Liberty Property Trust (NYSE:LRY) reported that net income per common share (diluted) was $0.39 per share for the quarter ended December 31, 2007, compared to $0.67 per share (diluted) for the quarter ended December 31, 2006, and $1.80 per share (diluted) for the full year 2007 compared to $2.95 per share (diluted) for 2006. Net income for the fourth quarter of 2007 includes gains on the sale of properties of $0.10 per share, net of tax, compared with $0.28 per share in gains for the same period in 2006.
Funds from operations available to common shareholders (diluted) ("FFO") for the fourth quarter of 2007 was $0.79 per share, compared to $0.76 per share for the fourth quarter of 2006. For the year ended December 31, 2007, FFO per share was $3.18, compared to $3.12 per share for 2006.
"Despite the uncertainty clouding the nation's economic picture, a snapshot of the commercial real estate environment is not quite so gloomy. We continue to see solid market activity and prospects across the board in each of our product types in all of our markets. This is not 2001 where demand evaporated and sublet space swamped the markets. Supply and demand is more balanced; prospect activity is consistent; and market behavior is disciplined," commented Bill Hankowsky, chief executive officer. "That said, Liberty is well-positioned to operate effectively in an uncertain and capital- constrained economic environment. Our existing occupancy is very healthy, and we are facing lower-than-average lease expirations this year. Our balance sheet is solid and we have no need to access the unsecured debt markets this year."
Portfolio Performancei
Leasing: At December 31, 2007 Liberty's in-service portfolio of 73.5 million square feet was 92.9% occupied, compared to 92.9% at the end of the third quarter. During the quarter, Liberty completed lease transactions totaling 4.1 million square feet of space.
Same Store Performance: Property level operating income for same store properties was flat on a cash basis and decreased by 0.4% on a straight line basis for the fourth quarter of 2007 compared to the same quarter in 2006, and increased by 3.1% on a cash basis and 2.3% on a straight line basis for the full year 2007 compared to 2006.
Real Estate Investments
Development: During the fourth quarter, Liberty brought into service seven development properties totaling 956,000 square feet for a total investment of $137.2 million. At quarter-end the properties were 84.4% leased, and the current yield on the investments is 8.6%. A joint venture in which the company holds a 50% interest brought into service one development property for a total investment of $15 million. This property, which contains 340,000 square feet of leasable space, was 100% occupied as of December 31, 2007. The current yield on this investment is 10.5%. Additionally, 597,000 square feet of the 1.25 million square foot Comcast Center development came into service during the fourth quarter.
During the fourth quarter, Liberty began development of eight properties totaling 1.2 million square feet, with an expected total investment of $117.0 million. The properties consist of a 126,000 square foot flex building in Elkridge, MD; an office and a flex property totaling 112,000 square feet in suburban Milwaukee; a 100,000 square foot distribution building in the Richmond, VA market; two office buildings totaling 120,000 square feet in Phoenix; a 613,000 square foot distribution building in Houston; and a 105,000 square foot office building in Miramar, FL.
As of December 31, 2007, Liberty had 5.4 million square feet of wholly- owned and joint venture properties under development. This activity represents a total projected investment of $677.5 million, with an expected yield of 8.1%. The properties were 16.5% leased at year-end.
Acquisitions: During the fourth quarter, Liberty completed a merger with Republic Property Trust, in which Liberty acquired 2,417,000 square feet of operating office properties, six acres of land and a redevelopment property which will contain an additional 176,000 square feet in Washington, DC and Northern Virginia, for $913 million. Concurrently, Liberty contributed the properties and land to a joint venture in which Liberty holds a 25% interest. The joint venture valued the properties at $900 million. The transaction resulted in $13 million of goodwill.
In addition, the company acquired four distribution properties in North Carolina totaling 536,000 square feet for $26.7 million. The properties are 100% leased and have a current yield of 9.2%
Dispositions: During the fourth quarter, Liberty sold 33 properties containing 1.5 million square feet, and 15 acres of land, for $96.5 million. The properties sold consist of a distribution building in the Lehigh Valley, PA, three flex buildings in Minnesota, and the majority of the remainder of Liberty's Michigan portfolio.
About the Company
Liberty Property Trust (NYSE:LRY) 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 74 million square foot portfolio includes more than 700 properties which provide office, distribution and light manufacturing facilities to 2,100 tenants.
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