Liberty Property Trust
) reported second-quarter 2013 funds from operations (FFO) of 66
cents per share. This was in line with the Zacks Consensus
Estimate and ahead of the prior-year quarter figure of 63
The year-over-year increase was attributable to the strong
leasing deals, portfolio-restructuring activities and improving
market fundamentals. However, the sluggish pace of industrial
market recovery in the second-quarter and rising operating
expenses acted as headwinds.
Total operating revenue during the quarter came in at $178.1
million, up 8.3% from $164.5 million in the prior-year period. It
also surpassed Zacks Consensus Estimate of $174 million.
Behind the Headlines
This office and industrial real estate investment trust (REIT)
witnessed strong leasing activities in the second quarter, with
about 7.1 million square feet of leased space. At the end of the
quarter, the occupancy at the in-service portfolio of Liberty
Property - spanning 80.6 million square feet - increased 20 basis
points (bps) to 92.8% from 92.6% sequentially.
Subsequent to the reported quarter-end, Liberty Property inked
a lease deal for 550,800 square feet of space at a Penn.-based
building, 40 Logistics Drive. The lease for the property, which
is currently under development, will start in Aug 15, 2013.
In addition, the operating income from same-store properties
inched up 1.7% on a cash basis and 0.4% on a straight-line basis
from the year-ago quarter.
Portfolio Restructuring Activity
During the quarter under review, Liberty Property purchased a
Wash.D.C.-based office building (77.4% occupied) for $133.5
million. In addition, subsequent to quarter-end, the company
acquired a Phoenix-based untenanted distribution facility for
On the other hand, Liberty Property offloaded 6 operating
assets, spanning 498,000 square feet of leasable space (34.3%
leased at the time of the sale) for $51.4 million.
Additionally, Liberty Property brought 1 development property
(100% occupied) into operation with a total investment of $28.1
million. The asset, spanning 139,000 square feet of leasable
space, generates a current yield of 7.5%.
The company also commenced construction at 5 properties with
an estimated cost of $139.2 million. The properties under
construction include 1 build-to-suit distribution facility and 4
As of Jun 30, 2013, Liberty Property had cash and cash
equivalents of $61.7 million, compared with $38.4 million as of
Dec 31, 2012.
During the reported quarter, the company sold 1.2 million
shares under its equity program and generated net proceeds of
$50.4 million, which was primarily used to pay off debts under
the company's unsecured credit facility.
Management at Liberty Property remains confident regarding the
company's performance in 2013, due to its satisfactory second
quarter results. Consequently, it reaffirmed its guidance for
full-year 2013 FFO in the range of $2.60-$2.70 per share.
Moreover, management expects the rise in pent-up demand for
premium quality industrial space to strengthen market
fundamentals further. They anticipate this to positively effect
Liberty Property in form of rent and occupancy increments going
Going forward, we expect the company's ongoing portfolio
repositioning activity, which is aimed at increasing its
dominance in vibrant markets, to bode well for long-term
profitability. In addition, Liberty Property's relatively healthy
balance sheet with adequate liquidity puts the company at ease.
We expect these factors to add to Liberty Property's growth going
forward. However, continuous portfolio enhancement transactions
tend to keep operating expenses high, which affect the near-term
Liberty Property currently carries a Zacks Rank #3 (Hold).
Further, we look forward to the results of other REITs that
are scheduled to release second-quarter 2013 results on Jul 25,
after the closing bell. These include
Highwoods Properties Inc.
CBRE Group Inc.
Taubman Centers Inc.
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
CBRE GROUP INC (CBG): Free Stock Analysis
HIGHWOODS PPTYS (HIW): Free Stock Analysis
LIBERTY PPTY TR (LRY): Free Stock Analysis
TAUBMAN CENTERS (TCO): Free Stock Analysis
To read this article on Zacks.com click here.