Liberty Property Trust (

LRY

)

Q2 2011 Earnings Conference Call

July 26, 2011 12:00 ET

Executives

Jeanne Leonard – Investor Relations

Bill Hankowsky – Chief Executive Officer

George Alburger – Chief Financial Officer

Mike Hagan – Chief Investment Officer

Rob Fenza – Chief Operating Officer

Analysts

Alex Goldfarb – Sandler O’Neill

Brendan Maiorana – Wells Fargo

Sloan Bohlen – Goldman Sachs

Ki Bin Kim – Macquarie

Josh Attie – Citigroup

Jordan Sadler – KeyBanc Capital

John Guinee – Stifel

John Stewart – Green Street Advisors

Ross Nussbaum – UBS

Steve Boyd – Cowen and Company

Vincent Chao – Deutsche

Dan Donlan – Janney Capital Markets

Presentation

Operator

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Previous Statements by LRY
» Liberty Property Trust CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Liberty Property Trust (LRY) Q2 2010 Earnings Call Transcript
» Liberty Property Trust Q1 2010 Earnings Call Transcript

Good afternoon. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Liberty Property Trust Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I would now like to introduce Jeanne Leonard. Please go ahead, Ms. Leonard.

Jeanne Leonard – Investor Relations

Thank you, Michelle. Thank you everyone for tuning in today. You will 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 in the press release, you will also find a reconciliation of non-GAAP financial measures we referenced 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 that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance 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, risks that were detailed in the issued press release, and from time to time 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.

Bill, would you like to begin?

Bill Hankowsky – Chief Executive Officer

Thanks, Jeanne, and good afternoon everyone and welcome to our second quarter earnings call. Liberty had a very strong quarter across all components of our 2011 business plan. FFO for the quarter was $0.65 without a non-cash impairment it was $0.69. We leased 3.4 million square feet increasing occupancy to 89.5%, up 80 basis points. Occupancy increased across all of our property types, aided by a 67.5% renewal rate.

Last quarter, we revised our 2011 investment and capital plan. Year-to-date, we’ve sold $310 million in real estate. Our plan was to sell $300 million to $400 million this year, so halfway through the year we are already within the range of our expectations for the entire year. On the acquisition front, we have made investments of $100 million year-to-date and again our plan was to do $100 million to $200 million for the year, so again at mid year we are within our range for the entire year.

Mike will you give some details on all this activity in a moment. On the development front, we’ve started $96 million in developments and have firm plans to start another $180 million within the third and fourth quarters. Our plan for the year was to do $200 million to $300 million in development starts and that will easily be within the range for the year, and Rob will give you some details on that in a moment. All of this was achieved in a rough economic environment as we’ve seen with a recent employment numbers.

We’ve seen an uptick in prospect activity in the last two months, six to eight weeks that has us back kind of where we were in February-March this year, up from the downward activity we saw in April and May. So, we feel very good about where we are even in the face off this very slow sluggish recovery. We are on plan for (indiscernible) leasing. We are on plan for acquisitions, sales, and development. So, great quarter by Liberty and George would now walk us through some numbers.

George Alburger – Chief Financial Officer

Thank you, Bill. FFO for the second quarter 2011 was $0.65 per share. The operating results for the quarter include $1.6 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. Also included in FFO is a $4.2 million impairment charge, FFO does not include the $54 million in gains that were realized this quarter on property dispositions.

The gains resulted from the sale this quarter of 51 properties for $266 million. These sales which occurred halfway through the quarter were a big part of the revised capital plan for 2011 that we outlined last quarter.

During the quarter, we acquired two industrial properties for $41 million, one of the properties was 100% leased, the other is vacant that projected stabilized yield on this investment at 8%.

If we move into the core portfolio, during the quarter, we executed $3.1 million square feet of renewal and replacement leases. For these leases rents decreased by 6%, our guidance for the year is that rents would decrease by 7% to 12%.

For the same store group of properties operating income increased by 0.9% on a straight-line basis and increased by 2.8% on a cash basis for the second quarter of 2011 compared to the second quarter of 2010. Same store performance benefited from $1.5 million reduction in the reserve for bad debt. Excluding this item, same store performance was essentially flat on a straight-line basis and it increased by 1.5% on a cash basis.

On summary point, we had an excellent quarter. Occupancy up, rents albeit down, down less than the low end of our guidance, same store on a cash basis up, we covered our dividend, FFO without impairments would have been $0.69 per share, it was a good quarter. We hope to have a good third and fourth quarter but remember the second quarter included $1.5 million reduction for bad debts and the third and fourth quarter will have $3.5 million less NOI due to sales activity, $266 million in the second quarter, and $41 million from this Milwaukee sale which happened last week.

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