Liberty Property Trust Announces Second Quarter 2014 Results and Revised Full-Year Financial Projections

News provided by

Liberty Property Trust

Jul 22, 2014, 08:00 ET

MALVERN, Pa., July 22, 2014 /PRNewswire/ -- Liberty Property Trust reported that funds from operations available to common shareholders (diluted) ("FFO") for the second quarter of 2014 was $0.59 per share, compared to $0.66 per share for the second quarter of 2013. FFO per share for the six-month period ended June 30, 2014 was $1.17, compared to $1.31 per share for the same period in 2013. 

Net income per common share (diluted) was $0.20 for the quarter ended June 30, 2014, compared to $0.33 for the quarter ended June 30, 2013. Net income per common share (diluted) for the six-month period ended June 30, 2014 was $0.69, compared to $0.93 for the same period in 2013.

Results for the first half of 2014 reflect the sale of 6.6 million square feet of suburban office and flex properties which closed in two installments during December 2013 and January 2014. Year-over-year results are reflective of strategic portfolio transformation activities that have increased Liberty's industrial portfolio and decreased its office exposure.

Funds from Operations Guidance

Liberty now expects to report 2014 FFO per share in the range of $2.42 - $2.48. Previous guidance was $2.45-$2.55 per share. The revised guidance reflects reduced acquisition volumes for the year, minor delays in expected development starts, and slower than budgeted occupancy increases in the core portfolio.

Commenting on the quarter and revised projections, chairman and chief executive officer Bill Hankowsky said, "We continued to see good activity in the industrial markets, with solid demand and rent increases. The thin and pricey industrial transaction market is offering few acquisition opportunities that meet our investment criteria, therefore it has taken longer than expected to deploy the capital on our balance sheet in a manner that creates value. We believe that the delays in leasing and development starts that have contributed to our revised projections are somewhat situational and that they are not indicative of negative market trends."

Portfolio Performance

Leasing: At June 30, 2014, Liberty's in-service portfolio of 102.5 million square feet was 91.7% occupied, compared to 91.0% at the end of the first quarter of 2014. During the quarter, Liberty completed lease transactions totaling 7.2 million square feet of space.

Same Store Performance: Property level operating income for same store properties decreased by 2.3% on a cash basis and by 0.6% on a straight line basis for the second quarter of 2014 compared to the same quarter in 2013.

Real Estate Investments

Development: In the second quarter, Liberty brought into service one development property for a total investment of $12.4 million. The property contains 227,000 square feet of leasable space and was 100% occupied as of June 30, 2014. The current yield on this property is 8.8%.

Also during the quarter, Liberty began development on three properties for a projected investment of $69.2 million. The properties consist of an 800,000 square foot distribution building in Bethlehem, PA and a 130,000 square foot multi-tenant industrial building in Richmond, Virginia, both for inventory, and a fully-leased 76,000 square foot flex building in Philadelphia.

In addition, Liberty announced that agreements were executed to develop, in a joint venture with Comcast Corporation, a $933 million office and hotel property in Philadelphia. The project will include 1.334 million square feet of rentable office space and a 222-room Four Seasons Hotel.  Construction began earlier this month. The joint venture is 20% owned by Liberty and Liberty's investment in the project is expected to be approximately $185 million.

Acquisitions: Liberty acquired six properties for $53.2 million during the second quarter. They consist of five industrial properties which contain 705,000 square feet in Durham, North Carolina and an 85,000 square foot distribution building in Garden Grove, California. The properties are 100% leased. 

Real Estate Dispositions

Liberty sold three distribution buildings in southern New Jersey for $32.2 million into a joint venture in which Liberty holds a 25% interest. The properties total 603,000 square feet.

FFO Guidance Reconciliation

As stated above, Liberty expects to report 2014 funds from operations ("FFO") per share in the range of $2.42 - $2.48. A reconciliation of projected FFO to projected GAAP net income for 2014 is below (all amounts projected):

2014 Range (original)

2014 Range (revised)









Low

High

Low

High

Net income per share

$ 1.30

$ 1.40

$ 1.42

$ 1.51

Depreciation and amortization of









   unconsolidated joint ventures

0.09

0.11

0.09

0.11

Depreciation and amortization

1.53

1.61

1.52

1.56

Gain on property dispositions

(0.44)

(0.54)

(0.58)

(0.68)

Noncontrolling interest share of addbacks

(0.03)

(0.02)

(0.03)

(0.02)







Funds from operations per share


$ 2.45

$ 2.55

$ 2.42

$ 2.48

About the Company

Liberty Property Trust (NYSE:LPT) is a leader in commercial real estate, serving customers in the United States and United Kingdom through the development, acquisition, ownership and management of superior office and industrial properties. Liberty's 103 million square foot portfolio includes more than 750 properties which provide office, distribution and light manufacturing facilities to 1,800 tenants. 

Additional information about the Company, including Liberty's Quarterly Supplemental Package with detailed financial information, is available in the Investors section of the Company's web site at www.libertyproperty.com. If you are unable to access the web site, a copy of the supplemental package may be obtained by contacting Liberty by phone at 610-648-1704, or by e-mail to [email protected].

Liberty will host a conference call during which management will discuss second quarter results, on Tuesday, July 22, 2014, at 1:00 p.m. Eastern Time. To access the conference call, please dial 855-277-7530. The passcode needed for access is 72369583. A replay of the call will be available until August 22, 2014, by dialing 1-855-859-2056 using the same passcode as above. The call can also be accessed in the Investors section of Liberty's web site at www.libertyproperty.com.

The statements contained in this press release may include forward-looking statements within the meaning of the federal securities law. These forward-looking statements include statements relating to, among others things, the timing of leasing, development and acquisition activity, expectations for our operating results, business and financial condition, our joint venture with Comcast, the impact of our strategic transformation activities on our portfolio and business and our growth prospects, as well as statements that are generally accompanied by words such as "believes," "anticipates," "expects," "estimates," "should," "seeks," "intends," "proposed," "planned," "outlook"  and "goal" or similar expressions. Although Liberty believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved.  As forward-looking statements, these statements involve risks, uncertainties and other factors that could cause actual results to differ materially from the expected results.  These risks, uncertainties and other factors include, without limitation, uncertainties affecting real estate business generally (such as entry into new leases, renewals of leases and dependence on tenants' business operations), risks relating to the integration of the operations of entities that we have acquired or may acquire, risks relating to financing arrangements and sales of securities, possible environmental liabilities, risks relating to leverage and debt service (including availability of financing terms acceptable to the company and sensitivity of the company's operations and financing arrangements to fluctuations in interest rates), dependence on the primary markets in which the company's properties are located, the existence of complex regulations relating to status as a REIT and the adverse consequences of the failure to qualify as a REIT, risks relating to litigation, including without limitation litigation involving entities that we have a acquired or may acquire, and the potential adverse impact of market interest rates on the market price for the company's securities, and other risks and uncertainties detailed in the company's filings with the Securities and Exchange Commission, including without limitation the Company's Annual Report on Form 10-K for the year ended December 31, 2013.  The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 Liberty Property Trust 

 Statement of Operations 

June 30, 2014

 (Unaudited and in thousands, except per share amounts) 













 Quarter Ended 

 Six months ended 

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2013





 Operating Revenue 









 Rental  

$                           139,377

$                           106,955

$                           278,311

$                           207,788

  Operating expense reimbursement

53,582

44,069

112,263

90,362

 Total operating revenue 

192,959

151,024

390,574

298,150










 Operating Expenses 









  Rental property

31,928

26,684

70,489

51,913

 Real estate taxes 

25,716

18,906

50,217

36,863

 General and administrative

14,973

16,455

33,334

36,248

 Depreciation and amortization 

57,872

37,527

114,606

74,748

 Total operating expenses 

130,489

99,572

268,646

199,772











 Operating Income 

62,470

51,452

121,928

98,378










 Other Income/Expense 









 Interest and other  

3,117

5,352

5,570

9,732

 Interest  

(38,470)

(28,133)

(77,677)

(55,872)

 Total other income/expense 

(35,353)

(22,781)

(72,107)

(46,140)










 Income before property dispositions, income taxes, noncontrolling interest 









    and equity in earnings of unconsolidated joint ventures 

27,117

28,671

49,821

52,238

 Gain on property dispositions 

1,896

-

1,896

-

 Income taxes 

(693)

(660)

(1,224)

(1,151)

 Equity in earnings of unconsolidated joint ventures 

1,546

1,566

5,705

3,323










 Income from continuing operations 

29,866

29,577

56,198

54,410










 Discontinued operations (including net gains on property dispositions of 










$140 and $7,625 for the quarters ended June 30, 2014 and 2013, respectively and $46,256 and $49,338 for the six month periods ended June 30, 2014 and 2013, respectively)

241

13,666

48,015

63,489

 Net Income 

30,107

43,243

104,213

117,899

 Noncontrolling interest - operating partnerships 

(821)

(3,134)

(2,674)

(6,551)

 Noncontrolling interest - consolidated joint ventures 

(37)

-

(390)

-

 Net Income available to common shareholders     

$                             29,249

$                             40,109

$                           101,149

$                           111,348











 Net income 

$                             30,107

$                             43,243

$                           104,213

$                           117,899

 Other comprehensive income (loss) - foreign currency translation 

6,464

40

7,811

(4,812)

 Other comprehensive loss - change in net unrealized gain on derivative instruments
 

(1,145)

-

(1,656)

-

 Comprehensive income 

35,426

43,283

110,368

113,087

 Less: comprehensive income attributable to noncontrolling interest 

(983)

(3,135)

(3,209)

(6,406)

 Comprehensive income attributable to common shareholders 

$                             34,443

$                             40,148

$                           107,159

$                           106,681










 Basic income per common share  










 Continuing operations 

$                                 0.20

$                                 0.22

$                                 0.37

$                                 0.42

 Discontinued operations 

$                                     -

$                                 0.11

$                                 0.32

$                                 0.51

 Total basic income per common share 

$                                 0.20

$                                 0.33

$                                 0.69

$                                 0.93










 Diluted income per common share 










 Continuing operations 

$                                 0.20

$                                 0.22

$                                 0.37

$                                 0.42

 Discontinued operations 

$                                     -

$                                 0.11

$                                 0.32

$                                 0.51

 Total diluted income per common share 

$                                 0.20

$                                 0.33

$                                 0.69

$                                 0.93










 Weighted average shares 










 Basic 

147,012

120,081

146,749

119,416

 Diluted 

147,774

120,911

147,444

120,229










 Amounts attributable to common shareholders     










 Income from continuing operations 

$                             29,014

$                             26,848

$                             54,262

$                             49,751

 Discontinued operations 

235

13,261

46,887

61,597

 Net income 

$                             29,249

$                             40,109

$                           101,149

$                           111,348










 Liberty Property Trust 

 Statement of Funds From Operations 

June 30, 2014

 (Unaudited and in thousands, except per share amounts) 





























 Quarter Ended 

 Six months ended 

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2013


Per 

Per 

Per 

Per 


Weighted

Weighted

Weighted

Weighted


 Average  

 Average  

 Average  

 Average  

Dollars

Share

Dollars

Share

Dollars

Share

Dollars

Share










 Reconciliation of net income to FFO - basic: 











 Basic - income available to common shareholders 

$              29,249

$             0.20

$              40,109

$                         0.33

$        101,149

$             0.69

$        111,348

$              0.93












 Adjustments: 











 Depreciation and amortization of unconsolidated joint ventures 

3,341

3,301

6,632

6,698

 Depreciation and amortization 

57,509

44,804

113,616

89,776

 Gain on property dispositions 

(2,085)

(7,658)

(47,611)

(49,364)

 Noncontrolling interest share in addback for depreciation and amortization 












 and gain on property dispositions 

(1,380)

(1,199)

(1,707)

(1,399)

 Funds from operations available to common shareholders - basic 

$              86,634

$             0.59

$              79,357

$                         0.66

$        172,079

$             1.17

$        157,059

$              1.32












 Reconciliation of net income to FFO - diluted: 











 Diluted - income available to common shareholders 

$              29,249

$             0.20

$              40,109

$                         0.33

$        101,149

$             0.69

$        111,348

$              0.93












 Adjustments: 











 Depreciation and amortization of unconsolidated joint ventures 

3,341

3,301

6,632

6,698

 Depreciation and amortization  

57,509

44,804

113,616

89,776

 Gain on property dispositions 

(2,085)

(7,658)

(47,611)

(49,364)

 Noncontrolling interest excluding preferred unit distributions  

703

1,226

2,438

3,432

 Funds from operations available to common shareholders - diluted 

$              88,717

$             0.59

$              81,782

$                         0.66

$        176,224

$             1.17

$        161,890

$              1.31












 Reconciliation of weighted average shares: 











 Weighted average common shares - all basic calculations 

147,012

120,081

146,749

119,416

 Dilutive shares for long term compensation plans 

762

830

695

813

 Diluted shares for net income calculations 

147,774

120,911

147,444

120,229

 Weighted average common units 

3,551

3,714

3,555

3,714

 Diluted shares for Funds from operations calculations 

151,325

124,625

150,999

123,943










































The Company believes that the calculation of Funds from operations is helpful to investors and management as it is a measure of the Company's operating performance that excludes depreciation and amortization and gains and losses from property dispositions.  As a result, year over year comparison of Funds from operations reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, providing perspective not immediately apparent from net income.  In addition, management believes that Funds from operations provides useful information to the investment community about the Company's financial performance when compared to other REITs since Funds from operations is generally recognized as the standard for reporting the operating performance of a REIT.  Funds from operations available to common shareholders is defined by NAREIT as net income (computed in accordance with generally accepted accounting principles ("GAAP")), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Funds from operations available to common shareholders does not represent net income or cash flows from operations as defined by GAAP and does not necessarily indicate that cash flows will be sufficient to fund cash needs. It should not be considered as an alternative to net income as an indicator of the Company's operating performance or to cash flows as a measure of liquidity. Funds from operations available to common shareholders also does not represent cash flows generated from operating, investing or financing activities as defined by GAAP.












Liberty Property Trust

Balance Sheet 

June 30, 2014

(Unaudited and in thousands, except share and unit amounts)
























June 30, 2014

December 31, 2013

Assets






Real estate:







Land and land improvements

$                      1,162,397

$                      1,139,455

Building and improvements

5,244,783

5,144,758

Less: accumulated depreciation

(1,135,864)

(1,057,680)










Operating real estate

5,271,316

5,226,533










Development in progress

329,685

209,187

Land held for development

241,196

233,055










Net real estate


5,842,197

5,668,775










Cash and cash equivalents

228,678

163,414

Restricted cash


18,980

51,456

Accounts receivable

15,272

13,900

Deferred rent receivable

107,473

99,956

Deferred financing and leasing costs, net of accumulated





amortization (2014, $158,313; 2013, $140,958)

221,121

226,607

Investments in and advances to unconsolidated joint ventures

203,876

179,655

Assets held for sale  

-

275,957

Prepaid expenses and other assets

94,142

95,840










Total assets


$                      6,731,739

$                      6,775,560










Liabilities






Mortgage loans


$                         537,338

$                         545,306

Unsecured notes


2,708,668

2,708,213

Credit facility


-

-

Accounts payable 

56,073

70,406

Accrued interest


28,530

25,777

Dividend and distributions payable

71,864

71,323

Other liabilities


219,050

250,819










Total liabilities


3,621,523

3,671,844










Noncontrolling interest - operating partnership - 301,483 preferred units





outstanding as of June 30, 2014 and December 31, 2013

7,537

7,537










Equity






Shareholders' equity:





Common shares of beneficial interest, $.001 par value, 283,987,000 shares





authorized, 149,008,030 (includes 1,249,909 in treasury) and 147,846,801





(includes 1,249,909 in treasury) shares issued and outstanding as of 





June 30, 2014 and December 31, 2013, respectively

149

148

Additional paid-in capital

3,709,753

3,669,618

Accumulated other comprehensive income

15,752

9,742

Distributions in excess of net income

(630,706)

(591,713)

Common shares in treasury, at cost, 1,249,909 shares as of





June 30, 2014 and December 31, 2013

(51,951)

(51,951)

Total shareholders' equity

3,042,997

3,035,844










Noncontrolling interest - operating partnership






3,553,566 and 3,556,566 common units outstanding as of June 30, 2014 and December 31, 2013, respectively

55,763

56,713

Noncontrolling interest - consolidated joint ventures

3,919

3,622










Total equity


3,102,679

3,096,179










Total liabilities, noncontrolling interest - operating partnership & equity

$                      6,731,739

$                      6,775,560










SOURCE Liberty Property Trust