Liberty Property (LPT) Q2 FFO & Revenues Surpass Estimates

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Liberty Property Trust LPT reported second-quarter 2018 adjusted funds from operations (AFFO) per share of 69 cents, which surpassed the Zacks Consensus Estimate of 65 cents.

Notably, NAREIT FFO for the quarter of 12 cents was impacted by development service fee expenses and non-cash impairment charge, totaling $86.0 million, or 57 cents per share. In the prior-year quarter, the company reported NARIET FFO of 65 cents.

Total operating revenues of around $176.6 million for the quarter also outpaced the Zacks Consensus Estimate of $166.5 million. Additionally, the reported figure increased 8% year over year. The company also revised its guidance for 2018.

During the reported quarter, Liberty Property accomplished lease deals for 6.1 million square feet of space. As of Jun 30, 2018, occupancy at the company's operating portfolio, spanning 102.9 million square feet of space, expanded 30 basis points (bps) sequentially to 97%.

Amid these, shares of Liberty Property declined 3.1% to $42 during regular trading session on Jul 24.

Quarter in Detail

Liberty Property's industrial portfolio, spanning 96.1 million square feet of area, enjoyed occupancy of 97% at the end of the second quarter, marking an expansion of 30 bps from the last reported quarter. Industrial rents escalated 14.7% on retained and replacement leases commenced during the quarter.  

The office portfolio, comprising 6.8 million square feet of space, had occupancy of 96.6%, up 70 bps from the previous quarter. Office rents were up 18% on retained and replacement leases.

Same-store operating income for the industrial portfolio jumped 5.5% on a cash and 4.1% on a GAAP basis.

Portfolio Activity

During the April-June quarter, Liberty acquired three industrial properties, spanning 774,000 square feet of space, for $97.5 million.

On the other hand, Liberty Property sold a 208,000-square-foot office building - 5 Crescent Drive at the Philadelphia Navy Yard - for $130.5 million.

The company brought into service five wholly-owned development properties, having 1.6 million square feet of leasable space and 94.7% occupied as of the end of the quarter, for a total investment of $163.4 million. Further, Liberty Property commenced development of two wholly-owned properties during the quarter, aggregating 924,000 square feet of leasable space, at an estimated investment of $96.5 million.

Balance-Sheet Position

Liberty Property exited second-quarter 2018 with cash and cash equivalents of around $24.2 million, up from $11.9 million recorded at the end of December 2017.


Liberty Property revised its outlook for 2018. The company now guides FFO per share of $2.58-$2.65 compared to its previous outlook of $2.55-$2.65. The Zacks Consensus Estimate for the same is currently pegged at $2.60.

Our Take

We are impressed with the better-than-expected performance of Liberty Property in the second quarter. The company is shifting its focus toward industrial properties due to favorable demand-supply conditions. Its premium quality industrial properties, situated at key locations, are expected to enjoy high demand, going forward. This is favorable for its same-store operating results. Furthermore, the company anticipates to increase sale of non-core office properties in the current year. Although such asset-pruning effort will optimize its portfolio, the near-term dilution impact from such dispositions cannot be bypassed. Also, rate hike remains a concern.

Liberty Property Trust Price, Consensus and EPS Surprise

Liberty Property Trust Price, Consensus and EPS Surprise | Liberty Property Trust Quote

Currently, Liberty Property carries a Zacks Rank #3 (Hold). You can see  the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Vornado Realty Trust VNO , Boston Properties BXP and Extra Space Storage EXR . While Vornado will report Q2 figures on Jul 30, the other two companies are scheduled to release quarterly numbers on Jul 31.

Note:  Anything related to earnings presented in this write-up represent funds from operations (FFO) - a widely used metric to gauge the performance of REITs.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: BXP , VNO , EXR , LPT

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