Like all owners, Liberty must grapple with falling demand for
space. Reflecting a national trend, prices for new leases in the
firm’s portfolio have slipped considerably over the past year.
Average straight-line office rents slipped from $16.77 per square
foot at the end of 2008 to $12.68 per square foot by the end of
the third quarter. After going through some ups and downs,
average flex space pricing ended the third quarter at $6.58 per
square foot, a decline of 93 cents since 2008.
Still, some fundamentals offer a silver lining. Even after ticking slightly downward, total occupancy in Liberty’s portfolio
remains at a sturdy 89.3 percent. And despite being presented
with more choices in a softening market, Liberty’s tenants are
renewing their leases at a rate of 60 percent, compared to the
customary 50 percent renewal rate.
Bold Moves
The centerpiece of Liberty’s response to the capital markets crisis
has been an aggressive campaign to bolster its balance sheet. So
far, it has raised $950 million in fresh capital. Liberty kicked off
its effort in October 2008, when it raised $150 million through
an equity offering. “Our feeling at the time was to be very decisive and very quick in accessing capital,” Hankowsky recalls.
Liberty soon followed up that success by initiating a continu-
ous equity offering in December 2008. By the time it concluded
early last August, the program had yielded another $300 million
through the sale of 13. 3 million shares. Liberty executives ac-
knowledge that the strategy represented a calculated risk, because
extending the offering over eight months allowed more time for
the stock to decrease in value. However, the continuous offering
also gave Liberty greater control over the timing of the sale, an
advantage that ultimately outweighed concerns about market
volatility. “We took on a certain risk that we felt we could take,”
explains George Alburger, executive vice president and chief
financial officer.
Spreading Liberty Across the Pond
Liberty’s steady-on approach
to business extends to its activities beyond U.S. borders.
Since 1991, the firm has
maintained a presence in the
United Kingdom through
an affiliate, now known as
Liberty Property Trust U.K.
Ltd. Globalization has become a byword over the past
two decades, but Liberty has
no current plans to plant its
flag in additional countries,
reports chairman, president
and CEO Bill Hankowsky.
Instead, Liberty’s U.K. unit
will continue to focus on a
select number of high-profile,
often complex projects.
One of those developments
reached a milestone in
October, when the Cam-
bridge City Council signed off
on the £900 million expansion
of the Cambridge Biomedical
Campus. Located adjacent
to Addenbroke’s Hospital on
the city’s southern edge,
the project will eventually en-
compass 2. 3 million square
feet of space for research,
teaching and treatment.
Liberty is developing the ex-
pansion in joint venture with
Countryside Partners PLC.
