On Jun 27, 2013, we reiterated our long-term recommendation on
Liberty Property Trust
), a Pa.-based industrial real estate investment trust (REIT) at
Neutral. The move reflects the company's solid operating
platform, ongoing portfolio repositioning activity amid uneven
economic conditions, to focus on markets having better job and
rent growth prospects.
Liberty Property Trust reported first-quarter 2013 FFO (funds
from operations) of 65 cents per share, beating the Zacks
Consensus Estimate by 2 cents. However, this compared unfavorably
with the prior-year quarter figure of 68 cents. The results were
attributable to consistent performance of the overall portfolio
as well as strong leasing and development activities. Yet,
increase in operating expenses acted as a headwind.
Liberty Property boasts a strong portfolio of multi-tenant
industrial and office properties located in multiple prime U.S.
markets that enable the mitigation of geographical concentration
The company recently acquired a property in Washington, D.C. for
$133.5 million. The deal brings in leasable space to Liberty
Property, whose current downtown properties are mostly occupied.
This property has retail tenants like The UPS Store of
United Parcel Service Inc.
) and M Street Store. Moreover, its office tenants are The Urban
Institute, George Washington University, Stewart & Stewart,
Nevertheless, the company generates significant revenue from its
office portfolio. Office demand is highly correlated to job
growth. Given the current economic environment and the volatility
in the job market, demand for Liberty Property's office portfolio
is likely to suffer.
For Liberty Property, the Zacks Consensus Estimates for 2013 FFO
per share remained stable at $2.65, while for 2014 the estimate
has moved up by a cent to $2.76 per share, over the last 30 days.
Hence, the stock carries a Zacks Rank #3 (Hold).
Other REITs to Consider
A number of REITs that are worth considering include
Winthrop Realty Trust
), both carrying a Zacks Rank # 1(Strong Buy).
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.
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