Amid growing demand for premium quality industrial space, Liberty Property Trust (LPT) is boosting the quality of its portfolio through repositioning activities. During the third quarter, the company bought one distribution building at Charlotte, NC for $6.8 million. On the other hand, the company started the development of eight wholly-owned properties for a total estimated investment of $157.9 million. Majority of the properties were industrial/distribution buildings.
Moreover, in December, the company disclosed that its fourth-quarter acquisitions would aggregate $27.3 million and comprise a vacant distribution building in southern California. Fourth-quarter dispositions till Dec 16 amounted to $70.7 million of suburban office and non-core industrial properties. With the improving U.S. industrial market fundamentals, we believe that these initiatives are poised to strengthen the company’s portfolio in upscale locations, going forward.
Liberty Property also came up with encouraging results in the third quarter of 2014. It reported funds from operations ("FFO") of 64 cents per share, which surpassed the Zacks Consensus Estimate by 2 cents and the prior-year quarter figure by 7 cents. Results were aided by higher operating income on a year-over-year basis.
Recently, the company revealed its FFO per share outlook for both 2014 and 2015. For 2014, the company expects FFO per share in the range of $2.45 – $2.47, while for 2015, the guidance comes within $2.55 – $2.65. Notably, the company’s fourth-quarter results include around $2 million of gain from U.K. land sales, which was previously expected to take place in 2015.
Going forward, we believe that Liberty Property’s repositioning efforts and divestiture of non-core assets would help it ride on the growth trajectory. Yet, the company’s large construction pipeline increases its operational risks. Also, sluggish office space demand due to adequate space availability exerts pressure on rent and occupancies. Moreover, an anticipated rise in interest rates in the long term remains a concern.
To gain a deeper insight into Liberty Property, you can refer to our updated research report issued on Dec 29, 2014.
Over the last 7 days, the Zacks Consensus Estimate for 2014 and 2015 remained unchanged at $2.46 and $2.61 per share, respectively. The stock currently has a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Other better-ranked REIT stocks include Host Hotels & Resorts, Inc. (HST), Prologis Inc. (PLD) and Public Storage (PSA). All these stocks have a Zacks Rank #2 (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.
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