On Sep 24, 2013, we reinstated our long-term recommendation on
Liberty Property Trust
) at Neutral. The move depicts the company's decent
second-quarter results, strategic efforts to improve its core
operations and a conservative balance sheet management. Yet,
stiff competition, rising interest rates and a volatile office
sector remain our plausible concerns.
Driven by improving market fundamentals, strong leasing and
development activities, Liberty Property's second-quarter 2013
FFO (funds from operations) per share of 66 cents surpassed the
year-ago figure by 4.8%. However, it came in line with the Zacks
Consensus Estimate as the positive impact was marred by a rise in
Nevertheless, we expect Liberty Property to benefit from its
focus on metro-office, multi-tenant industrial and flex
properties and markets that have strong demographic and economic
fundamentals. Furthermore, with its solid portfolio repositioning
program, the company is efficiently meeting the rising demand for
premium quality industrial space.
In addition, this Pa.-based real estate investment trust
(REIT) aims to strengthen its balance sheet and liquidity
position, which helps it fund investments. In relation to this,
the recent senior notes offering and equity shares offering to
finance the acquisition of the operating partnership of Cabot
Industrial Value Fund III is noteworthy.
Yet, continued volatility in the office sector with job cuts
and stiff competition from private and public companies remain
our concerns. Also, Liberty Property's large development pipeline
and continuous acquisition spree involves significant upfront
operating expenses with limited near-term profitability.
Moreover, the rise in interest rates and the capital market
volatility adversely affect the company's funding expenses.
Over the last 30 days, the Zacks Consensus Estimate for 2013
FFO per share declined 1.9% to $2.59. Also, for 2014 it moved
down 0.4% to $2.72 per share. The stock currently has a Zacks
Rank #3 (Hold).
Other Stocks to Consider
Better performing REITs that are worth a look include
Sovran Self Storage Inc.
SL Green Realty Corp.
Douglas Emmett Inc
). All the stocks carry a Zacks Rank #2 (Buy).
Note: FFO, a widely accepted and reported measure of the
performance of REITs is derived by adding depreciation,
amortization and other non-cash expenses to net income.
DOUGLAS EMMETT (DEI): Free Stock Analysis
LIBERTY PPTY TR (LRY): Free Stock Analysis
SL GREEN REALTY (SLG): Free Stock Analysis
SOVRAN SLF STOR (SSS): Free Stock Analysis
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