Shares of Liberty Property Trust, the Wayne-based company that developed the Comcast, Camden waterfront, Navy Yard, and Great Valley office centers but has lately focused on warehouses, rose nearly 2 percent Monday after an investor called for the sale of its remaining properties.
In a letter copied to the U.S. Securities and Exchange Commission, shareholder Land & Buildings Investment Management’s founder, Jonathan Litt, urged Liberty chairman-chief executive Bill Hankowsky and other board members to run “a full review of strategic alternatives,” given the company’s “substantial and persistent” stock discount below the net asset value of Liberty properties.
In a response Monday night, Liberty said its board and top managers “have had numerous discussions” with Litt’s team, and have already “taken aggressive actions to position [Liberty properties] for enhanced growth and drive solid financial results by divesting office properties and redeploying the proceeds into value-enhancing industrial assets and development opportunities,” and is “encouraged" by the robust market for industrial space and “outstanding development opportunities.”
Still, Liberty added, the board “is mindful of its fiduciary duties and obligations to our shareholders, and is committed to taking actions that enhance value for all shareholders.”
While Liberty sells at a discount, other industrial real estate investment trusts (REITs) trade at premiums, as large investors rush to build national inventories of space to support digital-era commerce, Litt noted in his letter.
Litt’s “rationale is quite simple,” wrote John Guinee, a Maryland-based REIT analyst at investment bank Stifel & Co. Blackstone, Prologis, and other large property investors have been buying up multibillion-dollar warehouse portfolios at fat premium prices.
That implies that Liberty’s properties, which are grouped in the Midwest, South, and Southwest along with the Philadelphia area, would be worth around $60 a share — more than they has been with Hankowsky and his team in charge. The stock closed Monday at $51.58, up $0.82 or 1.62%.
Guinee added that he hadn’t heard of any offers, but firms like Blackstone and Prologis are large enough and rich enough to buy portfolios as large as Liberty’s at the high prices they have paid in other recent deals, which could enrich Liberty’s investors beyond what its management has done.
Last month Liberty sold 800 Walnut St., the University of Pennsylvania medical office building at the edge of rival Thomas Jefferson University’s campus, to the Penn Health system for $99.25 million, twice what Liberty invested in the 12-story building six years ago and a record price per square foot for Center City office space.
But the office sales have failed to revive Liberty’s share price above its historic range, which peaked in 2007, before the financial crisis.
Hankowsky’s plan to boost returns by shifting to warehouses “has simply not worked – and time is running out,” Litt added. Liberty should weigh a sale before considering a plan to find new management replacing Hankowsky, a move that “could further delay” boosting share values, he added.
The company has not filed a response to Litt’s letter with the Securities and Exchange Commission. Land & Building is based in Stamford, Conn.
With around 1 percent of Liberty’s shares, can Land & Building rally other institutional investors to push Liberty into a profitable sale and dissolution?
In 2014-15, the firm pressured another Philadelphia-based REIT, Pennsylvania Real Estate Investment Trust (PREIT), to speed and expand its planned sales of upstate shopping malls, and consider selling all its mall properties, in an attempt to boost its share price from the low $20s to a target of around $30 a share.
PREIT responded that it was already selling its less-successful malls but would do so at its own pace. It has renovated malls in the Philadelphia area, including the Gallery, which it plans to reopen in September, in partnership with Macerich — a real estate investment trust that invests in shopping malls — and with city tax incentives, as Fashion District Philadelphia.