Liberty Property Reports In Line

Liberty Property Trust (LRY - Analyst Report) reported second quarter 2011 FFO (fund from operations) of 65 cents per share compared with 67 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.

The reported earnings were in line with the Zacks Consensus Estimate. Recurring FFO for the quarter stood at 69 cents per share.

At quarter end, the in-service portfolio of Liberty Property, spanning 77 million square feet, had occupancy of 89.5% compared with 88.7% in the previous quarter. During the reported quarter, Liberty Property leased 3.4 million square feet of space.

Operating income from same-store properties increased 2.8% on a cash basis and 0.9% on straight line basis year over year. Same-store occupancy during the quarter was 91.5% compared with 90.2% 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 51 properties, spanning 3.1 million square feet, for a total of $266.0 million.

Apart from these property sales, the company also sold properties where it was involved in a joint venture .These include a $8.4 million sale of an industrial property in Bridgeport, New Jersey, an office property in Solihull, United Kingdom for $7.5 million and five acres of land for $9.6 million in Manchester, United Kingdom. The company did not commence any new developments during the quarter.

During the quarter, Liberty acquired two new properties for a total investment of $41.1 million. The acquired properties consist of a 179,000 square foot multi-tenant industrial building in Charlotte, North Carolina, and a 535,000 square foot distribution building in Lehigh Valley, Pennsylvania.

Liberty has entered into two lease agreements for  the Lehigh Valley property to ensure 100% occupancy. The two lease agreements will be effective September 1, 2011 and January 1, 2012, respectively.

 At the end of the reported quarter, the company had cash and cash equivalents of $49.9 million. Liberty Property currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.

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

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