Liberty Property Trust’s (LPT - Free Report) continued efforts to reposition its portfolio toward industrial real estate assets are a strategic fit. However, the company is monetizing non-core office properties to pursue such expansion opportunities.
Such efforts to refine portfolio and capitalize on value-creation opportunities are expected to drive the company’s long-term growth. Specifically, the company is growing its industrial platform in response to customers’ demand for industrial space. It is actively investing in strategic acquisitions and value-additive development projects.
Notably, fundamentals of the industrial market continue to remain robust, backed by growing demand for industrial properties amid economic recovery and job-market improvements, which has led to strong rent growth, high occupancy and development opportunities. These factors will likely benefit industrial REITs like Prologis (PLD - Free Report) , Terreno Realty Corporation (TRNO - Free Report) and Duke Realty (DRE - Free Report) .
For Liberty Property, given its premium quality industrial portfolio located in upscale locations and pro-business environment, the company is poised to gain. In fact, its industrial portfolio, spanning 96.1 million square feet of area, enjoys higher occupancy and leasing activity.
Also, shares of this Zacks Rank #3 (Hold) company have outperformed its industry over the past six months. In fact, its shares have returned 8.2% compared with the industry’s rally of 6.9% during the same time frame.
You can see the complete list of today’s Zacks #1 Rank (Strong buy) stocks here.
To fund acquisition of preferred properties, the company is divesting its non-core office properties. Particularly, the company plans to accelerate the disposition of its remaining sub-urban office properties in 2018, particularly the Phoenix portfolio and Philadelphia suburban office buildings. While such efforts to enhance portfolio-mix are a strategic fit for long-term growth, the near-term dilution impact of such moves on earnings is unavoidable.
Further, the company has a significant development pipeline, spanning 6.7 square million feet of space across 16 markets, with total investment of $764 million. This exposes it to various risks such as rising construction costs, entitlement delays and lease-ups.
Also, since the recovery in the industrial market has continued for a long time, any chances of a striking decrease in availability rates are less. In addition, supply is likely to increase in the upcoming quarters and this may affect growth tempo of this real estate category.
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