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Liberty Property (LPT) Stock Up on Q3 FFO & Revenue Beat
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Liberty Property Trust reported third-quarter 2018 funds from operations (FFO) per share of 69 cents, which surpassed the Zacks Consensus Estimate of 65 cents. Total operating revenues of around $172.3 million for the quarter also outpaced the Zacks Consensus Estimate of $160.5 million.
On a year-over-year basis, the company’s FFO per share climbed from 66 cents per share recorded in the year-earlier quarter. However, total operating revenues marginally fell from the prior-year figure.
During the reported quarter, Liberty Property accomplished lease deals for 5.1 million square feet of space. As of Sep 30, 2018, occupancy at the company’s in-service portfolio, spanning 103.5 million square feet, shrunk 40 basis points (bps) sequentially to 96.6%.
Amid these, shares of Liberty Property increased 3.2% to $41.52 during regular trading session on Oct 23.
Quarter in Detail
Liberty Property’s industrial portfolio, spanning 97.5 million square feet of area, had occupancy of 96.5% at the end of the third quarter, marking a contraction of 50 bps from the previous quarter. Industrial distribution rents escalated 17.5% on a U.S. GAAP basis on retention and replacement leases signed during the quarter.
The office portfolio, comprising 6.0 million square feet of space, had occupancy of 96.9%, up 30 bps from the previous quarter. Office rents were up 45.8% on a U.S. GAAP basis on retention and replacement leases.
Same-store operating income for the industrial portfolio increased 4.1% on a cash and 3.8% on a GAAP basis from the prior-year quarter.
Portfolio Activity
During the Sep-end quarter, Liberty acquired two industrial buildings in New Jersey and one industrial building in Texas, aggregating 1.3 million square feet of space, for $101.1 million.
On the other hand, Liberty sold five office buildings in Arizona, totaling 806,000 square feet of area, for $255 million. The company also sold 66 acres of land in the Lehigh Valley for $9.7 million.
The company brought into service three industrial development properties, having 803,000 square feet of leasable space and 64.7% occupied as of the end of the quarter, for a total investment of $52.8 million. Further, Liberty commenced development of eight properties during the quarter under review, aggregating 1.8 million square feet of leasable space, at an estimated investment of $179 million.
Balance-Sheet Position
Liberty Property exited third-quarter 2018 with cash and cash equivalents of around $17.8 million, up from $11.9 million recorded at the end of December 2017.
Outlook
Liberty Property revised its outlook for 2018. The company now guides FFO per share of $2.07-$2.09 compared to its previous outlook of $2.01-$2.08. Excluding certain charges incurred in the second quarter, the new range is $2.64-$2.66. The Zacks Consensus Estimate for the same is currently pinned at $2.62.
The company also increased its projected disposition activity to $800-$950 million from $700-$900 million guided earlier. Further, the company projects rental increases on renewal and replacement leases in the industrial portfolio during 2018 in the range of 13-15% on a GAAP basis, and 5-6% on a cash basis.
Our Take
The better-than-expected performance of Liberty Property in the third quarter is encouraging. Leveraging on the strong fundamentals of the industrial real estate market, the company is focusing to expand its industrial portfolio through strategic acquisitions and development projects. Furthermore, it is disposing non-core office properties to pursue such expansion opportunities. Such efforts to refine portfolio and capitalize on value creation opportunities are expected to drive the company’s long-term growth.
Nonetheless, large scale dispositions will likely have a dilutive impact on the company’s earnings in the near term. In addition, with rising supply of industrial real estate space, there is lesser scope for robust rent and occupancy growth. Also, rate hike remains a concern.
We now look forward to the earnings releases of other REITs like Kimco Realty Corporation (KIM - Free Report) , Simon Property Group, Inc. (SPG - Free Report) and Iron Mountain Incorporated (IRM - Free Report) , which are slated to report their quarterly numbers on Oct 25.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Liberty Property (LPT) Stock Up on Q3 FFO & Revenue Beat
Liberty Property Trust reported third-quarter 2018 funds from operations (FFO) per share of 69 cents, which surpassed the Zacks Consensus Estimate of 65 cents. Total operating revenues of around $172.3 million for the quarter also outpaced the Zacks Consensus Estimate of $160.5 million.
On a year-over-year basis, the company’s FFO per share climbed from 66 cents per share recorded in the year-earlier quarter. However, total operating revenues marginally fell from the prior-year figure.
During the reported quarter, Liberty Property accomplished lease deals for 5.1 million square feet of space. As of Sep 30, 2018, occupancy at the company’s in-service portfolio, spanning 103.5 million square feet, shrunk 40 basis points (bps) sequentially to 96.6%.
Amid these, shares of Liberty Property increased 3.2% to $41.52 during regular trading session on Oct 23.
Quarter in Detail
Liberty Property’s industrial portfolio, spanning 97.5 million square feet of area, had occupancy of 96.5% at the end of the third quarter, marking a contraction of 50 bps from the previous quarter. Industrial distribution rents escalated 17.5% on a U.S. GAAP basis on retention and replacement leases signed during the quarter.
The office portfolio, comprising 6.0 million square feet of space, had occupancy of 96.9%, up 30 bps from the previous quarter. Office rents were up 45.8% on a U.S. GAAP basis on retention and replacement leases.
Same-store operating income for the industrial portfolio increased 4.1% on a cash and 3.8% on a GAAP basis from the prior-year quarter.
Portfolio Activity
During the Sep-end quarter, Liberty acquired two industrial buildings in New Jersey and one industrial building in Texas, aggregating 1.3 million square feet of space, for $101.1 million.
On the other hand, Liberty sold five office buildings in Arizona, totaling 806,000 square feet of area, for $255 million. The company also sold 66 acres of land in the Lehigh Valley for $9.7 million.
The company brought into service three industrial development properties, having 803,000 square feet of leasable space and 64.7% occupied as of the end of the quarter, for a total investment of $52.8 million. Further, Liberty commenced development of eight properties during the quarter under review, aggregating 1.8 million square feet of leasable space, at an estimated investment of $179 million.
Balance-Sheet Position
Liberty Property exited third-quarter 2018 with cash and cash equivalents of around $17.8 million, up from $11.9 million recorded at the end of December 2017.
Outlook
Liberty Property revised its outlook for 2018. The company now guides FFO per share of $2.07-$2.09 compared to its previous outlook of $2.01-$2.08. Excluding certain charges incurred in the second quarter, the new range is $2.64-$2.66. The Zacks Consensus Estimate for the same is currently pinned at $2.62.
The company also increased its projected disposition activity to $800-$950 million from $700-$900 million guided earlier. Further, the company projects rental increases on renewal and replacement leases in the industrial portfolio during 2018 in the range of 13-15% on a GAAP basis, and 5-6% on a cash basis.
Our Take
The better-than-expected performance of Liberty Property in the third quarter is encouraging. Leveraging on the strong fundamentals of the industrial real estate market, the company is focusing to expand its industrial portfolio through strategic acquisitions and development projects. Furthermore, it is disposing non-core office properties to pursue such expansion opportunities. Such efforts to refine portfolio and capitalize on value creation opportunities are expected to drive the company’s long-term growth.
Nonetheless, large scale dispositions will likely have a dilutive impact on the company’s earnings in the near term. In addition, with rising supply of industrial real estate space, there is lesser scope for robust rent and occupancy growth. Also, rate hike remains a concern.
Currently, Liberty Property carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Liberty Property Trust Price, Consensus and EPS Surprise
Liberty Property Trust Price, Consensus and EPS Surprise | Liberty Property Trust Quote
We now look forward to the earnings releases of other REITs like Kimco Realty Corporation (KIM - Free Report) , Simon Property Group, Inc. (SPG - Free Report) and Iron Mountain Incorporated (IRM - Free Report) , which are slated to report their quarterly numbers on Oct 25.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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