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Liberty (LPT) Q2 FFO and Revenues Beat, Fall Y/Y, Stock Down

Liberty Property Trust LPT reported second-quarter 2017 funds from operations (“FFO”) per share of 65 cents, which surpassed the Zacks Consensus Estimate of 62 cents. Total operating revenue of around $183.1 million also outpaced the Zacks Consensus Estimate of $170.2 million.

However, on a year-over-year basis, the company’s FFO per share reported a decline of 3 cents from 68 cents reported in the year-ago quarter. Also, total operating revenue edged down 1.9% year over year.

During the reported quarter, Liberty Property accomplished lease deals for 6.5 million square feet of space. However, as of Jun 30, 2017, occupancy at the company’s operating portfolio, spanning 98.9 million square feet, contracted 50 basis points (bps) sequentially to 95.6%.

Amid these, shares of Liberty Property fell nearly 0.4% to $41.34 during regular trading session on Jul 25.

Quarter in Detail

Liberty Property’s industrial portfolio, spanning 92.3 million square feet, was leased 95.9% at the end of the quarter, underlining a contraction of 70 bps from the prior quarter. However, industrial distribution rents escalated 11.9% on renewal and replacement leases signed during the quarter.  

On the other hand, the office portfolio, comprising 6.6 million square feet, had occupancy of 91.5%, up 310 bps from the prior quarter. This was due to the commencement of a previously announced lease for 170,000 square feet of office space. Office rents were up 5.7% on renewal and replacement leases.

Same-store properties’ operating income inched up 0.7% year over year on a cash basis and 1.4% on a straight-line basis. Additionally, same-store operating income for the industrial portfolio climbed 2.1% on a cash basis and 2.7% on a straight-line basis. However, same-store operating income for office portfolio decreased 6.6% on a cash basis and 5.5% on a straight-line basis.

Liberty Property exited second-quarter 2017 with cash and cash equivalents of around $14.7 million, down from $43.6 million recorded at the end of the prior year.

Portfolio Activity

During the second quarter, four wholly owned development properties were brought into service by Liberty Property, for an aggregate investment of $65.2 million. The properties comprised 724,000 square feet of leasable space and were 100% occupied at the end of the quarter.

Furthermore, the company began development of two wholly owned properties. These properties aggregate 1,026,000 square feet of leasable space and involve projected investment of $73.6 million.

During the reported quarter, Liberty acquired one 101,000 square foot industrial building, which is presently under development, in Gardena, CA, for $20.1 million.  On the other hand, during the reported quarter, the company sold two suburban office buildings aggregating 94,000 square feet for $8.1 million.


Liberty Property updated its guidance and now expects full-year 2017 FFO per share in the range of $2.49–$2.55, against $2.42–$2.52 guided earlier. The Zacks Consensus Estimate for the same is currently pegged at $2.47.

Our Take

Liberty Property is poised for growth as fundamentals of the industrial real estate market remain robust, backed by growing demand, resulting in solid rent growth and development opportunities. However, increasing supply of industrial real estates in the upcoming period, adverse near-term impact on earnings from dispositions and rise in interest rates remain concerns.

Currently, Liberty Property carries a Zacks Rank #2 (Buy).    You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Liberty Property Trust Price, Consensus and EPS Surprise

Liberty Property Trust Price, Consensus and EPS Surprise | Liberty Property Trust Quote

We now look forward to the earnings releases of Essex Property Trust Inc. ESS, Apartment Investment and Management Company AIV and Ventas Inc. VTR, all of which are expected to report quarterly numbers this week.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. 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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