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MALVERN, PA-Second-quarter leasing activity in Liberty Property Trust’s portfolio was the highest for any quarter in the locally based REIT’s history, Bill Hankowsky, CEO, said during a conference call. There were a record 265 transactions for leases aggregating 4.5 million sf.

“Why, then,” he asked, “was occupancy relatively flat at 89.9%?” He answered by saying there were five notable move-outs and 11 lease terminations by companies shutting down operations, exiting the market they were in or downsizing. Liberty voluntarily accepted termination fees from 11 tenants, all creditworthy. “There’s no reason for us to accept them unless we’re convinced we can make money for shareholders,” he said.

The average lease term remaining on the terminations was three years, and the fees represented two years of rent or two-thirds of the tenants’ obligations. “We’re comfortable that we can release the vacant space within two years, which will increase our profits,” he explained. The “comfort” is within the context of improving conditions overall in Liberty’s markets.

“The economy is allowing our markets to show measured but real fundamental gains,” Hankowsky said. “This quarter was a little bit better than last quarter and much better than a year ago.” He said while “leasing execution remains very strong, the real estate landscape remains competitive, preventing meaningful rent growth. Until this reverses, our earnings will continue to be negatively impacted by declining rents on new and renewal leases.”

Liberty is ratcheting up its pipeline. During second quarter it began construction of nine properties totaling 650,000 sf at an investment of $109.5 million. It also acquired nine properties containing 1.4 million sf for a total cost of $123.5 million.

Regarding Comcast Center, Hankowsky said, “leasing interest is very strong,” but had no new tenants to name. “We’re heartened by the interest and by people’s willingness to pay the rates projected in our pro forma.” Asked about the previously stated potential for finding a partner in the building, he said, “when we get further leasing clarity, we’ll explore the market to see if there’s interest.”

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