Liberty Property Trust enjoyed a lift in investor sentiment along with the rest of the industrial set in recent quarters, but the stock's underperformance relative to some peers could make it the next big takeout target.
The Pennsylvania-headquartered real estate investment trust has fallen behind the top-flight
"Liberty's decision to issue $404 million of stock is extremely disappointing as this offering is substantially below the company's net asset value and will significantly dilute existing shareholders," the firm said in a news release.

Land & Buildings said it has pushed "publicly and privately" over the last year for the company, which has been selling off office assets to focus entirely on the booming industrial segment, to pursue strategic alternatives in light of the company's "substantial undervaluation." Several large industrial portfolio transactions have revealed the prices buyers are willing to pay for quality product.
There is also a "credible party" interested in buying Liberty Property Trust at $60 per share, the firm said.
Stifel analyst John Guinee described the Liberty Property Trust portfolio as on the newer side and oriented toward the big-box model, comparable to the portfolios of First Industrial Realty Trust Inc. and Duke Realty Corp. or "any number of private portfolios out there." In an interview, he estimated a $60-per-share offer would represent an approximately 4.5% capitalization rate — a figure that makes sense for an industrial portfolio of Liberty Property Trust's quality in current market conditions.

"They could easily reject $55 [per share], but when you get up to $60 — if there's a $60 bid out there — it gets awfully hard to reject," he said, adding "I believe there is interest in Liberty, and I do think Liberty is reluctant to sell. But at a certain price you just can't say no."
Liberty Property Trust did not respond to a request for comment.
For the 12 months through Sept. 13, the company produced a 21.1% total return, slightly below the U.S. industrial REIT median of 24.1% and lagging the 28.2% return of industry heavyweight Prologis Inc.
Tom Catherwood, an analyst at financial services firm BTIG, attributed Liberty Property Trust's discount in the public market to both the company's residual office footprint — investors like pure play REITs, and office is out of favor currently — and its particular market mix, which is weighted toward the Northeast and Pennsylvania and is not as heavily coastal as the portfolios of peers like Prologis and Duke Realty.
"They're doing well, just not as well," he said of the company, citing its weaker same-store net operating income and funds from operations growth and its less ambitious development pipeline. He said investors have recently become more aware of the discrepancy between Liberty Property Trust and other industrial players.
"There's been a lot of questions. ... What's going on with all these other companies that are doing great? Why is Liberty, on a fundamental basis, falling behind?" he said.
Catherwood said management has some leeway given its ongoing strategic shift out of the office market, but he said a firm $60-per-share offer could materialize in the medium term.
"At the end of the day, the company, from an operating fundamentals side, has materially underperformed its peer group," he said. "It's hard to say whether that's market-based, or whether that's management-based, but something has to give eventually. Either management needs to come up with a new strategy, or there needs to be a change in management, or the company needs to be sold."


