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Is it Apt to Hold Liberty Property in Your Portfolio Now?

Zacks Equity Research

Liberty Property Trust LPT has been aiming to divest its non-core properties and using the dry powder for gaining preferred properties across the United States. While such efforts are a strategic fit for long-term growth, the near-term dilution impact of such moves on earnings is unavoidable.

Liberty Property recently announced the sale of a medical-office building — 800 Walnut Street — in Philadelphia, for $99.25 million, the sale price of which is remarkably more than double the building’s development cost. Part of the sale proceeds was used to repay $35.9 million of mortgage debt that encumbered the property. Consequently, the company will record a loss of $7.6 million, or five cents per diluted share, for early extinguishment of debt, in second-quarter 2019.

These efforts to grow the company’s national pure-play industrial platform in top-tier markets and financing that through the disposition of office assets are likely to help the company achieve a favorable portfolio mix.

Further, given its premium-quality industrial portfolio located in upscale locations, pro-business environment and continued e-commerce demand, Liberty Property is well poised to continue on the growth trajectory. This favorable environment is also benefiting a number of other industrial real estate investment trusts (REIT), including Terreno Realty TRNO, Duke Realty DRE and Prologis Inc. PLD.

In fact, the company, which is witnessing decent demand for its properties, announced the addition of two new leases and renewal of a third one in Atlanta.

Encouragingly, over the past year, shares of this Zacks Rank #3 (Hold) company have outperformed the industry. While its shares have gained 15.8%, the industry has rallied 11.7% during the same time period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nonetheless, recovery in the industrial market has continued for long, and a whole lot of new buildings are slated to be completed and made available in the market in the near term, leading to higher supply and lesser scope for rent and occupancy growth. Additionally, any protectionist trade policies will have an adverse impact on economic growth, as well as the company’s business over the long term.

Further, the company will likely exit its wholly-owned office portfolio by the end of this year and exceed the asset sales guidance of $600-$650 million. This is expected to impact its near-term earnings.

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Prologis, Inc. (PLD) : Free Stock Analysis Report
Liberty Property Trust (LPT) : Free Stock Analysis Report
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