Liberty's $1B+ 'head scratcher' deal

Radnor-based Liberty Property Trust's $1.5 billion acquisition of 177 warehouses and other industrial properties (total 23 million sq ft) from Cabot Properties this summer "is a head scratcher," writes John W. Guinee, real estate analyst at Stifel & Co.

"This acquisition is a bit conflicted," Guinee told clients in a report. Up until now, "Liberty had been very disciplined" in developing new industrial properties or buying them at low prices. But the Cabot acquisition, at a "premium" price of $65/square feet - slightly more expensive than it would cost to build it all new, and financed by a new $834 million stock issue -- "is a 180 degree change," and will trim the company's 2013 profits, he added.

"We had been hoping that Liberty would grow the industrial portfolio in a more value-added manner, while selling the office more aggressively," the analyst concluded. Liberty remains a major office landlord in Philadelphia, where it has been developing sites at the former Naval Base and trying to interest the limited group of big companies looking for space in Center City Philadelphia in building sites it still controls near the Comcast headquarters.