein, Presidential has two loans that are due from entities that are controlled by Mr. Lichtenstein in the aggregate outstanding principal amount of $12,825,000 with a net carrying value of $2,769,098.

The $6,945,107 net carrying value of investments in and advances to joint ventures with entities controlled by Mr. Lichtenstein and loans outstanding to entities controlled by Mr. Lichtenstein constitute approximately 23% of the Company's total assets at June 30, 2009.

5. DISCONTINUED OPERATIONS

For the periods ended June 30, 2009 and 2008, income from discontinued operations includes the Crown Court property in New Haven, Connecticut (which consists of 105 apartment units and 2,000 square feet of commercial space) and two cooperative apartment units in Riverdale, New York. The Crown Court property was designated as held for sale during the three months ended September 30, 2008 and sold on April 1, 2009. One cooperative apartment unit in Riverdale, New York was designated as held for sale during the three months ended March 31, 2009 and is now subject to a contract for sale. Another cooperative apartment unit in Riverdale, New York was designated as held for sale during the three months ended June 30, 2009. In addition, income from discontinued operations for the periods ended June 30, 2008, included 42 cooperative apartment units at the Towne House Apartments in New Rochelle, New York and one cooperative apartment unit in New Haven, Connecticut, which were sold during the three months ended September 30, 2008.

The following table summarizes income (loss) for the properties sold or held for sale:

 Three Months Ended Six Months Ended
 June 30, June 30,
 2009 2008 2009 2008
 ---- ---- ---- ----
Revenues:
 Rental $ 1,413 $274,741 $ 135,511 $547,150
 ----------- -------- ---------- --------

Rental property expenses:
 Operating expenses 5,625 110,803 11,504 226,398
 Interest on mortgage debt - 37,373 36,091 75,160
 Real estate taxes - 44,361 49,349 88,721
 Depreciation 66 14,720 219 31,385
 ----------- -------- ---------- --------
Total 5,691 207,257 97,163 421,664
 ----------- -------- ---------- --------

Other income:
 Investment income 2 93 3 192
 ---------- ------- ---------- --------

Income (loss) from
 discontinued operations (4,276) 67,577 38,351 125,678


Net gain from
 sales of discontinued
 operations 3,208,336 - 3,208,336 -
 ---------- -------- ---------- --------
Total income from
 discontinued operations $3,204,060 $ 67,577 $3,246,687 $125,678
 ========== ======== ========== ========

The Crown Court property in New Haven, Connecticut was owned subject to a long-term net lease with an option to purchase the property in April, 2009 for a purchase price of $1,635,000 over the outstanding principal mortgage balance at the date of the exercise of the option. On April 1, 2009, the Company completed the sale of the Crown Court property. The net proceeds of sale were $1,545,851 and the gain from sale for financial reporting purposes was $3,208,336.

The Company owns a small portfolio of cooperative apartments located in New York and Connecticut. These apartments are held for the production of rental income and generally are not marketed for sale. However, from time to time, the Company will receive purchase offers for some of these apartments or decide to market specific apartments and will make sales if the purchase price is acceptable to management.

During the three months ended March 31, 2009, the Company designated a cooperative apartment unit in Riverdale, New York as held for sale and, in July, 2009, entered into a contract for its sale for a sales price of $154,000. The sale is expected to close in the fourth quarter of 2009. The carrying value of the unit at June 30, 2009 was $24,594, net of accumulated depreciation of $3,831. The gain from sale for financial reporting purposes is estimated to be approximately $116,800 and the estimated net proceeds of sale will be approximately $141,400. During the three months ended June 30, 2009, the Company designated another cooperative apartment unit in Riverdale, New York as held for sale. The Company expects to sell the unit within one year for net proceeds in excess of its carrying value. The carrying value of the unit at June 30, 2009 was $6,225, net of accumulated depreciation of $3,262.

In September, 2008, the Company sold a package of 42 cooperative apartment units at Towne House located in New Rochelle, New York for a sales price of $3,450,000. The net proceeds of sale were $3,343,187 and the gain from sale for financial reporting purposes was $2,806,499.

In July, 2008, the Company sold one cooperative apartment unit located in New Haven, Connecticut for a sales price of $122,000. The net proceeds of sale were $113,990 and the gain from the sale for financial reporting purposes was $85,759.

The assets and liabilities of the cooperative apartment units in Riverdale, New York at June 30, 2009 and the assets and liabilities of the Crown Court property at December 31, 2008 are segregated in the consolidated balance sheets. The components are as follows:

 June 30, December 31,
 2009 2008
 ---- ----

Assets related to discontinued operations:
 Land $ 2,546 $ 168,000
 Buildings 35,366 3,090,544
 Furniture and equipment - 45,382
 Less: accumulated depreciation (7,093) (2,912,447)
 ------- -----------
Total $30,819 $ 391,479
 ======= ===========

Liabilities related to discontinued operations:
 Mortgage debt $ - $ 2,078,971
 ======= ===========

6. SECURITIES AVAILABLE FOR SALE

The tables below summarize the Company's securities available for sale:

 Gross Gross
 Amortized Unrealized Unrealized Fair
 Cost Gains Losses Value
 --------- ---------- ---------- -----

June 30, 2009
-------------
U.S. Government Agencies
 notes and bonds
 maturing within
 one year $1,119,213 $ - $ (4,713) $1,114,500
U.S. Government Agencies
 notes and bonds
 maturing from
 one to four years 3,312,409 4,046 (20,661) 3,295,794
Common stock of REITS 2,011 5,969 - 7,980
 ---------- ------- -------- ----------
 $4,433,633 $10,015 $(25,374) $4,418,274
 ========== ======= ======== ==========

December 31, 2008
-----------------
Common stock of REITS $ 2,011 $ 7,637 $ - $ 9,648
 ========== ======= ======== ==========

7. HATO REY PARTNERSHIP

PDL, Inc. (a wholly owned subsidiary of Presidential) is the general partner of the Hato Rey Partnership. Presidential and PDL, Inc. have an aggregate 60% general and limited partner interest in the Hato Rey Partnership. The Company exercises effective control over the partnership through its ability to manage the affairs of the partnership in the ordinary course of business. Accordingly, the Company consolidates the Hato Rey Partnership in the accompanying consolidated financial statements.

The Hato Rey Partnership owns and operates the Hato Rey Center, an office building with 209,000 square feet of commercial space, located in Hato Rey, Puerto Rico. The Company agreed to lend up to $2,500,000 to the Hato Rey Partnership to pay for the cost of improvements to the building and fund any negative cash flows from the operation of the property. The loan, which is advanced from time to time as funds are needed, bore interest at the rate of 11% per annum until May 11, 2008 and 13% thereafter, with interest and principal to be paid out of the first positive cash flow from the property or upon a refinancing of the first mortgage on the property. At June 30, 2009, the Company had advanced $2,500,000 of the loan to the Hato Rey Partnership. The $2,500,000 loan and accrued interest in the amount of $656,422 have been eliminated in consolidation.

On January 1, 2009, the Company adopted SFAS No. 160 which requires amounts attributable to noncontrolling interests to be reported separately. For the six months ended June 30, 2009, the Hato Rey Partnership had a loss of $209,040. The consolidated financial statements reflect the separate disclosure of the noncontrolling interest's share (40%) of the loss of $83,616. Prior to the adoption of SFAS No. 160, the partners constituting the noncontrolling interest in the Hato Rey Partnership had no basis in their investment and, as a result, the Company was required to record in its consolidated financial statements any losses attributable to the noncontrolling interest and the Company would have recorded any future earnings of the noncontrolling interest up to the amount of the losses previously recorded by the Company attributable to the noncontrolling interest. Under SFAS No. 160, this rule is no longer applicable. For the years ended December 31, 2008 and 2007, the Hato Rey Partnership had losses of $481,352 and $521,102, respectively, of which $192,541 and $208,441, respectively, represented the noncontrolling interest share absorbed by the Company.

8. INCOME TAXES

Presidential has elected to qualify as a Real Estate Investment Trust under the Internal Revenue Code. A REIT which distributes at least 90% of its real estate investment trust taxable income to its shareholders each year by the end of the following year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders.

The Company adopted FIN 48 on January 1, 2007. If the Company's tax positions in relation to certain transactions were examined and were not ultimately upheld, the Company would be required to pay an income tax assessment and related interest. Alternatively, the Company could elect to pay a deficiency dividend to its shareholders in order to continue to qualify as a REIT and the related interest assessment to the taxing authorities.

Upon adoption of FIN 48 the Company recorded a reduction to the January 1, 2007 balance of retained earnings of $460,800 for accrued interest for prior years related to the tax positions for which the Company may have been required to pay a deficiency dividend. In addition, the Company recorded interest expense of $356,780 for the year ended December 31, 2007 and $147,526 for the six months ended June 30, 2008 for the interest related to these matters. The Company recognized this interest expense in general and administrative expenses in its consolidated statements of operations. As of June 30, 2008, the Company had accrued $965,106 of interest related to these matters, which was included in accrued liabilities in its consolidated balance sheet. During the three months ended September 30, 2008, the statute of limitations with respect to the tax year related to the FIN 48 interest accrual expired and the Company reversed the $965,106 interest accrual. As of June 30, 2009, the tax years that remain open to examination by the federal, state and local taxing authorities are the 2005 - 2007 tax years and the Company was not required to accrue any liability for those years pursuant to FIN 48.

For the year ended December 31, 2008, the Company had taxable income (before distributions to shareholders) of approximately $2,293,000 ($0.68 per share), which is comprised of capital gains of $5,186,000 ($1.53 per share) and an ordinary loss of $2,893,000 ($0.85 per share). The Company intends to apply approximately $230,000 of its 2006 net operating loss carryforward and all of its available 2008 distributions to its 2008 taxable income to reduce its 2008 taxable income to zero. Therefore, no provision for Federal income taxes was made at December 31, 2008.

As previously stated, in order to maintain REIT status, Presidential is required to distribute 90% of its REIT taxable income (exclusive of capital gains). As a result of the ordinary tax loss of $.85 per share for 2008, the Company will not be required to make a distribution in 2009 for the 2008 year in order to maintain its qualification as a REIT.

For the six months ended June 30, 2009, the Company had a tax loss of approximately $378,000 ($0.11 per share), which is comprised of an ordinary loss of approximately $3,488,000 ($1.03 per share) and capital gains of approximately $3,110,000 ($0.92 per share).

9. ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss are as follows:

 June 30, December 31,
 2009 2008
 ----------- -----------
Defined benefit plan
 liability adjustment $(3,572,373) $(3,572,373)
Contractual postretirement
 benefits liability adjustment 161,903 174,232
Minimum contractual pension
 benefit liability adjustment (199,373) (199,373)
Net unrealized gain (loss) on
 securities available
 for sale (15,359) 7,637
 ----------- -----------
Total accumulated other
 comprehensive loss $(3,625,202) $(3,589,877)
 =========== ===========

The Company's other comprehensive income (loss) consists of the changes in the net unrealized gain (loss) on securities available for sale and the adjustments to the pension liabilities and the postretirement benefits liability, if any. Thus, comprehensive income (loss), which consists of net income (loss) plus or minus other comprehensive income, is as follows:

 Three Months Ended Six Months Ended
 June 30, June 30,
 2009 2008 2009 2008
 ----------- ----------- ----------- -----------

Net income (loss) $4,392,694 $(627,403) $5,144,054 $(1,546,061)

Other comprehensive
 income (loss)-
 Net unrealized
 loss on securities
 available for sale (20,479) (1,408) (22,996) (2,010)
 Adjustment for
 contractual
 postretirement
 benefits (6,165) 29,529 (12,329) 59,058
 ---------- --------- ----------- -----------
Comprehensive
 income (loss) 4,366,050 (599,282) 5,108,729 (1,489,013)

Comprehensive loss
 attributable to
 noncontrolling
 interest 45,513 - 83,616 -
 ---------- --------- ----------- -----------
Comprehensive
 income (loss)
 attributable to
 Presidential
 Realty Corporation $4,411,563 $(599,282) $5,192,345 $(1,489,013)
 ========== ========= =========== ===========

10. EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted income
(loss) per share attributable to Presidential Realty Corporation:






 Three Months Ended Six Months Ended
 June 30, June 30,
 2009 2008 2009 2008
 ---- ---- ---- ----
Income (loss) from
 continuing operations $1,188,634 $ (694,980) $1,897,367 $(1,671,739)
 ---------- ----------- ---------- -----------
Discontinued Operations:
 Income (loss) from
 discontinued operations (4,276) 67,577 38,351 125,678
 Net gain from sales of
 discontinued operations 3,208,336 - 3,208,336 -
 --------- ---------- --------- ----------
Total income from
 discontinued operations 3,204,060 67,577 3,246,687 125,678
 ---------- ----------- ---------- -----------
Net income (loss) 4,392,694 (627,403) 5,144,054 (1,546,061)


 Add: Net loss from
 noncontrolling interest 45,513 - 83,616 -
 ---------- ----------- ---------- -----------

Net Income (Loss)
 attributable to
 Presidential Realty
 Corporation $4,438,207 $ (627,403) $5,227,670 $(1,546,061)
 ========== =========== ========== ===========

Earnings per Common
Share attributable
to Presidential Realty
Corporation basic:
 Income (loss) from
 continuing operations $ 0.36 $ (0.18) $ 0.59 $ (0.43)
 ---------- ----------- ---------- -----------
 Discontinued Operations:
 Income from discontinued
 operations - 0.02 0.01 0.03
 Net gain from sales of
 discontinued operations 0.95 - 0.95 -
 ---------- ----------- ---------- -----------
Total income from
 discontinued operations 0.95 0.02 0.96 0.03
 ---------- ----------- ---------- -----------

Net Income (Loss) per
 Common Share - basic $ 1.31 $ (0.16) $ 1.55 $ (0.40)
 ========== =========== ========== ===========




 Three Months Ended Six Months Ended
 June 30, June 30,
 2009 2008 2009 2008
 ---- ---- ---- ----



Earnings per Common
Share attributable to
Presidential Realty
Corporation diluted:
 Income (loss) from
 continuing operations $ 0.36 $ (0.18) $ 0.58 $ (0.43)
 ---------- ---------- ---------- -----------
 Discontinued Operations:
 Income from
 discontinued operations - 0.02 0.01 0.03
 Net gain from sales of
 discontinued operations 0.95 - 0.95 -
 ---------- ---------- ---------- -----------

Total income from
 discontinued operations 0.95 0.02 0.96 0.03
 ---------- ---------- ---------- -----------

Net Income (Loss) per
 Common Share - diluted $ 1.31 $ (0.16) $ 1.54 $ (0.40)
 ========== ========== ========== ===========

Weighted average number
of shares outstanding:
 Basic 3,380,380 3,878,734 3,379,999 3,906,860
 Effect of dilutive
 securities -
 restricted stock 19,300 - 19,548 -
 ---------- ---------- ----------- -----------
Diluted 3,399,680 3,878,734 3,399,547 3,906,860
 ========== ========== =========== ===========

For the three months and six months ended June 30, 2008, the weighted average shares outstanding as used in the calculation for diluted loss per share does not include 32,800 of restricted shares to be vested, as their inclusion would be antidilutive.

11. COMMITMENTS AND CONTINGENCIES

Presidential is not a party to any material legal proceedings. The Company may from time to time be a party to routine litigation incidental to the ordinary course of its business.

In February, 2009, the Company completed a settlement of various claims it had asserted against Lightstone and Mr. Lichtenstein (see Notes 3 and 4).

In the opinion of management, all of the Company's properties are adequately covered by insurance in accordance with normal insurance practices.

The Company is involved in an environmental remediation process for contaminated soil found on its Mapletree Industrial Center property in Palmer, Massachusetts. The land area involved is approximately 1.25 acres. Since the most serious identified threat on the site is to songbirds, the proposed remediation will consist of removing all exposed materials and a layer of soil. The Company had previously estimated that the costs of the cleanup would not exceed $1,000,000. In accordance with the provisions of SFAS No. 5, "Accounting for Contingencies", in the fourth quarter of 2006, the Company accrued a $1,000,000 liability, which was discounted by $145,546, and charged $854,454 to expense. The discount rate used was 4.625%, which was the interest rate on 10 year Treasury Bonds. At June 30, 2009, the accrued liability balance was $880,993 and the discount balance was $140,285, for a net accrued liability of $740,708.

The remediation must comply with the requirements of the Massachusetts Department of Environmental Protection ("MADEP") and during the three months ended March 31, 2009, the Company obtained the consent of MADEP to a specific plan of remediation, which the Company plans to complete in 2009. The Company is securing final bids for completion of the work and management expects that the actual cost of the remediation will be substantially less than the balance of the net accrued liability at June 30, 2009.

Actual costs incurred may vary from these estimates due to the inherent uncertainties involved. The Company believes that any liability in excess of amounts accrued which may result from the resolution of this matter will not have a material adverse effect on the financial condition, liquidity or the cash flow of the Company.

12. CONTRACTUAL PENSION AND POSTRETIREMENT BENEFITS

The following tables set forth the components of net periodic benefit costs for contractual pension benefits:

 Three Months Ended Six Months Ended
 June 30, June 30,
 2009 2008 2009 2008
 -------- -------- -------- --------

Service cost $ - $ - $ - $ -
Interest cost 19,449 19,398 38,899 38,796
Amortization of prior
 service cost (7,731) (11,594) (15,461) (23,188)
Recognized actuarial loss 14,031 - 28,060 -
 ------- -------- -------- --------

Net periodic benefit cost $25,749 $ 7,804 $ 51,498 $ 15,608
 ======= ======== ======== ========

The following tables set forth the components of net periodic benefit costs for contractual postretirement benefits:

 Three Months Ended Six Months Ended
 June 30, June 30,
 2009 2008 2009 2008
 -------- -------- -------- --------

Service cost $ 405 $ 518 $ 811 $ 1,036
Interest cost 6,700 9,697 13,401 19,392
Amortization of prior
 service cost 925 925 1,851 1,851
Recognized actuarial loss (gain) (8,193) (631) (16,387) (1,262)
 ------- ------- ------- --------

Net periodic benefit cost $ (163) $10,509 $ (324) $ 21,017
 ======= ======= ======= ========

During the six months ended June 30, 2009, the Company made contributions of $73,303 and $11,555 for contractual pension benefits and postretirement benefits, respectively. The Company anticipates additional contributions of $0 and $10,000 for contractual pension benefits and postretirement benefits, respectively, for the remainder of 2009.

13. DEFINED BENEFIT PLAN

The following table sets forth the components of net periodic benefit costs for the defined benefit plan:

 Three Months Ended Six Months Ended
 June 30, June 30,
 2009 2008 2009 2008
 ---- ---- ---- ----

Service cost $ 39,392 $59,414 $ 78,785 $118,828
Interest cost 69,454 76,199 138,906 152,398
Expected return
 on plan assets (36,892) (91,989) (73,783) (183,978)
Amortization of
 prior service cost 3,154 3,154 6,308 6,308
Amortization of
 accumulated loss 63,183 4,522 126,366 9,044
 -------- -------- -------- ---------
Net periodic
 benefit cost $138,291 $ 51,300 $276,582 $ 102,600
 ======== ======== ======== =========

The Company's funding policy for the defined benefit plan is based on contributions that comply with the minimum and maximum amounts required by law. During the six months ended June 30, 2009, the Company did not make a contribution to the defined benefit plan. The Company is required to make a $600,000 contribution to the plan in 2009. In July, 2009, the Company made the required $600,000 contribution to the defined benefit plan.

14. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

Estimated fair values of the Company's financial instruments as of June 30, 2009 and December 31, 2008 have been determined using available market information and various valuation estimation methodologies. Considerable judgment is required to interpret the effects on fair value of such items as future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. The estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. Also, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair values.

The following table summarizes the estimated fair values of financial instruments:

 June 30, 2009 December 31, 2008
 ------------- -----------------
 (Amounts in thousands)
 Net Estimated Net Estimated
 Carrying Fair Carrying Fair
 Value (1) Value Value (1) Value
 --------- ----- --------- -----
Assets:
 Cash and cash equivalents $ 1,699 $ 1,699 $ 5,985 $5,985
 Securities available
 for sale 4,418 4,418 10 10
 Notes receivable 2,853 3,026 2,249 2,366

Liabilities:
 Mortgage debt 16,207 20,542 16,392 19,484

(1) Net carrying value is net of discounts where applicable.

The fair value estimates presented above are based on pertinent information available to management as of June 30, 2009 and December 31, 2008. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued since June 30, 2009 and, therefore, current estimates of fair value may differ significantly from the amounts presented above.

Fair value methods and assumptions are as follows:

Cash and Cash Equivalents - The estimated fair value approximates carrying value, due to the short maturity of these investments.

Securities Available for Sale - The fair value of securities available for sale was determined to be Level 1 financial assets within the valuation hierarchy established by SFAS No. 157, and is based on current market quotes received from financial sources that trade such securities.

Notes Receivable - The fair value of notes receivable has been estimated by discounting projected cash flows using current rates for similar notes receivable.

Mortgage Debt - The fair value of mortgage debt has been estimated by discounting projected cash flows using current rates for similar debt.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

Forward-Looking Statements

Certain statements made in this report may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding the intent, belief or current expectations of the Company and its management and involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the following:

o generally adverse economic and business conditions, which, among other things (a) affect the demand for apartments, retail and office space at properties owned by the Company or which are security for loans made by the Company, (b) affect the availability and creditworthiness of prospective tenants and the rental rates obtainable at the properties, and (c) affect consumer demand for the products offered by the tenants at the malls owned by the joint ventures in which the Company is a member, which adversely affects the operating results and valuations of such malls;
o adverse changes in the real estate markets, including a severe tightening of the availability of credit, which adversely affect the ability of the Company or the joint ventures in which the Company is a member to sell, or refinance the mortgages on, their properties and which may also affect the ability of prospective tenants to rent space at these properties;
o risks of real estate development, ownership and operation;
o governmental actions and initiatives; and
o environmental and safety requirements.

Overview

Presidential Realty Corporation is taxed for federal income tax purposes as a real estate investment trust. Presidential owns real estate directly and through a partnership and joint ventures and makes loans secured by interests in real estate.

During the past two years, the downturn in the economy, higher unemployment and lack of consumer confidence have adversely affected the operating results of the shopping mall properties in which the Company has invested. These conditions, among others, resulted in defaults in 2008 on two of the mezzanine loans made by the Company to joint ventures owning seven shopping mall properties and in defaults on the first mortgage loans secured by six of these properties. In January, 2009, the borrower defaulted in the payment of interest on the Company's third mezzanine loan. (See Liquidity and Capital Resources - Joint Venture Mezzanine Loans and Settlement Agreement below.)

In addition, the turmoil in the credit markets has made it very difficult for the Company and its joint venture partners to obtain refinancing of the mortgage loans on some of its properties on satisfactory terms. For example, the Company was unable to refinance the existing $15,086,721 first mortgage on its Hato Rey Center office building in May, 2008 when the terms of the mortgage anticipated repayment. As a result, while the mortgage is not in default, the annual interest rate was increased by 200 basis points (the payment of which is deferred until maturity) and the mortgagee is entitled to receive all net cash flow from the property to reduce the outstanding principal balance. During 2008 and the first six months of 2009, there was no net cash flow available to reduce the principal balance of the mortgage and no assurances can be given that there will be any net cash flow available in 2009. While the Company has been successful in decreasing the vacancy rate at the Hato Rey Center property, the worsening economy may adversely affect the Company's ability to continue to decrease vacancy rates in the near future and to refinance the property. (See Hato Rey Partnership below.)

The restrictive credit markets also adversely affect the ability of the Company and the joint ventures to sell properties owned by them on satisfactory terms because of the inability of prospective purchasers to obtain financing on satisfactory terms.

From time to time in the Company's recent history, the Company has considered various strategic alternatives, including a merger, consolidation or sale of all or substantially all of its assets. In the past, no appropriate opportunity has been found but the Board of Directors and management will always consider reasonable proposals. In the current economic environment, the Company may seek to sell one or more of its assets if reasonable prices can be determined and obtained. If a sale or sales can be made, management may consider submitting a plan of liquidation to its shareholders for approval. The plan of liquidation would provide for the sale of all of the Company's assets over time and the distribution of the net proceeds of sale to the shareholders after satisfaction of the Company's liabilities. While management has considered this course of action, among others, as noted above, there has been no determination to adopt such a plan of liquidation at this time or to enter into any strategic alternative. Further, there can be no assurance that the Company will be able to sell any of its assets at prices that management deems fair.

Critical Accounting Policies

In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"), management is required to make estimates and assumptions that affect the financial statements and disclosures. These estimates require difficult, complex and subjective judgments. The Company's critical accounting policies are described in its Form 10-K for the year ended December 31, 2008. There have been no significant changes in the Company's critical accounting policies since December 31, 2008.

Results of Operations

Continuing Operations:

Revenues decreased by $86,790 primarily as a result of decreases in interest income on mortgages-notes receivable and interest income on mortgages-notes receivable-related parties, partially offset by an increase in rental revenues.

Rental revenues increased by $60,618 due to increased rental revenues at the Hato Rey Center property of $72,409.

Interest on mortgages-notes receivable decreased by $66,312 primarily as a result of repayments of $5,585,000 on notes receivable during 2008. Interest income earned on those notes was $170,331 during the 2008 period. This decrease was partially offset by an increase of $75,000 in interest received on the Consolidated Note and the $30,104 amortization of discount on the $750,000 note receivable received in the Settlement Agreement (see Liquidity and Capital Resources - Joint Venture Mezzanine Loans and Settlement Agreement below).

Interest on mortgages-notes receivable-related parties decreased by $92,000 as a result of a decrease of $92,000 in payments of interest received on the Consolidated Loans (see Liquidity and Capital Resources - Consolidated Loans below).

Costs and expenses increased by $33,728 primarily due to increases in general and administrative expenses and increases in interest on mortgage debt. These increases were partially offset by a decrease in amortization of in-place lease values and mortgage costs.

General and administrative expenses increased by $48,966 primarily as a result of increases in pension plan expenses of $94,264 and professional fees of $53,777. These increases in general and administrative expenses were partially offset by decreases in salary expense of $42,148 and interest expense accrued in accordance with FIN 48 of $68,684. Salary expense decreased primarily due to a lower amount of salary to be accrued in 2009 compared to 2008, a difference of $105,185, pursuant to an amendment of an executive employment agreement which would require payments upon the retirement of the executive. This decrease was partially offset by an increase of $72,240 in office salaries. In the second quarter of 2009, the Company reduced its office staff and paid severance pay of $77,500. With respect to FIN 48, the Company accrued $68,684 of interest in the 2008 period related to certain tax positions for which the Company may have been required to pay a deficiency dividend. When the statute of limitations with respect to these tax positions expired in September, 2008, the accrued liability was reversed. The Company has no such further tax positions requiring an interest accrual in 2009.

Interest on mortgage debt increased by $14,296 primarily as a result of a $34,386 increase in mortgage interest expense on the Hato Rey Center property first mortgage. The terms of the existing first mortgage provided for a 2% per annum increase in the interest rate on the mortgage beginning on May 12, 2008. This increase was partially offset by a $18,833 decrease in the amortization of discount on mortgage payable.

Amortization of in-place lease values and mortgage costs decreased by $25,630 as a result of a $16,360 decrease in the amortization of in-place lease values and a $9,270 decrease in the amortization of mortgage costs. In-place lease values were recorded in connection with the partial step acquisition of the Hato Rey Partnership in prior years and amortize over the remaining terms of the leases.

Other income increased by $2,004,132 primarily as a result of a $2,279,289 increase in the gain recorded upon the settlement of some joint venture loans to David Lichtenstein and The Lightstone Group ("Lightstone"). This increase was partially offset by the $276,902 increase in the loss from joint ventures as a result of an increase of $114,596 in the loss from the investments in nine malls, and a $162,306 loss from the investment in IATG Puerto Rico, LLC ("IATG"). (See Liquidity and Capital Resources - Joint Venture Mezzanine Loans and Settlement Agreement and Investments in and Advances to Joint Ventures below.)

Income from continuing operations increased by $1,883,614 from a loss of $694,980 in 2008 to income of $1,188,634 in 2009. The $1,883,614 increase in income in 2009 was a result of the $2,279,289 increase in the gain recorded upon the settlement of some joint venture loans with David Lichtenstein and Lightstone.

Discontinued Operations:

In 2009, the Company has three properties that are classified as discontinued operations: the Crown Court property in New Haven, Connecticut (which consists of 105 apartment units and 2,000 square feet of commercial space) and two cooperative apartment units in Riverdale, New York. The Crown Court property was designated as held for sale during the three months ended September 30, 2008. The Crown Court property was owned subject to a long-term net lease with an option to purchase the property in April, 2009 for a purchase price of $1,635,000 over the outstanding principal mortgage balance at the date of the exercise of the option. On April 1, 2009, the Company completed the sale of the Crown Court property. The net proceeds of sale were $1,545,851 and the gain from sale for financial reporting purposes was $3,208,336. In addition, two cooperative apartment units in Riverdale, New York were designated as held for sale during 2009. In July, 2009, the Company entered into a contract of sale for one of these apartment units for a sales price of $154,000. The sale is expected to close in the fourth quarter of 2009. The carrying value of the unit at June 30, 2009 was $24,594, net of accumulated depreciation of $3,831. The gain from sale for financial reporting purposes is estimated to be approximately $116,800 and the estimated net proceeds of sale will be approximately $141,400.

In 2008, the Company had two properties that were classified as discontinued operations. The Towne House property in New Rochelle, New York and a cooperative apartment unit in New Haven, Connecticut were sold during the quarter ended September 30, 2008.

The following table compares the total income (loss) from discontinued operations for the three month periods ended June 30, for properties included in discontinued operations:

 2009 2008
 ---- ----
Income (loss) from discontinued operations:

Cooperative apartment unit, New Haven, CT $ - $ 628
Cooperative apartment units, Riverdale, NY (2,526) (661)
Crown Court, New Haven, CT (1,750) 34,895
Towne House, New Rochelle, NY - 32,715
 ---------- -------

Income (loss) from
 discontinued operations (4,276) 67,577


Net gain from sales of
 discontinued operations:
Crown Court 3,208,336 -
 ---------- -------

Total income from
 discontinued operations $3,204,060 $67,577
 ========== =======

Continuing Operations:

Revenues decreased by $292,214 primarily as a result of decreases in interest income on mortgages-notes receivable and interest income on mortgages-notes receivable-related parties, partially offset by an increase in rental revenues.

Rental revenues increased by $95,290 due to increased rental revenues at the Hato Rey Center property of $114,259.

Interest on mortgages-notes receivable decreased by $281,182 primarily as a result of repayments of $5,585,000 on notes receivable during 2008. Interest income earned on those notes was $376,346 during the 2008 period. This decrease was partially offset by an increase of $74,271 in interest received on the Consolidated Note and the $30,104 amortization of discount on the $750,000 note receivable received in the Settlement Agreement.

Interest on mortgages-notes receivable-related parties decreased by $127,500 as a result of a decrease of $127,500 in payments of interest received on the Consolidated Loans.

Costs and expenses decreased by $15,183 primarily due to decreases in general and administrative expenses and amortization of in-place lease values and mortgage costs. These decreases were partially offset by increases in interest on mortgage debt and depreciation expense.

General and administrative expenses decreased by $53,037 primarily as a result of decreases in salary expense of $181,265 and interest expense accrued in accordance with FIN 48 of $147,526. Salary expense decreased primarily due to a lower amount of salary to be accrued in 2009 compared to 2008, a difference of $210,370, pursuant to an amendment of an executive employment agreement which would require payments upon the retirement of the executive. With respect to FIN 48, the Company accrued $147,526 of interest in the 2008 period related to certain tax positions for which the Company may have been required to pay a deficiency dividend. When the statute of limitations with respect to these tax positions expired in September, 2008, the accrued liability was reversed. The Company has no such further tax positions requiring an interest accrual in 2009. These decreases in general and administrative expenses were partially offset by increases in pension plan expenses of $188,531 and professional fees of $64,770.

Interest on mortgage debt increased by $56,177 primarily as a result of a $107,169 increase in mortgage interest expense on the Hato Rey Center property first mortgage. This increase was partially offset by a $48,254 decrease in the amortization of discount on mortgage payable.

Depreciation on real estate increased by $27,567 primarily as a result of a $26,694 increase in depreciation on the Hato Rey Center property.

Amortization of in-place lease values and mortgage costs decreased by $65,416 as a result of a $39,810 decrease in the amortization of in-place lease values and a $25,606 decrease in the amortization of mortgage costs.

Other income increased by $3,846,137 primarily as a result of a $3,979,289 gain recorded upon the settlement of some joint venture loans to David Lichtenstein and Lightstone. This increase was partially offset by the $129,478 increase in the loss from joint ventures. The loss of $227,842 from the investment in IATG was partially offset by a $98,364 decrease in the loss from the investments in the nine malls. (See Liquidity and Capital Resources - Joint Venture Mezzanine Loans and Settlement Agreement and Investments in and Advances to Joint Ventures below.)

Income from continuing operations increased by $3,569,106 from a loss of $1,671,739 in 2008 to income of $1,897,367 in 2009. The $3,569,106 increase in income in 2009 was a result of the $3,979,289 gain recorded upon the settlement of some joint venture loans with David Lichtenstein and Lightstone.

Discontinued Operations:

The following table compares the total income (loss) from discontinued operations for the six month periods ended June 30, for properties included in discontinued operations:

 2009 2008
 ---- ----

Income (loss) from discontinued operations:

Cooperative apartment unit, New Haven, CT $ - $ 879
Cooperative apartment units, Riverdale, NY (6,117) (2,217)
Crown Court, New Haven, CT 44,468 69,379
Towne House, New Rochelle, NY - 57,637
 ---------- --------

Income from discontinued operations 38,351 125,678

Net gain from sales of
 discontinued operations:
Crown Court 3,208,336 -
 ---------- --------

Total income from
 discontinued operations $3,246,687 $125,678
 ========== ========

Balance Sheet

Net mortgage portfolio increased by $603,677 primarily as a result of the $750,000 note receivable from the Settlement Agreement with David Lichtenstein and Lightstone in February of 2009 (see Liquidity and Capital Resources - Joint Venture Mezzanine Loans and Settlement Agreement below). The note was recorded at its fair value of $664,000 ($750,000 note receivable less a discount of $86,000). The carrying value of the note at June 30, 2009 was $694,104 as a result of $30,104 of amortization of discount for the period. This increase was partially offset by the $75,000 principal repayment the Company received on its loan receivable relating to the Cambridge Green sale in 2007.

Investments in and advances to joint ventures increased by $2,664,122 as a result of the $3,250,000 investment recorded for the Company's 50% ownership interest in IATG, which the Company received from the Settlement Agreement with Lightstone (see Liquidity and Capital Resources - Joint Venture Mezzanine Loans and Settlement Agreement below), partially offset by $585,878 of equity in the loss from the joint ventures.

Assets related to discontinued operations decreased by $360,660 primarily as a result of the sale of the Crown Court property.

Cash and cash equivalents decreased by $4,285,815 primarily as a result of the $4,431,622 purchase of securities available for sale.

Securities available for sale increased by $4,408,626 as a result of the $4,431,622 purchase of securities available for sale, partially offset by the $22,996 decrease in the fair value of the securities.

Other assets decreased by $103,455 primarily as a result of a decrease in deferred charges of $46,420 and the $31,195 of amortization of in-place lease values.

Liabilities related to discontinued operations decreased by $2,078,971 as a result of the sale of the Crown Court property.

Other liabilities decreased by $214,328 primarily as a result of a $102,746 decrease in deferred commission income and a $67,720 decrease in deferred rental income.

In January, 2009, three independent directors of the Company each received 1,000 shares of the Company's Class B common stock as a partial payment of directors' fees for the 2009 year. The shares were valued at $1.61 per share, which was the market value of the Class B common stock at the grant date, and, accordingly, the Company recorded $4,830 in prepaid directors' fees (to be amortized during 2009) based on the market value of the stock. The Company recorded additions to the Company's Class B common stock of $300 at par value of $.10 per share and $4,530 to additional paid-in capital.

Liquidity and Capital Resources

Presidential obtains funds for working capital and investment from its available cash and cash equivalents, from operating activities, from refinancing of mortgage loans on its real estate equities or from sales of such equities, and from repayments on its mortgage portfolio. The Company also has at its disposal a $250,000 unsecured line of credit from a lending institution. At June 30, 2009, there was no outstanding balance due under the line of credit.

Management believes that the Company has sufficient liquidity and capital resources to carry on its existing business and, barring any unforeseen circumstances, to pay the dividends required to maintain REIT status in the foreseeable future. Except as discussed herein, management is not aware of any other trends, events, commitments or uncertainties that will have a significant effect on liquidity.

In the fourth quarter of 2008, the Company reduced its dividend from $.16 per share to $.08 per share. The decision of the Board of Directors of the Company to reduce the Company's dividend at that time recognized, among other things, the adverse economic conditions currently affecting real estate markets, the then existing defaults on two of the Company's loans to affiliates of David Lichtenstein, the Company's inability to refinance the Hato Rey Center office building mortgage and the desirability of conserving the Company's cash resources under these circumstances. On February 4, 2009, the Company announced that it was not declaring a dividend for the first quarter of 2009 and that it was unlikely that it would declare any dividend in 2009.

To the extent that payments received on its mortgage portfolio or payments received from sales are taxable as capital gains, the Company has the option to distribute the gain to its shareholders or to retain the gain and pay Federal income tax on it. The Company does not have a specific policy as to the retention or distribution of capital gains. The Company's dividend policy regarding capital gains for future periods will be based upon many factors including, but not limited to, the Company's present and projected liquidity, its desire to retain funds available to pay operating expenses or for additional investment, and its ability to reduce taxes by paying dividends.

At June 30, 2009, Presidential had $1,698,735 in available cash and cash equivalents, a decrease of $4,285,815 from the $5,984,550 at December 31, 2008. This decrease in cash and cash equivalents was due to cash used in operating activities of $1,056,135, cash used in investing activities of $3,017,752, and by cash used in financing activities of $211,928.

During the quarter ended June 30, 2009, the Company invested $4,431,622 of its cash in securities available for sale. The Company purchased Federal notes and bonds maturing at dates ranging from 2009 through 2013 with interest rates ranging from 1.625% to 5.125%. The Company purchased these notes and bonds to utilize its cash to earn higher interest rates.

Joint Venture Mezzanine Loans and Settlement Agreement

In February, 2008, Lightstone III defaulted on payments of interest due under the Company's $9,500,000 loan related to the Macon/Burlington Malls. Lightstone III also defaulted on payments of interest due on the first mortgage loan covering the properties and the holder of the first mortgage commenced foreclosure proceedings and appointed a receiver to operate the properties. The Company believes that the outstanding principal balance of the first mortgage substantially exceeds the current value of the Macon/Burlington Malls and that it is unlikely that the Company will be able to recover any interest or any principal on its mezzanine loan from the collateral that it holds as security for the loan.

In October, 2008, Lightstone I defaulted on the payment of interest due under the Company's $8,600,000 mezzanine loan relating to the Four Malls and also did not make the payments of the preferential return of 11% per annum due on the Company's $1,438,410 investment in the Martinsburg Mall. Lightstone I also defaulted on payments of interest due under the first mortgage covering the Martinsburg Mall and three of the Four Malls (Bradley Square, Mount Berry Square and Shenango Valley) on and after August 1, 2008 and the holder of the first mortgage commenced foreclosure proceedings and appointed a receiver to operate the properties. The Company believes that the outstanding principal balance of the first mortgage substantially exceeds the current value of the mortgaged properties and that it is unlikely that the Company will be able to recover any amount of its mezzanine loan in the amount of $8,600,000 and investment in the amount of $1,438,410 from the collateral that it holds as security for its mezzanine loan and investment.

The Company's mezzanine loan in the amount of $7,835,000 to Lightstone II secured by interests in the Shawnee Mall and the Brazos Mall ("Shawnee/Brazos Malls") was in good standing at December 31, 2008. However, the borrower failed to make the interest payments due on January 1, 2009 and on the first day of subsequent months and the loan due to the Company is now in default. The first mortgage loan secured by the properties was due to mature in January of 2009 but Lightstone II obtained a one year extension of the maturity date until January of 2010. In connection with the extension, the holder of the first mortgage exercised its right (exercisable because the cash flow from the properties did not satisfy a required debt service coverage ratio) to retain all cash flow from the properties (after payment of all operating expenses but before payment of interest on the Company's mezzanine loan) as additional security for the repayment of the first mortgage loan. Lightstone II is attempting to sell the properties (which sale requires the consent of Presidential), but a sale will be difficult to accomplish under current market conditions and with only short term financing on the properties.

Subsequent to the defaults under the $9,500,000 and $8,600,000 mezzanine loans, the Company asserted various claims against Lightstone and Mr. Lichtenstein personally with respect to such loans and on February 27, 2009 completed a settlement of such claims. Under the settlement:

(1) $5,000,003 of the indebtedness under the $9,500,000 mezzanine loan and $5,000,003 of the indebtedness under the $8,600,000 mezzanine loan were assumed by an affiliate of Lightstone which is the debtor on an existing loan from the Company in the outstanding principal amount of $2,074,994. The total indebtedness was consolidated into a nonrecourse loan in the outstanding principal amount of $12,075,000 (the "Consolidated Note") and is secured by the ownership interests in entities owning nine apartment properties (1,056 apartment units) located in Virginia (which had previously secured the $2,074,994 indebtedness) and the ownership interests in entities owning nine additional apartment properties (931 apartment units) located in Virginia and North Carolina.

The Consolidated Note accrues interest at the rate of 13% per annum and is due on February 1, 2012. All net cash flow from the eighteen apartment properties will be utilized to pay the interest accrued on the Consolidated Note and to the extent that there is not sufficient cash flow to pay all accrued interest, the unpaid interest will be deferred until the maturity of the Consolidated Note. The Company anticipates that a substantial portion of the annual interest will not be paid currently and will be deferred in accordance with the terms of the Consolidated Note. The Company also anticipates that it is likely that on the maturity date of the Consolidated Note, the outstanding principal balance of the Consolidated Note plus any unpaid deferred interest thereon will exceed the value of the Company's security therefore and, accordingly, since the Consolidated Loan is a nonrecourse loan, the Company does not expect to obtain payment in full of the Consolidated Note on maturity.

(2) The Company obtained a 50% ownership interest in IATG, the Lightstone affiliate that owns The Las Piedras Industrial Complex, an industrial property located in Las Piedras, Puerto Rico and consisting of approximately 68 acres of land and 380,800 square feet of rentable space contained in several buildings in the complex. The property is substantially vacant and the owners may attempt to sell the property. Lightstone has agreed to advance funds to pay any negative cash flow from the operations of the property until a sale can be accomplished and has agreed that if it does not do so, it will transfer its remaining 49% interest in the property to Presidential.

(3) The Company received at closing $250,000 in cash and a note from Mr. Lichtenstein in the amount of $750,000 payable without interest on January 31, 2010. Mr. Lichtenstein is not personally liable for payment of the $750,000 note, but the note is secured by a 25% ownership interest in the Las Piedras property.

(4) The Company received a personal guaranty from Mr. Lichtenstein that the Company will receive all accrued interest on the Company's $7,835,000 mezzanine loan (relating to the Shawnee/Brazos Malls) through the date of repayment and $500,000 of the principal amount of the loan, which personal guaranty is limited to $500,000. As part of the settlement, the Company agreed to modify its right to receive repayment in full of the $7,835,000 loan before Mr. Lichtenstein receives any return on his capital contributions to the borrowing entity to the following extent: the Company will receive the first net proceeds of any sale or refinancing of the Shawnee/Brazos Malls in an amount equal to all accrued and unpaid interest and $2,000,000 of principal; Mr. Lichtenstein will receive the next $1,000,000 of any such net sale or refinancing proceeds; the Company will receive the next $1,000,000 of any such net proceeds and any additional net proceeds shall be paid 50% to the Company and 50% to Mr. Lichtenstein. Mr. Lichtenstein's guaranty is secured by his remaining interest in IATG.

The Company has agreed with Lightstone that it will not foreclose on its $7,835,000 mezzanine loan so long as the first mortgage on the Shawnee/Brazos Malls is not accelerated or due at maturity and the holder of the first mortgage is retaining funds from operations of the properties in an amount sufficient to pay the interest due on the mezzanine loan.

It is impossible to predict at this time whether or to what extent the Company will be able to recover any amounts on the $7,835,000 mezzanine loan. While the Shawnee/Brazos Malls currently generate more than sufficient cash flow to service the first mortgage and the Company's mezzanine loan, if the adverse market conditions currently affecting the sale and refinancing of shopping mall properties persist through 2009, it may not be possible to extend or refinance the first mortgage when it becomes due in January of 2010 or to sell the properties for an amount in excess of the first mortgage balance. The carrying value on the Company's financial statements of the $7,835,000 mezzanine loan and the Company's minority interest in the entity owning the Shawnee/Brazos Malls was $1,511,887 at December 31, 2008.

While under existing market conditions it is difficult to place a value on the assets and collateral received from Lightstone and Mr. Lichtenstein in settlement of the Company's claims against them, management believes that the settlement is in the best interests of the Company taking into account the nature of the Company's claims and the cost and unpredictability of litigation and collection of any judgment that might have been obtained.

The defaults in payment of the Company's $9,500,000 mezzanine loan to Lightstone III, the $8,600,000 mezzanine loan to Lightstone I, and the $7,835,000 mezzanine loan to Lightstone II have had and will have a material adverse affect on the Company's business, financial condition, results of operations and prospects.

The principal effect of the transactions resulting from the Settlement Agreement on the Company's consolidated financial statements in 2009, is as follows:

(i) The carrying value of the $12,075,000 Consolidated Note on the Company's consolidated balance sheet is $2,074,994. This is the same carrying value of the $2,074,994 note that was on the Company's consolidated balance sheet prior to the consolidation of this note with the additional $10,000,006 indebtedness received in the settlement agreement. The $10,000,006 additional portion of the note was received in partial settlement of the $9,500,000 and $8,600,000 mezzanine loans, which had a net carrying value of $0 on the Company's consolidated balance sheet. Accordingly, there was no significant adjustment on the Company's consolidated balance sheet in 2009 as a result of the receipt of the Consolidated Note. No gain or loss was recorded on the Company's consolidated financial statements in connection with the consolidation of the $2,074,994 and $10,000,006 indebtedness and the substitution of the collateral for the $10,000,006 indebtedness.

(ii) The 50% membership interest in IATG obtained by the Company was recorded on the Company's consolidated balance sheet at its fair value of $3,250,000 and a gain on the settlement of the joint venture loans in the amount of $3,250,000 was recognized on the Company's consolidated financial statements.

(iii) The $750,000 non-interest bearing, nonrecourse note due on January 31, 2010, which is secured by an additional 25% ownership interest in IATG was recorded on the Company's consolidated balance sheet at its fair value of $664,000 ($750,000 note receivable less a discount on the note receivable of $86,000) and a gain on the settlement of the joint venture loans in the amount of $664,000 was recognized on the Company's consolidated financial statements.

In March, 2009, the Company's preliminary estimate of the fair value of the 50% ownership interest in IATG was $1,500,000 and its preliminary estimate of the fair value of the $750,000 note was $200,000. The Company recorded a $1,500,000 investment in joint ventures and a $200,000 note receivable on its consolidated balance sheet and recognized a gain on settlement of joint venture loans of $1,700,000 in its consolidated financial statements at March 31, 2009.

The Company based the preliminary estimated fair value of its interest in the IATG property on information available to it at the time. During the quarter ended June 30,2009, the Company obtained an independent appraisal of the property owned by IATG and based on the appraised value of $6,500,000, the Company has adjusted the preliminary estimate of the value of its 50% ownership interest in the IATG property from $1,500,000 to $3,250,000 and its preliminary estimate of the $750,000 note receivable from $200,000 to $664,000. Accordingly, in June, 2009, the Company recorded an additional $1,750,000 in investments in joint ventures and an additional $464,000 for the note receivable on its consolidated balance sheet and recognized an additional gain of $2,214,000 on the gain on settlement of joint venture loans in its consolidated financial statements. While management believes that the $6,500,000 appraised value of the IATG property is a reasonable value, there can be no assurance that if and when the property is sold, it can be sold for its appraised value.

In summary, as a result of the Settlement Agreement, in 2009 the Company recorded assets of $3,914,000 on the Company's consolidated balance sheet (a $750,000 note receivable less an $86,000 discount on the note receivable and a $3,250,000 investment in joint ventures) and recorded a $3,914,000 gain on the settlement of joint venture loans in its consolidated financial statements. The Company also received a net cash payment of $65,289 ($250,000 less $184,711 of expenses for the settlement), which was also recorded in gain on settlement of joint venture loans in its consolidated financial statements. In addition, for the period ended June 30, 2009, the Company recognized in interest income $30,104 of the amortization of discount recorded on the note receivable.

The $12,075,000 Consolidated Note accrues interest at the rate of 13% per annum. However, the Company believes that the monthly interest due on the $2,074,994 portion of the note will be paid in accordance with the terms of the note and therefore, the Company only accrues the interest due on this portion of the note. The interest due on the $10,000,006 portion of the note is not on the accrual basis and interest is recorded on a cash basis as interest is received. At June 30, 2009, the Company recorded interest income of $92,914 on the $2,074,994 portion of the note, of which $21,415 was accrued, and the Company received interest payments of $75,020 on the $10,000,006 portion of the note. At June 30, 2009, the deferred and unaccrued interest on the $10,000,006 portion of the note was $372,758.

Operating Activities

Cash from operating activities includes interest on the Company's mortgage portfolio, net cash received from rental property operations and distributions received from joint ventures. In 2009, cash received from interest on the Company's mortgage portfolio was $204,349. Net cash received from rental property operations was $373,098. Net cash received from rental property operations is before additions and improvements and mortgage amortization. In 2009, the Company did not receive any distributions from the joint ventures.

Investing Activities

Presidential holds a portfolio of mortgage notes receivable. During 2009, the Company received principal payments of $96,306 on its mortgage portfolio.

During the quarter ended June 30, 2009, the Company received $1,545,851 of net proceeds from the sale of its Crown Court property.

As a result of the Settlement Agreement with Lightstone, the Company had received a $250,000 payment for the Company's costs related to the Settlement Agreement. The Company paid the $184,711 costs of the Settlement Agreement and the remaining balance of $65,289 was recorded in gain on settlement of joint venture loans.

During the first six months of 2009, the Company invested $293,576 in additions and improvements to its properties.

In May, 2009, the Company invested $4,431,622 in securities available for sale.

Financing Activities

The Company's indebtedness at June 30, 2009, consisted of mortgage debt of $16,206,864. The mortgage debt is collateralized by individual properties. The $15,086,721 mortgage on the Hato Rey Center property is nonrecourse to the Company, whereas the $1,060,652 Building Industries Center mortgage and the $59,491 Mapletree Industrial Center mortgage are recourse to Presidential. In addition, some of the Company's mortgages provide for Company liability for damages resulting from specified acts or circumstances, such as for environmental liabilities and fraud. Generally, mortgage debt repayment is serviced with cash flow from the operations of the individual properties. During 2009, the Company made $210,428 of principal payments on mortgage debt.

The mortgages on the Company's properties are at fixed rates of interest and will fully amortize by periodic principal payments, with the exception of the Building Industries Center mortgage, which has a balloon payment of $1,038,086 due at maturity in March, 2010, and the Hato Rey Center mortgage. The Company expects to repay the $1,038,086 balloon payment due in March, 2010 on the Building Industries Center mortgage, unless it is able to obtain an extension on satisfactory terms. The $15,086,721 Hato Rey Center mortgage matures in May, 2028, and had a fixed rate of interest of 7.38% per annum until May, 2008; thereafter the interest rate increased by 2% and additional repayments of principal will be required from surplus cash flows from operations of the property (see Hato Rey Partnership below).

Investments In and Advances to Joint Ventures

At December 31, 2008, the Company had investments in and advances to four joint ventures which owned and operated nine shopping malls located in seven states. These investments in and advances to joint ventures were made to entities controlled by David Lichtenstein and Lightstone. As a result of the February 27, 2009, Settlement Agreement, the Company now has investments in and advances to joint ventures in two entities that are controlled by Mr. Lichtenstein and Lightstone. The Company accounts for these investments using the equity method.

The first investment is the Company's mezzanine loan in the amount of $7,835,000 to Lightstone II which is secured by ownership interests in the Shawnee/Brazos Malls. In connection with this loan, the Company received a 29% ownership interest in Lightstone II. The loan matures in 2014 and has an interest rate of 11% per annum. Since January 1, 2009, the interest payments due on the $7,835,000 loan have not been made and the loan is in default (see Joint Venture Mezzanine Loans and Settlement Agreement above). The $7,835,000 investment has been reduced by payments of interest (distributions received) and the Company's share of the losses recorded from the joint venture and the balance of the Company's investment in the Shawnee/Brazos Malls at June 30, 2009 is $1,153,851.

The second investment is a 50% ownership interest in IATG, the Lightstone affiliate that owns The Las Piedras Industrial Complex, an industrial property located in Las Piedras, Puerto Rico and consisting of approximately 68 acres of land and 380,800 square feet of rentable space contained in several buildings in the complex.

The Company's estimate of the fair value of its 50% ownership interest in IATG is $3,250,000 and the Company recorded a $3,250,000 investment in joint ventures on its consolidated balance sheet and recognized a gain on settlement of joint venture loans of $3,250,000 in its consolidated financial statements (see Joint Venture Mezzanine Loans and Settlement Agreement above).

Activity in investments in and advances to joint ventures for the period ended June 30, 2009 is as follows:

 Equity
 in the
 Loss
 Balance at from Balance at
 December 31, Joint June 30,
 2008 Investments Ventures 2009
 ------------ ------------- ----------- -----------

Shawnee/Brazos
 Malls (1) $1,511,887 $ - $(358,036) $1,153,851
IATG (2) - 3,250,000 (227,842) 3,022,158
 ---------- ---------- --------- ----------
 $1,511,887 $3,250,000 $(585,878) $4,176,009
 ========== ========== ========= ==========

Equity in the income (loss) from joint ventures is as follows:

 Three Months Ended Six Months Ended
 June 30, June 30,
 2009 2008 2009 2008
 ---- ---- ---- ----

Shawnee/Brazos Malls (1) $(210,200) $(222,197) $(358,036) $(537,794)
IATG (2) (162,306) - (227,842) -
Martinsburg Mall (3) - 79,992 - 120,427
Four Malls (4) - 46,601 - (129,019)
Macon/Burlington Malls (5) - - - 89,986
 --------- --------- --------- ---------
 $(372,506) $ (95,604) $(585,878) $(456,400)
 ========= ========= ========= =========

(1) Interest income earned by the Company at the rate of 11% per annum on the outstanding $7,835,000 loan from the Company to Lightstone II is included in the calculation of the Company's share of the loss from joint ventures for the Shawnee/Brazos Malls.

(2) The fair value of the Company's 50% ownership interest in IATG is $3,250,000. The Company also recorded its 50% share of the loss from IATG for the four month period ended June 30, 2009.

(3) In 2007, the Company's basis of its investment in the Martinsburg Mall was reduced by distributions and losses to zero. Any subsequent distributions received from the Martinsburg Mall were recorded in income.

(4) Interest income earned by the Company at the rate of 11% per annum on the outstanding $8,600,000 loan from the Company to Lightstone I was included in the calculation of the Company's share of the income (loss) from joint ventures for the Four Malls. In the second quarter of 2008, the Company's basis of its investment in the Four Malls was reduced by distributions and losses to zero and, accordingly, the Company only recorded its share of the loss to the extent of its basis. Any subsequent distributions received from the Four Malls were recorded in income.

(5) In 2007, the Company's basis of its investment in the Macon/Burlington Malls was reduced by distributions and losses to zero. Any subsequent distributions received from the Macon/Burlington Malls were recorded in income.

The Lightstone Group is controlled by David Lichtenstein. At June 30, 2009, in addition to Presidential's investments of $4,176,009 in these joint ventures with entities controlled by Mr. Lichtenstein, Presidential has two loans that are due from entities that are controlled by Mr. Lichtenstein in the aggregate outstanding principal amount of $12,825,000 with a net carrying value of $2,769,098.

The $6,945,107 net carrying value of investments in and advances to joint ventures with entities controlled by Mr. Lichtenstein and loans outstanding to entities controlled by Mr. Lichtenstein constitute approximately 23% of the Company's total assets at June 30, 2009.

Hato Rey Partnership

At June 30, 2009 the Company has an aggregate 60% general and limited partnership interest in the Hato Rey Partnership. The Hato Rey Partnership owns and operates the Hato Rey Center, an office building in Hato Rey, Puerto Rico.

In 2005 and 2006, tenants vacated 82,387 square feet of space to occupy their own newly constructed office buildings and Presidential commenced an aggressive program to lease the vacant space. Since March, 2006 the vacancy rate at the property has been reduced from 48% to approximately 25% at July 31, 2009. However, as a result of local economic conditions and higher than historical vacancy rates in the Hato Rey area, the rent up of vacant space at the building has been slower than anticipated.

Over the last three years, Presidential has loaned $2,500,000 to the owning partnership to fund negative cash flow from the operations of the property during the periods of high vacancy rates and to pay the costs of a modernization program. Interest accrued on the loan at the rate of 11% until May, 2008 and 13% thereafter, with interest and principal to be paid from the first positive cash flow from the property or upon a refinancing of the first mortgage on or sale of the property. At June 30, 2009, total advances under the loan were $2,500,000. The $2,500,000 loan and the accrued interest in the amount of $656,422 have been eliminated in consolidation.

The Company had expected to refinance the existing first mortgage on the building in the second quarter of 2008, when the terms of the existing mortgage were to be automatically modified to increase the interest rate thereon, but the combination of the slower than anticipated rent up and the turmoil in the lending markets made a refinancing unfeasible. The modification of the terms of the existing mortgage provided for an increase in its interest rate by 2% per annum (from 7.38% to 9.38%) and that payment of the additional 2% will be deferred until the maturity date of the mortgage in 2028. In addition, the modification provides that all net cash flow from the property will be utilized to repay the outstanding principal of the mortgage loan, which will be prepayable without penalty. The Company intends to refinance this mortgage when occupancy rates at the property have further improved and lending markets have returned to a more normal state. The management of Presidential believes that the vacancy rate at the property can continue to be reduced over the next few years. However, until the first mortgage is refinanced, the Company will not receive any cash payments on its loan to the partnership since principal and interest on the Company's loan are payable only out of operating cash flow or refinancing or sale proceeds and, under the terms of the modified mortgage, all net cash flow will be utilized to reduce principal on the first mortgage. During 2009, there was no net cash flow available to reduce the principal on the first mortgage.

On January 1, 2009, the Company adopted SFAS No. 160 which requires amounts attributable to noncontrolling interests to be reported separately. For the six months ended June 30, 2009, the Hato Rey Partnership had a loss of $209,040. The consolidated financial statements reflect the separate disclosure of the noncontrolling interest's share (40%) of the loss of $83,616. Prior to the adoption of SFAS No. 160, the partners constituting the noncontrolling interest in the Hato Rey Partnership had no basis in their investment and, as a result, the Company was required to record in its consolidated financial statements any losses attributable to the noncontrolling interest and the Company would have recorded any future earnings of the noncontrolling interest up to the amount of the losses previously recorded by the Company attributable to the noncontrolling interest. Under SFAS No. 160, this rule is no longer applicable. For the years ended December 31, 2008 and 2007, the Hato Rey Partnership had losses of $481,352 and $521,102, respectively, of which $192,541 and $208,441, respectively, represented the noncontrolling interest share absorbed by the Company.

Environmental Matters

Mapletree Industrial Center - Palmer, Massachusetts

The Company is involved in an environmental remediation process for contaminated soil found on this property. The land area involved is approximately 1.25 acres. Since the most serious identified threat on the site is to songbirds, the proposed remediation will consist of removing all exposed metals and a layer of soil. The Company had previously estimated that the costs of the cleanup would not exceed $1,000,000. In accordance with the provisions of SFAS No. 5, "Accounting for Contingencies", in the fourth quarter of 2006, the Company accrued a $1,000,000 liability which was discounted by $145,546 and charged $854,454 to expense. The discount rate used was 4.625%, which was the interest rate on 10 year Treasury Bonds. At June 30, 2009, the accrued liability balance was $880,993 and the discount balance was $140,285 for a net accrued liability of $740,708.

The remediation must comply with the requirements of the Massachusetts Department of Environmental Protection ("MADEP") and during the three months ended March 31, 2009, the Company obtained the consent of MADEP to a specific plan of remediation, which the Company plans to complete in 2009. The Company is securing final bids for completion of the work and management expects that the actual cost of the remediation will be substantially less than the balance of the net accrued liability at June 30, 2009.

Actual costs incurred may vary from these estimates due to the inherent uncertainties involved. The Company believes that any liability in excess of amounts accrued which may result from the resolution of this matter will not have a material adverse effect on the financial condition, liquidity or the cash flow of the Company.

Consolidated Loans

Presidential holds two nonrecourse loans (the "Consolidated Loans"), which it received in 1991 from Ivy Properties, Ltd. and its affiliates "(Ivy"). At June 30, 2009, the Consolidated Loans have an outstanding principal balance of $4,770,050 and a net carrying value of zero. Pursuant to existing agreements, the Company is entitled to receive, as payments of principal and interest on the Consolidated Loans, 25% of the cash flow of Scorpio Entertainment, Inc. ("Scorpio"), a company owned by two of the Ivy principals (Steven Baruch who is an executive officer and Director of Presidential and Thomas Viertel who is an executive officer of Presidential) to carry on theatrical productions. Amounts received by Presidential from Scorpio will be applied to unpaid and unaccrued interest on the Consolidated Loans and recognized as income. While these amounts have been material in the past, the Company believes that they will not be material in the balance of 2009. The profitability of theatrical production is by its nature uncertain and management believes that any estimate of payments from Scorpio on the Consolidated Loans for future periods is too speculative to project. During the six months ended June 30, 2009 and 2008, the Company received payments of zero and $127,500, respectively, from Scorpio. The Consolidated Loans bear interest at a rate equal to the JP Morgan Chase Prime rate, which was 3.25% at June 30, 2009. At June 30, 2009, the unpaid and unaccrued interest was $3,598,466 and such interest is not compounded.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

While the Company is not required as a smaller reporting company to comply with this Item 3, it is providing the following general discussion of qualitative market risk.

The Company's financial instruments consist primarily of notes receivable and mortgage notes payable. Substantially all of these instruments bear interest at fixed rates, so the Company's cash flows from them are not directly impacted by changes in market rates of interest. However, changes in market rates of interest impact the fair values of these fixed rate assets and liabilities. The Company generally holds its notes receivable until maturity or prepayment and repays its notes payable at maturity or upon sale of the related properties, and, accordingly, any fluctuations in values do not impact the Company's earnings, balance sheet or cash flows. The Company does not own any derivative financial instruments or engage in hedging activities.

ITEM 4. CONTROLS AND PROCEDURES

a) As of the end of the period covered by this quarterly report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in this report.

b) There has been no change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held its Annual Meeting of Stockholders on June 15, 2009. The following actions were taken at the Annual Meeting:

1. The following persons were elected as Directors by the holders of the Company's Class A Common Stock:

 Votes Votes
 For Withheld
 ----- --------

Robert Feder 306,205 27,191
Jeffrey F. Joseph 305,851 27,545
Steven Baruch 305,851 27,545
Thomas Viertel 305,851 27,545

2. The following persons were elected as Directors by the holders of the Company's Class B Common Stock:

 Votes Votes
 For Withheld
 ----- --------

Richard Brandt 1,885,936 303,050
Mortimer Caplin 1,885,859 303,127

ITEM 6. EXHIBITS

31.1 Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

31.2 Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

32.1 Certification of Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PRESIDENTIAL REALTY CORPORATION
(Registrant)

DATE: August 13, 2009 By: /s/ Jeffrey F. Joseph
 --------------------------------
 Jeffrey F. Joseph
 President and Chief Executive Officer



DATE: August 13, 2009 By: /s/ Elizabeth Delgado
 --------------------------------
 Elizabeth Delgado
 Treasurer

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