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Liberty Property Trust Announces First Quarter 2018 Results

MALVERN, Pa., April 24, 2018 (GLOBE NEWSWIRE) -- Liberty Property Trust announced financial and operating results for the quarter ended March 31, 2018.

Highlights for First Quarter 2018

  • Net income available to common shareholders $0.95 per diluted share
  • NAREIT Funds from Operations $0.65 per diluted share
  • Same store operating income for the industrial portfolio increased by 5.0% over prior year quarter on GAAP basis and 7.0% on cash basis
  • Portfolio occupancy 96.7% at quarter-end
  • Industrial rents increased 12.4% on GAAP and 7.9% on cash basis
  • $223.4 million in developments delivered
  • $133.8 million in development starts
  • $90.9 million in asset acquisitions
  • $190.8 million in asset dispositions totaling 1.5 million square feet

Earnings Guidance

  • Liberty increased U.S. GAAP net income available to common shareholders per diluted share guidance range for 2018 to be $3.07 - $3.88 from a previous range of $3.05 - $3.88
  • Liberty increased NAREIT Funds from Operations per diluted share guidance range for 2018 to be $2.55 - $2.65 from a previous range of $2.53 - $2.65

Financial Results
Net income: Net income available to common shareholders for the first quarter of 2018 was $140.2 million, or $0.95 per diluted share, compared to $43.0 million, or $0.29 per diluted share, for the first quarter of 2017.

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 first quarter of 2018 was $98.6 million, or $0.65 per diluted share, compared to $90.7 million, or $0.60 per diluted share, for the first quarter of 2017. 

Management Comments
”Clearly we are operating in an extraordinary environment for industrial real estate,” said CEO Bill Hankowsky. “Demand remains strong, resulting in outstanding performance for the core portfolio and development pipeline. We also executed adroitly on the capital recycling front, with significant sales of non-core assets, including a sizeable amount of the suburban office properties slated for sale under our 2018 strategic plan.” 

Operating Performance               
Occupancy: At March 31, 2018, Liberty’s operating portfolio of 101.3 million square feet was 96.7% occupied, compared to 96.9% at the end of the fourth quarter 2017. During the quarter, Liberty completed lease transactions totaling 6.3 million square feet of space.

  • Occupancy of Liberty’s 94.4 million square foot industrial portfolio was 96.7% at quarter-end, compared to 97.0% at the end of the fourth quarter of 2017. Industrial rents increased 12.4% on retained and replacement leases commenced during the quarter, and 81.4% of these leases have built-in rent escalators.
  • Occupancy of Liberty’s 6.8 million square foot office portfolio was 95.9% at quarter-end, up from 95.6% at the end of the fourth quarter 2017. Office rents increased 23.5% on retained and replacement leases commenced during the quarter, and 92.2% of these leases contain built-in rent escalators.

Same Store Performance: Property level operating income for same store industrial properties increased by 7.0% on a cash basis and 5.0% on a GAAP basis for the first quarter of 2018, compared to the same quarter in 2017.

Real Estate Investments
Development Deliveries: In the first quarter, Liberty brought into service three wholly-owned development properties for a total investment of $85.1 million. The properties contain 519,000 square feet of leasable space and were 100% occupied as of the end of the quarter. The current yield on these properties at March 31, 2018 was 8.7%.

Liberty Property 18th & Arch, a joint venture in which Liberty holds a 20% share, completed the remaining 250,000 of office space at Comcast Technology Center, representing a total investment by the joint venture of $138.3 million for that portion of the project. In aggregate, Liberty has delivered 1.3 million square feet of office space in this project, for an aggregate investment by the joint venture of $737.9 million. The project also includes a 217-room Four Seasons Hotel, scheduled to be delivered in the fourth quarter of 2018.

Development Starts: In the first quarter, Liberty began development of six wholly-owned properties totaling 1.7 million square feet of leasable space at a projected investment of $123.5 million.

In addition, a joint venture in which Liberty holds an interest began development of a 134,000 square foot industrial property at a projected investment of $10.3 million.

Real Estate Acquisitions
During the first quarter, Liberty acquired one building in California totaling 400,000 square feet for $90.9 million. The property is 100% leased.

Real Estate Dispositions
During the first quarter, Liberty sold 24 properties totaling approximately 1.5 million square feet for $190.8 million. The properties sold were primarily office properties located in suburban Philadelphia.

Subsequent Event
On April 18, 2018 the company filed a current report on Form 8-K regarding notification from its third-party contractor for the Comcast Technology Center development that the contractor has incurred or will incur cost overruns on the project.

2018 Outlook
A reconciliation of U.S. GAAP net income to common shareholders per diluted share to NAREIT FFO per diluted share for 2018 is below (all amounts projected). Additional information on assumptions underlying this guidance is included in Liberty’s first quarter 2018 supplemental financial report on the company’s website.

  Revised 2018
Outlook
  Previous 2018
Outlook
Net income available to common shareholders per diluted share $3.07 - $3.88   $3.05 - $3.88
Depreciation and amortization of unconsolidated joint ventures 0.07 – 0.08   0.07 – 0.08
Depreciation and amortization 1.14 – 1.22   1.14 – 1.22
Gain on property dispositions (1.80) – (2.60)   (1.80) – (2.60)
Noncontrolling interest share of addbacks 0.07 – 0.07   0.07 – 0.07
NAREIT FFO, per diluted share $2.55 - $2.65   $2.53 - $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 superior industrial and office properties. Liberty's 101 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 first quarter results on Tuesday, April 24, 2018, at 1 p.m. Eastern Time.  To access the conference call, please dial 855-277-7530. The passcode needed for access is 4092806. A replay of the call will be available until May 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.

Inquiries: Jeanne Leonard, Liberty Property Trust, 610.648.1704

Liberty Property Trust
Balance Sheet 
March 31, 2018
(Unaudited and in thousands)
       
  March 31, 2018
    December 31, 2017
 
Assets      
Real estate:      
Land and land improvements $ 1,180,071     $ 1,136,826  
Building and improvements   4,448,883       4,344,119  
Less: accumulated depreciation   (962,688 )     (926,320 )
       
Operating real estate   4,666,266       4,554,625  
       
Development in progress   373,154       333,437  
Land held for development   316,226       330,748  
       
Net real estate   5,355,646       5,218,810  
       
Cash and cash equivalents   30,380       11,882  
Restricted cash   9,366       13,803  
Accounts receivable   12,767       11,215  
Deferred rent receivable   117,776       112,444  
Deferred financing and leasing costs, net   151,530       152,094  
Investments in and advances to unconsolidated joint ventures   350,458       288,456  
Assets held for sale   238,199       340,328  
Prepaid expenses and other assets   148,509       290,725  
       
Total assets $ 6,414,631     $ 6,439,757  
       
Liabilities      
       
Mortgage loans, net   264,906       267,093  
Unsecured notes, net   2,284,197       2,283,513  
Credit facilities   257,175       358,939  
Accounts payable   68,499       77,644  
Accrued interest   34,855       21,796  
Dividend and distributions payable   60,518       60,330  
Other liabilities   186,807       204,720  
Liabilities held for sale   1,849       9,819  
Total liabilities   3,158,806       3,283,854  
       
Noncontrolling interest   7,537       7,537  
       
Equity      
Shareholders' equity      
Common shares of beneficial interest   148       147  
Additional paid-in capital   3,683,660       3,674,978  
Accumulated other comprehensive loss   (29,674 )     (37,797 )
Distributions in excess of net income   (468,883 )     (549,970 )
Total shareholders' equity   3,185,251       3,087,358  
       
Noncontrolling interest - operating partnership   58,186       56,159  
Noncontrolling interest - consolidated joint ventures   4,851       4,849  
       
Total equity   3,248,288       3,148,366  
       
Total liabilities, noncontrolling interest - operating partnership and equity $ 6,414,631     $ 6,439,757  
 

 

Liberty Property Trust
Statement of Operations
March 31, 2018
(Unaudited and in thousands, except per share amounts)
       
  Quarter Ended
  March 31, 2018   March 31, 2017
Operating Revenue      
Rental $ 125,203     $ 116,868  
Operating expense reimbursement   38,610       37,413  
Development service fee income   26,352       11,485  
Total operating revenue   190,165       165,766  
       
Operating Expenses      
Rental property   15,931       17,535  
Real estate taxes   23,498       21,906  
General and administrative   18,628       16,993  
Expensed pursuit costs   324       32  
Systems implementation expense   706        
Depreciation and amortization   43,686       43,092  
Development service fee expense   28,067       11,004  
Total operating expenses   130,840       110,562  
       
Operating Income   59,325       55,204  
       
Other Income/Expense      
Interest and other income   2,486       1,862  
Interest expense   (22,750 )     (21,634 )
Total other income/expense   (20,264 )     (19,772 )
       
Income before gain on property dispositions, income taxes,      
noncontrolling interest and equity in earnings of      
unconsolidated joint ventures   39,061       35,432  
Gain on property dispositions   4,121       807  
Income taxes   (554 )     (622 )
Equity in earnings of unconsolidated joint ventures   6,764       5,731  
       
Income from continuing operations   49,392       41,348  
Discontinued operations (including net gain on property dispositions of $90.0 million for the quarter ended March 31, 2018)   94,333       2,896  
Net Income   143,725       44,244  
Noncontrolling interest - operating partnerships   (3,457 )     (1,149 )
Noncontrolling interest - consolidated joint ventures   (87 )     (63 )
Net Income available to common shareholders $ 140,181     $ 43,032  
       
Net income $ 143,725     $ 44,244  
Other comprehensive gain - foreign currency translation   7,932       3,177  
Other comprehensive gain - derivative instruments   385       313  
Comprehensive income   152,042       47,734  
Less: comprehensive income attributable to noncontrolling interest   (3,738 )     (1,293 )
Comprehensive income attributable to common shareholders $ 148,304     $ 46,441  
       
Basic income per common share      
Continuing operations $ 0.33     $ 0.27  
Discontinued operations $ 0.62     $ 0.02  
Basic income per common share $ 0.95     $ 0.29  
       
Diluted income per common share      
Continuing operations $ 0.33     $ 0.27  
Discontinued operations $ 0.62     $ 0.02  
Diluted income per common share $ 0.95     $ 0.29  
       
Weighted average shares      
Basic   147,060       146,471  
Diluted   147,873       147,221  
       

 

Liberty Property Trust  
Statement of Funds from Operations  
March 31, 2018  
(Unaudited and in thousands, except per share amounts)  
 
  Quarter Ended  
  March 31, 2018   March 31, 2017  
NAREIT FFO        
     
Reconciliation of net income available to common shareholders to NAREIT FFO available to common shareholders:        
Net income available to common shareholders $ 140,181     $ 43,032    
         
Adjustments:        
Depreciation and amortization of unconsolidated joint ventures   3,202       2,325    
Depreciation and amortization   44,490       45,078    
Gain on property dispositions / impairment - depreciable real estate assets continuing operations   (2,596 )     (807 )  
Gain on property dispositions / impairment - depreciable real estate assets discontinued operations   (90,049 )        
Noncontrolling interest share in addback for depreciation and amortization and gain on property dispositions / impairment - depreciable real estate assets   1,046       (1,090 )  
NAREIT FFO available to common shareholders - basic   96,274       88,538    
         
Noncontrolling interest share in addback for depreciation and amortization and gain on property dispositions / impairment - depreciable real estate assets   (1,046 )     1,090    
Noncontrolling interest excluding preferred unit distributions   3,339       1,031    
NAREIT FFO available to common shareholders - diluted $ 98,567     $ 90,659    
         
         
NAREIT FFO available to common shareholders - basic per share $ 0.65     $ 0.60    
NAREIT FFO available to common shareholders - diluted per share $ 0.65     $ 0.60    
         
Reconciliation of weighted average shares:        
Weighted average common shares - all basic calculations   147,060       146,471    
Dilutive shares for long term compensation plans   813       750    
Diluted shares for net income calculations   147,873       147,221    
Weighted average common units   3,520       3,529    
Diluted shares for NAREIT FFO calculations   151,393       150,750    


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.

 

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