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On Jan 27, we upgraded our long-term recommendation on Liberty Property Trust to Neutral from Underperform, following its completion of the Cabot buyout in the fourth quarter and announcement of the latest deal with Comcast to build property worth $1.2 billion in the U.S.

Why the Upgrade?

Liberty Property is expected to benefit from the progressing U.S. industrial market fundamentals that are being driven by healthy demand for industrial properties with improving net absorption rate and declining vacancy rates. Capitalizing on the opportunity, the company sealed the $1.475 billion buyout of the operating partnership of Cabot Industrial Value Fund III in fourth-quarter 2013.

Also, the Comcast deal penned on Jan 15 to build a mixed use tower in Philadelphia – which is projected to be U.S.’s tallest building outside New York and Chicago – raised investors’ hope. These initiatives are poised to strengthen the company’s presence in upscale locations, going forward.

In addition, to lower its exposure to suburban office properties, the company inked a deal to divest 97 properties and 159 acres of land in the fourth quarter. Of this, Liberty Property concluded the sale of 49 properties and 140 acres of land in late Dec 2013, and garnered $367.7 million. The sale of the remaining assets is slated to be accomplished by late Jan 2014. These activities are anticipated to enhance the company’s portfolio mix and boost the top line going forward.

Over the last 30 days, the Zacks Consensus Estimate for both 2013 and 2014 FFO per share rose by a penny to $2.50 per share. The stock currently has a Zacks Rank #3 (Hold).

Liberty Property is slated to report its fourth-quarter 2013 results on Feb 4. The company’s Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.59%. This along with the Zacks Rank #3 makes us confident about a positive earnings beat.

Other Stocks to Consider

Some better-ranked REIT-Equity Trust – Otherstocks include National Health Investors Inc. (NHI - Snapshot Report), Public Storage (PSA - Analyst Report) and Sabra Health Care REIT, Inc. (SBRA - Snapshot Report). All these stocks carry a Zacks Rank #2 (Buy).

FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

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