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Liberty Property Reports In Line

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Liberty Property Trust (LRY), a real estate investment trust (:REIT), reported second quarter 2012 FFO (funds from operations) of 63 cents per share compared with 69 cents in the year-earlier quarter. Reported FFO in the quarter was in line with the Zacks Consensus Estimate. 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.

Total revenue for second quarter 2012 stood at $169.2 million compared with $164.4 million in the year-ago quarter. Total revenue for the reported quarter exceeded the Zacks Consensus Estimate of $168 million.

At the end of the reported quarter, the in-service portfolio of Liberty Property, spanning 77.0 million square feet, had occupancy of 90.7% compared with 90.5% in the previous quarter.  Liberty Property witnessed strong leasing activities in the quarter with about 5.5 million square feet of leased space. Operating income from same-store properties slipped 0.6% on a cash basis and 1.0% on a straight line basis year over year.

Liberty Property continues to reposition its portfolio by selling suburban office and high-finish flex properties.The company also intends to enhance its cash reserves through significant divestiture of commodity office space. During the reported quarter, Liberty Property sold 54 properties (82.3% leased), spanning 2.7 million square feet in Wisconsin, Maryland, Virginia, North Carolina and New Jersey, for approximately $208.6 million.Additionally, Liberty Property acquired four properties (58% leased) spanning 603,000 square feet of leasable space for $29.3 million. 

During second quarter 2012, Liberty Property began development of three properties, spanning 246,000 square feet, for an estimated investment of $23.5 million.  Also, the company brought into service one development property spanning 128,000 square feet for $6.6 million.

During the reported quarter, Liberty property redeemed $100 million worth of its outstanding 7.40% Series F Cumulative Redeemable Preferred Units at par. Also the company issued $400 million of 4.125% senior unsecured notes to increase its liquidity. At the end of second quarter 2012, the company had $154.1 million in cash and cash equivalents.

Liberty Property currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Duke Realty Corp. (DRE) carries a Zacks #3 Rank, which translates into a short-term Hold rating.

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