A REIT to Beat Global Heat: Liberty Property Trust (LRY)

A recent International Energy Agency study reported glumly that the world’s CO2 emissions are 60% above the curve required to keep global warming within the U.N. goal of a 2-degree C. rise by 2035. To get back on track, the study pointed to improved energy efficiency within commercial buildings as being particularly simple and cost effective. A recent addition to our stock universe, Liberty Property Trust, is accomplishing just that. Liberty Property is a real estate investment trust (REIT), but unlike the REIT we profiled in the last newsletter, Digital Realty Trust, which focuses on electronic data storage facilities, Liberty Property specializes in office and industrial properties. It is a mature company, and its stock is useful as a steady income vehicle. Liberty owns almost 80 million square feet in 700 properties clustered in the Mid-Atlantic, Southeast, Southwest and Midwest, as well as a few properties in the United Kingdom. The company is in the midst of repositioning its portfolio from almost entirely suburban office space to higher-value metro and industrial spaces. But it is a slow change: this year the company only expects to shift about 6% of its properties. The trust was founded in 1972 and has built a solid reputation for high-quality LEED-certified developments and property management.

Liberty Property is attractive to most investors because of its sizable yield and relatively low risk. In the first quarter of 2012 its properties were 90% occupied, an improvement over last year’s dip. The company is currently experiencing some weakness due to the overall economy and its own less-profitable suburban focus. This is causing lower cash flow than normal. The lull will probably continue until 2013 as Liberty’s portfolio shifts and the economy improves. All said, however, Liberty Property has been a remarkably steady company. It had a substantial dip during the financial crisis, but otherwise the stock price has remained flat for the past ten years. With a yield of more than five percent and a firm foundation, it is a fine place for income-oriented clients to park some cash.

Corporate Responsibility

One of the notable characteristics of Liberty Property is its dedication to sustainability. The company has more than 40 projects that are LEED certified and 59 Energy Star-certified buildings nationwide. In addition to building and retrofitting office spaces for energy efficiency, Liberty Property manages its properties in a sustainable manner. Buildings are painted only with low- or no-VOC paint, are cleaned using green cleaning products, and have wide-ranging recycling programs, which are surprisingly rare in the corporate world. The EPA named the company a 2012 Energy Star Partner of the Year. The company’s board includes two women.
Revenues: $?? Billion
2013E $2.67
2012E $2.54
2011A $2.57
Projected Annual Growth Rate: 5%
Dividend: 5.3%
52 Week High-Low: $36.93 – $26.06
Risk: Medium
Website: libertyproperty.com