Will Liberty Property Rise on Industrial Sector Fundamentals?
Liberty Property Trust (LPT) is aggressively enhancing its portfolio mix through continued portfolio restructuring activity to capitalize on the growing U.S. industrial sector fundamentals. Although this is encouraging for long-term growth, the continuous acquisition and development spree involves significant upfront operating expenses and drags on the margin, thereby leading to a dilution effect on the near-term earnings. In addition, sluggish office space demand due to adequate space availability exerts pressure on rent and occupancies.
Consequently, Liberty Property’s first-quarter 2014 funds from operations (:FFO) of 58 cents per share fell a penny short of the Zacks Consensus Estimate and came 7 cents below the prior-year quarter figure. The company made consecutive disposition of its suburban office and flex properties during December and January
Despite the short term adverse impact, we believe that the repositioning efforts by the company through strategic acquisitions, JV investments and dispositions would help it ride on the growth trajectory in the long run. Last month, this real estate investment trust (:REIT) acquired 5 Durham, NC-based industrial assets.
Most recently, the company started development on the mixed use tower – Comcast Innovation & Technology Center building – in Philadelphia, which is being constructed in alliance with Comcast Corp. (CMCSA). Moreover, Comcast has inked a lease deal for around 74% of the office space at the property. With the improving U.S. industrial market fundamentals, we believe that these initiatives will strengthen the company’s portfolio in upscale locations and poise the company well for recovery, going forward.
For further insight into Liberty Property, you can refer to our updated research report, which was issued on Jul 10, 2014.
Over the last 30 days, the Zacks Consensus Estimate for 2014 and 2015 moved south by a penny to $2.50 and $2.71 per share, respectively. Consequently, the stock currently has a Zacks Rank #4 (Sell).
Stocks That Warrant a Look
However, better-ranked stocks in the REIT industry include Parkway Properties Inc. (PKY) and Terreno Realty Corp. (TRNO). Both these stocks carry a Zacks Rank #1 (Strong Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation,amortization and other non-cash expenses to net income.
Read the Full Research Report on LPT
Read the Full Research Report on CMCSA
Read the Full Research Report on PKY
Read the Full Research Report on TRNO
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