Liberty Property Trust LPT reported first-quarter 2015 funds from operations (“FFO”) of 70 cents per share, which surpassed the Zacks Consensus Estimate of 62 cents as well as the prior-year quarter figure of 58 cents.
Total operating revenue of $206.9 million came in 4.7% above the year-ago quarter figure. This comfortably beat the Zacks Consensus Estimate of $202 million.
Quarterly results reflect rent and occupancy growth, strong leasing activities and development deliveries, and continued strength in the industrial and Class A office markets. Following the earnings release on Tuesday, before the market opened, shares of Liberty Property climbed 1.7% in the day’s trading.
Quarter in Details
During the reported quarter, Liberty Property accomplished lease deals for 6.7 million square feet of space compared with 5.3 million square feet leased in fourth-quarter 2014. Consequently, as of Mar 31, 2015, occupancy at the company’s in-service portfolio – spanning 105 million square feet – climbed 20 basis points (bps) sequentially to 93.2%.
Same-store properties’ operating income increased 1.8% on a cash basis and 2.9% year over year on a straight-line basis.
During the quarter, Liberty Property brought into operation 4 wholly owned development properties for a total investment amount of $47 million. The property, with 466,000 square feet of leasable space, is 87% occupied as of Apr 1, 2015.
Liberty Property did not acquire or begin development of any new properties. However, the company divested 7 properties, comprising 622,000 square feet of leasable space, for $42.2 million.
The company exited first-quarter 2015 with cash and cash equivalents of $38.8 million, down from $69.3 million as of Dec 31, 2015.
Our Take
Liberty Property’s better-than-expected FFO is indeed encouraging for investors. Moreover, the company’s plan to strengthen its portfolio base on the back of industrial property buyouts and shedding of non-core office properties will drive its growth, going ahead. This, however, poses near-term operational risks as well.
Currently, Liberty Property carries a Zacks Rank #3 (Hold).
Presently, we look forward to the results of other REITs such as General Growth Properties, Inc GGP, Avalonbay Communities Inc. AVB and Plum Creek Timber Co. Inc. PCL that are scheduled to report next week.
Note: FFO, 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.
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