The office and industrial real estate investment trust (REIT),
Liberty Property Trust
), reported third-quarter 2013 funds from operations (FFO) of 57
cents per share. This missed the Zacks Consensus Estimate of 61
cents as well as the prior-year quarter figure of 64 cents.
The quarterly results were affected by costs related to the
buyout of Cabot Industrial Value Fund III Operating Partnership,
L.P, share dilutions and higher termination fees.
However, total operating revenue during the quarter came in at
$183.4 million, up 9.4% from $167.7 million in the prior-year
period but fell short of the Zacks Consensus Estimate of $186
Inside the Headlines
Liberty Property continued strong leasing activity in the
third quarter, with about 8.7 million square feet of leased
space. With this, the company set a new leasing record.
As of Sep 30, 2013, the occupancy at the in-service portfolio
of Liberty Property - spanning 83.7 million square feet -
declined 220 basis points (bps) to 90.6% from 92.8% sequentially.
This was due to the timing of the initiation of some lease
agreements. Nevertheless, on a signed basis, the in-service
portfolio was 92.4% leased at the end of the quarter.
On the other hand, in third-quarter 2013, same-store
properties' operating income upped 1.8% on a cash basis and 1.0%
on a straight-line basis from the year-ago quarter.
Portfolio Restructuring Activity
During the said quarter, Liberty Property acquired a Phoenix,
Ariz.-based industrial building for $27.9 million. The untenanted
property (at the time of acquisition) spans 593,600 square feet
of leasable space.
The company also brought 4 development assets (35% occupied as
of Sep 30, 2013) into operation with a total investment of $163.2
million. The asset, spanning 2.5 million square feet of leasable
space, generates a current yield of 5.1% and a stabilized yield
Moreover, Liberty Property commenced construction at 1
distribution building in Aberdeen, Md. with an estimated cost of
$50.3 million. The property, which is 100% pre-leased to a
high-end tenant, spans 945,720 square foot.
Cabot Fund Acquisition
Subsequent to the quarter end, the company sealed the buyout
of the operating partnership of Cabot Industrial Value Fund III
for around $1.475 billion. Notably, Liberty Property announced
the acquisition during the third quarter of 2013.
A number of transaction related items impacted the
third-quarter 2013 results. These include an equity offering of
24.2 million common shares; issuance of 4.40% senior unsecured
notes worth $450 million; and acquisition expenses worth $2.7
million (included in third-quarter general and administrative
expenses) and fees worth $4.2 million (included in third-quarter
As of Sep 30, 2013, Liberty Property had cash and cash
equivalents of $1.1 billion, compared with $61.7 million as of
Jun 30, 2013.
Management at Liberty Property anticipates the Cabot Fund
acquisition related expenses and associated shares dilution to
affect the near-term earnings. Consequently, it lowered its
guidance for full-year 2013 FFO in the range of $2.48-$2.50 per
share, from the previous guidance of $2.60-$2.70.
Also, keeping the effect of the Cabot Fund acquisition in
mind, Liberty Property projects fourth-quarter 2013 FFO per share
in the range of 62-64 cents.
Although one-time expenses and short-term shares dilution were
a drag on the third-quarter earnings, the strong leasing and
portfolio repositioning activities helped Liberty Property sail
over the tides. Going forward, we expect the company's aim to
boost its industrial portfolio, by increasing its dominance in 14
of its existing markets, to bode well for long-term growth.
Further, to lower its exposure to suburban office properties,
Liberty Property anticipates shedding its interests in these
assets, with around $650-$750 million worth of dispositions to
occur in the upcoming 1 to 3 quarters. We expect these strategic
initiatives to add to Liberty Property's growth going
Liberty Property currently carries a Zacks Rank #3 (Hold).
Further, we look forward to the results of other REITs that
are scheduled to release third-quarter 2013 results on Oct 24.
Mack-Cali Realty Corp
Taubman Centers Inc.
). Mack-Cali and Rayonier will report before the market opens,
while Taubman will report after the closing bell.
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
MACK CALI CORP (CLI): Free Stock Analysis
LIBERTY PPTY TR (LRY): Free Stock Analysis
RAYONIER INC (RYN): Free Stock Analysis
TAUBMAN CENTERS (TCO): Free Stock Analysis
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