Liberty Property Trust LPT will sell around 8.5 million square feet of suburban office properties as part of its efforts to conclude the multi-year portfolio repositioning plan. The company has also reaffirmed its 2015 guidance and offered its outlook for 2016.
Specifically, Liberty Property expects 2015 funds from operations (“FFO”) per share in the range of $2.66–$2.69 and guided 2016 FFO per share in the range of $2.35–$2.55.
This real estate investment trust (REIT), which has been improving its portfolio amid growing demand for premium quality industrial space through repositioning of its business and including more industrial properties, anticipates asset sales of $0.9–$1.2 billion in 2016.
The company intends to use these proceeds to finance its growing development pipeline as well as potential acquisitions. In fact, it expects to start in new development projects worth $500–$700 million in 2016.
Liberty Property also revealed that its 2015 sales have reached $550 million with the divestment of the Horsham, PA properties and its development pipeline is now 55% pre-leased.
Its chief executive officer (CEO) further stated that management is “seeing remarkable interest” from high-quality companies in search of location at The Navy Yard, PA; Rio Salado in Tempe; and the planned Camden Waterfront office project.
Amid favorable fundamentals in the industrial real estate market and growth in occupancy and rent, the company is aiming to establish its footprint of industrial properties in the U.S. and the UK, focus on office spaces with scope for value addition in four markets, and shed its remaining non-core suburban office properties.
Although such efforts of strategic dispositions and acquisitions are expected to enhance the company’s overall portfolio quality in the long term, an adverse near-term impact on earnings from these dispositions cannot be bypassed.
Liberty Property currently has a Zacks Rank #3 (Hold). Investors interested in the REIT sector may consider stocks like Cousins Properties Incorporated CUZ, Public Storage PSA and STAG Industrial, Inc. STAG. All these stocks carry a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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