president and national director of property
management.
In a bid to identify savings, Liberty
Property began dialogues with more
than 700 property management suppliers
and contractors during the first quarter
of 2009. Some solutions turned out to
be surprisingly straightforward, such
as reducing the number of landscaping
rotations. Liberty’s janitorial contractors
found savings by focusing on buildings’
most highly trafficked spaces, while trimming the frequency of cleanings in less
busy areas. And independent audits of
office buildings identified ways to reduce energy consumption.
That effort dovetails with Liberty’s portfolio-wide effort to cut
energy consumption 30 percent by 2012.
This summer, Liberty expects to finish construction of a 345,000 square foot
manufacturing and distribution facility for Tasty Baking Co.
Poised for Action
After going to great lengths to shore up its balance sheet, Liberty
Property appears to be well positioned to add to its portfolio, especially once distressed assets make their anticipated appearance
on the market. In the past, the firm has shown a willingness to
make significant acquisitions. In 2007, Liberty acquired Republic Property Trust, a public REIT with a 25-asset portfolio in and
around Washington, D.C.
Some analysts speculate that Liberty is likely to get back in the
acquisition market in 2010 after a nearly two-year absence. “We
suspect the company will look to pursue industrial and metro of-
fice assets in existing markets,” wrote KeyBank Capital Markets
Inc. analysts Jordan Sadler and Craig Mailman in a research
note. “While the widely anticipated wave of distressed sales
has yet to materialize, ultimately, we suspect the opportunities
will unfold over time, which should allow [Liberty] to remain
competitive on pricing, but not overly aggressive, as it pursues
accretive acquisitions.”
To what extent—or whether—Liberty will pick up new assets
this year remains far from certain, however. On the positive side,
the company is encouraged by signs of economic stabilization. “We
do think the decline in fundamentals in the market has reached
the bottom,” says Hankowsky, who expects improvement in the
industrial sector first, followed by the office market. However, he
cautions that job growth and other economic engines will almost
certainly be slow to bounce back in 2010. As a result, Liberty’s
preliminary estimates of acquisition activity cover a remarkably
broad range—anywhere from zero to $100 million.
At first glance, Liberty’s strong financial position also seems to
raise the possibility of geographic expansion. Every few years, the
firm tends to set up shop in a new market. As recently as 2007,
Liberty opened an office in Phoenix, establishing a permanent
presence west of the Rocky Mountains for the first time. However, Hankowsky reports that the company has no immediate
plans to hang out its shingle in a new locale.
If investment opportunities do surface, Liberty will favor
beefing up market share in its current strongholds. As examples,
Hankowsky cites the office market in the Washington-Baltimore
corridor, where Liberty has owned properties since 1977. On the
industrial side, Liberty might build on its strength in Pennsyl-
vania’s Lehigh Valley. Whatever the property type, value-added
opportunities could be on Liberty’s radar: “We are open to look-
ing at assets that are vacant, under-leased or have development
challenges,” Hankowsky says. Liberty’s determination to stick
to its knitting also applies to its activities in the U.K. (For more,
see sidebar.)
