Liberty Property Beats by a Whisker (DRE) (LRY)

Zacks

Liberty Property Trust (LRY) reported FFO (fund from operations) of $77.2 million or 65 cents per share in third quarter 2011 compared with $81.5 million or 69 cents per share in the year-earlier quarter. Fund from operations, 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. Reported FFO per share in the quarter surpassed the Zacks Consensus Estimate by a penny.

At quarter end, the in-service portfolio of Liberty Property, spanning 78 million square feet, had occupancy of 89.9% compared with 89.5% in the previous quarter. During the reported quarter, Liberty Property leased 4.5 million square feet of space.

Operating income from same-store properties spiked 0.7% on a cash basis but inched down 0.1% on straight line basis year over year. Same-store occupancy during the quarter was 91.9% compared with 90.3% in the year-earlier quarter.

The company continues to pursue its portfolio repositioning program as it focuses on higher growth markets with better job and rent growth prospects.

During the quarter, Liberty Property sold 7 properties, spanning 654,000 million square feet, and 21 acres of land for a total of $74.6 million. The disposed operating properties include four office buildings in Brookfield, Wisconsin, totaling 338,424 square feet, a 117,100 square foot office building in Greenville, South Carolina, a 118,500 square foot industrial building in Orlando, Florida, and an 80,000 square foot flex building in Boca Raton, Florida.

During the quarter, Liberty Property acquired 8 properties for a total investment of $104.4 million. The acquired properties are currently 55.0% leased and span 1.9 million square feet of space. Subsequent to the end of the quarter, the company acquired a 1.08 million square foot industrial park in Charlotte, North Carolina named Cross point center for a total cost of $61.4 million.

Liberty signed a lease with American Tire Distributors in Charlotte for a 179,000 square foot build-to-suit warehouse development, which is expected to commence in November this year. The company has already started development of a 153,000 square foot office building in Philadelphia.

In the quarter, the company replaced its existing $500 million credit facility, which was expected to mature in November, 2013 with a new credit facility. The new facility is worth $500 million and comes with an one-year extension option.

At the end of the reported quarter, the company had cash and cash equivalents of $ 24.4 million. The company expects to report funds from operation in the range of $2.55-$2.58 per share for fiscal 2011.

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

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