Analysts took Liberty Property Trust executives to task
during a third-quarter earnings conference call, urging the real estate
investment trust to make some changes to get it out of a "multi-year
rut."
In general, the analysts said the company's stock price
and funds from operations have underperformed and more needs to be done to
improve those areas. Some analysts urged Liberty to ramp up the sale of
suburban office properties putting a drag on the company; consider exiting some
markets that aren't part of its core industrial business; and buy back its own
stock. Even the issue of succession planning came up as did questioning the
company's strategy of spending $335 million to amass 370 acres of land.
"When you look at the company over the past four or
five years, FFO has been flat, the total return has lagged peers, year-to-date
has lagged as well," said Alex Goldfarb of Sandler O'Neill on the call.
"So internally or maybe at the board level, what are the things that you
guys discuss?"
It was apparent in a research report Sandler O'Neill
issued after the call that the answers Liberty executives gave didn't satisfy
many of the issues that were raised.
"It was clear during the Q&A session of
Tuesday's call that many analysts are wondering what management will do
differently to get the company out of its multi-year rut; management responded
that it just needs to focus on executing its business plan," the report
said. "If the plan were working well, we would be supportive, but [Liberty
Property Trust's] FFO has been flat-lined over the past five years, ranging
from $2.65 in 2010 to this year's estimate of $2.45 (our forecast for 2015 is
$2.58). [Its] stock price is essentially where it was in late 2009 while its
industrial peers, several of whom went through equity recapitalizations, are
all well above their late 2009 levels. While management tried to get folks to
focus on the December 16th FY15 outlook call as a way to show that all will be
well, we wonder what is going to be different if the company intends to execute
the same plan that has produced underperformance of the past several
years."
Bill Hankowsky, president and CEO of Liberty, said the
company is committed to executing on a plan it initiated a few years ago to
sell off suburban office and flex properties, having sold off 13.5 million
square feet so far. It will continue to buy industrial space but has been
stymied this year from acquiring much because it believes prices of industrial
buildings are too expensive at this time. As an antidote, the company pointed
to its deep development pipeline of 6.7 million square feet totaling $1.4 billion
in investment.
"We are going to post some good numbers over the
next couple of quarters and everything will be fine," Hankowsky said,
trying to reassure the analysts and investors.
The company reported FFO, the accepted measure of a
REIT's financial performance, for the third quarter came in at 64 cents a share
compared with 57 cents a share for the same period a year ago. For the first
nine months, FFO swung to $1.80 a share down from $1.86 a share during the same
timeframe last year. Leasing activity has been strong and the company said its
105 million square feet is 92.3 percent occupied.
Source: Philadelphia
Business Journal
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