Monday, February 12, 2018

Liberty Planning to Sell Remaining Suburban Office Holdings for Up to $800 Million

Ramping up its transition out of the office sector and into the businiess of owning warehouse and logistics property, Liberty Property Trust (NYSE: LPT) said this week that it hopes to raise up to $800 million for reinvestment into industrial acquisition and development by divesting its remaining suburban office portfolio by the end of the year.

"We intend in 2018 to dispose of all of our remaining suburban office properties and redeploy these proceeds into our accretive development pipeline, along with industrial acquisitions within targeted markets," Liberty CEO Bill Hankowsky told analysts in a Tuesday conference call. "We anticipate asset sales of at least $600 million to $800 million."

While most of those properties designated for sale are located in the Philadelphia suburbs, "we also expect to take advantage of the market and selectively harvest value," Hankowsky added.

Liberty will plow proceeds from the sales into its growing industrial platform, acquiring $400 million to $600 million of industrial properties in target markets and starting up to $600 million worth of development projects, he added.

As part of its ongoing shift, Liberty last month sold a 641,000-square-foot suburban office portfolio in King of Prussia, PA in the Renaissance Park corporate center for $77 million. The REIT also disclosed the pending sale of 779,000 square feet of additional office space in the Philadelphia region, with multiple contracts totaling $107 million.

Liberty executives said the properties being put on the market include the Vanguard corporate campus, a six-building office complex in Malvern where the REIT is based. The company will also sell its Malvern headquarters and holdings in Tempe, AZ.

Liberty plans to hold onto its Philadelphia CBD office assets, including the under-construction Comcast Technology Center and newly build assets in the Navy Yard.

Sandler O'Neill REIT analyst Alexander Goldfarb applauded the asset sales, but noted that industrial capitalization rates continue to decrease.

"We and others have pressed LPT over the years to exit the capex-intensive and slower-growth office to orient entirely to industrial," Goldfarb said.

In late 2016, Liberty sold a nearly $1 billion suburban office portfolio in five markets to a partnership of Horsham, PA-based Workspace Property Trust, Safanad, a Dubai-based global principal investment firm; and affiliates of diversified investment firm Square Mile Capital Management LLC.
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