LIBERTY PROPERTY TRUST 
By MALVERN, Pa., April 22, 2014 /PRNewswire/ -- Liberty Property Trust reported that funds from operations available to common shareholders (diluted) ("FFO") for the first quarter of 2014 was $0.58 per share, compared to $0.65 per share for the first quarter of 2013. Funds from operations for the first quarter of 2014 and 2013 include $3.9 million and $3.8 million, respectively, of additional compensation expense due to the accelerated vesting of long-term compensation due to the years of service and ages of certain employees.
Net income per common share (diluted) was $0.49 for the quarter ended March 31, 2014, compared to $0.60 for the quarter ended March 31, 2013. Net income for the quarter ended March 31, 2014 included net gains on property dispositions of $46.0 million ($0.31 per share) versus $43.5 million ($0.36 per share) for the corresponding quarter in 2013.
Results for the first quarter 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.
"In the first quarter, Liberty finalized our transformational sale of suburban office and flex properties, we announced the largest office build-to-suit development in the company's history, and we lowered our cost of borrowing with a new, expanded line of credit," said Bill Hankowsky, chairman and chief executive officer. "With the exception of the effects of the winter's unusually harsh weather conditions, our portfolio performed as expected and budgeted in the first quarter. We continue to see strong activity in our industrial markets and anticipate accelerating growth in earnings in the second half of 2014 consistent with our previously announced earnings guidance."
Portfolio Performance
Leasing: At March 31, 2014, Liberty's in-service portfolio of 101.5 million square feet was 91.0% occupied, compared to 91.6% at the end of the fourth quarter of 2013. During the quarter, Liberty completed lease transactions totaling 5.3 million square feet of space.
Same Store Performance: Property level operating income for same store properties decreased by 1.4% on a cash basis and by 1.8% on a straight line basis for the first quarter of 2014 compared to the same quarter in 2013.
Real Estate Investments
Development: In the first quarter, Liberty brought into service three development properties for a total investment of $30.5 million. The properties contain 502,000 square feet of leasable space and were 86.4% occupied as of March 31, 2014. The current yield on these properties is 7.4% and the projected stabilized yield is 8.4%.
Also during the quarter, Liberty began development on two properties for a projected investment of $61.0 million. The properties consist of two distribution properties for inventory in Texas: a 199,000 square foot distribution facility in Coppell and a 207,000 square foot distribution facility in Houston.
In addition, Liberty announced preliminary terms to develop, in a joint venture with Comcast Corporation, a 1.5 million square foot office and hotel property in Philadelphia, for $900 million. The joint venture will be 20% owned by Liberty and will be managed by Liberty. Development is expected to commence in summer 2014.
Acquisitions: Liberty acquired two properties for $37.6 million during the quarter: a vacant 523,000 square foot distribution facility in California's Inland Empire, and a fully-leased, 90,000 square foot distribution facility in Greenville, South Carolina.
Real Estate Dispositions
In December 2013, Liberty entered into an agreement to sell 159 acres of land and 97 operating properties totaling 6.6 million square feet of leasable space. In December, the company closed on the first installment of the sale for $367.7 million. This installment comprised 140 acres of land and 49 properties totaling 4.0 million square feet of leasable space. In January 2014, the remaining 19 acres of land and 48 properties totaling 2.6 million square feet of leasable space were sold for $329.6 million. At the time of sale the combined percentage leased for the 97 properties was 88.2%.
Liberty sold one additional operating property during the quarter, a vacant 60,000 square foot distribution building in southern California for $5.0 million.
Capital Activities and Balance Sheet Management
Liberty replaced its existing $500 million credit facility which was due November 2015 with a new, $800 million facility. The new facility matures in March 2018 and the company has options to extend the maturity date for up to one additional year. Based upon the company's current credit ratings, borrowings under the new facility bear interest at LIBOR plus 105 basis points.
FFO Guidance
Liberty expects to report 2014 funds from operations ("FFO") per share in the range of $2.45 - $2.55. A reconciliation of projected FFO to projected GAAP net income for 2014 is below (all amounts projected):
2014 Range
Low High
Net income per share $1.30 $1.40
Depreciation and amortization
of
unconsolidated joint ventures 0.09 0.11
Depreciation and amortization 1.53 1.61
Gain on property dispositions (0.44) (0.54)
Noncontrolling interest share
of addbacks (0.03) (0.03)
===== =====
Funds from operations per
share $2.45 $2.55
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 101 million square foot portfolio includes more than 700 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 jleonard@libertyproperty.com.
Liberty will host a conference call during which management will discuss first quarter results, on Tuesday, April 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 24534109. A replay of the call will be available until May 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, future asset dispositions, expectations for our operating results, business and financial condition, the impact of the Cabot acquisition 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
March 31, 2014
(Unaudited and in thousands, except per share amounts)
Quarter Ended
-------------
March 31, 2014 March 31, 2013
-------------- --------------
Operating Revenue
Rental $138,934 $104,716
Operating expense reimbursement 58,681 42,411
Total operating revenue 197,615 147,127
------- -------
Operating Expenses
Rental property 38,561 25,229
Real estate taxes 24,501 17,957
General and administrative 18,361 19,793
Depreciation and amortization 56,734 37,220
Total operating expenses 138,157 100,199
------- -------
Operating Income 59,458 46,928
Other Income/Expense
Interest and other 2,535 2,573
Interest (39,207) (27,739)
Total other income/expense (36,672) (25,166)
------- -------
Income before property dispositions, income taxes, noncontrolling interest
and equity in earnings of unconsolidated joint ventures 22,786 21,762
(Loss) gain on property dispositions (83) 1,800
Income taxes (531) (491)
Equity in earnings of unconsolidated joint ventures 4,159 1,757
----- -----
Income from continuing operations 26,331 24,828
Discontinued operations (including net gains on property dispositions of
$46,117 and $41,713 for the quarters ended March 31, 2014 and 2013, respectively) 47,775 49,828
------ ------
Net Income 74,106 74,656
Noncontrolling interest - operating partnerships (1,853) (3,417)
Noncontrolling interest - consolidated joint ventures (353) -
Net Income available to common shareholders $71,900 $71,239
======= =======
Net income $74,106 $74,656
Other comprehensive income (loss) - foreign currency translation 1,346 (4,851)
Other comprehensive loss - change in net unrealized gain on derivative instruments (511) -
Comprehensive income 74,941 69,805
Less: comprehensive income attributable to noncontrolling interest (2,226) (3,271)
------ ------
Comprehensive income attributable to common shareholders $72,715 $66,534
======= =======
Basic income per common share
Continuing operations $0.17 $0.19
===== =====
Discontinued operations $0.32 $0.41
===== =====
Total basic income per common share $0.49 $0.60
===== =====
Diluted income per common share
Continuing operations $0.17 $0.19
===== =====
Discontinued operations $0.32 $0.41
===== =====
Total diluted income per common share $0.49 $0.60
===== =====
Weighted average shares
Basic 146,425 118,688
======= =======
Diluted 147,095 119,532
======= =======
Amounts attributable to common shareholders
Income from continuing operations $25,250 $22,908
Discontinued operations 46,650 48,331
Net income $71,900 $71,239
======= =======
Liberty Property Trust
Balance Sheet
March 31, 2014
(Unaudited and in thousands, except share and unit amounts)
March 31, 2014 December 31, 2013
-------------- -----------------
Assets
Real estate:
Land and land improvements $1,149,233 $1,139,455
Building and improvements 5,206,349 5,144,758
Less: accumulated depreciation (1,094,397) (1,057,680)
Operating real estate 5,261,185 5,226,533
Development in progress 242,771 209,187
Land held for development 239,755 233,055
------- -------
Net real estate 5,743,711 5,668,775
Cash and cash equivalents 370,553 163,414
Restricted cash 20,041 51,456
Accounts receivable 17,963 13,900
Deferred rent receivable 102,729 99,956
Deferred financing and leasing costs, net of accumulated
amortization (2014, $150,476; 2013, $140,958) 222,832 226,607
Investments in and advances to unconsolidated joint ventures 181,249 179,655
Assets held for sale - 275,957
Prepaid expenses and other assets 103,587 95,840
------- ------
Total assets $6,762,665 $6,775,560
========== ==========
Liabilities
Mortgage loans $542,809 $545,306
Unsecured notes 2,708,440 2,708,213
Credit facility - -
Accounts payable 53,458 70,406
Accrued interest 42,218 25,777
Dividend and distributions payable 71,653 71,323
Other liabilities 215,253 250,819
------- -------
Total liabilities 3,633,831 3,671,844
--------- ---------
Noncontrolling interest - operating partnership - 301,483 preferred units
outstanding as of March 31, 2014 and December 31, 2013 7,537 7,537
Equity
Shareholders' equity:
Common shares of beneficial interest, $.001 par value, 183,987,000 shares
authorized, 148,541,749 (includes 1,249,909 in treasury) and
147,846,801
(includes 1,249,909 in treasury) shares issued and
outstanding as of
March 31, 2014 and December 31, 2013, respectively 149 148
Additional paid-in capital 3,691,717 3,669,618
Accumulated other comprehensive income 10,558 9,742
Distributions in excess of net income (589,775) (591,713)
Common shares in treasury, at cost, 1,249,909 shares as of
March 31, 2014 and December 31, 2013 (51,951) (51,951)
Total shareholders' equity 3,060,698 3,035,844
Noncontrolling interest - operating partnership
3,553,566 and 3,556,566 common units outstanding as of March
31, 2014 and December 31, 2013, respectively 56,681 56,713
Noncontrolling interest - consolidated joint ventures 3,918 3,622
----- -----
Total equity 3,121,297 3,096,179
--------- ---------
Total liabilities, noncontrolling interest - operating partnership & equity $6,762,665 $6,775,560
========== ==========
Liberty Property Trust
Statement of Funds From Operations
March 31, 2014
(Unaudited and in thousands, except per share amounts)
Quarter Ended
-------------
March 31, 2014 March 31, 2013
-------------- --------------
Per Per
Weighted Weighted
Average Average
Dollars Share Dollars Share
------- ----- ------- -----
Reconciliation of net income to FFO - basic:
Basic - income available to common shareholders $71,900 $0.49 $71,239 $0.60
===== =====
Adjustments:
Depreciation and amortization of unconsolidated joint ventures 3,291 3,397
Depreciation and amortization 56,107 44,972
Gain on property dispositions (45,526) (41,706)
Noncontrolling interest share in addback for depreciation and amortization
and gain on property dispositions (327) (200)
----
Funds from operations available to common shareholders - basic $85,445 $0.58 $77,702 $0.65
======= ===== ======= =====
Reconciliation of net income to FFO - diluted:
Diluted - income available to common shareholders $71,900 $0.49 $71,239 $0.60
===== =====
Adjustments:
Depreciation and amortization of unconsolidated joint ventures 3,291 3,397
Depreciation and amortization 56,107 44,972
Gain on property dispositions (45,526) (41,706)
Noncontrolling interest excluding preferred unit distributions 1,735 2,206
Funds from operations available to common shareholders - diluted $87,507 $0.58 $80,108 $0.65
======= ===== ======= =====
Reconciliation of weighted average shares:
Weighted average common shares - all basic calculations 146,425 118,688
Dilutive shares for long term compensation plans 670 844
--- ---
Diluted shares for net income calculations 147,095 119,532
Weighted average common units 3,556 3,714
Diluted shares for Funds from operations calculations 150,651 123,246
======= =======
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.
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SOURCE Liberty Property Trust
