Liberty Property Trust Announces 2018 Fourth Quarter and Full Year Results and Provides Guidance for 2019

WAYNE, Pa., Feb. 05, 2019 (GLOBE NEWSWIRE) -- Liberty Property Trust (NYSE: LPT) announced financial and operating results for the fourth quarter and full year of 2018, as well as guidance for 2019 performance.

Net income available to common shareholders was $1.14 per diluted share for the fourth quarter of 2018 and $3.24 per diluted share for the full year, compared to $0.87 per share and $1.91 per share respectively for the same periods in 2017.

NAREIT FFO* available to common shareholders was $0.74 for the fourth quarter of 2018 and $2.20 for the full year, compared to $0.68 per diluted share and $2.59 per diluted share respectively for the same periods in 2017.

Net income and NAREIT FFO for the fourth quarter of 2018 reflect a gain, net of tax, on the sale of development rights in the UK of over $0.12 per diluted share, partially offset by land impairments of $0.04 per share, resulting in net gains on non-depreciable assets of $0.08 per share in the aggregate.  Net income and NAREIT FFO for the full year of 2018 also reflect $0.57 per share in charges relating to two development projects.

Net income for the fourth quarter and the full year of 2018 also reflects impairment charges relating to depreciable office operating properties of $0.09 per diluted share (including our share of an impairment in an unconsolidated joint venture).  These charges did not impact NAREIT FFO.

Management Comments on the Quarter and Year
“2018 was another outstanding year for the industrial real estate business, particularly Liberty’s core business of developing, leasing and managing multi-tenant industrial properties in great locations. The winning combination of solid demand and moderate supply continues to underpin high occupancy and drive rents,” said Bill Hankowsky, Chairman and Chief Executive Officer. “The fourth quarter was particularly productive from a strategic perspective. We completed the sale of the bulk of our suburban office properties, and further simplified our business by expanding and recapitalizing our UK industrial platform and monetizing the rights to a UK mixed-use land holding for a significant gain.”

Fourth Quarter Activity
Real Estate Dispositions: Liberty sold nine operating properties totaling approximately 905,000 square feet and development rights to a 500-acre mixed use site in the UK for $284.2 million.

Subsequent to quarter end, Liberty sold an office portfolio of three properties in Orlando totaling approximately 151,000 square feet of leasable space for $23.4 million. 

Acquisitions: Liberty acquired nine industrial properties totaling 1.6 million square feet for $204.8 million.

Subsequent to quarter end, Liberty purchased a 290,000 square foot industrial building in Southern California for $31.3 million.

Development Deliveries: Liberty brought into service five industrial properties for a total investment of $133.8 million. The properties contain 1.7 million square feet and were 65.6% occupied as of the end of the quarter. In addition, a joint venture in which Liberty owns a 25% interest brought into service one industrial property for a total investment of $21.0 million.

Development Starts: Development commenced on six industrial properties totaling 1.3 million square feet at a projected investment of $141.5 million.

Operating Performance
Occupancy: At December 31, 2018, Liberty’s in-service portfolio of 106.1 million square feet was 96.3% occupied, compared to 96.6% at the end of the third quarter of 2018. During the quarter, Liberty completed lease transactions totaling 5.4 million square feet.  Liberty leased 22.9 million square feet overall in 2018.

Occupancy of Liberty’s 100.9 million square foot industrial portfolio was 96.3% at quarter-end, compared to 96.5% at the end of the third quarter. Industrial rents on retention and replacement leases commenced during the quarter increased 13.1% on a GAAP basis.

Same Store Performance: Property level operating income for same store industrial properties increased by 3.0% on a cash basis and 2.2% on a GAAP basis for the fourth quarter of 2018 compared to the same quarter in 2017. Fourth quarter same store performance was negatively impacted by 0.9% relating primarily to bad debt expense.  For the full year ended December 31, 2018, property level operating income for same store industrial properties increased by 4.8% on a cash basis and by 3.7% on a GAAP basis, compared to the full year ended December 31, 2017.

Capital and Balance Sheet Activity
Liberty recapitalized its UK industrial portfolio with a £129.5 million, 10-year, interest-only loan at 2.64%. This loan was used to repay short-term borrowings as well as to finance portions of Liberty’s existing UK industrial portfolio.

Subsequent to quarter end, Liberty issued $350 million of 4.375% senior unsecured notes.  The notes are due February 1, 2029 and were priced to yield 4.407%.  In October and November of 2018, in anticipation of conducting the offering of senior unsecured notes, Liberty separately entered into two interest rate lock agreements tied to the U.S. treasury rate.  These agreements were settled prior to consummation of the offering for an aggregate cost to Liberty of $5.7 million.

2019 Outlook
“The fundamental drivers of our business appear relatively unchanged from 2018, and we expect similar opportunities to grow in 2019. In 2018 we set the stage for, and completed a great deal of work toward, returning to our roots as an industrial real estate company. We are concentrating our efforts and capital solely in the industrial business. Our outlook for 2019 incorporates a similarly aggressive push toward completion of this repositioning activity. To look out a bit further, it is reasonable to expect we will complete the disposition of all wholly-owned office assets within 18 months,” said Mr. Hankowsky.

For 2019, Liberty expects to report net income available to common shareholders in the range of $2.21-$2.32 per diluted share, and NAREIT FFO in the range of $2.53-$2.65 per diluted share.

In 2019, Liberty expects asset sales in the range of $600-$650 million and acquisitions in the range of $300-$350 million. Liberty expects to start development of $475-$550 million in wholly-owned properties.

Liberty anticipates property level operating income for industrial same store properties to grow by 2.5% to 3.5% on a GAAP basis and 3.75% to 4.75% on a cash basis. This projection reflects continued occupancy of one property leased to a major retailer which is in bankruptcy.  Should this tenant terminate its lease and vacate by the end of the first quarter, it could impact Liberty’s same store NOI growth by as much as 1.0% during 2019. Industrial rental growth is projected to be between 13% to 15% on a GAAP basis and 3.0% to 5.0% on a cash basis.

As is customary the first quarter will reflect approximately $0.04 per diluted share of incremental non-cash expenses due to the accelerated vesting of grants to certain employees under the retirement provisions of our compensation plan.

A reconciliation of GAAP net income available to common shareholders per diluted share to NAREIT FFO per diluted share for 2019 is below (all 2019 amounts projected). Additional information on assumptions underlying this guidance is included in Liberty’s fourth quarter 2018 supplemental financial report on the company’s website.

*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 (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 logistics, warehouse, manufacturing, and R&D facilities in key markets. Liberty's 106 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 fourth quarter, full year results and 2019 guidance, on Tuesday, February 5, 2019, at 12 p.m. Eastern Time.  To access the conference call, please dial 855-277-7530. The passcode needed for access is 4255088. A replay of the call will be available until March 5, 2019, 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 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.

Inquiries: Jeanne Leonard, Liberty Property Trust, 610.648.1704