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EX-12.1 - EXHIBIT 12.1 - LIBERTY PROPERTY TRUSTlptex121-93015.htm
EX-31.3 - EXHIBIT 31.3 - LIBERTY PROPERTY TRUSTlptex313-93015.htm
EX-32.4 - EXHIBIT 32.4 - LIBERTY PROPERTY TRUSTlptex324-93015.htm
EX-31.2 - EXHIBIT 31.2 - LIBERTY PROPERTY TRUSTlptex312-93015.htm
EX-32.2 - EXHIBIT 32.2 - LIBERTY PROPERTY TRUSTlptex322-93015.htm
EX-31.4 - EXHIBIT 31.4 - LIBERTY PROPERTY TRUSTlptex314-93015.htm
EX-31.1 - EXHIBIT 31.1 - LIBERTY PROPERTY TRUSTlptex311-93015.htm
EX-10.1 - EXHIBIT 10.1 - LIBERTY PROPERTY TRUSTlptex101-93015.htm
EX-32.3 - EXHIBIT 32.3 - LIBERTY PROPERTY TRUSTlptex323-93015.htm
EX-32.1 - EXHIBIT 32.1 - LIBERTY PROPERTY TRUSTlptex321-93015.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________
FORM 10-Q
__________________________________________________________
 
(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    
For the quarterly period ended September 30, 2015
  
OR

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to             
Commission file numbers: 1-13130 (Liberty Property Trust)
1-13132 (Liberty Property Limited Partnership) 
__________________________________________________________
LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Exact name of registrants as specified in their governing documents)
__________________________________________________________
 
MARYLAND (Liberty Property Trust)
23-7768996
PENNSYLVANIA (Liberty Property Limited Partnership)
23-2766549
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
 
 
500 Chesterfield Parkway
Malvern, Pennsylvania
19355
(Address of Principal Executive Offices)
(Zip Code)
 
Registrants’ Telephone Number, Including Area Code (610) 648-1700
__________________________________________________________
 
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past ninety (90) days.    Yes  x    No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. (See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one):
  
Large Accelerated Filer
x
Accelerated Filer
o
Non-Accelerated Filer
o (Do not check if a smaller reporting company)
Smaller Reporting Company
o
    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
On November 3, 2015, 147,771,561 Common Shares of Beneficial Interest, par value $0.001 per share, of Liberty Property Trust were outstanding.



EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2015 of Liberty Property Trust and Liberty Property Limited Partnership. Unless stated otherwise or the context otherwise requires, references to the “Trust” mean Liberty Property Trust and its consolidated subsidiaries, and references to the “Operating Partnership” mean Liberty Property Limited Partnership and its consolidated subsidiaries. The terms the “Company,” “we,” “our” and “us” mean the Trust and the Operating Partnership, collectively.

The Trust is a self-administered and self-managed Maryland real estate investment trust (“REIT”). Substantially all of the Trust's assets are owned directly or indirectly, and substantially all of the Trust's operations are conducted directly or indirectly, by its subsidiary, the Operating Partnership, a Pennsylvania limited partnership.

The Trust is the sole general partner and also a limited partner of the Operating Partnership, owning 97.7% of the common equity of the Operating Partnership at September 30, 2015. The common units of limited partnership interest in the Operating Partnership (the “Common Units”), other than those owned by the Trust, are exchangeable on a one-for-one basis (subject to anti-dilution protections) for the Trust's common shares of beneficial interest, $0.001 par value per share (the “Common Shares”).

The financial results of the Operating Partnership are consolidated into the financial statements of the Trust. The Trust has no significant assets other than its investment in the Operating Partnership. The Trust and the Operating Partnership are managed and operated as one entity. The Trust and the Operating Partnership have the same managers.

The Trust's sole business purpose is to act as the general partner of the Operating Partnership. Net proceeds from equity issuances by the Trust are contributed to the Operating Partnership in exchange for partnership units. The Trust itself does not issue any indebtedness, but guarantees certain of the unsecured debt of the Operating Partnership.

We believe combining the quarterly reports on Form 10-Q of the Trust and the Operating Partnership into this single report results in the following benefits:
enhances investors' understanding of the Trust and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the Company's disclosure applies to both the Trust and the Operating Partnership; and
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

To help investors understand the significant differences between the Trust and the Operating Partnership, this report presents the following separate sections for each of the Trust and the Operating Partnership:
consolidated financial statements;
the following notes to the consolidated financial statements;
Income per Common Share of the Trust and Income per Common Unit of the Operating Partnership;
Noncontrolling Interests of the Trust and Limited Partners' Equity and Noncontrolling Interest of the Operating Partnership

This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Trust and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Trust and Operating Partnership are compliant with Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended.





2


Liberty Property Trust/Liberty Property Limited Partnership
Form 10-Q for the period ended September 30, 2015
 
Index
 
Page
 
 
 
PART I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II.
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.

3


Index
 
Page
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 
 
 
 
 
 
 
LIBERTY PROPERTY TRUST SENIOR OFFICER SEVERANCE PLAN
 
 
 
 
 
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
 
 
 
 
 
CERTIFICATION OF CEO OF LIBERTY PROPERTY TRUST REQUIRED BY RULE 13A-14(A)
 
 
 
 
 
CERTIFICATION OF CFO OF LIBERTY PROPERTY TRUST REQUIRED BY RULE 13A-14(A)
 
 
 
 
 
CERTIFICATION OF CEO OF LIBERTY PROPERTY TRUST, IN ITS CAPACITY AS THE GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(A)
 
 
 
 
 
CERTIFICATION OF CFO OF LIBERTY PROPERTY TRUST, IN ITS CAPACITY AS THE GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(A)
 
 
 
 
 
CERTIFICATION OF CEO OF LIBERTY PROPERTY TRUST REQUIRED BY RULE 13A-14(B)
 
 
 
 
 
CERTIFICATION OF CFO OF LIBERTY PROPERTY TRUST REQUIRED BY RULE 13A-14(B)
 
 
 
 
 
CERTIFICATION OF CEO OF LIBERTY PROPERTY TRUST, IN ITS CAPACITY AS THE GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(B)
 
 
 
 
 
CERTIFICATION OF CFO OF LIBERTY PROPERTY TRUST, IN ITS CAPACITY AS THE GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(B)
 
 
 
 
 
XBRL Instance Document
 
 
 
 
 
XBRL Taxonomy Extension Schema Document
 
 
 
 
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
 
XBRL Extension Labels Linkbase
 
 
 
 
 
XBRL Taxonomy Extension Presentation Linkbase Document
 

4


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST
(Unaudited and in thousands, except share and unit amounts)
 
 
September 30, 2015
 
December 31, 2014
ASSETS
 
 
 
Real estate:
 
 
 
Land and land improvements
$
1,218,906

 
$
1,189,760

Building and improvements
5,352,219

 
5,343,908

Less accumulated depreciation
(1,228,702
)
 
(1,182,569
)
Operating real estate
5,342,423

 
5,351,099

Development in progress
338,673

 
277,411

Land held for development
291,159

 
269,059

Net real estate
5,972,255

 
5,897,569

Cash and cash equivalents
48,652

 
69,346

Restricted cash
14,939

 
20,325

Accounts receivable
14,384

 
15,481

Deferred rent receivable
119,224

 
107,909

Deferred financing and leasing costs, net of accumulated amortization (2015, $180,608; 2014, $169,468)
208,623

 
206,286

Investments in and advances to unconsolidated joint ventures
213,894

 
208,832

Assets held for sale

 
8,389

Prepaid expenses and other assets
97,822

 
91,399

Total assets
$
6,689,793

 
$
6,625,536

LIABILITIES
 
 
 
Mortgage loans
$
372,660

 
$
487,301

Unsecured notes
2,608,307

 
2,509,094

Credit facility
300,000

 
167,000

Accounts payable
60,256

 
52,043

Accrued interest
43,771

 
24,513

Dividend and distributions payable
71,863

 
72,253

Other liabilities
218,290

 
219,418

Total liabilities
3,675,147

 
3,531,622

Noncontrolling interest - operating partnership - 301,483 preferred units outstanding as of September 30, 2015 and December 31, 2014
7,537

 
7,537

EQUITY
 
 
 
Liberty Property Trust shareholders’ equity
 
 
 
Common shares of beneficial interest, $.001 par value, 283,987,000 shares authorized; 147,753,980 and 148,557,270 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively
148

 
149

Additional paid-in capital
3,673,001

 
3,688,644

Accumulated other comprehensive loss
(13,837
)
 
(6,252
)
Distributions in excess of net income
(709,091
)
 
(654,869
)
Total Liberty Property Trust shareholders’ equity
2,950,221

 
3,027,672

Noncontrolling interest – operating partnership
 
 
 
3,539,075 and 3,553,566 common units outstanding as of September 30, 2015 and December 31, 2014, respectively
52,969

 
54,786

Noncontrolling interest – consolidated joint ventures
3,919

 
3,919

Total equity
3,007,109

 
3,086,377

Total liabilities, noncontrolling interest - operating partnership and equity
$
6,689,793

 
$
6,625,536


See accompanying notes.

5


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF LIBERTY PROPERTY TRUST
(Unaudited and in thousands, except per share amounts)
 
Three Months Ended
 
September 30, 2015
 
September 30, 2014
OPERATING REVENUE
 
 
 
Rental
$
145,009

 
$
143,294

Operating expense reimbursement
53,963

 
55,062

Total operating revenue
198,972

 
198,356

OPERATING EXPENSE
 
 
 
Rental property
31,454

 
33,105

Real estate taxes
25,953

 
25,595

General and administrative
15,573

 
14,748

Depreciation and amortization
55,718

 
58,578

Total operating expense
128,698

 
132,026

Operating income
70,274

 
66,330

OTHER INCOME (EXPENSE)
 
 
 
Interest and other income
4,959

 
6,233

Interest expense
(33,559
)
 
(37,958
)
Total other income (expense)
(28,600
)
 
(31,725
)
Income before gain (loss) on property dispositions, income taxes and equity in (loss) earnings of unconsolidated joint ventures
41,674

 
34,605

Gain (loss) on property dispositions
53,467

 
(20
)
Income taxes
(599
)
 
(859
)
Equity in (loss) earnings of unconsolidated joint ventures
(847
)
 
1,592

Income from continuing operations
93,695

 
35,318

Discontinued operations (including net gain on property dispositions of $38 for the three months ended September 30, 2014)

 
133

Net income
93,695

 
35,451

Noncontrolling interest – operating partnership
(2,306
)
 
(944
)
Noncontrolling interest – consolidated joint ventures
(58
)
 
(84
)
Net income available to common shareholders
$
91,331

 
$
34,423

 
 
 
 
Net income
$
93,695

 
$
35,451

Other comprehensive loss - foreign currency translation
(7,970
)
 
(13,000
)
Other comprehensive (loss) income - derivative instruments
(1,220
)
 
666

Other comprehensive loss
(9,190
)
 
(12,334
)
Total comprehensive income
84,505

 
23,117

Less: comprehensive income attributable to noncontrolling interest
(2,148
)
 
(739
)
Comprehensive income attributable to common shareholders
$
82,357

 
$
22,378

Earnings per common share
 
 
 
Basic:
 
 
 
Income from continuing operations
$
0.61

 
$
0.23

Income from discontinued operations

 

Income per common share – basic
$
0.61

 
$
0.23

Diluted:
 
 
 
Income from continuing operations
$
0.61

 
$
0.23

Income from discontinued operations

 

Income per common share – diluted
$
0.61

 
$
0.23

Distributions per common share
$
0.475

 
$
0.475

Weighted average number of common shares outstanding
 
 
 
Basic
148,582

 
147,422

Diluted
149,176

 
148,088

Amounts attributable to common shareholders
 
 
 
Income from continuing operations
$
91,331

 
$
34,293

Discontinued operations

 
130

Net income available to common shareholders
$
91,331

 
$
34,423

See accompanying notes.

6


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF LIBERTY PROPERTY TRUST
(Unaudited and in thousands, except per share amounts)
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
OPERATING REVENUE
 
 
 
Rental
$
440,962

 
$
421,620

Operating expense reimbursement
168,430

 
167,326

Total operating revenue
609,392

 
588,946

OPERATING EXPENSE
 
 
 
Rental property
98,973

 
103,728

Real estate taxes
78,579

 
75,812

General and administrative
51,428

 
48,077

Depreciation and amortization
171,347

 
173,184

Impairment - real estate assets
16,775

 

Total operating expense
417,102

 
400,801

Operating income
192,290

 
188,145

OTHER INCOME (EXPENSE)
 
 
 
Interest and other income
17,911

 
11,786

Interest expense
(103,295
)
 
(115,635
)
Total other income (expense)
(85,384
)
 
(103,849
)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures
106,906

 
84,296

Gain on property dispositions
56,987

 
1,878

Income taxes
(2,613
)
 
(2,083
)
Equity in earnings of unconsolidated joint ventures
805

 
7,297

Income from continuing operations
162,085

 
91,388

Discontinued operations (including net gain on property dispositions of $46,292 for the nine months ended September 30, 2014)

 
48,276

Net income
162,085

 
139,664

Noncontrolling interest – operating partnership
(4,117
)
 
(3,618
)
Noncontrolling interest – consolidated joint ventures
(171
)
 
(474
)
Net income available to common shareholders
$
157,797

 
$
135,572

 
 
 
 
Net income
$
162,085

 
$
139,664

Other comprehensive loss - foreign currency translation
(6,229
)
 
(5,189
)
Other comprehensive loss - derivative instruments
(1,539
)
 
(990
)
Other comprehensive loss
(7,768
)
 
(6,179
)
Total comprehensive income
154,317

 
133,485

Less: comprehensive income attributable to noncontrolling interest
(4,105
)
 
(3,948
)
Comprehensive income attributable to common shareholders
$
150,212

 
$
129,537

Earnings per common share
 
 
 
Basic:
 
 
 
Income from continuing operations
$
1.06

 
$
0.60

Income from discontinued operations

 
0.32

Income per common share – basic
$
1.06

 
$
0.92

Diluted:
 
 
 
Income from continuing operations
$
1.06

 
$
0.60

Income from discontinued operations

 
0.32

Income per common share – diluted
$
1.06

 
$
0.92

Distributions per common share
$
1.425

 
$
1.425

Weighted average number of common shares outstanding
 
 
 
Basic
148,594

 
146,987

Diluted
149,220

 
147,661

Amounts attributable to common shareholders
 
 
 
Income from continuing operations
$
157,797

 
$
88,430

Discontinued operations

 
47,142

Net income available to common shareholders
$
157,797

 
$
135,572

See accompanying notes.

7


CONSOLIDATED STATEMENT OF EQUITY OF LIBERTY PROPERTY TRUST
(Unaudited and in thousands)
 
 
 
COMMON SHARES OF
BENEFICIAL INTEREST
 
ADDITIONAL PAID-IN CAPITAL
 
ACCUMULATED OTHER COMPREHENSIVE LOSS
 
DISTRIBUTIONS IN EXCESS OF NET INCOME
 
TOTAL LIBERTY PROPERTY TRUST SHAREHOLDERS’
EQUITY
 
NONCONTROLLING INTEREST - OPERATING PARTNERSHIP-COMMON
 
NONCONTROLLING INTEREST -
CONSOLIDATED
JOINT
VENTURES
 
TOTAL EQUITY
 
NONCONTROLLING INTEREST - OPERATING PARTNERSHIP (MEZZANINE)
Balance at January 1, 2015
 
$
149

 
$
3,688,644

 
$
(6,252
)
 
$
(654,869
)
 
$
3,027,672

 
$
54,786

 
$
3,919

 
$
3,086,377

 
$
7,537

Net proceeds from the issuance of common shares
 

 
38,195

 

 

 
38,195

 

 

 
38,195

 

Net income
 

 

 

 
157,797

 
157,797

 
3,763

 
171

 
161,731

 
354

Distributions
 

 

 

 
(212,019
)
 
(212,019
)
 
(5,173
)
 
(171
)
 
(217,363
)
 
(354
)
Share repurchase
 
(1
)
 
(65,462
)
 

 

 
(65,463
)
 

 

 
(65,463
)
 

Share-based compensation
 

 
11,400

 

 

 
11,400

 

 

 
11,400

 

Other comprehensive loss - foreign currency translation
 

 

 
(6,082
)
 

 
(6,082
)
 
(147
)
 

 
(6,229
)
 

Other comprehensive loss - derivative instruments
 

 

 
(1,503
)
 

 
(1,503
)
 
(36
)
 

 
(1,539
)
 

Redemption of noncontrolling interests – common units
 

 
224

 

 

 
224

 
(224
)
 

 

 

Balance at September 30, 2015
 
$
148

 
$
3,673,001

 
$
(13,837
)
 
$
(709,091
)
 
$
2,950,221

 
$
52,969

 
$
3,919

 
$
3,007,109

 
$
7,537


See accompanying notes.

8


CONSOLIDATED STATEMENTS OF CASH FLOWS OF LIBERTY PROPERTY TRUST
(Unaudited and in thousands)
 
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
OPERATING ACTIVITIES
 
 
 
Net income
$
162,085

 
$
139,664

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
173,726

 
176,207

Amortization of deferred financing costs
3,249

 
3,727

Impairment - real estate assets
16,775

 

Equity in earnings of unconsolidated joint ventures
(805
)
 
(7,297
)
Distributions from unconsolidated joint ventures
2,490

 

Gain on property dispositions
(56,987
)
 
(48,170
)
Share-based compensation
10,709

 
10,422

Other
(8,143
)
 
(5,202
)
  Changes in operating assets and liabilities:
 
 
 
Restricted cash
4,914

 
28,469

Accounts receivable
1,023

 
(4,771
)
Deferred rent receivable
(17,122
)
 
(11,928
)
Prepaid expenses and other assets
(20,182
)
 
(38,882
)
Accounts payable
8,312

 
18,824

Accrued interest
19,258

 
15,500

Other liabilities
371

 
(26,232
)
Net cash provided by operating activities
299,673

 
250,331

INVESTING ACTIVITIES
 
 
 
Investment in operating properties - acquisitions
(100,756
)
 
(97,677
)
Investment in operating properties - other
(58,038
)
 
(61,480
)
Investments in and advances to unconsolidated joint ventures
(30,609
)
 
(13,894
)
Distributions from unconsolidated joint ventures
23,093

 
10,213

Net proceeds from disposition of properties/land
243,943

 
351,301

Investment in development in progress
(123,547
)
 
(222,484
)
Investment in land held for development
(101,934
)
 
(73,547
)
Investment in deferred leasing costs
(34,404
)
 
(28,409
)
Other
(6,366
)
 
5,501

Net cash used in investing activities
(188,618
)
 
(130,476
)
FINANCING ACTIVITIES
 
 
 
Net proceeds from issuance of common shares
38,195

 
44,097

Share repurchase
(65,463
)
 

Proceeds from unsecured notes
398,576

 

Repayments of unsecured notes
(300,000
)
 
(200,000
)
Repayments of mortgage loans
(112,970
)
 
(9,329
)
Proceeds from credit facility
919,700

 
179,750

Repayments on credit facility
(786,700
)
 
(38,800
)
Payment of deferred financing costs
(3,478
)
 
(3,622
)
Distribution paid on common shares
(212,402
)
 
(209,779
)
Distribution paid on units
(5,704
)
 
(5,692
)
Net cash used in financing activities
(130,246
)
 
(243,375
)
Net decrease in cash and cash equivalents
(19,191
)
 
(123,520
)
Decrease in cash and cash equivalents related to foreign currency translation
(1,503
)
 
(808
)
Cash and cash equivalents at beginning of period
69,346

 
163,414

Cash and cash equivalents at end of period
$
48,652

 
$
39,086


See accompanying notes.

9


CONSOLIDATED BALANCE SHEETS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands, except unit amounts)
 
 
September 30, 2015
 
December 31, 2014
ASSETS
 
 
 
Real estate:
 
 
 
Land and land improvements
$
1,218,906

 
$
1,189,760

Building and improvements
5,352,219

 
5,343,908

Less accumulated depreciation
(1,228,702
)
 
(1,182,569
)
Operating real estate
5,342,423

 
5,351,099

Development in progress
338,673

 
277,411

Land held for development
291,159

 
269,059

Net real estate
5,972,255

 
5,897,569

Cash and cash equivalents
48,652

 
69,346

Restricted cash
14,939

 
20,325

Accounts receivable
14,384

 
15,481

Deferred rent receivable
119,224

 
107,909

Deferred financing and leasing costs, net of accumulated amortization (2015, $180,608; 2014, $169,468)
208,623

 
206,286

Investments in and advances to unconsolidated joint ventures
213,894

 
208,832

Assets held for sale

 
8,389

Prepaid expenses and other assets
97,822

 
91,399

Total assets
$
6,689,793

 
$
6,625,536

LIABILITIES
 
 
 
Mortgage loans
$
372,660

 
$
487,301

Unsecured notes
2,608,307

 
2,509,094

Credit facility
300,000

 
167,000

Accounts payable
60,256

 
52,043

Accrued interest
43,771

 
24,513

Distributions payable
71,863

 
72,253

Other liabilities
218,290

 
219,418

Total liabilities
3,675,147

 
3,531,622

Limited partners' equity - 301,483 preferred units outstanding as of September 30, 2015, and December 31, 2014
7,537

 
7,537

OWNERS’ EQUITY
 
 
 
General partner’s equity - 147,753,980 and 148,557,270 common units outstanding as of September 30, 2015 and December 31, 2014, respectively
2,950,221

 
3,027,672

Limited partners’ equity – 3,539,075 and 3,553,566 common units outstanding as of September 30, 2015 and December 31, 2014, respectively
52,969

 
54,786

Noncontrolling interest – consolidated joint ventures
3,919

 
3,919

Total owners’ equity
3,007,109

 
3,086,377

Total liabilities, limited partners' equity and owners’ equity
$
6,689,793

 
$
6,625,536


See accompanying notes.

10


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands, except per unit amounts)
 
 
Three Months Ended
 
September 30, 2015
 
September 30, 2014
OPERATING REVENUE
 
 
 
Rental
$
145,009

 
$
143,294

Operating expense reimbursement
53,963

 
55,062

Total operating revenue
198,972

 
198,356

OPERATING EXPENSE
 
 
 
Rental property
31,454

 
33,105

Real estate taxes
25,953

 
25,595

General and administrative
15,573

 
14,748

Depreciation and amortization
55,718

 
58,578

Total operating expense
128,698

 
132,026

Operating income
70,274

 
66,330

OTHER INCOME (EXPENSE)
 
 
 
Interest and other income
4,959

 
6,233

Interest expense
(33,559
)
 
(37,958
)
Total other income (expense)
(28,600
)
 
(31,725
)
Income before gain (loss) on property dispositions, income taxes and equity in (loss) earnings of unconsolidated joint ventures
41,674

 
34,605

Gain (loss) on property dispositions
53,467

 
(20
)
Income taxes
(599
)
 
(859
)
Equity in (loss) earnings of unconsolidated joint ventures
(847
)
 
1,592

Income from continuing operations
93,695

 
35,318

Discontinued operations (including net gain on property dispositions of $38 for the three months ended September 30, 2014)

 
133

Net income
93,695

 
35,451

Noncontrolling interest – consolidated joint ventures
(58
)
 
(84
)
Preferred unit distributions
(118
)
 
(118
)
Income available to common unitholders
$
93,519

 
$
35,249

Net income
$
93,695

 
$
35,451

Other comprehensive loss - foreign currency translation
(7,970
)
 
(13,000
)
Other comprehensive (loss) income - derivative instruments
(1,220
)
 
666

Other comprehensive loss
(9,190
)
 
(12,334
)
Total comprehensive income
$
84,505

 
$
23,117

Earnings per common unit
 
 
 
Basic:
 
 
 
Income from continuing operations
$
0.61

 
$
0.23

Income from discontinued operations

 

Income per common unit - basic
$
0.61

 
$
0.23

Diluted:
 
 
 
Income from continuing operations
$
0.61

 
$
0.23

Income from discontinued operations

 

Income per common unit - diluted
$
0.61

 
$
0.23

Distributions per common unit
$
0.475

 
$
0.475

Weighted average number of common units outstanding
 
 
 
        Basic
152,121

 
150,976

        Diluted
152,715

 
151,642

Net income allocated to general partners
$
91,331

 
$
34,423

Net income allocated to limited partners
$
2,306

 
$
944


See accompanying notes.

11


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands, except per unit amounts)
 
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
OPERATING REVENUE
 
 
 
Rental
$
440,962

 
$
421,620

Operating expense reimbursement
168,430

 
167,326

Total operating revenue
609,392

 
588,946

OPERATING EXPENSE
 
 
 
Rental property
98,973

 
103,728

Real estate taxes
78,579

 
75,812

General and administrative
51,428

 
48,077

Depreciation and amortization
171,347

 
173,184

Impairment - real estate assets
16,775

 

Total operating expense
417,102

 
400,801

Operating income
192,290

 
188,145

OTHER INCOME (EXPENSE)
 
 
 
Interest and other income
17,911

 
11,786

Interest expense
(103,295
)
 
(115,635
)
Total other income (expense)
(85,384
)
 
(103,849
)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures
106,906

 
84,296

Gain on property dispositions
56,987

 
1,878

Income taxes
(2,613
)
 
(2,083
)
Equity in earnings of unconsolidated joint ventures
805

 
7,297

Income from continuing operations
162,085

 
91,388

Discontinued operations (including net gain on property dispositions of $46,292 for the nine months ended September 30, 2014)

 
48,276

Net income
162,085

 
139,664

Noncontrolling interest – consolidated joint ventures
(171
)
 
(474
)
Preferred unit distributions
(354
)
 
(354
)
Income available to common unitholders
$
161,560

 
$
138,836

Net income
$
162,085

 
$
139,664

Other comprehensive loss - foreign currency translation
(6,229
)
 
(5,189
)
Other comprehensive loss - derivative instruments
(1,539
)
 
(990
)
Other comprehensive loss
(7,768
)
 
(6,179
)
Total comprehensive income
$
154,317

 
$
133,485

Earnings per common unit
 
 
 
Basic:
 
 
 
Income from continuing operations
$
1.06

 
$
0.60

Income from discontinued operations

 
0.32

Income per common unit - basic
$
1.06

 
$
0.92

Diluted:
 
 
 
Income from continuing operations
$
1.06

 
$
0.60

Income from discontinued operations

 
0.32

Income per common unit - diluted
$
1.06

 
$
0.92

Distributions per common unit
$
1.425

 
$
1.425

Weighted average number of common units outstanding
 
 
 
        Basic
152,134

 
150,541

        Diluted
152,760

 
151,215

Net income allocated to general partners
$
157,797

 
$
135,572

Net income allocated to limited partners
$
4,117

 
$
3,618


See accompanying notes.

12


CONSOLIDATED STATEMENT OF OWNERS’ EQUITY OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands)
 
 
GENERAL
PARTNER’S
EQUITY
 
LIMITED PARTNERS’
EQUITY  –
COMMON UNITS
 
NONCONTROLLING
INTEREST –
CONSOLIDATED
JOINT VENTURES
 
TOTAL
OWNERS’
EQUITY
 
LIMITED PARTNERS' EQUITY - PREFERRED
Balance at January 1, 2015
$
3,027,672

 
$
54,786

 
$
3,919

 
$
3,086,377

 
$
7,537

Contributions from partners
49,595

 

 

 
49,595

 

Unit repurchase
(65,463
)
 

 

 
(65,463
)
 

Distributions to partners
(212,019
)
 
(5,173
)
 
(171
)
 
(217,363
)
 
(354
)
Other comprehensive loss - foreign currency translation
(6,082
)
 
(147
)
 

 
(6,229
)
 

Other comprehensive loss - derivative instruments
(1,503
)
 
(36
)
 

 
(1,539
)
 

Net income
157,797

 
3,763

 
171

 
161,731

 
354

Redemption of limited partners common units for common shares
224

 
(224
)
 

 

 

Balance at September 30, 2015
$
2,950,221

 
$
52,969

 
$
3,919

 
$
3,007,109

 
$
7,537


See accompanying notes.

13


CONSOLIDATED STATEMENTS OF CASH FLOWS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands)
 
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
OPERATING ACTIVITIES
 
 
 
Net income
$
162,085

 
$
139,664

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
173,726

 
176,207

Amortization of deferred financing costs
3,249

 
3,727

Impairment - real estate assets
16,775

 

Equity in earnings of unconsolidated joint ventures
(805
)
 
(7,297
)
Distributions from unconsolidated joint ventures
2,490

 

Gain on property dispositions
(56,987
)
 
(48,170
)
Noncash compensation
10,709

 
10,422

Other
(8,143
)
 
(5,202
)
  Changes in operating assets and liabilities:
 
 
 
Restricted cash
4,914

 
28,469

Accounts receivable
1,023

 
(4,771
)
Deferred rent receivable
(17,122
)
 
(11,928
)
Prepaid expenses and other assets
(20,182
)
 
(38,882
)
Accounts payable
8,312

 
18,824

Accrued interest
19,258

 
15,500

Other liabilities
371

 
(26,232
)
Net cash provided by operating activities
299,673

 
250,331

INVESTING ACTIVITIES
 
 
 
Investment in operating properties - acquisitions
(100,756
)
 
(97,677
)
Investment in operating properties - other
(58,038
)
 
(61,480
)
Investments in and advances to unconsolidated joint ventures
(30,609
)
 
(13,894
)
Distributions from unconsolidated joint ventures
23,093

 
10,213

Net proceeds from disposition of properties/land
243,943

 
351,301

Investment in development in progress
(123,547
)
 
(222,484
)
Investment in land held for development
(101,934
)
 
(73,547
)
Investment in deferred leasing costs
(34,404
)
 
(28,409
)
Other
(6,366
)
 
5,501

Net cash used in investing activities
(188,618
)
 
(130,476
)
FINANCING ACTIVITIES
 
 
 
Proceeds from unsecured notes
398,576

 

Repayment of unsecured notes
(300,000
)
 
(200,000
)
Repayments of mortgage loans
(112,970
)
 
(9,329
)
Proceeds from credit facility
919,700

 
179,750

Repayments on credit facility
(786,700
)
 
(38,800
)
Payment of deferred financing costs
(3,478
)
 
(3,622
)
Capital contributions
38,195

 
44,097

Unit repurchase
(65,463
)
 

Distributions to partners
(218,106
)
 
(215,471
)
Net cash used in financing activities
(130,246
)
 
(243,375
)
Net decrease in cash and cash equivalents
(19,191
)
 
(123,520
)
Decrease in cash and cash equivalents related to foreign currency translation
(1,503
)
 
(808
)
Cash and cash equivalents at beginning of period
69,346

 
163,414

Cash and cash equivalents at end of period
$
48,652

 
$
39,086


See accompanying notes.

14


Liberty Property Trust and Liberty Property Limited Partnership
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2015
Note 1: Organization and Basis of Presentation
Organization
Liberty Property Trust (the “Trust”) is a self-administered and self-managed Maryland real estate investment trust (a “REIT”). Substantially all of the Trust’s assets are owned directly or indirectly, and substantially all of the Trust’s operations are conducted directly or indirectly, by its subsidiary, Liberty Property Limited Partnership, a Pennsylvania limited partnership (the “Operating Partnership” and, together with the Trust and their consolidated subsidiaries, the “Company”). The Trust is the sole general partner and also a limited partner of the Operating Partnership, owning 97.7% of the common equity of the Operating Partnership at September 30, 2015. The Company owns and operates industrial properties nationally and owns and operates office properties in a focused group of office markets. Additionally, the Company owns certain assets in the United Kingdom. Unless otherwise indicated, the notes to the Consolidated Financial Statements apply to both the Trust and the Operating Partnership. The terms the “Company,” “we,” “our” and “us” mean the Trust and Operating Partnership collectively.
Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2014. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial statements for these interim periods have been included. The results of interim periods are not necessarily indicative of the results to be obtained for a full fiscal year.
As disclosed in Note 2, Income per Common Share of the Trust - Share Repurchase, the Company repurchased common shares pursuant to a share repurchase program authorized by the Company's Board of Trustees. These repurchased shares along with those repurchased in prior periods are subject to state corporate laws that establish the legal status of redeemed shares and prevent them from being reported as treasury shares within the consolidated financial statements. The Trust previously misclassified the repurchased shares as common shares in treasury. The share repurchases should have been classified as reductions of common shares of beneficial interest and additional paid-in capital. The accompanying consolidated balance sheet of the Trust as of December 31, 2014 has been restated to correct the misclassification. The correction results in reductions in common shares of beneficial interest and additional paid-in capital at December 31, 2014 of $1,000 and $51.9 million, respectively, from the previously reported amounts of $150,000 and $3,740.6 million, respectively.  The reclassification has no impact on the previously reported consolidated statements of comprehensive income, nor does it have any effect on the previously reported consolidated statements of cash flows.  In addition, the reclassification has no impact on the previously reported consolidated financial statements of the Operating Partnership.
Recently Issued Accounting Standards
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance. The standard clarifies the required factors that an entity must consider when recognizing revenue. The standard also requires additional disclosures concerning contracts with customers, judgments concerning revenue recognition, and assets recognized for the costs to obtain or fulfill a contract. ASU 2014-09 is effective for the Company beginning January 1, 2018. The Company is evaluating the impact ASU 2014-09 will have on its financial position and results of operations.
In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). The standard requires the costs for issuing debt to appear on a balance sheet as a direct deduction from the debt's value. ASU 2015-03 is effective for the Company beginning January 1, 2016. The standard would be applied retrospectively. The Company does not anticipate that the adoption of ASU 2015-03 will have a material impact on its financial position or results of operations.
In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis (Topic 810) ("ASU 2015-02"). The standard requires that all entities re-evaluate and revise consolidation documentation for limited partnerships and similar legal entities. It makes changes to both the variable interest model and voting model. ASU 2015-02 is effective for the Company

15


beginning January 1, 2016. The standard allows for either a full retrospective or a modified retrospective approach to adoption. The Company is evaluating the impact ASU 2015-02 will have on its financial position and results of operations.

16


Note 2: Income per Common Share of the Trust

The following table sets forth the computation of basic and diluted income per common share of the Trust (in thousands except per share amounts):
 
 
For the Three Months Ended
 
For the Three Months Ended
 
September 30, 2015
 
September 30, 2014
 
Income
(Numerator)
 
Weighted
Average
Shares
(Denominator)
 
Per Share
 
Income
(Numerator)
 
Weighted
Average
Shares
(Denominator)
 
Per Share
Income from continuing operations net of noncontrolling interest - basic
$
91,331

 
148,582

 
$
0.61

 
$
34,293

 
147,422

 
$
0.23

Dilutive shares for long-term compensation plans

 
594

 
 
 

 
666

 
 
Income from continuing operations net of noncontrolling interest - diluted
$
91,331

 
149,176

 
$
0.61

 
$
34,293

 
148,088

 
$
0.23

Discontinued operations net of noncontrolling interest - basic
$

 
148,582

 
$

 
$
130

 
147,422

 
$

Dilutive shares for long-term compensation plans

 
594

 
 
 

 
666

 
 
Discontinued operations net of noncontrolling interest - diluted
$

 
149,176

 
$

 
$
130

 
148,088

 
$

Net income available to common shareholders - basic
$
91,331

 
148,582

 
$
0.61

 
$
34,423

 
147,422

 
$
0.23

Dilutive shares for long-term compensation plans

 
594

 
 
 

 
666

 
 
Net income available to common shareholders - diluted
$
91,331

 
149,176

 
$
0.61

 
$
34,423

 
148,088

 
$
0.23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended
 
For the Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
Income
(Numerator)
 
Weighted
Average
Shares
(Denominator)
 
Per Share
 
Income
(Numerator)
 
Weighted
Average
Shares
(Denominator)
 
Per Share
Income from continuing operations net of noncontrolling interest - basic
$
157,797

 
148,594

 
$
1.06

 
$
88,430

 
146,987

 
$
0.60

Dilutive shares for long-term compensation plans

 
626

 
 
 

 
674

 
 
Income from continuing operations net of noncontrolling interest - diluted
157,797

 
149,220

 
$
1.06

 
88,430

 
147,661

 
$
0.60

Discontinued operations net of noncontrolling interest - basic

 
148,594

 
$

 
47,142

 
146,987

 
$
0.32

Dilutive shares for long-term compensation plans

 
626

 
 
 

 
674

 
 
Discontinued operations net of noncontrolling interest - diluted

 
149,220

 
$

 
47,142

 
147,661

 
$
0.32

Net income available to common shareholders - basic
157,797

 
148,594

 
$
1.06

 
135,572

 
146,987

 
$
0.92

Dilutive shares for long-term compensation plans

 
626

 
 
 

 
674

 
 
Net income available to common shareholders - diluted
$
157,797

 
149,220

 
$
1.06

 
$
135,572

 
147,661

 
$
0.92



17


Dilutive shares for long-term compensation plans represent the unvested common shares outstanding during the periods as well as the dilutive effect of outstanding options. The amount of anti-dilutive options excluded from the computation of diluted income per common share for the three and nine months ended September 30, 2015 was 2,260,000 and 1,528,000, respectively, as compared to 1,183,000 and 850,000, respectively, for the same periods in 2014.
During the three and nine months ended September 30, 2015, 12,000 and 65,000 common shares, respectively, were issued upon the exercise of options. During the year ended December 31, 2014, 44,000 common shares were issued upon the exercise of options.
Share Repurchase
In August 2015, the Company’s Board of Trustees authorized a share repurchase plan under which the Company may purchase up to $250 million of the Company’s outstanding common shares. Purchases made pursuant to the program will be made in either the open market or in privately negotiated transactions from time to time as permitted by securities laws and other legal requirements.
During the three and nine months ended September 30, 2015, the Company purchased an aggregate of 2,125,000 common shares for $65.5 million as part of the share repurchase plan.


18


Note 3: Income per Common Unit of the Operating Partnership

The following table sets forth the computation of basic and diluted income per common unit of the Operating Partnership (in thousands, except per unit amounts):
 
 
For the Three Months Ended
 
For the Three Months Ended
 
September 30, 2015
 
September 30, 2014
 
Income (Numerator)
 
Weighted
Average Units
(Denominator)
 
Per Unit
 
Income
(Numerator)
 
Weighted
Average Units
(Denominator)
 
Per Unit
Income from continuing operations - net of noncontrolling interest - consolidated joint ventures
$
93,637

 
 
 
 
 
$
35,234

 
 
 
 
Less: Preferred unit distributions
(118
)
 
 
 
 
 
(118
)
 
 
 
 
Income from continuing operations available to common unitholders - basic
$
93,519

 
152,121

 
$
0.61

 
$
35,116

 
150,976

 
$
0.23

Dilutive units for long-term compensation plans

 
594

 
 
 

 
666

 
 
Income from continuing operations available to common unitholders - diluted
$
93,519

 
152,715

 
$
0.61

 
$
35,116

 
151,642

 
$
0.23

Income from discontinued operations - basic
$

 
152,121

 
$

 
$
133

 
150,976

 
$

Dilutive units for long-term compensation plans

 
594

 
 
 

 
666

 
 
Income from discontinued operations - diluted
$

 
152,715

 
$

 
$
133

 
151,642

 
$

Income available to common unitholders - basic
$
93,519

 
152,121

 
$
0.61

 
$
35,249

 
150,976

 
$
0.23

Dilutive units for long-term compensation plans

 
594

 
 
 

 
666

 
 
Income available to common unitholders - diluted
$
93,519

 
152,715

 
$
0.61

 
$
35,249

 
151,642

 
$
0.23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

19


 
For the Nine Months Ended
 
For the Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
Income
(Numerator)
 
Weighted
Average Units
(Denominator)
 
Per Unit
 
Income
(Numerator)
 
Weighted
Average Units
(Denominator)
 
Per Unit
Income from continuing operations net of noncontrolling interest - consolidated joint ventures
$
161,914

 
 
 
 
 
$
90,914

 
 
 
 
Less: Preferred unit distributions
(354
)
 
 
 
 
 
(354
)
 
 
 
 
Income from continuing operations available to common unitholders - basic
161,560

 
152,134

 
$
1.06

 
90,560

 
150,541

 
$
0.60

Dilutive units for long-term compensation plans

 
626

 
 
 

 
674

 
 
Income from continuing operations available to common unitholders - diluted
161,560

 
152,760

 
$
1.06

 
90,560

 
151,215

 
$
0.60

Income from discontinued operations - basic

 
152,134

 
$

 
48,276

 
150,541

 
$
0.32

Dilutive units for long-term compensation plans

 
626

 
 
 

 
674

 
 
Income from discontinued operations - diluted

 
152,760

 
$

 
48,276

 
151,215

 
$
0.32

Income available to common unitholders - basic
161,560

 
152,134

 
$
1.06

 
138,836

 
150,541

 
$
0.92

Dilutive units for long-term compensation plans

 
626

 
 
 

 
674

 
 
Income available to common unitholders - diluted
$
161,560

 
152,760

 
$
1.06

 
$
138,836

 
151,215

 
$
0.92


Dilutive units for long-term compensation plans represent the unvested common units outstanding during the periods as well as the dilutive effect of outstanding options. The amount of anti-dilutive options excluded from the computation of diluted income per common unit for the three and nine months ended September 30, 2015 was 2,260,000 and 1,528,000, respectively, as compared to 1,183,000 and 850,000, respectively, for the same periods in 2014.
During the three and nine months ended September 30, 2015, 12,000 and 65,000 common units, respectively, were issued upon exercise of options. During the year ended December 31, 2014, 44,000 common units were issued upon the exercise of options.
Share Repurchase
In August 2015, the Company’s Board of Trustees authorized a share repurchase plan under which the Company may purchase up to $250 million of the Company’s outstanding common units. Purchases made pursuant to the program will be made in either the open market or in privately negotiated transactions from time to time as permitted by securities laws and other legal requirements.
During the three and nine months ended September 30, 2015, the Company purchased an aggregate of 2,125,000 common shares for $65.5 million as part of the share repurchase plan. In connection with these repurchases, an equal number of common units were repurchased by the Operating Partnership from the Trust.

20


Note 4: Accumulated Other Comprehensive Income (Loss)

The following table sets forth the components of Accumulated Other Comprehensive Income (Loss) (in thousands):

 
 
Nine Months Ended September 30,
 
 
2015
 
2014
Foreign Currency Translation:
 
 
 
 
     Beginning balance
 
$
(5,823
)
 
$
8,592

     Translation adjustment
 
(6,229
)
 
(5,189
)
     Ending balance
 
(12,052
)
 
3,403

 
 
 
 
 
Derivative Instruments:
 
 
 
 
     Beginning balance
 
(377
)
 
1,584

     Unrealized loss
 
(2,592
)
 
(2,090
)
     Reclassification adjustment (1)
 
1,053

 
1,100

     Ending balance
 
(1,916
)
 
594

Total accumulated other comprehensive (loss) income
 
(13,968
)
 
3,997

Less: portion included in noncontrolling interest – operating partnership
 
131

 
(290
)
Total accumulated other comprehensive (loss) income included in shareholders' equity/owners' equity
 
$
(13,837
)
 
$
3,707


(1)
Amounts reclassified out of Accumulated Other Comprehensive (Loss) Income/General & Limited Partner's Equity into contractual interest expense.

Note 5: Segment Information
The Company owns and operates industrial properties nationally and owns and operates office properties in a focused group of office markets. Additionally, the Company owns certain assets in the United Kingdom. The Company's reportable segments are as follows.
Carolinas;
Chicago/Milwaukee;
Houston;
Lehigh/Central PA;
Minnesota;
Orlando;
Philadelphia;
Richmond/Hampton Roads;
Southeastern PA;
South Florida;
Tampa; and
United Kingdom.
Certain other segments are aggregated into an "Other" category which includes the reportable segments: Arizona; Atlanta; Cincinnati/Columbus/Indianapolis; Dallas; Maryland; New Jersey; Northern Virginia; Southern California; Washington D.C. and other.
The Company evaluates the performance of its reportable segments based on net operating income. Net operating income includes operating revenue from external customers, real estate taxes, amortization of lease transaction costs and other operating expenses which relate directly to the management and operation of the assets within each reportable segment.
The Company's accounting policies for the segments are the same as those used in the Company's consolidated financial statements. There are no material inter-segment transactions.

21


The operating information by reportable segment is as follows (in thousands):
 
 
 
For the Three Months
 
For the Nine Months