Liberty Property Trust
) reported second quarter 2014 funds from operations (FFO) of 59
cents per share, which missed the Zacks Consensus Estimate by 2
cents and came below the prior-year quarter figure by 7 cents.
Following this announcement, shares of the company slipped 3.76%
during the regular trading session on Jul 22.
Results reflect the impact of the company's strategic shift
towards the industrial portfolio and consecutive curtailment of its
office properties. Also, the company cut down its full-year 2014
FFO per share guidance.
Moreover, the company's total operating revenue of $193.0
million in the quarter fell short of the Zacks Consensus Estimate
of $199 million. Nevertheless, this exceeded the year-ago quarter
figure of $151.0 million by 27.8%.
Quarter in Detail
Liberty accomplished lease deals for 7.2 million square feet of
space, up from 5.3 million square feet of space leased in
first-quarter 2014. Consequently, as of Jun 30, 2014, the occupancy
at the in-service portfolio of Liberty - spanning 102.5 million
square feet - climbed 70 basis points (bps) sequentially to
However, for the quarter, same-store properties' operating
income declined 2.3% on a cash basis and 0.6% year over year on a
Liberty exited second-quarter 2014 with cash and cash
equivalents of $228.7 million, down from $370.6 million as of Mar
Portfolio Restructuring Activity in Q2
During the quarter, Liberty bought 5 industrial properties in
Durham, NC and 1 distribution building in Garden Grove, CA for a
total price of $53.2 million. All assets are 100% leased. On the
other hand, the company divested three distribution properties for
$32.2 million in southern NJ. The assets were sold to a joint
venture in which the company has 25% stake.
On the construction front, Liberty brought in-operation 1
development asset for total investment of $12.4 million.
Additionally, the company started construction at 3 properties for
total estimated investment of $69.2 million.
Moreover, in early July, Liberty revealed that in collaboration
) it has started the development of the Comcast Innovation &
Technology Center - a $933 million office and hotel property - in
Philadelphia. Comcast has an 80% stake in this JV while the rest is
owned by Liberty, with the latter's expected total investment of
around $185 million (Read:
Liberty, Comcast JV Developing Philadelphia
2014 Outlook Trimmed
Liberty trimmed its guidance for 2014 FFO per share to the range
of $2.42 - $2.48, from the previous range of $2.45 - $2.55. The
Zacks Consensus Estimate of $2.47 for the same falls within the new
The pessimism stemmed from slower-than-expected growth in its
core portfolio's occupancy level, decreased 2014 acquisition
numbers and development starts delay.
Yet again Liberty came up with lower-than-expected results,
followed by a guidance cut. In addition to this miss in
second-quarter 2014, Liberty has failed to meet expectations in a
couple of prior quarters and reported an average negative surprise
of 4.13% in the last four quarters.
The persisting weakness in the company's core office markets
continues to impact its business. Although the company is aiming at
strengthening its portfolio base through industrial properties
buyouts and office assets divestiture, its aggressive disposition
efforts would continue to have a dilutive impact on its financials
in the near-to-medium term. Consequently, Liberty currently carries
a Zacks Rank #4 (Sell).
We now look forward to the results of other REITs such as
Mack-Cali Realty Corp.
SL Green Realty Corp.
) that are scheduled to report this week.
Note: FFO, 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.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
COMCAST CORP A (CMCSA): Free Stock Analysis
MACK CALI CORP (CLI): Free Stock Analysis
SL GREEN REALTY (SLG): Free Stock Analysis
LIBERTY PPTY TR (LPT): Free Stock Analysis
To read this article on Zacks.com click here.