Liberty Property Boosts Liquidity Position - Analyst Blog

Liberty Property Trust (LPT) disclosed a new unsecured revolving credit facility worth $800 million. This replaced an existing facility worth $500 million, which was due Nov 2, 2015. The move is aimed at strengthening the balance sheet and availing credit facility at competitive terms.

This new facility bears an annual interest rate of LIBOR (London Inter-Bank Offer Rate) plus 105 basis points and a facility fee of 20 basis points. Notably, based on its current credit rating, Liberty Property got the credit facility at lower rates compared to the replaced facility (previous rate and facility fee being LIBOR plus 125 and 25 basis points, respectively). Through an accordion feature, the facility can be enhanced to $1.2 billion. Moreover, the initial maturity date of Mar 26, 2018 can be extended by one additional year.

A consortium of leading financial institutions assisted Liberty Property in obtaining this credit facility. Among them, Merrill Lynch, Pierce, Fenner & Smith Incorporated of Bank of America Corporation BAC and J.P. Morgan Securities LLC of JPMorgan Chase & Co. JPM acted as the joint lead arrangers and bookrunners.

We expect the strategic move to improve the company's liquidity position going forward. This would position it better to continue to invest in growth needs which go a long in enhancing top-line. In addition, Liberty Property maintains a conservative balance sheet and offers a steady dividend payout to shareholders. As of Dec 31, 2013, the company had cash and cash equivalents of $163.4 million, up from $38.4 million as of Dec 31, 2012.

Last month, this office and industrial real estate investment trust (REIT), reported fourth-quarter 2013 funds from operations (FFO) of 63 cents per share, which was in line with the Zacks Consensus Estimate as well as the prior-year quarter figure. The decent results were attributable to year-over-year revenue gains, strong leasing and portfolio restructuring activity.

Liberty Property currently carries a Zacks Rank #3 (Hold). Another better-ranked REIT stock is Cousins Properties Inc. CUZ having a Zacks Rank #2 (Buy).

Note: FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.