Liberty Property Trust (LRY) has reaffirmed its funds from operations (:FFO) per share guidance for 2013 at $2.48–$2.50. The company has further provided its 2014 outlook and expects FFO per share to range between $2.45 and $2.55. Currently the Zacks Consensus Estimate for 2013 and 2014 stands at $2.50 and $2.52 per share respectively.
At present, the U.S. industrial market is benefiting from healthy demand for industrial properties with improving net absorption rate and declining vacancy rates. With the continuously rising demand for premium-quality industrial space, Liberty Property is repositioning its portfolio and shifting focus to the industrial real estate. Consequently, the company has been involved in several deals in the past six months.
In October, Liberty Property sealed the $1.475 billion buyout of Cabot Industrial Value Fund III that enhanced its industrial platform by 23 million square feet. The company gained 177 properties in 24 new and existing Liberty industrial markets.
On the other hand, Liberty Property is striving to lower its exposure to the suburban office properties market. Thus, in November, the company disclosed a deal to dispose a 6.6 million square foot portfolio of suburban office and high-finish flex properties, as well as 159 acres of land for $700 million.
But the repositioning moves came at a cost. Notably, the 2013 guidance reflects the Cabot buyout related expenses and the earnings dilution impact associated with equity issuance. The 2014 outlook figures also incorporate the effect of an estimated reduction in net operating income due to sale of properties.
Therefore, despite the near-term drag to profitability, we believe that repositioning efforts on the part of Liberty are encouraging. They are expected to poise the company well for growth from the latter half of 2014 and buoy its profitability in 2015.
This Pennsylvania-based real estate investment trust (:REIT) currently has a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider stocks like Getty Realty Corp. (GTY), Sabra Health Care REIT, Inc. (SBRA) and National Health Investors Inc. (NHI). While Getty Realty and Sabra Health Care carry a Zacks Rank #1 (Strong Buy), National Health Investors holds a Zacks Rank #2 (Buy).
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 net income.
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