LRY Starts Philadelphia Construction - Analyst Blog

Liberty Property Trust (LRY), a leading real estate investment trust (REIT), has recently started construction work on two industrial flex buildings in The Navy Yard Commerce Center – a business park in Philadelphia. The project (20% pre-leased) will span across 103,137 square feet of space. Liberty Property is also mulling to develop a third building at the site when leasing of the first two is on full swing, which will expand the total capacity of the project by an additional 82,863 square feet of space.

The entire cost of development is anticipated to be approximately $16 million, $12.3 million of which will be funded by the City of Philadelphia through the Federal Recovery Zone Facility Bonds (RZ-FBs). Recovery Zone Facility Bonds are a new type of tax-exempt private activity bonds created by the American Recovery and Reinvestment Act , and are used to finance certain kinds of business development activities in areas of significant economic distress.

The investment is part of the long-term strategy of the company to capitalize on the significant growth potential of The Philadelphia Navy Yard. The newly constructed buildings are also expected to attract an increasing array of companies that are new to the region or  are expanding within the city. Liberty Property has already leased about 22,391 square feet of space to The Fretz Corporation, one of the leading appliance wholesale distributors in the U.S.

Based in Pennsylvania, Liberty Property provides leasing, property management, development, construction management, design management, and related services for a portfolio of industrial and office properties. The company focuses primarily on prime suburban properties in the Southeast, Mid-Atlantic, and Midwestregions of the U.S. In addition, Liberty Property also owns certain assets in the U.K.

Liberty Property's assets are designed to accommodate various types of tenants and space requirements. The company specifically focuses on metro-office, multi-tenant industrial and flex properties and markets that have strong demographic and economic fundamentals, ensuring a steady revenue stream for the company.

Furthermore, Liberty Property operates in multiple markets that enable it to diversify its risks. In each of these markets, the company offers an appropriate mix of office and industrial properties. The company is also repositioning its portfolio as it intends to focus on higher growth markets characterized by better job and rent growth prospects.

We maintain our ‘Neutral' recommendation on Liberty Property, which presently has a Zacks #4 Rank that translates into a short-term ‘Sell' rating and indicates that the stock is expected to underperform the overall U.S. equity market for the next 1–3 months. However, we have a Zacks #1 Rank (‘Strong Buy') for MPG Office Trust  Inc. (MPG), one of the peers of Liberty Property.

 
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