WAYNE, Pa., Oct. 23, 2018 (GLOBE NEWSWIRE) -- Liberty Property Trust (NYSE: LPT) announced financial and operating results for the quarter ended September 30, 2018.

Highlights for Third Quarter 2018

• Net income available to common shareholders $1.01 per diluted share
• NAREIT Funds from Operations $0.69 per diluted share
• Same store operating income for the industrial portfolio increased by 3.8% over prior year quarter on a U.S. GAAP basis and 4.1% on a cash basis
• Industrial portfolio occupancy 96.5% at quarter-end
• Industrial rents increased 17.5% on a U.S. GAAP basis and 7.7% on cash basis
• $52.8 million in developments delivered
• $179.0 million in development starts
• $101.1 million in asset acquisitions
• $255.0 million in asset dispositions totaling 806,000 square feet

Earnings Guidance

• Liberty revised U.S. GAAP net income available to common shareholders per diluted share guidance range for 2018 to be $3.17 - $3.33 from a previous range of $3.24 - $3.59
• Liberty increased NAREIT Funds from Operations per diluted share guidance range for 2018 to be $2.07 - $2.09 from a previous range of $2.01 - $2.08

Management Comments:
“Liberty’s strong results reflect the unique landscape in which we are operating and our ability to capitalize on this environment. We continue to benefit from the dynamic and evolving logistics industry and robust demand for quality industrial space from users both large and small,” said Bill Hankowsky, Chairman and Chief Executive Officer. “Consistent with the opportunities we see in the marketplace, we intend to complete our strategic shift by monetizing our remaining, high-quality office assets and focusing our efforts and capital solely on our industrial platform.”  

Financial Results
Net income: Net income available to common shareholders for the third quarter of 2018 was $150.1 million, or $1.01 per diluted share, compared to $59.5 million, or $0.40 per diluted share, for the third quarter of 2017. For the nine months ended September 30, 2018, net income available to common shareholders was $309.9 million, or $2.09 per diluted share, compared to $154.0 million, or $1.04 per diluted share, for the first nine months of 2017.

Net income for the third quarter of 2018 includes gains on sale of $96.9 million, or $0.64 per diluted share, compared to $23.8 million, or $0.16 per diluted share, for the same period in 2017. Net income for the nine months ended September 30, 2018 includes gains on sale of $239.4 million, or $1.58 per diluted share, compared to $30.5 million, or $0.20 per diluted share, for the first nine months of 2017.

Net income for the first nine months of 2018 includes $60.0 million in additional development service fee expense relating to the completion of development of Comcast Technology Center, and a $26.0 million non-cash impairment charge associated with the development of a mixed-use project in Camden, New Jersey.

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 2018 was $105.1 million, or $0.69 per diluted share, compared to $99.2 million, or $0.66 per diluted share, for the third quarter of 2017.  FFO available to common shareholders for the nine months ended September 30, 2018 was $221.3 million, or $1.46 per diluted share, compared to $288.1 million, or $1.91 per diluted share, for the first nine months of 2017. FFO for the first nine months of 2018 was impacted by the aforementioned development service fee expenses and non-cash impairment charge totaling $86.0 million, or $0.57 per diluted share.

Operating Performance               
Occupancy: At September 30, 2018, Liberty’s in-service portfolio of 103.5 million square feet was 96.6% occupied, compared to 97.0% at the end of the second quarter of 2018. During the quarter, Liberty completed leasing transactions totaling 5.1 million square feet, and occupancy on a signed but not yet commenced basis as of September 30, 2018 was 97.2%.

• Occupancy of Liberty’s 97.5 million square foot industrial portfolio was 96.5% at quarter-end, compared to 97.0% for the previous quarter. Industrial distribution rents increased 17.5% on a U.S. GAAP basis on retention and replacement leases signed during the quarter.  Of these leases, 99.5% have built-in rent escalators.
• Occupancy of Liberty’s 6.0 million square foot office portfolio was 96.9% at quarter-end, compared to 96.6% for the previous quarter. Office rents increased 45.8% on a U.S. GAAP basis on retention and replacement leases signed in the office portfolio, and 90.8% of these leases contain built-in rent escalators.

Same Store Performance: Property level operating income for same store industrial properties increased by 4.1% on a cash basis and by 3.8% on a U.S. GAAP basis for the third quarter of 2018, compared to the same quarter in 2017.  For the nine months ended September 30, 2018, property level operating income for same store industrial properties increased by 5.4% on a cash basis and by 4.2% on a U.S. GAAP basis, compared to the same period in 2017.

Real Estate Investments
Development Deliveries: In the third quarter, Liberty brought into service three industrial development properties for a total investment of $52.8 million. The properties contain 803,000 square feet of leasable space and were 64.7% occupied as of the end of the quarter. The yield on these properties at September 30, 2018 was 4.4% and the projected stabilized yield is 7.5%.

Development Starts: In the third quarter, Liberty began development of eight properties totaling 1.8 million square feet of leasable space at a projected investment of $179.0 million. The properties consist of seven industrial distribution buildings and one build-to-suit office property.

Acquisitions: During the third quarter, Liberty purchased two industrial buildings in New Jersey and one industrial building in Texas totaling 1.3 million square feet for $101.1 million.

Subsequent to quarter end, Liberty purchased seven industrial properties totaling 1.1 million square feet in the United Kingdom for £111 million.

Real Estate Dispositions
During the third quarter Liberty sold five office buildings in Arizona totaling 806,000 square feet for $255.0 million. The company recorded a gain on this sale of $94.9 million in the third quarter of 2018. Liberty also sold 66 acres of land in the Lehigh Valley for proceeds of $9.7 million and recorded a gain of $1.9 million in the third quarter of 2018.

2018 Outlook

• Liberty has revised its guidance range for 2018 net income available to common shareholders to $3.17 - $3.33 per diluted share. This change reflects charges incurred in the second quarter.
• Liberty has revised its guidance range for 2018 NAREIT FFO to $2.07 - $2.09 per diluted share. This change reflects charges incurred in the second quarter. Without charges, the new range would be $2.64 - $2.66 per diluted share.
• Rental increases on renewal and replacement leases in the industrial portfolio during 2018 are expected to range from 13% - 15% on a GAAP basis and from 5% to 6% on a cash basis.
• Projected disposition activity range increased to $800 – $950 million from $700 - $900 million.

A reconciliation of projected U.S. GAAP net income available to common shareholders per share to projected NAREIT FFO per share for 2018 and projected FFO per diluted share before charges is below. Additional information on assumptions underlying this guidance is included in Liberty’s third quarter supplemental financial report on the company’s website.

	Revised 2018 Outlook	Previous 2018 Outlook
Projected net income available to common shareholders per diluted share	$3.17 - $3.33	$3.24 - $3.59
Depreciation and amortization of unconsolidated joint ventures	0.08 – 0.08	0.07 – 0.08
Depreciation and amortization	1.17 – 1.17	1.21 – 1.22
Gain on property dispositions	(2.43) – (2.57)	(2.60) – (2.90)
Noncontrolling interest share of addbacks	0.08 – 0.08	0.09 – 0.09
Projected NAREIT FFO per diluted share	$2.07 - $2.09	$2.01 - $2.08
18th & Arch and Camden charges	0.57 – 0.57	0.57 – 0.57
Projected FFO per diluted share before charges	$2.64 - $2.66	$2.58 - $2.65

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 industrial and office properties. Liberty's 103.5 million square foot operating portfolio provides productive work environments for 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 23, 2018, at 9 a.m. Eastern Time.  To access the conference call, please dial 855-277-7530. The passcode needed for access is 5989189. A replay of the call will be available until November 24, 2018, 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, 2018
(Unaudited and in thousands)
	September 30, 2018				December 31, 2017
Assets
Real estate:
Land and land improvements	$	1,174,720			$	1,026,820
Building and improvements		4,459,247				4,135,150
Less: accumulated depreciation		(957,292	)			(866,355	)
Operating real estate		4,676,675				4,295,615
Development in progress		440,503				333,437
Land held for development		357,120				330,748
Net real estate		5,474,298				4,959,800
Cash and cash equivalents		17,770				11,882
Restricted cash		13,371				13,803
Accounts receivable		13,406				10,389
Deferred rent receivable		121,820				107,150
Deferred financing and leasing costs, net		153,970				147,837
Investments in and advances to unconsolidated joint ventures		357,970				288,456
Assets held for sale		294,191				610,611
Prepaid expenses and other assets		372,279				289,829
Total assets	$	6,819,075			$	6,439,757
Liabilities
Mortgage loans, net	$	233,682			$	267,093
Unsecured notes, net		2,285,565				2,283,513
Credit facilities		569,909				358,939
Accounts payable		72,553				76,313
Accrued interest		35,491				21,796
Dividend and distributions payable		60,415				60,330
Other liabilities		260,353				201,588
Liabilities held for sale		3,986				14,282
Total liabilities		3,521,954				3,283,854
Noncontrolling interest		7,537				7,537
Equity
Shareholders' equity
Common shares of beneficial interest		148				147
Additional paid-in capital		3,688,631				3,674,978
Accumulated other comprehensive loss		(46,322	)			(37,797	)
Distributions in excess of net income		(417,357	)			(549,970	)
Total shareholders' equity		3,225,100				3,087,358
Noncontrolling interest - operating partnership		59,057				56,159
Noncontrolling interest - consolidated joint ventures		5,427				4,849
Total equity		3,289,584				3,148,366
Total liabilities, noncontrolling interest - operating partnership and equity	$	6,819,075			$	6,439,757

 

Liberty Property Trust
Statement of Operations
September 30, 2018
(Unaudited and in thousands, except per share amounts)
	Quarter Ended								Nine Months Ended
	September 30, 2018				September 30, 2017				September 30, 2018				September 30, 2017
Operating Revenue
Rental	$	121,512			$	114,562			$	359,137			$	350,930
Operating expense reimbursement		37,842				34,012				111,980				107,889
Development service fee income		12,956				24,176				59,132				53,920
Total operating revenue		172,310				172,750				530,249				512,739
Operating Expenses
Rental property		15,100				15,182				45,310				47,646
Real estate taxes		23,391				20,703				68,242				64,709
General and administrative		13,121				11,873				43,407				43,964
Expensed pursuit costs		1,292				4,772				1,675				4,957
Systems implementation expense		1,177				142				3,352				157
Depreciation and amortization		43,544				42,081				128,044				129,461
Development service fee expense		12,924				23,665				120,799				52,497
Impairment charges - real estate assets		—				3,936				26,000				3,936
Total operating expenses		110,549				122,354				436,829				347,327
Operating (loss) income		61,761				50,396				93,420				165,412
Other Income/Expense
Interest and other income		3,445				1,735				8,585				5,539
Interest expense		(23,289	)			(21,448	)			(66,600	)			(62,409	)
Total other income/expense		(19,844	)			(19,713	)			(58,015	)			(56,870	)
Income before gain on property dispositions, income taxes, and equity in earnings of unconsolidated joint ventures		41,917				30,683				35,405				108,542
Gain on property dispositions		2,002				23,840				54,705				30,542
Income taxes		(472	)			(582	)			(1,967	)			(1,528	)
Equity in earnings of unconsolidated joint ventures		6,766				4,305				20,958				14,026
Income from continuing operations		50,213				58,246				109,101				151,582
Discontinued operations (including net gain of $94.9 million and a net gain of $184.7 million on property dispositions for the three and nine months ended September 30, 2018, respectively)		103,858				2,913				209,585				6,639
Net Income		154,071				61,159				318,686				158,221
Noncontrolling interest - operating partnerships		(3,696	)			(1,545	)			(7,738	)			(4,044	)
Noncontrolling interest - consolidated joint ventures		(232	)			(75	)			(1,010	)			(195	)
Net Income available to common shareholders	$	150,143			$	59,539			$	309,938			$	153,982
Net income	$	154,071			$	61,159			$	318,686			$	158,221
Other comprehensive (loss) gain - foreign currency translation		(3,015	)			5,634				(9,221	)			16,314
Other comprehensive gain (loss) - derivative instruments		6				91				493				366
Comprehensive income		151,062				66,884				309,958				174,901
Less: comprehensive income attributable to noncontrolling interest		(3,858	)			(1,754	)			(8,545	)			(4,629	)
Comprehensive income attributable to common shareholders		147,204				65,130				301,413				170,272
Basic income per common share
Continuing operations	$	0.33			$	0.39			$	0.71			$	1.01
Discontinued operations	$	0.69			$	0.02			$	1.39			$	0.04
Basic income per common share	$	1.02			$	0.41			$	2.10			$	1.05
Diluted income per common share
Continuing operations	$	0.33			$	0.38			$	0.71			$	1.00
Discontinued operations	$	0.68			$	0.02			$	1.38			$	0.04
Diluted income per common share	$	1.01			$	0.40			$	2.09			$	1.04
Weighted average shares
Basic		147,324				146,811				147,241				146,678
Diluted		148,271				147,596				148,160				147,430

 

Liberty Property Trust
Statement of Funds from Operations
September 30, 2018
(Unaudited and in thousands, except per share amounts)
	Quarter Ended								Nine Months Ended
	September 30, 2018				September 30, 2017				September 30, 2018				September 30, 2017
NAREIT FFO
Reconciliation of net income available to common shareholders to NAREIT FFO available to common shareholders:
Net income available to common shareholders	$	150,143			$	59,539			$	309,938			$	153,982
Adjustments:
Depreciation and amortization of unconsolidated joint ventures		3,193				2,577				9,631				7,197
Depreciation and amortization		43,112				46,195				130,284				136,616
Gain on property dispositions / impairment - depreciable real estate assets continuing operations		(17	)			(16,205	)			(51,227	)			(19,120	)
Gain on property dispositions / impairment - depreciable real estate assets discontinued operations		(94,878	)			5,714				(184,689	)			5,714
Noncontrolling interest share in addback for depreciation and amortization and gain on property dispositions / impairment - depreciable real estate assets		1,131				(896	)			2,234				(3,051	)
NAREIT FFO available to common shareholders - basic		102,684				96,924				216,171				281,338
Noncontrolling interest share in addback for depreciation and amortization and gain on property dispositions / impairment - depreciable real estate assets		(1,131	)			896				(2,234	)			3,051
Noncontrolling interest excluding preferred unit distributions		3,578				1,427				7,384				3,690
NAREIT FFO available to common shareholders - diluted	$	105,131			$	99,247			$	221,321			$	288,079
NAREIT FFO available to common shareholders - basic per share	$	0.70			$	0.66			$	1.47			$	1.92
NAREIT FFO available to common shareholders - diluted per share	$	0.69			$	0.66			$	1.46			$	1.91
Reconciliation of weighted average shares:
Weighted average common shares - all basic calculations		147,324				146,811				147,241				146,678
Dilutive shares for long term compensation plans		947				785				919				752
Diluted shares for net income calculations		148,271				147,596				148,160				147,430
Weighted average common units		3,520				3,528				3,520				3,528
Diluted shares for NAREIT FFO calculations		151,791				151,124				151,680				150,958

NAREIT Funds from Operations available to common shareholders is defined by NAREIT as net income (computed in accordance with U.S. GAAP), excluding gains (or losses) from sales of depreciable property and impairments of depreciable real estate assets, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  The SEC has agreed to the disclosure of this non-GAAP financial measure on a per share basis in its Release No. 34-47226, Conditions for Use of Non-GAAP Financial Measures. The Company believes that the calculation of NAREIT FFO 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 operating property dispositions. As a result, year over year comparison of NAREIT FFO 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 NAREIT FFO provides useful information to the investment community about the Company’s financial performance when compared to other REITs since NAREIT FFO is generally recognized as the standard for reporting the operating performance of a REIT. NAREIT FFO available to common shareholders does not represent net income or cash flows from operations as defined by U.S. 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. NAREIT FFO available to common shareholders also does not represent cash flows generated from operating, investing or financing activities as defined by U.S. GAAP. The Company believes that the line on its consolidated statements of comprehensive income entitled “net income available to common shareholders” is the most directly comparable U.S. GAAP measure to FFO.

Inquiries: Jeanne Leonard, Liberty Property Trust, 610.648.1704

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