Liberty Property Trust Announces First Quarter 2019 Results

WAYNE, Pa., April 30, 2019 (GLOBE NEWSWIRE) -- Liberty Property Trust (NYSE: LPT) announced financial and operating results for the first quarter of 2019.

Highlights for First Quarter 2019

  • 8.9 million square feet of leasing in quarter
  • Rents increased 16.3% on a GAAP basis
  • Cash same store operating income increased by 4.6%
  • Six development projects delivered, 87.8% occupied at 3/31, 100% leased today
  • NAREIT Funds from Operations $0.62 per diluted share
  •  2019 FFO guidance raised

Management Comments
“Demand from users for industrial space continues to be outstanding. The dynamism of the market is reflected in an extraordinarily active quarter with nearly nine million square feet of leasing activity, including significant renewals of 2020 expirations at very favorable rents and longer than typical lease terms,” said Bill Hankowsky, Chairman and Chief Executive Officer. “We are updating expectations for the year to reflect the solid performance of our portfolio.”

Financial Results
Net Income: Net income available to common shareholders was $0.37 per diluted share for the first quarter of 2019, compared to $0.95 per share for the same period in 2018. Net income for the first quarter of 2019 and 2018 reflect gains on sales net of impairments of $0.06 and $0.64 per diluted share, respectively.

NAREIT FFO* available to common shareholders was $0.62 for the first quarter of 2019, compared to $0.65 per diluted share for the same period in 2018.

Industrial Operating Performance          
Occupancy: At March 31, 2019, Liberty’s in-service operating portfolio of 103.0 million square feet was 95.6% occupied, compared to 96.3% at the end of the fourth quarter of 2018. During the quarter, Liberty completed lease transactions totaling 8.9 million square feet.  Rents on retention and replacement leases commenced during the quarter increased 6.6% on a cash basis (16.3% GAAP).
             
Same Store Performance: Property level operating income for same store properties increased by 4.6% on a cash basis (1.7% GAAP) for the first quarter of 2019, compared to the same quarter in 2018.

Real Estate Investments
Acquisitions: Liberty acquired five industrial properties totaling 1.1 million square feet for $127.5 million.

Development Deliveries: Liberty brought into service six industrial properties for a total investment of $89.1 million. The properties contain 850,000 square feet and were 87.8% occupied as of the end of the quarter, and are currently 100% leased.

Development Starts: Development commenced on two industrial properties totaling 163,000 square feet at a projected investment of $18.1 million.

Real Estate Dispositions
Liberty sold four operating properties totaling 297,000 square feet for $85.2 million.

Subsequent to quarter end, Liberty sold three office properties totaling approximately 74,000 square feet and 18 acres of land in Malvern, Pennsylvania for $10.2 million.

Capital and Balance Sheet Activity
During the first quarter, Liberty increased the dividend on its common shares of beneficial interest to $0.41 per share.

Additionally during the first quarter, Liberty issued $350 million of 4.375% senior unsecured notes due February 1, 2029. 

2019 Outlook
For 2019, Liberty now expects to report net income available to common shareholders in the range of $2.23-$2.32 per diluted share, and NAREIT FFO in the range of $2.55-$2.65 per diluted share.

Liberty anticipates property level operating income for industrial same store properties to grow by 1.6% to 2.6% on a GAAP basis and 3.0% to 4.0% on a cash basis. This projection reflects our expectation that a major retailer in bankruptcy will vacate its 849,000 square foot space on May 1.

A reconciliation of GAAP net income available to common shareholders per diluted share to NAREIT FFO per diluted share for 2019 is below (all amounts projected). Additional information on assumptions underlying this guidance is included in Liberty’s first quarter 2019 supplemental financial report on the company’s website.

  Revised 2019
Outlook
  Previous 2019
Outlook
Net income, per diluted share $2.23 - $2.32   $2.21 - $2.32
Depreciation and amortization of unconsolidated joint ventures 0.09 – 0.09   0.09 – 0.09
Depreciation and amortization 1.26 – 1.36   1.26 – 1.36
Gain on property dispositions (1.08) – (1.17)   (1.08) – (1.17)
Noncontrolling interest share of addbacks 0.05 – 0.05   0.05 – 0.05
NAREIT FFO, per diluted share $2.55 - $2.65   $2.53 - $2.65

*Funds from Operations: Liberty 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 (“GAAP”) net income to NAREIT FFO is included in the financial data tables accompanying this press release.

About the Company
Liberty Property Trust 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 logistics, warehouse, manufacturing, and R&D facilities in key markets. Liberty's 108 million square foot operating portfolio provides productive work environments 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 first quarter  results, on Tuesday, April 30, 2019, at 1 p.m. Eastern Time.  To access the conference call, please dial 888-870-2815. The passcode needed for access is 4764619. A replay of the call will be available until May 31, 2019, by dialing 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 other 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 
March 31, 2019
(Unaudited and in thousands)
 
  March 31, 2019   December 31, 2018
Assets      
  Real estate:      
   Land and land improvements $   1,311,504     $   1,241,593  
   Building and improvements   4,564,769       4,410,324  
   Less: accumulated depreciation   (978,406 )     (945,365 )
       
  Operating real estate   4,897,867       4,706,552  
       
  Development in progress   440,593       472,169  
  Land held for development   297,384       296,244  
       
  Net real estate   5,635,844       5,474,965  
       
  Cash and cash equivalents   96,949       84,923  
  Restricted cash   17,696       10,899  
  Accounts receivable   15,992       14,109  
  Deferred rent receivable   114,944       111,627  
  Deferred financing and leasing costs, net   163,155       157,980  
  Investments in and advances to unconsolidated joint ventures   353,215       350,981  
  Assets held for sale   423,846       477,716  
  Right of use asset   18,097        
  Prepaid expenses and other assets   98,841       251,192  
       
  Total assets $   6,938,579     $   6,934,392  
       
Liabilities      
       
  Mortgage loans, net $   396,690     $   395,202  
  Unsecured notes, net   2,632,089       2,285,698  
  Credit facilities   100,000       411,846  
  Accounts payable   51,267       65,260  
  Accrued interest   37,236       22,309  
  Dividend and distributions payable   62,229       60,560  
  Right of use liability   18,752        
  Other liabilities   218,131       272,143  
  Liabilities held for sale   18,035       17,065  
  Total liabilities   3,534,429       3,530,083  
       
  Noncontrolling interest   5,337       7,537  
       
Equity      
  Shareholders' equity      
  Common shares of beneficial interest   148       148  
  Additional paid-in capital   3,697,783       3,691,778  
  Accumulated other comprehensive loss   (51,803 )     (55,243 )
  Distributions in excess of net income   (313,279 )     (306,822 )
  Total shareholders' equity   3,332,849       3,329,861  
       
  Noncontrolling interest - operating partnership   61,280       61,471  
  Noncontrolling interest - consolidated joint ventures   4,684       5,440  
       
  Total equity   3,398,813       3,396,772  
       
  Total liabilities, noncontrolling interest - operating partnership and equity $   6,938,579     $   6,934,392  
 

 

Liberty Property Trust
Statement of Operations
March 31, 2019
(Unaudited and in thousands, except per share amounts)
       
  Quarter Ended
  March 31, 2019   March 31, 2018
Revenue      
  Rental $   156,886     $   146,361  
  Development service fee income   864       26,352  
  Total revenue   157,750       172,713  
       
Expenses      
  Rental property   13,620       13,260  
  Real estate taxes   22,462       21,578  
  General and administrative   15,607       14,335  
  Leasing   3,208       2,812  
  Other operating expenses   2,268       2,502  
  Interest expense   25,519       22,670  
  Depreciation and amortization   43,484       39,659  
  Development service fee expense   833       28,067  
  Impairment charges - real estate assets   99        
  Total expenses   127,100       144,883  
       
  Interest and other income   3,394       2,494  
  Gain on property dispositions   741       4,158  
  Equity in earnings of unconsolidated joint ventures   7,009       6,764  
  Income from continuing operations before income taxes   41,794       41,246  
       
Income taxes   (832 )     (528 )
       
Income from continuing operations   40,962       40,718  
Discontinued operations (including net gain of $8.7 million on property
dispositions for the three months ended March 31, 2019 and $90.0 million for the
three months ended March 31, 2018)
  14,786       103,007  
Net Income   55,748       143,725  
  Noncontrolling interest - operating partnerships   (1,374 )     (3,457 )
  Noncontrolling interest - consolidated joint ventures   (44 )     (87 )
Net Income available to common shareholders $   54,330     $   140,181  
       
  Net income $   55,748     $   143,725  
  Other comprehensive income - foreign currency translation   5,376       7,932  
  Other comprehensive (loss) income - derivative instruments   (1,854 )     385  
Comprehensive income   59,270       152,042  
  Less: comprehensive income attributable to noncontrolling interest   (1,500 )     (3,738 )
Comprehensive income attributable to common shareholders $   57,770     $   148,304  
       
Basic income per common share      
  Continuing operations $   0.27     $   0.27  
  Discontinued operations $   0.10     $   0.68  
Basic income per common share $   0.37     $   0.95  
       
Diluted income per common share      
  Continuing operations $   0.27     $   0.27  
  Discontinued operations $   0.10     $   0.68  
Diluted income per common share $   0.37     $   0.95  
       
Weighted average shares      
  Basic   147,559       147,060  
  Diluted   148,540       147,873  
       

 

Liberty Property Trust
Statement of Funds from Operations
March 31, 2019
(Unaudited and in thousands, except per share amounts)
       
  Quarter Ended
  March 31, 2019   March 31, 2018
NAREIT FFO      
   
Reconciliation of net income available to common shareholders to NAREIT FFO
available to common shareholders:
     
Net income available to common shareholders $   54,330     $   140,181  
       
Adjustments:      
Depreciation and amortization of unconsolidated joint ventures   3,132       3,202  
Depreciation and amortization   45,033       44,490  
Gain on property dispositions / impairment - depreciable real estate assets
continuing operations
  (294 )     (2,633 )
Gain on property dispositions / impairment - depreciable real estate assets
discontinued operations
  (8,667 )     (90,012 )
Noncontrolling interest share in addback for depreciation and amortization and
gain on property dispositions / impairment - depreciable real estate assets
  (910 )     1,046  
NAREIT FFO available to common shareholders - basic   92,624       96,274  
       
Noncontrolling interest share in addback for depreciation and amortization and
gain on property dispositions / impairment - depreciable real estate assets
  910       (1,046 )
Noncontrolling interest excluding preferred unit distributions   1,290       3,339  
NAREIT FFO available to common shareholders - diluted $   94,824     $   98,567  
       
       
NAREIT FFO available to common shareholders - basic per share $   0.63     $   0.65  
NAREIT FFO available to common shareholders - diluted per share $   0.62     $   0.65  
       
Reconciliation of weighted average shares:      
Weighted average common shares - all basic calculations   147,559       147,060  
Dilutive shares for long term compensation plans   981       813  
Diluted shares for net income calculations   148,540       147,873  
Weighted average common units   3,520       3,520  
Diluted shares for NAREIT FFO calculations   152,060       151,393  

NAREIT Funds from Operations available to common shareholders is defined by NAREIT as net income (computed in accordance with U.S. GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. 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 has opted to include gains and losses from the sale of assets incidental to its main business as a REIT. 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

Source: Liberty Property Trust