Have Liberty Property shares stopped dropping?

"We are now a company primarily focused on industrial real estate," Bill Hankowsky, chief executive at Malvern-based Liberty Property Trust (and an owner of the Inquirer and philly.com), told investors in a statement today. Investors have noticed, and they're not impressed: total returns for LRY are down -7% so far this year, vs. a 9% gain for Bloomberg's Diversified Real Estate Investment Trust index. Liberty now trades at just 13.5 times its trailing "funds from operations" (REITs are managed to minimize profits and taxes, so they brag about cash flow), compared to 25 times at Radnor-based Brandywine Realty Trust (whose total returns are +15% this year.)

Looks bad, no? So it's time to buy, says analyst John Guinee at Stifel & Co. Liberty will be 76% warehouse and industrial once it's done selling blocs of aging suburban offices early next year, and it's undervalued relative to other industrial REITs. He's urging clients buy Liberty at the recent $33 and change a share, and projects a target price at $36.

Liberty says funds from operations are likely to be flat to slightly higher next year. "This change is positive for the company, but the positive impact will not be reflected in our operating results until the proceeds from the sale have been fully deployed," which isn't expected til late in 2014. Meantime Liberty is leaving the door open to some high-profile new office projects, which Philadelphia real estate observers expect may include the long-awaited second Comcast office tower next to the company headquarters Liberty developed in the mid-2000s.