Liberty Property Trust Announces Third Quarter Results

Oct 26, 2010, 07:30 ET from Liberty Property Trust

MALVERN, Pa., Oct. 26 /PRNewswire-FirstCall/ -- Liberty Property Trust (NYSE: LRY) reported that net income per common share (diluted) was $0.30 per share for the quarter ended September 30, 2010, compared to $0.39 per share (diluted) for the quarter ended September 30, 2009. For the nine-month period ended September 30, 2010, net income per common share (diluted) was $0.86, compared to $1.02 per share for the same period in 2009.  

Funds from operations available to common shareholders (diluted) ("FFO") for the third quarter of 2010 was $0.69 per share, compared to $0.72 per share for the third quarter of 2009. A reconciliation of GAAP net income to FFO is included in the financial tables accompanying this press release.  Funds from operations for the third quarter include lease termination fees of $2.0 million. FFO per share for the nine-month period ended September 30, 2010 was $2.00, compared to $2.16 per share for the same period in 2009.  

"In the third quarter we achieved solid execution across all of our disciplines - strong leasing volumes and tenant retention; acquisition of nearly one million square feet of value-add real estate; and adroit financial execution," said Bill Hankowsky, chairman and chief executive officer.  "The consistency of Liberty's performance is in stark contrast to the inconsistency of the economic recovery."

Portfolio Performance

Leasing: At September 30, 2010 Liberty's in-service portfolio of 79.8 million square feet was 89.0% occupied, compared to 88.7% at the end of the second quarter.  During the quarter, Liberty completed lease transactions totaling 6.3 million square feet of space.  

Same Store Performance: Property level operating income for same store properties decreased by 2.1% on a cash basis and decreased by 3.8% on a straight line basis for the third quarter of 2010 compared to the same quarter in 2009.  Occupancy of the same store portfolio was 90.3% as of September 30, 2010, as compared to 90.8% as of June 30, 2010.

Capital and Balance Sheet Management

During the third quarter, Liberty repaid $169.7 million of August 2010, 8.5% senior unsecured notes and issued $350 million of ten-year, 4.75% senior unsecured notes.  The net proceeds from this issuance were used to repay borrowings under the company's unsecured credit facility and for general corporate purposes.

Also during the quarter, Liberty replaced its existing $600 million credit facility which was due in January 2011 with a new, $500 million facility which matures in 2013.  Based upon Liberty's current credit ratings, borrowings under this facility will bear interest at LIBOR plus 230 basis points.  

Real Estate Investments

Development: During the third quarter, Liberty brought into service one development property totaling 75,000 square feet for a total investment of $10.5 million.  This property is 100% occupied at a current yield of 12.5%.  A joint venture in which the company holds a 25% interest brought into service one development property for a total investment of $134.0 million.  This 176,000 square foot property is currently 39.0% leased.  The projected stabilized yield is 4.7%.  No development projects were commenced during the quarter, and Liberty is not currently developing any properties.

Acquisitions: Liberty acquired three properties during the quarter, for $38.4 million.  These properties include two distribution buildings in Houston, TX, totaling 227,800 square feet.  These two properties were vacant when purchased, but Liberty has since leased 46,400 square feet, which will commence in the fourth quarter of 2010.  The third property is a 714,000 square foot distribution property in Orlando, FL.  This property is 100% leased.  The projected stabilized yield on the three properties is 8.7%.

Dispositions: Liberty sold one operating property, a 220,000 square foot industrial building in High Point, North Carolina, and five acres of land, for $3.9 million.

Earnings Outlook

Liberty expects to report funds from operations for 2010 in the range of $2.65 - $2.67 per share, and for 2011 in the range of $2.60 - $2.80 per share.  A reconciliation of FFO to GAAP net income for both 2010 and 2011 is below:

2010 Range

2011 Range

Low

High

Low

High

Projected net income per share

$ 1.12

$ 1.14

$ 1.12

$ 1.30

Depreciation and amortization of unconsolidated joint ventures

0.12

0.14

0.12

0.14

Depreciation and amortization

1.48

1.50

1.46

1.50

Gain on property dispositions

(0.05)

(0.07)

(0.08)

(0.10)

Minority interest share of addbacks

(0.02)

(0.04)

(0.02)

(0.04)

Projected funds from operations per share

$  2.65

$    2.67

$    2.60

$   2.80

Commenting on this guidance, Bill Hankowsky said: "In viewing next year's prospects, we assume that the economic recovery will continue at its current pace, which is a very long, slow ramp up.  Based on this pace of growth, we will not begin to see significant impact on our results until late in 2011.  We have assumed modest acquisition and development investment, but we are armed with an outstanding balance sheet and enormous financial capacity, we will take advantage of investment opportunities should they become available."

About the Company

Liberty Property Trust (NYSE: LRY) 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 80 million square foot portfolio includes more than 700 properties which provide office, distribution and light manufacturing facilities to 2,000 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 jleonard@libertyproperty.com.

Liberty will host a conference call during which management will discuss third quarter results, on Tuesday, October 26, 2010, at 1 p.m. eastern time.  To access the conference call in the United States or Canada, please dial 1-888-870-2815.  For international access, dial 706-643-7691.  The conference identification number is 16649597.  A replay of the call will be available by dialing 1-800-642-1687 for US/Canada participants or 706-645-9291 for international participants.  The conference identification number 16649597 is needed to access the replay.  The call can also be accessed via the Internet on the Investors page of Liberty's web site at www.libertyproperty.com for two weeks following the call.

The statements contained in this press release may include forward-looking statements within the meaning of the federal securities law.  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 factors include, without limitation, the uncertainties affecting real estate businesses generally (such as entry into new leases, renewals of leases and dependence on tenants' business operations), risks relating to our ability to maintain and increase property occupancy and rental rates, the financial condition of tenants, the uncertainties of real estate development and construction activity, the costs and availability of financing, the effects of local economic and market conditions, regulatory changes, potential liability relative to environmental matters and other risks and uncertainties detailed in the company's filings with the Securities and Exchange Commission.  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

September 30, 2010

(Unaudited and in thousands, except per share amounts)

Quarter Ended

Nine Months Ended

September 30, 2010

September 30, 2009

September 30, 2010

September 30, 2009

Operating Revenue

Rental  

$                   131,655

$                   129,848

$                   391,574

$                   386,138

Operating expense reimbursement

57,182

56,511

170,250

167,796

Total operating revenue

188,837

186,359

561,824

553,934

Operating Expenses

 Rental property

38,181

35,957

113,093

108,968

Real estate taxes

22,731

22,852

67,512

66,279

General and administrative

12,634

11,246

40,074

38,453

Depreciation and amortization

43,178

43,039

129,845

127,478

Total operating expenses

116,724

113,094

350,524

341,178

Operating Income

72,113

73,265

211,300

212,756

Other Income/Expense

Interest and other  

2,487

2,624

7,956

8,227

Debt extinguishment gain

-

455

-

1,547

Interest  

(34,896)

(36,533)

(112,468)

(110,898)

Total other income/expense

(32,409)

(33,454)

(104,512)

(101,124)

Income before property dispositions, income taxes, minority interest

   and equity in earnings of unconsolidated joint ventures

39,704

39,811

106,788

111,632

Gain (loss) on property dispositions

691

100

3,701

(2,244)

Income taxes

(475)

(86)

(1,430)

(430)

Equity in earnings of unconsolidated joint ventures

385

515

1,562

2,124

Income from continuing operations

40,305

40,340

110,621

111,082

Discontinued operations (including net gain on property dispositions of  $221 and $5,131 for the quarters ended September 30, 2010 and 2009 and $5,491  and $9,000 for the nine month periods ended September 30, 2010 and 2009)

701

10,404

6,221

16,716

Net Income

41,006

50,744

116,842

127,798

Noncontrolling interest - operating partnerships

(6,451)

(6,818)

(19,155)

(19,732)

Noncontrolling interest - consolidated joint ventures

89

(23)

(47)

397

Net Income available to common shareholders

$                     34,644

$                     43,903

$                     97,640

$                   108,463

Basic income per common share  

Continuing operations

$                         0.30

$                         0.30

$                         0.82

$                         0.87

Discontinued operations

$                         0.01

$                         0.09

$                         0.05

$                         0.15

Total basic income per common share

$                         0.31

$                         0.39

$                         0.87

$                         1.02

Diluted income per common share

Continuing operations

$                         0.29

$                         0.30

$                         0.81

$                         0.87

Discontinued operations

$                         0.01

$                         0.09

$                         0.05

$                         0.15

Total diluted income per common share

$                         0.30

$                         0.39

$                         0.86

$                         1.02

Weighted average shares

Basic

113,077

111,351

112,708

105,989

Diluted

113,773

111,926

113,388

106,441

Amounts attributable to common shareholders

Income from continuing operations

$                     33,966

$                     33,857

$                     91,628

$                     92,354

Discontinued operations

678

10,046

6,012

16,109

Net income

$                     34,644

$                     43,903

$                     97,640

$                   108,463

Liberty Property Trust

Statement of Funds From Operations

September 30, 2010

(Unaudited and in thousands, except per share amounts)

Quarter Ended

Nine Months Ended

September 30, 2010

September 30, 2009

September 30, 2010

September 30, 2009

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

$ 34,644

$        0.31

$ 43,903

$        0.39

$   97,640

$        0.87

$ 108,463

$        1.02

Adjustments:

Depreciation and amortization of unconsolidated joint ventures

3,799

3,991

11,253

12,113

Depreciation and amortization

42,523

43,041

128,243

128,427

Gain on property dispositions

(626)

(9,442)

(6,036)

(14,817)

Noncontrolling interest share in addback for depreciation and amortization

and gain on property dispositions

(1,531)

(1,293)

(4,485)

(4,497)

Funds from operations available to common shareholders - basic

$ 78,809

$        0.70

$ 80,200

$        0.72

$ 226,615

$        2.01

$ 229,689

$        2.17

Reconciliation of net income to FFO - diluted:

Diluted - income available to common shareholders

$ 34,644

$        0.30

$ 43,903

$        0.39

$   97,640

$        0.86

$ 108,463

$        1.02

Adjustments:

Depreciation and amortization of unconsolidated joint ventures

3,799

3,991

11,253

12,113

Depreciation and amortization  

42,523

43,041

128,243

128,427

Gain on property dispositions

(626)

(9,442)

(6,036)

(14,817)

Noncontrolling interest excluding preferred unit distributions  

1,198

1,565

3,396

3,974

Funds from operations available to common shareholders - diluted

$ 81,538

$        0.69

$ 83,058

$        0.72

$ 234,496

$        2.00

$ 238,160

$        2.16

Reconciliation of weighted average shares:

Weighted average common shares - all basic calculations

113,077

111,351

112,708

105,989

Dilutive shares for long term compensation plans

696

575

680

452

Diluted shares for net income calculations

113,773

111,926

113,388

106,441

Weighted average common units

3,943

4,017

3,949

4,018

Diluted shares for funds from operations calculations

117,716

115,943

117,337

110,459

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

September 30, 2010

(In thousands, except share amounts)

September 30, 2010

December 31, 2009

Assets

(unaudited)

Real estate:

Land and land improvements

$                   863,143

$                  848,988

Building and improvements

4,406,194

4,283,250

Less: accumulated depreciation

(1,064,018)

(970,935)

Operating real estate

4,205,319

4,161,303

Development in progress

-

66,714

Land held for development

209,668

218,633

Net real estate

4,414,987

4,446,650

Cash and cash equivalents

111,941

237,446

Restricted cash

41,163

42,232

Accounts receivable

9,600

6,057

Deferred rent receivable

106,540

95,527

Deferred financing and leasing costs, net of accumulated

amortization (2010, $118,298; 2009, $108,390)

142,218

134,309

Investments in and advances to unconsolidated joint ventures

172,936

175,584

Assets held for sale  

5,457

5,564

Prepaid expenses and other assets

81,197

85,574

Total assets

$                5,086,039

$               5,228,943

Liabilities

Mortgage loans

$                   338,405

$                  473,993

Unsecured notes

2,023,143

1,842,882

Credit facility

-

140,000

Accounts payable

42,735

31,195

Accrued interest

25,915

31,251

Dividend and distributions payable

55,913

55,402

Other liabilities

152,952

171,051

Total liabilities

2,639,063

2,745,774

Equity

Shareholders' equity:

Common shares of beneficial interest, $.001 par value, 183,987,000 shares

authorized, 115,017,633 (includes 1,249,909 in treasury) and 113,875,211

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

September 30, 2010 and December 31, 2009, respectively

115

114

Additional paid-in capital

2,543,049

2,509,704

Accumulated other comprehensive (loss) income

364

2,339

Distributions in excess of net income

(401,857)

(337,911)

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

September 30, 2010 and December 31, 2009

(51,951)

(51,951)

Total shareholders' equity

2,089,720

2,122,295

Noncontrolling interest - operating partnership

3,943,224 and 4,011,354 common units outstanding as of

September 30, 2010 and December 31, 2009, respectively

68,629

72,294

9,740,000 preferred units outstanding as of September 30, 2010 and December 31, 2009

287,959

287,959

Noncontrolling interest - consolidated joint ventures

668

621

Total equity

2,446,976

2,483,169

Total liabilities & equity

$                5,086,039

$               5,228,943

SOURCE Liberty Property Trust



RELATED LINKS

http://www.libertyproperty.com