Liberty Property Trust's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Liberty Property Trust ( LRY)

Q4 2011 Earnings Call

February 7, 2012 1:00 pm ET

Executives

Jeanne A. Leonard – Investor Relations

William P. Hankowsky – Chairman, President & Chief Executive Officer

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

Michael T. Hagan – Executive Vice President and Chief Investment Officer

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

Analysts

Craig Mailman – KeyBanc Capital Markets

Joshua H. Attie – Citigroup

Alexander Goldfarb – Sandler O'Neill

Ki Bin Kim – Macquarie Research Equities

Brendan Maiorana – Wells Fargo Securities, LLC.

John Guinee – Stifel Nicolaus & Company, Inc.

John Steward – Green Street Advisor

Presentation

Operator

Good afternoon. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter Earnings Conference 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. Ms. Jeanne Leonard. You may begin your conference.

Jeanne A. Leonard

Thank you, Melissa, and thank you everyone for tuning in today. You are going to hear prepared remarks from Chief Executive Office, Bill Hankowsky; Chief Financial Officer, George Alburger; Chief Investment Officer, Mike Hagan; and Chief Operating Officer, Rob Fenza.

Liberty issued a press release detailing our fourth quarter results this morning as well as the supplemental financial information package. You can access these in the Investor section of Liberty’s website at www.libertyproperty.com. In both documents, you will 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?

William P. Hankowsky

Thank you, Jeanne, and good afternoon, everyone. I’d like to spend just a couple of minutes reviewing our fourth quarter results, looking at our overall performance in 2011 and then giving you a sense of where we see the world six weeks into 2012.

The fourth quarter was another solid quarter of results for Liberty. We leased 4.6 million square feet bringing year-end leasing production to 15.8 million square feet. Our renewal rate remained above historic norms, rent declines were less than expected, and we saw a marked increase in occupancy to 91.3%, our best level in three years.

The fourth quarter was also a solid quarter in which we completed our 2011 capital and investment activity. We acquired $250 million in assets in 2011 totaling 4.2 million square feet. We also sold $365 million worth of real estate and another 4.2 million square feet. And finally, we started 10 development projects, a total of 3.1 million square feet valued at $289 million. All of these were either at the high-end or exceeded our projections for the year.

But perhaps more importantly, 2011 was the year that allowed us to significantly move forward on our long-term strategy. We were able to decrease our portfolio in suburban in high-finish flex product while increasing our industrial and metro office product. We either have or are in the midst of exiting the suburban office markets in Greenville, South Carolina, Greensboro of North Carolina, Richmond, Milwaukee and Lehigh Valley.

By the end of this year 2012, and upon completion of our development pipeline, we’ll increase Liberty’s industrial square feet since 2008 from 49% to 62% of our portfolio. So 2011 was a very solid and productive year for us. We performed well in the core, we exceeded our investment activity and re-advanced our strategy.

Where we see the world now, particularly, since our guidance call in December? There were solid job numbers last Friday, which is encouraging. However, we still have a long way to go to get to a landlord’s market particularly on the office side. So we see a very competitive landscape for office in most markets.

The industrial side is stronger in terms of demand. We see our 2012 business plans remaining as we plan them. This would include a dip in our occupancy during the first half of 2012 due to planned expirations while occupancy would rise in the second half of the year. And as a result, we reaffirm our 2012 guidance of $2.45 to $2.50 a share.

And with that, let me turn over to George and Mike and Rob to provide some further details.

George J. Alburger, Jr.

Thank you, Bill. FFO for the fourth quarter was $0.63 per share. The operating results for the quarter include $700,000 in lease termination fees. For the year, lease termination fees totaled $3.6 million which is a little less than the low end of our guidance, which was at lease termination fees would be in the $0.04 to $0.06 per share range for the year.

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