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Liberty Property (LPT) Up 1.6% on Q1 FFO Beat, Raises Guidance

Zacks Equity Research

Liberty Property Trust LPT reported first-quarter 2019 NAREIT funds from operations (FFO) per share of 62 cents, which surpassed the Zacks Consensus Estimate of 60 cents.

Results reflect 4.6% increase in cash same-store operating income. Amid healthy demand from users for industrial space, the company witnessed a solid leasing activity. Moreover, it raised its 2019 FFO guidance.

However, revenues were down 8.7% from the prior-year period to $157.8 million. The revenue figure also missed the Zacks Consensus Estimate of $168.5 million.

Reflecting analysts’ bullish sentiments, shares of Liberty Property hit a 52-week high of $49.82 on Apr 30, before crawling back to $49.64 at the close of the trading session, denoting a 1.60% increase from the previous day.

Quarter in Detail

For its industrial portfolio, during the reported quarter, Liberty Property accomplished lease deals for 8.9 million square feet of space. As of Mar 31, 2019, occupancy at the company’s in-service operating portfolio, spanning 103.0 million square feet, shrunk 70 basis points (bps) sequentially to 95.6%. Rents increased 6.6% on a cash basis (16.3% GAAP) on retention and replacement leases commenced during the quarter.

Property level operating income for same-store properties were up 4.6% on a cash basis (1.7% GAAP) year over year.

Portfolio Activity

During the March-end quarter, Liberty Property acquired five industrial properties, aggregating 1.1 million square feet, for $127.5 million. At the same time, the company sold four operating properties, totaling 297,000 square feet, for $85.2 million.

The company brought into service six industrial properties, comprising 850,000 square feet of space for a total investment of $89.1 million. These properties are currently 100% leased and were 87.8% occupied as of the end of the first quarter.

Balance-Sheet Position

Liberty Property exited first-quarter 2019 with cash and cash equivalents of around $96.9 million, up from $84.9 million recorded at the end of December 2018.


Liberty Property has raised its guidance for 2019. The company now guides FFO per share of $2.55-$2.65 compared to the prior projection of $2.53-$2.65. The Zacks Consensus Estimate for the same is currently pinned at $2.58.

The company expects same-store property level operating income for industrial properties to be up 1.6-2.6% on a GAAP basis and 3-4% on a cash basis. This reflects the expectation of an 849,000-square-foot space vacate on May 1 by a major retailer in bankruptcy.

Our Take

Banking on the strong fundamentals of the industrial real estate market, Liberty Property is focusing to expand its portfolio through strategic acquisitions and development. Also, it is disposing non-core office properties to pursue such expansion opportunities. Further, it has a decent balance sheet, superior access to capital, strategic asset sales activity and ample liquidity position that lends financial flexibility to invest in its growth endeavors.

However, large scale dispositions will likely have a dilutive impact on the company’s earnings in the near term. In addition, with rising supply of industrial real estate space, there is lesser scope for robust rent and occupancy growth.

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.

Liberty Property Trust Price, Consensus and EPS Surprise

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

We now look forward to the earnings releases of other REITs like Apartment Investment and Management Co. AIV, Regency Centers Corp. REG and Federal Realty Investment Trust FRT which are slated to report their quarterly numbers on May 2.

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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