Liberty Property Trust (
- a hybrid real estate investment trust (REIT) - reported fourth
quarter 2012 FFO (funds from operations) of 63 cents per share,
in line with the Zacks Consensus Estimate as well as the
prior-year quarter. The result was attributable to the strong
acquisitions and development activities, slightly impacted by
uncertain economic conditions.
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For full year 2012, Liberty Property reported FFO of $2.58 per
share, well ahead of the Zacks Consensus Estimate of $2.52. Yet,
it was slightly below the prior-year FFO of $2.61 per share.
Total revenue during the reported quarter came in at $176.2
million, up 4.4% from the prior-year period. Also, it came well
ahead of the Zacks Consensus Estimate of $174 million. For the
full year, total revenue increased 3.4% year over year to $685.6
million, but marginally missed the Zacks Consensus Estimate of
Inside the Headlines Numbers
At the end of the quarter, the occupancy at in-service portfolio
of Liberty Property - spanning 81.3 million square feet -
increased 30 bps (basis point) to 92.1% from 91.8% in the
previous quarter. The company witnessed strong leasing activities
in the quarter with about 4.9 million square feet of leased
space. In the full year, the company leased total 18.5 million
square feet of space.
Operating income from same-store properties slipped 0.2% on a
cash basis and 0.3% on a straight-line basis from the year-ago
quarter. For 2012, it dipped by 0.3% on a cash basis and by 0.8%
on a straight-line basis compared with 2011.
Portfolio Restructuring Activity
Liberty Property witnessed continuous demand for premium quality
industrial space from large corporate users and build-to-suit
opportunities for both industrial and office users. During the
reported quarter, the company acquired 22 industrial buildings
for $176.3 million. The properties, spanning total 3.5 million
square feet of leasable space, were 92.5% occupied.
Also, the company divested two properties, spanning 257,000
square feet of leasable space (61.9% leased at the time of the
sale), for $17.7 million.
During the same period, Liberty Property brought 5 development
properties worth $44.1 million into operation. The properties,
spanning 290,000 square feet of leasable space, were 77.0%
occupied and 97.7% leased as of Dec 31, 2012. The properties,
generating current yield of 8.5%, is projected to generate
stabilized yield of 10.5%.
In addition, the company started developing 1 property for GAC
Industries in Houston, Texas. The estimated construction cost of
the property, spanning 181,000 square foot, is $11.6 million.
Subsequent to end of the quarter, Liberty Property unveiled its
plan to start construction at 3 Quarry Ridge in Malvern, Pa. - a
200,000 square foot, six-story office building - for The Vanguard
Group. The construction cost of 100% pre leased property is
estimated to be $55 million.
During the reported quarter, Liberty Property issued 10 ½ year
3.375% Senior Unsecured Notes worth $300 million. The net
proceeds from the offering was used to pay off partly or fully
the borrowings under its unsecured credit facility and for
general corporate purposes.
At the end of 2012, the company has cash and cash equivalents of
Management at Liberty Property remains optimistic about the
company's performance in 2013. For full year 2013, it expects FFO
per share in the range of $2.60-$2.70. The guidance reflected an
expected increase in overall occupancy along with organic growth
through increased development opportunities.
We believe that, though the uneven economic conditions remain a
concern for the short term, Liberty Property's portfolio
repositioning activity to focus on markets having better job and
rent growth prospects will boost its top-line growth. In
addition, the company has a relatively healthy balance sheet with
adequate liquidity to repay debt. Yet, the continuous acquisition
spree of Liberty Property involves significant upfront operating
expenses, which limits its near-term profitability.
Last week, one of Liberty Property's peers,
Duke Realty Corp. (
reported fourth quarter 2012 core FFO of 27 cents per share, in
line with the Zacks Consensus Estimate, but fell 3 cents from the
Liberty Property currently holds a Zacks Rank #4 (Sell). However,
other REITs that are performing better than Liberty Property
Ventas Inc. (
Simon Property Group Inc. (
, both carrying a Zacks Rank #2 (Buy).
Note: Funds from operations, a widely used metric to gauge
the performance of REITs, are obtained after adding depreciation
and amortization and other non-cash expenses to net income.