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Liberty Property Trust Announces Third Quarter 2017 Results
Company Also Enters Into $900 Million Credit Facility

MALVERN, Pa., Oct. 24, 2017 (GLOBE NEWSWIRE) -- Liberty Property Trust (NYSE:LPT) announced financial and operating results for the quarter ended September 30, 2017.

Highlights for Third Quarter 2017

  • Net income available to common shareholders $0.40 per diluted share
  • NAREIT Funds from Operations $0.66 per diluted share
  • Same store operating income increased by 2.6% over prior year quarter
  • Same store operating income for the industrial portfolio increased by 4.3%
  • Portfolio occupancy increased to 95.9%
  • Industrial rents increased 14.8%
  • Office rents increased 12.6%
  • $98.7 million in development delivered

Earnings Guidance

  • Liberty increased Funds from Operations guidance range for 2017 to be $2.54 - $2.57 from a previous range of $2.49 - $2.55
  • Guidance range for 2017 industrial same store NOI revised to 3 – 3.5% from previous range of 2 – 3%
  • Liberty now expects dispositions for 2017 to be in a range of $400 - $550 million. Fourth quarter dispositions are expected to be in the $380 - $530 million range, with the majority closing late in the quarter.

Financial Results
Net income: Net income available to common shareholders for the third quarter of 2017 was $59.5 million, or $0.40 per diluted share, compared to $54.3 million, or $0.37 per diluted share, for the third quarter of 2016.

For the nine months ended September 30, 2017, net income available to common shareholders was $154.0 million, or $1.04 per diluted share, compared to $161.4 million, or $1.10 per diluted share, for the first nine months of 2016.

Funds from Operations: The company uses the National Association of Real Estate Investment Trusts (“NAREIT”) definition of Funds from Operations (“FFO”) as an operating measure of the company’s financial performance.  A reconciliation of U.S. GAAP net income to NAREIT FFO is included in the financial data tables accompanying this press release.

NAREIT FFO available to common shareholders for the third quarter of 2017 was $99.2 million, or $0.66 per diluted share, compared to $99.6 million, or $0.66 per diluted share, for the third quarter of 2016. 

NAREIT FFO available to common shareholders for the nine months ended September 30, 2017 was $288.1 million, or $1.91 per diluted share, compared to $294.8 million, or $1.96 per diluted share, for the first nine months of 2016.

Management Comments
“Our results for the quarter and the year to-date reflect a continued strong and sustainable market for high-quality industrial properties,” said Bill Hankowsky, chief executive officer. “The combination of significant user demand, manageable new supply, and the ongoing evolution of supply chain dynamics is creating constant opportunities to capitalize on our versatile portfolio of distribution facilities and multi-tenant industrial properties in prime locations.

“We believe this environment will produce favorable results for industrial for the foreseeable future, and we intend to fund increased investment in our industrial platform through meaningful sales of office properties, reflected in the guidance update provided today.”

Operating Performance               
Same Store Performance: Property level operating income for same store properties increased by 3.0% on a cash basis and by 2.6% on a straight line basis for the third quarter of 2017, compared to the same quarter in 2016.  For the nine months ended September 30, 2017, property level operating income for same store properties increased by 1.7% on a cash basis and by 1.6% on a straight line basis, compared to the same period in 2016.

  • Same store operating income for the industrial portfolio increased by 5.2% on a cash basis and 4.3% on a straight line basis, compared to the same period in 2016. For the nine months ended September 30, 2017, industrial same store operating income increased by 3.2% on a cash basis and 3.0% on a straight line basis, compared to the same period in 2016.
  • Same store operating income for the office portfolio decreased by 7.7% on a cash basis and by 5.3% on a straight line basis, compared to the same period in 2016. For the nine months ended September 30, 2017, office same store operating income decreased by 6.1% on a cash basis and by 5.3% on a straight line basis, compared to the same period in 2016.

Occupancy: At September 30, 2017, Liberty’s in-service portfolio of 100 million square feet was 95.9% occupied, compared to 95.6% at the end of the second quarter of 2017. During the quarter, Liberty completed leasing transactions totaling 5.9 million square feet of space.

  • Occupancy of Liberty’s 93.4 million square foot industrial portfolio was 96.3% at quarter-end, compared to 95.9% for the previous quarter. Industrial distribution rents increased 14.8% on renewal and replacement leases signed during the quarter.  100% of these leases have built-in rent escalators.
  • Occupancy of Liberty’s 6.7 million square foot office portfolio was 91.0%, down from 91.5% from the previous quarter. Office rents increased 12.6% on renewal and replacement leases signed in the office portfolio, and 94.4% of these leases contain built-in rent escalators.

Real Estate Investments

Development Deliveries: In the third quarter, Liberty brought into service six development properties for a total investment of $98.7 million. The properties contain 994,545 square feet of leasable space and were 54.2% leased and yielding 3.7% as of the end of the quarter. The projected stabilized yield for these properties is 8.0%. The properties are 74.9% leased on a signed basis as of October 24, 2017.

Development Starts: In the third quarter, Liberty began development of three distribution properties totaling 308,892 square feet of leasable space at a projected investment of $29.4 million. The properties consist of:

  • A build-to-suit at 1806 Highway 146 South, LaPorte, TX, 77,892 square feet
  • 2980 Green Road, Greer, SC, 94,500 square feet
  • 1955 TW Alexander Drive, Durham, NC, 136,500 square feet

Acquisitions: During the third quarter, Liberty increased its position in northern New Jersey and southern California with the purchase of three industrial buildings totaling 354,391 square feet for $42.2 million. The buildings are 100% leased.

Real Estate Dispositions
During the third quarter Liberty disposed of two industrial buildings totaling 104,994 square feet for $5.8 million via a condemnation conveyance, and one 28,495 square foot office property for $2.8 million.

Balance Sheet and Capital Activity
During the quarter, Liberty’s board of trustees renewed the company’s share repurchase authority to purchase up to $250 million of its outstanding common shares, valid through September 28, 2019.

Subsequent to quarter end, Liberty amended and restated its existing $800 million unsecured revolving credit facility which was set to mature in March 2018 with a new, $900 million unsecured facility.  The new facility includes a revolving credit facility for aggregate borrowings of up to $800 million and a delayed draw term loan facility for aggregate borrowings of up to $100 million, and may be increased up to $1.6 billion in the aggregate in accordance with the terms of the credit agreement.  The new facility matures in October 2021 and Liberty has rights to extend the maturity date for up to one additional year. Subject to adjustment based upon Liberty’s corporate credit ratings, borrowings under the new facility currently bear interest at LIBOR plus 0.875% for revolving credit loans and LIBOR plus 0.95% for the delayed draw term loans.  The credit facility also contains customary covenants consistent with this type of facility.

In addition, subsequent to quarter end, Liberty also entered into a new $30 million unsecured working capital revolving credit facility on terms substantially consistent with the new unsecured revolving credit facility discussed above.

2017 Outlook
A reconciliation of projected U.S. GAAP net income available to common shareholders per share to projected NAREIT FFO per share for 2017 is below (all amounts projected). Additional information on assumptions underlying this guidance is included in Liberty’s third quarter supplemental financial report on the company’s website.

  Revised 2017
Outlook
Previous 2017
Outlook
Net income, per diluted share $2.27 - $2.80 $1.99 - $2.19
Depreciation and amortization of unconsolidated joint ventures 0.06 – 0.08 0.05 – 0.07
Depreciation and amortization 1.19 – 1.21 1.18 – 1.20
Gain on property dispositions (0.98) – (1.52) (0.74) – (0.92)
Noncontrolling interest share of addbacks 0.0 – 0.0 0.01 – 0.01
NAREIT FFO, per diluted share $2.54 - $2.57 $2.49 - $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 100 million square foot portfolio includes 566 properties which provide office, distribution and light manufacturing facilities to 1,200 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 24, 2017, at 1 p.m. Eastern Time.  To access the conference call, please dial 855-277-7530. The passcode needed for access is 80597739. A replay of the call will be available until November 24, 2017, by dialing 1-855-859-2056 using the same passcode as above. The call can also be accessed via the Internet on the Investors page of Liberty’s web site at www.libertyproperty.com.

Forward-Looking Statements
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, achievement of strategic targets, expectations for our operating results, business and financial condition, 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,” “remain confident,” 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 our ability to maintain and increase property occupancy and rental rates, risks relating to the continued repositioning of the Company's portfolio, risks relating to construction and development activities, risks relating to acquisition and disposition activities, risks relating to the integration of the operations of entities that we have acquired or may acquire, risks relating to joint venture relationships and any possible need to perform under certain guarantees that we have issued or may issue in connection with such relationships, risks related to properties developed by the Company on a fee basis, risks associated with tax abatement, tax credit programs, or other government incentives, 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 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.  The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

Liberty Property Trust
Balance Sheet 
September 30, 2017
(Unaudited and in thousands)
       
  September 30, 2017   December 31, 2016
Assets      
Real estate:      
Land and land improvements $   1,081,447     $   1,094,470  
Building and improvements   4,539,552       4,501,921  
Less: accumulated depreciation   (1,015,786 )     (940,115 )
       
Operating real estate   4,605,213       4,656,276  
       
Development in progress   395,089       267,450  
Land held for development   331,340       336,569  
       
Net real estate   5,331,642       5,260,295  
       
Cash and cash equivalents   47,666       43,642  
Restricted cash   16,824       12,383  
Accounts receivable   13,258       13,994  
Deferred rent receivable   123,718       109,245  
Deferred financing and leasing costs, net   154,147       153,393  
Investments in and advances to unconsolidated joint ventures   283,803       245,078  
Assets held for sale   177,549       4,548  
Prepaid expenses and other assets   161,067       150,235  
       
Total assets $   6,309,674     $   5,992,813  
       
Liabilities      
       
Mortgage loans, net $   269,380     $   276,650  
Unsecured notes, net   2,282,828       2,280,286  
Credit facility   295,000        
Accounts payable   78,384       65,914  
Accrued interest   34,707       21,878  
Dividend and distributions payable   60,131       71,501  
Other liabilities   209,710       206,124  
Total liabilities   3,230,140       2,922,353  
       
Noncontrolling interest   7,537       7,537  
       
Equity      
Shareholders' equity      
Common shares of beneficial interest   147       147  
Additional paid-in capital   3,671,757       3,655,910  
Accumulated other comprehensive loss   (39,741 )     (56,031 )
Distributions in excess of net income   (619,349 )     (596,635 )
Total shareholders' equity   3,012,814       3,003,391  
       
Noncontrolling interest - operating partnership   54,525       54,631  
Noncontrolling interest - consolidated joint ventures   4,658       4,901  
       
Total equity   3,071,997       3,062,923  
       
Total liabilities, noncontrolling interest - operating partnership and equity $   6,309,674     $   5,992,813  
       

 

Liberty Property Trust
Statement of Operations
September 30, 2017
(Unaudited and in thousands, except per share amounts)
               
  Quarter Ended   Year to Date
  September 30, 2017   September 30, 2016   September 30, 2017   September 30, 2016
Operating Revenue              
Rental $   129,356     $   140,697     $   377,706     $   418,896  
Operating expense reimbursement   40,121       50,160       120,523       148,757  
Development service fee income   24,176             53,920        
Total operating revenue   193,653       190,857       552,149       567,653  
               
Operating Expenses              
Rental property   18,941       26,496       56,541       79,752  
Real estate taxes   23,258       25,968       69,783       76,490  
General and administrative   11,910       15,379       43,949       51,888  
Expensed pursuit costs   4,772       772       4,957       882  
Depreciation and amortization   46,582       46,920       137,831       154,543  
Development service fee expense   23,665             52,497        
Impairment charges - real estate assets   9,650             9,650        
Total operating expenses   138,778       115,535       375,208       363,555  
               
Operating Income   54,875       75,322       176,941       204,098  
               
Other Income/Expense              
Interest and other income   1,781       3,153       5,585       12,743  
Loss on debt extinguishment         (3,494 )           (3,494 )
Interest expense   (23,060 )     (29,528 )     (67,345 )     (91,071 )
Total other income/expense   (21,279 )     (29,869 )     (61,760 )     (81,822 )
               
Income before gain on property dispositions, income taxes,              
noncontrolling interest and equity in earnings of              
unconsolidated joint ventures   33,596       45,453       115,181       122,276  
Gain on property dispositions   23,840       1,318       30,542       25,671  
Income taxes   (582 )     (80 )     (1,528 )     (1,633 )
Equity in earnings of unconsolidated joint ventures   4,305       9,043       14,026       19,540  
               
Net Income   61,159       55,734       158,221       165,854  
Noncontrolling interest - operating partnerships   (1,545 )     (1,424 )     (4,044 )     (4,250 )
Noncontrolling interest - consolidated joint ventures     (75 )       (57 )       (195 )       (170 )
Net Income available to common shareholders $ 59,539     $ 54,253     $ 153,982     $ 161,434  
               
Net income   61,159       55,734       158,221       165,854  
Other comprehensive gain (loss) - foreign currency translation   5,634       (4,407 )     16,314       (23,003 )
Other comprehensive gain (loss) - derivative instruments   91       663       366       (1,132 )
Comprehensive income   66,884       51,990       174,901       141,719  
Less: comprehensive income attributable to noncontrolling interest $   (1,754 )   $   (1,393 )   $   (4,629 )   $   (3,851 )
Comprehensive income attributable to common shareholders $ 65,130     $ 50,597     $ 170,272     $ 137,868  
               
Basic income per common share $ 0.41     $ 0.37     $ 1.05     $ 1.10  
               
Diluted income per common share $ 0.40     $ 0.37     $ 1.04     $ 1.10  
               
Weighted average shares              
Basic   146,811       146,215       146,678       146,121  
Diluted   147,596       147,107       147,430       146,788  
               

 

Liberty Property Trust
Statement of Funds from Operations
September 30, 2017
(Unaudited and in thousands, except per share amounts)
  Quarter Ended   Year to Date
  September 30, 2017   September 30, 2016   September 30, 2017   September 30, 2016
NAREIT FFO              
               
Reconciliation of net income available to common shareholders to NAREIT FFO available to common shareholders:              
Net income available to common shareholders $   59,539     $   54,253     $   153,982     $   161,434  
               
Adjustments:              
Depreciation and amortization of unconsolidated joint ventures   2,577       3,768       7,197       8,706  
Depreciation and amortization   46,195       46,577       136,616       153,471  
Gain on property dispositions / impairment - depreciable real estate assets of unconsolidated joint ventures         (4,994 )           (6,987 )
Gain on property dispositions / impairment - depreciable real estate assets   (10,491 )     (1,318 )     (13,406 )     (25,671 )
Noncontrolling interest share in addback for depreciation and amortization and gain on property dispositions / impairment - real estate assets   (896 )     (1,035 )     (3,051 )     (3,052 )
NAREIT FFO available to common shareholders - basic   96,924       97,251       281,338       287,901  
               
Noncontrolling interest share in addback for depreciation and amortization and gain on property dispositions / impairment - real estate assets   896       1,035       3,051       3,052  
Noncontrolling interest excluding preferred unit distributions   1,427       1,306       3,690       3,896  
NAREIT FFO available to common shareholders - diluted $   99,247     $   99,592     $   288,079     $   294,849  
               
               
               
NAREIT FFO available to common shareholders - basic per share $ 0.66     $ 0.67     $ 1.92     $ 1.97  
NAREIT FFO available to common shareholders - diluted per share $ 0.66     $ 0.66     $ 1.91     $ 1.96  
               
               
               
AFFO              
               
NAREIT FFO available to common shareholders - diluted $   99,247     $   99,592     $   288,079     $   294,849  
Straight line rent adjustment, net of related bad debt expense   (4,791 )     (3,275 )     (14,737 )     (10,877 )
Share - based compensation expense   2,111       1,670       10,975       10,472  
Tenant Improvements and Lease Transaction Costs   (12,372 )     (18,387 )     (41,899 )     (48,315 )
Non-reimbursed Capital Expenditures   (10,545 )     (8,301 )     (15,478 )     (12,760 )
Gain on sale / impairment of non-depreciable assets   (3,699 )           (7,516 )      
Loss (gain) on debt extinguishment         3,494             (749 )
AFFO available to common shareholders - diluted $   69,951     $   74,793     $   219,424     $   232,620  
               
Reconciliation of weighted average shares:              
Weighted average common shares - all basic calculations   146,811       146,215       146,678       146,121  
Dilutive shares for long term compensation plans   785       892       752       667  
Diluted shares for net income calculations   147,596       147,107       147,430       146,788  
Weighted average common units   3,528       3,536       3,528       3,538  
Diluted shares for NAREIT FFO calculations   151,124       150,643       150,958       150,326  


Inquiries: Jeanne Leonard, Liberty Property Trust, 610.648.1704

Liberty Property Trust