Liberty Property Trust Q1 2010 Earnings Call Transcript

Liberty Property Trust Q1 2010 Earnings Call Transcript
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Liberty Property Trust (LRY)

Q1 2010 Earnings Call

April 26, 2010 1:00 pm ET

Executives

Jeanne A. Leonard – Vice President Investor Relations

William P. Hankowsky – Chairman of the Board of Trustees, President & Chief Executive Officer

George J. Alburger, Jr. – Chief Financial Officer, Executive Vice President & Treasurer

Michael T. Hagan – Chief Investment Officer

Robert E. Fenza – Chief Operating Officer & Executive Vice President

Analysts

Paul Adornato – BMO Capital Markets

[Jon Petersen – Macquarie]

Jordan Sadler – Key Bank

Sloan Bohlen – Goldman Sachs

Alexander Goldfarb – Sandler O’Neill

Michael Bilerman – Citigroup

Brendan Maiorana – Wells Fargo Securities

John Guinee – Stifel Nicolaus

John Stewart – Green Street Advisors, Inc.

Dan Donlan – Janney Montgomery Scott

Presentation

Operator

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Previous Statements by LRY
» Liberty Property Trust Q4 2009 Earnings Call Transcript
» Liberty Property Trust Q3 2009 Earnings Call Transcript
» Liberty Property Trust Q1 2009 Earnings Call Transcript

At this time I would like to welcome everyone to the Liberty Property Trust first quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. (Operator Instructions) Ms. Leonard you may begin your conference.

Jeanne A. Leonard

You’re going to hear prepared remarks from Chief Executive Officer Bill Hankowsky, Chief Financial Officer George Alburger, Chief Investment Officer Mike Hagan and Chief Operating Officer Rob Fenza. During the call management will be referring to our quarterly supplemental information package. You can access this package as well as the corresponding press release on the investor section of Liberty’s website at

www.LibertyProperty.com

.

In this package and the press release you will also find reconciliation of non-GAAP financial measures we reference today to GAAP measures. I will also remind you that some of the statements made during this call will include forward-looking statements within the meaning of the federal securities law. Although Liberty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurances that these 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, risk that were detailed in the issued press release and from time-to-time in the company’s with the Securities 7 Exchange Commission. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

William P. Hankowsky

Liberty had a very solid first quarter with FFO coming in at $0.64 a share. Our performance this quarter was very consistent with our business plan for the year and consistent with our projected view of market behavior. We leased over 3.9 million square feet this quarter, slightly above our quarterly average for 2009. Occupancy declined 1%. This decline is mainly due to timing and we anticipate occupancy tracking up in the second half of the year. Our renewal rate was 55%. Rental rates declined 9.2% on a straight line basis. This is less than the over 13% decline we saw in the third and fourth quarters of last year.

So what are we seeing market fundamentals currently? Prospect activity is up generally with more activity in the industrial area than the office space. However, this is not consistent with each of our markets. When we say that activity is up, we’re comparing it to 2009. The activity is well below historic norms as the economy slowly works its way forward. Rents have bottomed out but are flat bouncing along the bottom. Concessions have also leveled out save for the idiosyncratic desperate deal down by a besieged landlord.

So in summary, on the operational front, we’re on track with our business plans for the year and continue to outperform both our markets and the nation by 270 and 390 basis points respectively. Another way to look at our performance is comparing Liberty’s share of our markets which is 1.2% and our share of first quarter leasing activity which is over 10% of all leases done in the first quarter in Liberty’s markets.

Let me turn to the investments side. We sold two buildings for $6.4 million this quarter. Our guidance for the year is $75 to $125 million in sales but, as we indicated last quarter, should we see an opportunity to sell more consistent with our long term strategic objectives, we will take advantage of these opportunities. On the acquisition front, we continue to look for opportunities. We have a strong interest in growing the portfolio but there is not a lot of product in the market and even less at pricing that makes sense to us. Our focus is on value added opportunities, something that has been a strong suit of Liberty’s since our IPO in 1994.

With our extremely strong balance sheet as of March 31

st

, we have over $700 million in capacity between cash and line availability to pursue acquisitions. Mike will provide you with some additional color on the investment environment in a moment. We are also continuing to explore build to suit opportunities with a number of clients and we would anticipate commencing one or more in 2010.

To sum up, the first quarter was a solid quarter for Liberty in a continued rugged market. We’re on track for the year and we affirm our guidance of $2.60 to $2.80 a share. With that, let me turn it over to George.

George J. Alburger, Jr.

FFO for the first quarter 2010 was $0.64 per share. The operating results for the quarter include $1.8 million in lease termination fees which is in line with our guidance that lease termination fees would be in the $0.04 to $0.06 per share range for the year. On our February earnings call we mentioned that the accelerated vesting of long term incentive compensation would affect general and administrative expenses for the first quarter of 2010. You may recall we had a similar situation in the first quarter of 2009.

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