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News Release
Inquiries: Jeanne Leonard, Liberty Property Trust, 610.648.1704
Liberty Property Trust Announces Second Quarter 2019 Results
Wayne, PA, July 30, 2019 - Liberty Property Trust (NYSE: LPT) announced financial and operating results for the second quarter of 2019.
Financial Results
Net Income: Net income available to common shareholders was $0.67 per diluted share for the second quarter of 2019, compared to $0.13 per diluted share for the same period in 2018. For the six months ended June 30, 2019, net income available to common shareholders was $1.04 per diluted share, compared to $1.08 per diluted share for the same period in 2018.
Net income for the second quarter and first six months of 2019 reflects gain on property dispositions net of impairments (including the Company’s share of impairment in unconsolidated joint ventures) of $50.2 million and $59.5 million, respectively, as compared to $48.3 million and $142.5 million for the comparative periods in 2018. Net income for the second quarter of 2018 and for the first six months of 2018 also includes $86.0 million in charges for the Comcast and Camden projects.
NAREIT FFO* available to common shareholders was $0.68 per diluted share for the second quarter of 2019, compared to $0.12 per diluted share for the same period in 2018. NAREIT FFO available to common shareholders for the six months ended June 30, 2019 was $1.30 per diluted share, compared to $0.77 per diluted share for the first six months of 2018.
FFO for the second quarter of 2019 reflects gain on sales of non-depreciable assets and recognition of insurance proceeds offset by a loss on early extinguishment of debt and severance expenses of $1.2 million in the aggregate, or $0.01 per diluted share. FFO for the second quarter of 2018 includes the $86.0 million, or $0.57 per diluted share, in charges for the Comcast and Camden projects discussed above.
Industrial Operating Performance
“Liberty’s second quarter activity was characterized by high leasing volume coupled with very attractive lease economics,” said Bill Hankowsky, chairman and chief executive officer. “This execution reflects the enduring strength of this remarkable industrial market, which provides unprecedented opportunity to achieve high retention rates while at the same time drive rents, minimize leasing costs, and lock in longer lease terms with contractual rent increases on every lease.”
1
Occupancy: At June 30, 2019, Liberty’s in-service operating portfolio of 104.0 million square feet was 95.2% occupied, compared to 95.6% at the end of the first quarter of 2019. The decrease is attributable to the previously announced vacating of space by Sears on May 1.
Leasing Activity: During the quarter, Liberty completed core lease transactions totaling 8.6 million square feet. Rents on retention and replacement leases commenced during the quarter increased 2.9% on a cash basis (11.9% GAAP). Notable leases include:
· 476,200 square foot 11-year lease signed in Indianapolis eliminating significant vacancy, bringing occupancy in that market to 98.8% as of June 30, 2019
· 1.0 million square foot renewal of 2021 expiration in Lehigh Valley
· 1.2 million square foot renewal of 2022 expiration in Lehigh Valley
Liberty entered 2019 with a smaller-than-usual lease expiration schedule for the year. After the first six months of the year, the company’s lease expirations on a square footage basis have been reduced by 72% for 2019 and 26% for 2020.
Same Store Performance: Property level operating income for same store properties increased by 2.9% on a cash basis (0.2% GAAP) for the second quarter of 2019, compared to the same quarter in 2018.
Real Estate Investments
Acquisitions: Liberty acquired a fully leased industrial property in Northern New Jersey totaling 218,000 square feet for $26.5 million.
Subsequent to quarter end, Liberty acquired one industrial property in Southern California totaling 203,300 square feet for $55.5 million.
Development Deliveries: Liberty brought into service two industrial properties for a total investment of $79.3 million. The properties contain 823,600 square feet and were 95.0% occupied as of the end of the quarter.
Development Starts: Development commenced on two industrial properties totaling 236,000 square feet at a projected investment of $17.0 million.
Real Estate Dispositions
Liberty sold four office properties totaling 227,400 square feet for $103.1 million. The properties sold included a 153,200 square foot medical office building in Philadelphia, which sold for $99.25 million. A portion of the proceeds of this sale was used to prepay $35.9 million of mortgage debt encumbering the property, and Liberty realized a loss of $7.6 million on early extinguishment of debt. The secured loan had carried an interest rate of 4.84% and was scheduled to mature in 2033.
2
Subsequent to quarter end, Liberty sold three industrial properties totaling approximately 316,200 square feet for $44.1 million.
*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 109 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 second quarter results, on Tuesday, July 30, 2019, at 1 p.m. Eastern Time. To access the conference call, please dial 888-870-2815. The passcode needed for access is 5296806. A replay of the call will be available until August 30, 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
3
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.
# # #
4
Liberty Property Trust
Balance Sheet
June 30, 2019
(Unaudited and in thousands)
|
|
|
June 30, 2019 |
|
December 31, 2018 |
|
|
Assets |
|
|
|
|
|
|
Real estate: |
|
|
|
|
|
|
Land and land improvements |
|
$ |
1,339,483 |
|
$ |
1,236,514 |
|
|
Building and improvements |
|
4,612,859 |
|
4,397,049 |
|
|
Less: accumulated depreciation |
|
(1,004,624 |
) |
(941,299 |
) |
|
|
|
|
|
|
|
|
Operating real estate |
|
4,947,718 |
|
4,692,264 |
|
|
|
|
|
|
|
|
|
Development in progress |
|
416,035 |
|
462,572 |
|
|
Land held for development |
|
303,135 |
|
296,244 |
|
|
|
|
|
|
|
|
|
Net real estate |
|
5,666,888 |
|
5,451,080 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
21,039 |
|
84,923 |
|
|
Restricted cash |
|
17,392 |
|
10,899 |
|
|
Accounts receivable |
|
12,458 |
|
14,109 |
|
|
Deferred rent receivable |
|
118,230 |
|
111,372 |
|
|
Deferred financing and leasing costs, net |
|
163,566 |
|
157,823 |
|
|
Investments in and advances to unconsolidated joint ventures |
|
350,768 |
|
350,981 |
|
|
Assets held for sale |
|
386,726 |
|
502,207 |
|
|
Right of use asset |
|
17,931 |
|
— |
|
|
Prepaid expenses and other assets |
|
127,261 |
|
251,000 |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
6,882,259 |
|
$ |
6,934,394 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans, net |
|
$ |
351,493 |
|
$ |
395,202 |
|
|
Unsecured notes, net |
|
2,632,881 |
|
2,285,698 |
|
|
Credit facilities |
|
100,000 |
|
411,846 |
|
|
Accounts payable |
|
46,405 |
|
62,943 |
|
|
Accrued interest |
|
28,021 |
|
22,309 |
|
|
Dividend and distributions payable |
|
62,241 |
|
60,560 |
|
|
Lease liability |
|
18,617 |
|
— |
|
|
Other liabilities |
|
200,867 |
|
270,396 |
|
|
Liabilities held for sale |
|
19,033 |
|
21,131 |
|
|
Total liabilities |
|
3,459,558 |
|
3,530,085 |
|
|
|
|
|
|
|
|
|
Noncontrolling interest |
|
5,337 |
|
7,537 |
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
|
Common shares of beneficial interest |
|
148 |
|
148 |
|
|
Additional paid-in capital |
|
3,687,085 |
|
3,691,778 |
|
|
Accumulated other comprehensive loss |
|
(57,674 |
) |
(55,243 |
) |
|
Distributions in excess of net income |
|
(274,311 |
) |
(306,822 |
) |
|
Total shareholders’ equity |
|
3,355,248 |
|
3,329,861 |
|
|
|
|
|
|
|
|
|
Noncontrolling interest - operating partnership |
|
61,839 |
|
61,471 |
|
|
Noncontrolling interest - consolidated joint ventures |
|
277 |
|
5,440 |
|
|
|
|
|
|
|
|
|
Total equity |
|
3,417,364 |
|
3,396,772 |
|
|
|
|
|
|
|
|
|
Total liabilities, noncontrolling interest - operating partnership and equity |
|
$ |
6,882,259 |
|
$ |
6,934,394 |
|
Liberty Property Trust
Statement of Operations
June 30, 2019
(Unaudited and in thousands, except per share amounts)
|
|
|
Quarter Ended |
|
Six Months Ended |
|
|
|
|
June 30, 2019 |
|
June 30, 2018 |
|
June 30, 2019 |
|
June 30, 2018 |
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
Rental revenue |
|
$ |
160,359 |
|
$ |
146,107 |
|
$ |
316,732 |
|
$ |
291,482 |
|
|
Development service fee income |
|
978 |
|
19,824 |
|
1,842 |
|
46,176 |
|
|
Total revenue |
|
161,337 |
|
165,931 |
|
318,574 |
|
337,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
Rental property |
|
14,104 |
|
13,247 |
|
27,768 |
|
26,464 |
|
|
Real estate taxes |
|
23,487 |
|
21,793 |
|
45,860 |
|
43,295 |
|
|
General and administrative |
|
9,693 |
|
8,832 |
|
25,298 |
|
23,159 |
|
|
Leasing expense |
|
3,318 |
|
2,767 |
|
6,526 |
|
5,579 |
|
|
Other operating expenses |
|
3,256 |
|
1,577 |
|
5,524 |
|
4,079 |
|
|
Interest expense |
|
25,406 |
|
21,454 |
|
50,903 |
|
42,944 |
|
|
Depreciation and amortization |
|
43,032 |
|
40,076 |
|
86,430 |
|
79,582 |
|
|
Development service fee expense |
|
847 |
|
79,808 |
|
1,680 |
|
107,875 |
|
|
Impairment charges - real estate assets |
|
— |
|
26,000 |
|
99 |
|
26,000 |
|
|
Total expenses |
|
123,143 |
|
215,554 |
|
250,088 |
|
358,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
7,998 |
|
2,700 |
|
11,256 |
|
5,220 |
|
|
Gain on property dispositions |
|
5,462 |
|
48,584 |
|
5,957 |
|
52,742 |
|
|
Equity in earnings of unconsolidated joint ventures |
|
2,181 |
|
7,428 |
|
9,190 |
|
14,192 |
|
|
Income from continuing operations before income taxes |
|
53,835 |
|
9,089 |
|
94,889 |
|
50,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
261 |
|
(911 |
) |
(571 |
) |
(1,440 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
54,096 |
|
8,178 |
|
94,318 |
|
49,395 |
|
|
Discontinued operations (including gain on asset sales, net of impairments and debt extinguishment loss, of $41.2 million and $50.1 million for the three and six months ended June 30, 2019, respectively, and a net loss of $0.2 million and a net gain of $89.8 million and for the three and six months ended June 30, 2018, respectively) |
|
48,239 |
|
12,712 |
|
63,766 |
|
115,220 |
|
|
Net Income |
|
102,335 |
|
20,890 |
|
158,084 |
|
164,615 |
|
|
Noncontrolling interest - operating partnerships |
|
(2,443 |
) |
(585 |
) |
(3,817 |
) |
(4,042 |
) |
|
Noncontrolling interest - consolidated joint ventures |
|
(123 |
) |
(691 |
) |
(167 |
) |
(778 |
) |
|
Net Income available to common shareholders |
|
$ |
99,769 |
|
$ |
19,614 |
|
$ |
154,100 |
|
$ |
159,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
102,335 |
|
$ |
20,890 |
|
$ |
158,084 |
|
$ |
164,615 |
|
|
Other comprehensive income - foreign currency translation |
|
(5,894 |
) |
(14,138 |
) |
(518 |
) |
(6,206 |
) |
|
Other comprehensive (loss) income - derivative instruments |
|
(116 |
) |
102 |
|
(1,970 |
) |
487 |
|
|
Comprehensive income |
|
96,325 |
|
6,854 |
|
155,596 |
|
158,896 |
|
|
Less: comprehensive income attributable to noncontrolling interest |
|
(2,427 |
) |
(949 |
) |
(3,927 |
) |
(4,687 |
) |
|
Comprehensive income attributable to common shareholders |
|
$ |
93,898 |
|
$ |
5,905 |
|
$ |
151,669 |
|
$ |
154,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share |
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.36 |
|
$ |
0.05 |
|
$ |
0.62 |
|
$ |
0.33 |
|
|
Discontinued operations |
|
$ |
0.32 |
|
$ |
0.08 |
|
$ |
0.42 |
|
$ |
0.76 |
|
|
Basic income per common share |
|
$ |
0.68 |
|
$ |
0.13 |
|
$ |
1.04 |
|
$ |
1.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share |
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.35 |
|
$ |
0.05 |
|
$ |
0.62 |
|
$ |
0.32 |
|
|
Discontinued operations |
|
$ |
0.32 |
|
$ |
0.08 |
|
$ |
0.42 |
|
$ |
0.76 |
|
|
Diluted income per common share |
|
$ |
0.67 |
|
$ |
0.13 |
|
$ |
1.04 |
|
$ |
1.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares |
|
|
|
|
|
|
|
|
|
|
Basic |
|
147,805 |
|
147,274 |
|
147,706 |
|
147,184 |
|
|
Diluted |
|
148,668 |
|
148,333 |
|
148,606 |
|
148,104 |
|
Liberty Property Trust
Statement of Funds from Operations
June 30, 2019
(Unaudited and in thousands, except per share amounts)
|
|
|
Quarter Ended |
|
Six Months Ended |
|
|
|
|
June 30, 2019 |
|
June 30, 2018 |
|
June 30, 2019 |
|
June 30, 2018 |
|
|
NAREIT FFO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income available to common shareholders to NAREIT FFO available to common shareholders: |
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders |
|
$ |
99,769 |
|
$ |
19,614 |
|
$ |
154,100 |
|
$ |
159,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of unconsolidated joint ventures |
|
3,026 |
|
3,236 |
|
6,158 |
|
6,438 |
|
|
Depreciation and amortization |
|
42,704 |
|
42,682 |
|
87,737 |
|
87,172 |
|
|
Loss on property dispositions / impairment - depreciable real estate assets of unconsolidated joint ventures |
|
4,098 |
|
— |
|
4,098 |
|
— |
|
|
Loss (gain) on property dispositions / impairment - depreciable real estate assets continuing operations |
|
13 |
|
(48,614 |
) |
(35 |
) |
(51,210 |
) |
|
(Gain) loss on property dispositions / impairment - depreciable real estate assets discontinued operations |
|
(48,383 |
) |
238 |
|
(57,296 |
) |
(89,811 |
) |
|
Noncontrolling interest share in addback for depreciation and amortization and gain on property dispositions / impairment - depreciable real estate assets |
|
(34 |
) |
57 |
|
(944 |
) |
1,103 |
|
|
NAREIT FFO available to common shareholders - basic |
|
101,193 |
|
17,213 |
|
193,818 |
|
113,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest share in addback for depreciation and amortization and gain on property dispositions / impairment - depreciable real estate assets |
|
34 |
|
(57 |
) |
944 |
|
(1,103 |
) |
|
Noncontrolling interest excluding preferred unit distributions |
|
2,359 |
|
467 |
|
3,649 |
|
3,806 |
|
|
NAREIT FFO available to common shareholders - diluted |
|
$ |
103,586 |
|
$ |
17,623 |
|
$ |
198,411 |
|
$ |
116,190 |
|
|
NAREIT FFO available to common shareholders - basic per share |
|
$ |
0.68 |
|
$ |
0.12 |
|
$ |
1.31 |
|
$ |
0.77 |
|
|
NAREIT FFO available to common shareholders - diluted per share |
|
$ |
0.68 |
|
$ |
0.12 |
|
$ |
1.30 |
|
$ |
0.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of weighted average shares: |
|
|
|
|
|
|
|
|
|
|
Weighted average common shares - all basic calculations |
|
147,805 |
|
147,274 |
|
147,706 |
|
147,184 |
|
|
Dilutive shares for long term compensation plans |
|
863 |
|
1,059 |
|
900 |
|
920 |
|
|
Diluted shares for net income calculations |
|
148,668 |
|
148,333 |
|
148,606 |
|
148,104 |
|
|
Weighted average common units |
|
3,514 |
|
3,520 |
|
3,517 |
|
3,520 |
|
|
Diluted shares for NAREIT FFO calculations |
|
152,182 |
|
151,853 |
|
152,123 |
|
151,624 |
|
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.