Attached files

file filename
EX-32.4 - EXHIBIT 32.4 - LIBERTY PROPERTY TRUSTlptex324-9302017.htm
EX-32.3 - EXHIBIT 32.3 - LIBERTY PROPERTY TRUSTlptex323-9302017.htm
EX-32.2 - EXHIBIT 32.2 - LIBERTY PROPERTY TRUSTlptex322-9302017.htm
EX-32.1 - EXHIBIT 32.1 - LIBERTY PROPERTY TRUSTlptex321-9302017.htm
EX-31.4 - EXHIBIT 31.4 - LIBERTY PROPERTY TRUSTlptex314-9302017.htm
EX-31.3 - EXHIBIT 31.3 - LIBERTY PROPERTY TRUSTlptex313-9302017.htm
EX-31.2 - EXHIBIT 31.2 - LIBERTY PROPERTY TRUSTlptex312-9302017.htm
EX-31.1 - EXHIBIT 31.1 - LIBERTY PROPERTY TRUSTlptex311-9302017.htm
EX-12.1 - EXHIBIT 12.1 - LIBERTY PROPERTY TRUSTlptex121-9302017.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, 2017
  
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, a smaller reporting company or an emerging growth company. (See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth 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
 
 
Emerging Growth Company
o
    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes  o    No  x

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 2, 2017, 147,418,013 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, 2017 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, 2017. 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, 2017
 
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.
 
 
 
 
 
 
 
 
 
 
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, 2017
 
December 31, 2016
ASSETS
 
 
 
Real estate:
 
 
 
Land and land improvements
$
1,081,447

 
$
1,094,470

Building and improvements
4,539,552

 
4,501,921

Less accumulated depreciation
(1,015,786
)
 
(940,115
)
Operating real estate
4,605,213

 
4,656,276

Development in progress
395,089

 
267,450

Land held for development
331,340

 
336,569

Net real estate
5,331,642

 
5,260,295

Cash and cash equivalents
47,666

 
43,642

Restricted cash
16,824

 
12,383

Accounts receivable, net
13,258

 
13,994

Deferred rent receivable, net
123,718

 
109,245

Deferred financing and leasing costs, net of accumulated amortization (September 30, 2017, $168,173; December 31, 2016, $152,309)
154,147

 
153,393

Investments in and advances to unconsolidated joint ventures
283,803

 
245,078

Assets held for sale
177,549

 
4,548

Prepaid expenses and other assets
161,067

 
150,235

Total assets
$
6,309,674

 
$
5,992,813

LIABILITIES
 
 
 
Mortgage loans, net
$
269,380

 
$
276,650

Unsecured notes, net
2,282,828

 
2,280,286

Credit facility
295,000

 

Accounts payable
78,384

 
65,914

Accrued interest
34,707

 
21,878

Dividend and distributions payable
60,131

 
71,501

Other liabilities
209,710

 
206,124

Total liabilities
3,230,140

 
2,922,353

Noncontrolling interest - operating partnership - 301,483 preferred units outstanding as of September 30, 2017 and December 31, 2016
7,537

 
7,537

EQUITY
 
 
 
Liberty Property Trust shareholders’ equity
 
 
 
Common shares of beneficial interest, $.001 par value, 283,987,000 shares authorized; 147,399,264 and 146,993,018 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
147

 
147

Additional paid-in capital
3,671,758

 
3,655,910

Accumulated other comprehensive loss
(39,741
)
 
(56,031
)
Distributions in excess of net income
(619,350
)
 
(596,635
)
Total Liberty Property Trust shareholders’ equity
3,012,814

 
3,003,391

Noncontrolling interest – operating partnership
 
 
 
3,528,281 and 3,530,031 common units outstanding as of September 30, 2017 and December 31, 2016, respectively
54,525

 
54,631

Noncontrolling interest – consolidated joint ventures
4,658

 
4,901

Total equity
3,071,997

 
3,062,923

Total liabilities, noncontrolling interest - operating partnership and equity
$
6,309,674

 
$
5,992,813


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, 2017
 
September 30, 2016
OPERATING REVENUE
 
 
 
Rental
$
129,356

 
$
140,697

Operating expense reimbursement
40,121

 
50,160

Development service fee income
24,176

 

Total operating revenue
193,653

 
190,857

OPERATING EXPENSE
 
 
 
Rental property
18,941

 
26,496

Real estate taxes
23,258

 
25,968

General and administrative
11,910

 
15,379

Expensed pursuit costs
4,772

 
772

Depreciation and amortization
46,582

 
46,920

Development service fee expense
23,665

 

Impairment charges - real estate assets
9,650

 

Total operating expense
138,778

 
115,535

Operating income
54,875

 
75,322

OTHER INCOME (EXPENSE)
 
 
 
Interest and other income
1,781

 
3,153

Loss on debt extinguishment

 
(3,494
)
Interest expense
(23,060
)
 
(29,528
)
Total other income (expense)
(21,279
)
 
(29,869
)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures
33,596

 
45,453

Gain on property dispositions
23,840

 
1,318

Income taxes
(582
)
 
(80
)
Equity in earnings of unconsolidated joint ventures
4,305

 
9,043

Net income
61,159

 
55,734

Noncontrolling interest – operating partnership
(1,545
)
 
(1,424
)
Noncontrolling interest – consolidated joint ventures
(75
)
 
(57
)
Net income available to common shareholders
$
59,539

 
$
54,253

 
 
 
 
Net income
$
61,159

 
$
55,734

Other comprehensive income (loss) - foreign currency translation
5,634

 
(4,407
)
Other comprehensive income - derivative instruments
91

 
663

Other comprehensive income (loss)
5,725

 
(3,744
)
Total comprehensive income
66,884

 
51,990

Less: comprehensive income attributable to noncontrolling interest
(1,754
)
 
(1,393
)
Comprehensive income attributable to common shareholders
$
65,130

 
$
50,597

Earnings per common share
 
 
 
Income per common share – basic
$
0.41

 
$
0.37

Income per common share – diluted
$
0.40

 
$
0.37

Distributions per common share
$
0.40

 
$
0.475

Weighted average number of common shares outstanding
 
 
 
Basic
146,811

 
146,215

Diluted
147,596

 
147,107

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, 2017
 
September 30, 2016
OPERATING REVENUE
 
 
 
Rental
$
377,706

 
$
418,896

Operating expense reimbursement
120,523

 
148,757

Development service fee income
53,920

 

Total operating revenue
552,149

 
567,653

OPERATING EXPENSE
 
 
 
Rental property
56,541

 
79,752

Real estate taxes
69,783

 
76,490

General and administrative
43,949

 
51,888

Expensed pursuit costs
4,957

 
882

Depreciation and amortization
137,831

 
154,543

Development service fee expense
52,497

 

Impairment charges - real estate assets
9,650

 

Total operating expense
375,208

 
363,555

Operating income
176,941

 
204,098

OTHER INCOME (EXPENSE)
 
 
 
Interest and other income
5,585

 
12,743

Loss on debt extinguishment

 
(3,494
)
Interest expense
(67,345
)
 
(91,071
)
Total other income (expense)
(61,760
)
 
(81,822
)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures
115,181

 
122,276

Gain on property dispositions
30,542

 
25,671

Income taxes
(1,528
)
 
(1,633
)
Equity in earnings of unconsolidated joint ventures
14,026

 
19,540

Net income
158,221

 
165,854

Noncontrolling interest – operating partnership
(4,044
)
 
(4,250
)
Noncontrolling interest – consolidated joint ventures
(195
)
 
(170
)
Net income available to common shareholders
$
153,982

 
$
161,434

 
 
 
 
Net income
$
158,221

 
$
165,854

Other comprehensive income (loss) - foreign currency translation
16,314

 
(23,003
)
Other comprehensive income (loss) - derivative instruments
366

 
(1,132
)
Other comprehensive income (loss)
16,680

 
(24,135
)
Total comprehensive income
174,901

 
141,719

Less: comprehensive income attributable to noncontrolling interest
(4,629
)
 
(3,851
)
Comprehensive income attributable to common shareholders
$
170,272

 
$
137,868

Earnings per common share
 
 
 
Income per common share – basic
$
1.05

 
$
1.10

Income per common share – diluted
$
1.04

 
$
1.10

Distributions per common share
$
1.20

 
$
1.425

Weighted average number of common shares outstanding
 
 
 
Basic
146,678

 
146,121

Diluted
147,430

 
146,788

See accompanying notes.

7


CONSOLIDATED STATEMENT OF EQUITY OF LIBERTY PROPERTY TRUST
(Unaudited and in thousands)
 
 
 
NUMBER OF COMMON SHARES
 
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
 
NONCONTROLLING INTEREST -
CONSOLIDATED
JOINT
VENTURES
 
TOTAL EQUITY
 
NONCONTROLLING INTEREST - OPERATING PARTNERSHIP (MEZZANINE)
Balance at January 1, 2017
 
146,993,018

 
$
147

 
$
3,655,910

 
$
(56,031
)
 
$
(596,635
)
 
$
3,003,391

 
$
54,631

 
$
4,901

 
$
3,062,923

 
$
7,537

Net proceeds from the issuance of common shares
 
404,496

 

 
7,356

 

 

 
7,356

 

 

 
7,356

 

Net income
 

 

 

 

 
153,982

 
153,982

 
3,690

 
195

 
157,867

 
354

Distributions
 

 

 

 

 
(176,697
)
 
(176,697
)
 
(4,159
)
 
(438
)
 
(181,294
)
 
(354
)
Share-based compensation net of shares related to tax withholdings
 

 

 
8,465

 

 

 
8,465

 

 

 
8,465

 

Other comprehensive income - foreign currency translation
 

 

 

 
15,932

 

 
15,932

 
382

 

 
16,314

 

Other comprehensive income - derivative instruments
 

 

 

 
358

 

 
358

 
8

 

 
366

 

Redemption of noncontrolling interests – common units
 
1,750

 

 
27

 

 

 
27

 
(27
)
 

 

 

Balance at September 30, 2017
 
147,399,264

 
$
147

 
$
3,671,758

 
$
(39,741
)
 
$
(619,350
)
 
$
3,012,814

 
$
54,525

 
$
4,658

 
$
3,071,997

 
$
7,537


See accompanying notes.

8


CONSOLIDATED STATEMENTS OF CASH FLOWS OF LIBERTY PROPERTY TRUST
(Unaudited and in thousands)
 
Nine Months Ended
 
September 30, 2017
 
September 30, 2016
OPERATING ACTIVITIES
 
 
 
Net income
$
158,221

 
$
165,854

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
139,389

 
156,562

Amortization of deferred financing costs
2,811

 
3,068

Expensed pursuit costs
4,957

 
882

Impairment charges - real estate assets
9,650

 

Loss on debt extinguishment

 
3,494

Equity in earnings of unconsolidated joint ventures
(14,026
)
 
(19,540
)
Gain on property dispositions
(30,542
)
 
(25,671
)
Share-based compensation
12,467

 
17,673

Other
(2,547
)
 
(5,326
)
Changes in operating assets and liabilities:
 
 
 
Restricted cash
(3,330
)
 
4,059

Accounts receivable
1,976

 
(4,980
)
Deferred rent receivable
(15,360
)
 
(12,948
)
Prepaid expenses and other assets
(28,115
)
 
(23,054
)
Accounts payable
13,249

 
21,343

Accrued interest
12,829

 
12,800

Other liabilities
(42
)
 
(2,561
)
Net cash provided by operating activities
261,587

 
291,655

INVESTING ACTIVITIES
 
 
 
Investment in properties – acquisitions
(62,327
)
 
(9,278
)
Investment in properties – other
(39,719
)
 
(44,017
)
Investments in and advances to unconsolidated joint ventures
(41,154
)
 
(50,460
)
Distributions from unconsolidated joint ventures
17,089

 
49,372

Net proceeds from disposition of properties/land
56,474

 
142,808

Investment in development in progress
(189,282
)
 
(259,193
)
Investment in land held for development
(93,813
)
 
(70,809
)
Payment of deferred leasing costs
(28,424
)
 
(22,306
)
Other
24,096

 
4,874

Net cash used in investing activities
(357,060
)
 
(259,009
)
FINANCING ACTIVITIES
 
 
 
Net proceeds from issuance of common shares
7,356

 
11,967

Share repurchases, including shares related to tax withholdings
(4,879
)
 
(45,728
)
Proceeds from unsecured notes

 
396,648

Repayments of unsecured notes including prepayment premium

 
(303,673
)
Repayments of mortgage loans
(5,974
)
 
(25,260
)
Proceeds from credit facility
486,000

 
466,300

Repayments on credit facility
(191,000
)
 
(305,300
)
Payment of deferred financing costs
(22
)
 
(2,600
)
Distribution paid on common shares
(187,625
)
 
(209,428
)
Distribution to partners/noncontrolling interest holders
(5,450
)
 
(5,690
)
Net cash provided by (used in) financing activities
98,406

 
(22,764
)
Net increase in cash and cash equivalents
2,933

 
9,882

Increase (decrease) in cash and cash equivalents related to foreign currency translation
1,091

 
(2,945
)
Cash and cash equivalents at beginning of period
43,642

 
35,353

Cash and cash equivalents at end of period
$
47,666

 
$
42,290


See accompanying notes.

9


CONSOLIDATED BALANCE SHEETS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands, except unit amounts)
 
 
September 30, 2017
 
December 31, 2016
ASSETS
 
 
 
Real estate:
 
 
 
Land and land improvements
$
1,081,447

 
$
1,094,470

Building and improvements
4,539,552

 
4,501,921

Less accumulated depreciation
(1,015,786
)
 
(940,115
)
Operating real estate
4,605,213

 
4,656,276

Development in progress
395,089

 
267,450

Land held for development
331,340

 
336,569

Net real estate
5,331,642

 
5,260,295

Cash and cash equivalents
47,666

 
43,642

Restricted cash
16,824

 
12,383

Accounts receivable, net
13,258

 
13,994

Deferred rent receivable, net
123,718

 
109,245

Deferred financing and leasing costs, net of accumulated amortization (September 30, 2017, $168,173; December 31, 2016, $152,309)
154,147

 
153,393

Investments in and advances to unconsolidated joint ventures
283,803

 
245,078

Assets held for sale
177,549

 
4,548

Prepaid expenses and other assets
161,067

 
150,235

Total assets
$
6,309,674

 
$
5,992,813

LIABILITIES
 
 
 
Mortgage loans, net
$
269,380

 
$
276,650

Unsecured notes, net
2,282,828

 
2,280,286

Credit facility
295,000

 

Accounts payable
78,384

 
65,914

Accrued interest
34,707

 
21,878

Distributions payable
60,131

 
71,501

Other liabilities
209,710

 
206,124

Total liabilities
3,230,140

 
2,922,353

Limited partners’ equity - 301,483 preferred units outstanding as of September 30, 2017, and December 31, 2016
7,537

 
7,537

OWNERS’ EQUITY
 
 
 
General partner’s equity - 147,399,264 and 146,993,018 common units outstanding as of September 30, 2017 and December 31, 2016, respectively
3,012,814

 
3,003,391

Limited partners’ equity – 3,528,281 and 3,530,031 common units outstanding as of September 30, 2017 and December 31, 2016, respectively
54,525

 
54,631

Noncontrolling interest – consolidated joint ventures
4,658

 
4,901

Total owners’ equity
3,071,997

 
3,062,923

Total liabilities, limited partners’ equity and owners’ equity
$
6,309,674

 
$
5,992,813


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, 2017
 
September 30, 2016
OPERATING REVENUE
 
 
 
Rental
$
129,356

 
$
140,697

Operating expense reimbursement
40,121

 
50,160

Development service fee income
24,176

 

Total operating revenue
193,653

 
190,857

OPERATING EXPENSE
 
 
 
Rental property
18,941

 
26,496

Real estate taxes
23,258

 
25,968

General and administrative
11,910

 
15,379

Expensed pursuit costs
4,772

 
772

Depreciation and amortization
46,582

 
46,920

Development service fee expense
23,665

 

Impairment charges - real estate assets
9,650

 

Total operating expense
138,778

 
115,535

Operating income
54,875

 
75,322

OTHER INCOME (EXPENSE)
 
 
 
Interest and other income
1,781

 
3,153

Loss on debt extinguishment

 
(3,494
)
Interest expense
(23,060
)
 
(29,528
)
Total other income (expense)
(21,279
)
 
(29,869
)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures
33,596

 
45,453

Gain on property dispositions
23,840

 
1,318

Income taxes
(582
)
 
(80
)
Equity in earnings of unconsolidated joint ventures
4,305

 
9,043

Net income
61,159

 
55,734

Noncontrolling interest – consolidated joint ventures
(75
)
 
(57
)
Preferred unit distributions
(118
)
 
(118
)
Net income available to common unitholders
$
60,966

 
$
55,559

Net income
$
61,159

 
$
55,734

Other comprehensive income (loss) - foreign currency translation
5,634

 
(4,407
)
Other comprehensive income - derivative instruments
91

 
663

Other comprehensive income (loss)
5,725

 
(3,744
)
Total comprehensive income
$
66,884

 
$
51,990

Earnings per common unit
 
 
 
Income per common unit - basic
$
0.41

 
$
0.37

Income per common unit - diluted
$
0.40

 
$
0.37

Distributions per common unit
$
0.40

 
$
0.475

Weighted average number of common units outstanding
 
 
 
        Basic
150,339

 
149,751

        Diluted
151,124

 
150,643

Net income allocated to general partners
$
59,539

 
$
54,253

Net income allocated to limited partners
$
1,545

 
$
1,424


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, 2017
 
September 30, 2016
OPERATING REVENUE
 
 
 
Rental
$
377,706

 
$
418,896

Operating expense reimbursement
120,523

 
148,757

Development service fee income
53,920

 

Total operating revenue
552,149

 
567,653

OPERATING EXPENSE
 
 
 
Rental property
56,541

 
79,752

Real estate taxes
69,783

 
76,490

General and administrative
43,949

 
51,888

Expensed pursuit costs
4,957

 
882

Depreciation and amortization
137,831

 
154,543

Development service fee expense
52,497

 

Impairment charges - real estate assets
9,650

 

Total operating expense
375,208

 
363,555

Operating income
176,941

 
204,098

OTHER INCOME (EXPENSE)
 
 
 
Interest and other income
5,585

 
12,743

Loss on debt extinguishment

 
(3,494
)
Interest expense
(67,345
)
 
(91,071
)
Total other income (expense)
(61,760
)
 
(81,822
)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures
115,181

 
122,276

Gain on property dispositions
30,542

 
25,671

Income taxes
(1,528
)
 
(1,633
)
Equity in earnings of unconsolidated joint ventures
14,026

 
19,540

Net income
158,221

 
165,854

Noncontrolling interest – consolidated joint ventures
(195
)
 
(170
)
Preferred unit distributions
(354
)
 
(354
)
Income available to common unitholders
$
157,672

 
$
165,330

Net income
$
158,221

 
$
165,854

Other comprehensive income (loss) - foreign currency translation
16,314

 
(23,003
)
Other comprehensive income (loss) - derivative instruments
366

 
(1,132
)
Other comprehensive income (loss)
16,680

 
(24,135
)
Total comprehensive income
$
174,901

 
$
141,719

Earnings per common unit
 
 
 
Income per common unit - basic
$
1.05

 
$
1.10

Income per common unit - diluted
$
1.04

 
$
1.10

Distributions per common unit
$
1.20

 
$
1.425

Weighted average number of common units outstanding
 
 
 
        Basic
150,206

 
149,659

        Diluted
150,958

 
150,326

Net income allocated to general partners
$
153,982

 
$
161,434

Net income allocated to limited partners
$
4,044

 
$
4,250


See accompanying notes.

12


CONSOLIDATED STATEMENT OF OWNERS’ EQUITY OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands)
 
 
GENERAL PARTNER'S COMMON UNITS
 
LIMITED PARTNERS' COMMON UNITS
 
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, 2017
146,993,018

 
3,530,031

 
$
3,003,391

 
$
54,631

 
$
4,901

 
$
3,062,923

 
$
7,537

Contributions from partners
404,496

 

 
15,821

 

 

 
15,821

 

Distributions to partners

 

 
(176,697
)
 
(4,159
)
 
(438
)
 
(181,294
)
 
(354
)
Other comprehensive income - foreign currency translation

 

 
15,932

 
382

 

 
16,314

 

Other comprehensive income - derivative instruments

 

 
358

 
8

 

 
366

 

Net income

 

 
153,982

 
3,690

 
195

 
157,867

 
354

Redemption of limited partners common units for common shares
1,750

 
(1,750
)
 
27

 
(27
)
 

 

 

Balance at September 30, 2017
147,399,264

 
3,528,281

 
$
3,012,814

 
$
54,525

 
$
4,658

 
$
3,071,997

 
$
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, 2017
 
September 30, 2016
OPERATING ACTIVITIES
 
 
 
Net income
$
158,221

 
$
165,854

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
139,389

 
156,562

Amortization of deferred financing costs
2,811

 
3,068

Expensed pursuit costs
4,957

 
882

Impairment charges - real estate assets
9,650

 

Loss on debt extinguishment

 
3,494

Equity in earnings of unconsolidated joint ventures
(14,026
)
 
(19,540
)
Gain on property dispositions
(30,542
)
 
(25,671
)
Noncash compensation
12,467

 
17,673

Other
(2,547
)
 
(5,326
)
Changes in operating assets and liabilities:
 
 
 
Restricted cash
(3,330
)
 
4,059

Accounts receivable
1,976

 
(4,980
)
Deferred rent receivable
(15,360
)
 
(12,948
)
Prepaid expenses and other assets
(28,115
)
 
(23,054
)
Accounts payable
13,249

 
21,343

Accrued interest
12,829

 
12,800

Other liabilities
(42
)
 
(2,561
)
Net cash provided by operating activities
261,587

 
291,655

INVESTING ACTIVITIES
 
 
 
Investment in properties – acquisitions
(62,327
)
 
(9,278
)
Investment in properties – other
(39,719
)
 
(44,017
)
Investments in and advances to unconsolidated joint ventures
(41,154
)
 
(50,460
)
Distributions from unconsolidated joint ventures
17,089

 
49,372

Net proceeds from disposition of properties/land
56,474

 
142,808

Investment in development in progress
(189,282
)
 
(259,193
)
Investment in land held for development
(93,813
)
 
(70,809
)
Payment of deferred leasing costs
(28,424
)
 
(22,306
)
Other
24,096

 
4,874

Net cash used in investing activities
(357,060
)
 
(259,009
)
FINANCING ACTIVITIES
 
 
 
Proceeds from unsecured notes

 
396,648

Repayments of unsecured notes including prepayment premium

 
(303,673
)
Repayments of mortgage loans
(5,974
)
 
(25,260
)
Proceeds from credit facility
486,000

 
466,300

Repayments on credit facility
(191,000
)
 
(305,300
)
Payment of deferred financing costs
(22
)
 
(2,600
)
Capital contributions
7,356

 
11,967

Distributions to partners/noncontrolling interests
(197,954
)
 
(260,846
)
Net cash provided by (used in) financing activities
98,406

 
(22,764
)
Net increase in cash and cash equivalents
2,933

 
9,882

Increase (decrease) in cash and cash equivalents related to foreign currency translation
1,091

 
(2,945
)
Cash and cash equivalents at beginning of period
43,642

 
35,353

Cash and cash equivalents at end of period
$
47,666

 
$
42,290


See accompanying notes.

14


Liberty Property Trust and Liberty Property Limited Partnership
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2017
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, 2017. 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.
The Operating Partnership is a variable interest entity ("VIE") of the Trust as the limited partners do not have substantive kick-out or participating rights. The Trust is the primary beneficiary of the Operating Partnership as it has the power to direct the activities of the Operating Partnership and the rights to absorb 97.7% of the net income of the Operating Partnership. The Trust has no significant assets or liabilities other than its investment in the Operating Partnership. As the Operating Partnership is already consolidated in the balance sheets of the Trust, the identification of this entity as a VIE has no impact on the consolidated financial statements of the Trust. In addition, the Company holds a 20% interest in Liberty/Comcast 1701 JFK Boulevard, LP which was determined to be a VIE. The Company determined that it is not the primary beneficiary as the Company and its third party partner share control of the joint venture. The Company's maximum exposure to loss is equal to its equity investment in the joint venture which was $17.6 million and $18.7 million as of September 30, 2017 and December 31, 2016, respectively.
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, 2016. 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.
In the fourth quarter of 2016, the Company entered into an agreement relating to the development, for a fee, of an office building at its Camden Waterfront project in Camden, NJ. Project revenues and related costs and expenses are presented on a gross basis as "Development service fee income" and "Development service fee expense" in the Consolidated Statements of Comprehensive Income. Additionally, at the same time, the Company began classifying development fees and expenses relating to its development fee arrangements for certain unconsolidated joint venture projects in a manner consistent with the Camden project described above. Previously, development service fee income relating to its unconsolidated joint ventures had been classified as other income and development service fee expense had been classified as general and administrative expense in amounts as follows:
 
 
Three months ended
 
Nine months ended
 
 
September 30, 2016
 
September 30, 2016
Other income
 
$
1,219

 
$
3,789

General and administrative
 
$
1,058

 
$
3,210

In the first quarter of 2017, the Company adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which requires the Company to reclassify shares withheld for tax withholding purposes on share-based compensation awards from operating activities to financing activities. As a result of the adoption, a $4.8 million cash outflow has been reclassified in the September 30, 2016 consolidated statement of cash flows from operating activities to financing activities.

15


In the third quarter of 2017, the Company began to separately classify expensed pursuit costs (see Note 7) in the Consolidated Statements of Comprehensive Income. These costs, which were reclassed retrospectively for all periods, were formerly classified as general and administrative expense.
Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance (except revenue in the scope of other accounting standards, including standards related to leasing). Subsequently, the FASB issued the following standards related to ASU 2014-09: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations; ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing; ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients; and ASU 2017-13, Revenue from Contracts with Customers (Topic 606): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments (collectively, the “New Revenue Standards”). The Company must adopt the New Revenue Standards effective January 1, 2018.
The New Revenue Standards clarify the required factors that an entity must consider when recognizing revenue and require additional disclosures concerning contracts with customers, judgments concerning revenue recognition, and assets recognized for the costs to obtain or fulfill a contract. The Company continues to evaluate the New Revenue Standards by analyzing certain revenue streams. The Company concluded that there are no revenue streams from its lease agreements that are covered by the New Revenue Standards with the exception of non-lease components as further discussed. Once the new guidance setting forth principles for the recognition, measurement, presentation and disclosure of leases goes into effect on January 1, 2019, the Company believes that the New Revenue Standards will apply to components of revenue due under leases that are deemed to be non-lease components (such as common area maintenance and provision of utilities), which could affect the recognition pattern for such revenue. The Company continues to evaluate the qualitative and quantitative disclosure requirements of the New Revenue Standards. The Company does not expect the New Revenue Standards to have a material impact on the measurement and recognition of gains and losses on the sale of properties. The Company is in the process of evaluating any impact on the amount and timing of recognizing its development service fee income, which is currently accounted for under the percentage of completion method based on applicable costs incurred and estimated to be incurred. The Company continues to assess the impact from adopting the New Revenue Standards on its business processes, financial reporting disclosures, and internal controls over financial reporting (“ICFR”).
Significant assessment and implementation matters to be addressed prior to adopting the New Revenue Standards include completing a review of certain customer contracts, determining the impact the new accounting standard will have on the Company’s financial statements and related disclosures, and updating, through the completion of the implementation, the Company’s business processes, systems, and controls required to comply with the New Revenue Standards. Upon completion of the Company’s implementation plan and evaluation of the remaining revenue contracts, the Company will adopt additional controls around ICFR and its business processes for any new and existing revenue arrangements. The Company is on target to complete its assessment of the New Revenue Standards and the impact on the Company’s financial statements and related disclosures as of January 1, 2018. Although the Company is still completing its analysis of the impact from adopting the New Revenue Standards, the Company does not anticipate the impact to be material and, as a result, the Company plans to adopt the New Revenue Standards using the modified retrospective method.
In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 is effective for the Company beginning January 1, 2019. Early adoption of ASU 2016-02 is permitted. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. For leases in which the Company is the lessor, the standard requires that the lease and non-lease components of the lease agreement should be separated. Revenue related to the lease component of the contract will be recognized on a straight-line basis, while revenue related to the non-lease component will be recognized under the provisions of the New Revenue Standards. For lease agreements longer than one year in which the Company is the lessee, the Company will measure the present value of the future lease payments and recognize a right-of-use asset and corresponding lease liability on its balance sheet. In addition, the new standard states that only direct leasing costs may be capitalized. The Company is evaluating the impact ASU 2016-02 will have on its financial position and results of operations.
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 is designed to clarify how entities should classify cash receipts and cash payments in the statement of cash flows. ASU 2016-15 is effective for the Company beginning January 1, 2018. Early adoption of ASU 2016-15 is permitted. The standard requires retrospective application unless it is impracticable to do so. The Company is evaluating the impact ASU 2016-15 will have on its statement of cash flows.

16


In February 2017, the FASB issued ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets ("ASU 2017-05"). ASU 2017-05 is designed to provide guidance on how to recognize gain and losses on sales, including partial sale, of nonfinancial assets to noncustomers. ASU 2017-05 is effective for the Company beginning January 1, 2018. Early adoption is permitted but the standard is required to be adopted concurrently with the New Revenue Standards. The Company is evaluating the impact ASU 2017-05 will have on the Company's financial position and results of operations.
In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting ("ASU 2017-09"). ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. ASU 2017-09 is effective for the Company beginning January 1, 2018. Early adoption is permitted. The new guidance will be applied prospectively to awards modified on or after the adoption date. The Company is evaluating the impact ASU 2017-09 will have on the Company's financial position and results of operations.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). ASU 2017-12 is designed to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. ASU 2017-12 is effective for the Company beginning January 1, 2019. Early adoption is permitted using a modified retrospective transition method. This adoption method will require the Company to recognize the cumulative effect of initially applying ASU 2017-12 as an adjustment to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the update. The Company is evaluating the impact ASU 2017-12 will have on the Company's financial position and results of operations.
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, 2017
 
September 30, 2016
 
Income
(Numerator)
 
Weighted
Average
Shares
(Denominator)
 
Per Share
 
Income
(Numerator)
 
Weighted
Average
Shares
(Denominator)
 
Per Share
Net income available to common shareholders - basic
$
59,539

 
146,811

 
$
0.41

 
$
54,253

 
146,215

 
$
0.37

Dilutive shares for long-term compensation plans

 
785

 
 
 

 
892

 
 
Net income available to common shareholders - diluted
$
59,539

 
147,596

 
$
0.40

 
$
54,253

 
147,107

 
$
0.37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended
 
For the Nine Months Ended
 
September 30, 2017
 
September 30, 2016
 
Income
(Numerator)
 
Weighted
Average
Shares
(Denominator)
 
Per Share
 
Income
(Numerator)
 
Weighted
Average
Shares
(Denominator)
 
Per Share
Net income available to common shareholders - basic
$
153,982

 
146,678

 
$
1.05

 
$
161,434

 
146,121

 
$
1.10

Dilutive shares for long-term compensation plans

 
752

 
 
 

 
667

 
 
Net income available to common shareholders - diluted
$
153,982

 
147,430

 
$
1.04

 
$
161,434

 
146,788

 
$
1.10


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. There were no anti-dilutive options excluded from the computation of diluted income per common share for the three and nine months ended September 30, 2017 as compared to 160,000 and 762,000, respectively, for the same periods in 2016.

17


During the three and nine months ended September 30, 2017, 79,000 and 167,000 common shares, respectively, were issued upon the exercise of options. During the year ended December 31, 2016, 369,000 common shares were issued upon the exercise of options.
Share Repurchase
The Company’s Board of Trustees has authorized a share repurchase plan under which the Company may purchase up to $250 million of the Company’s outstanding common shares through September 28, 2019. Purchases made pursuant to the program may 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. There were no purchases under the plan during the three or nine months ended September 30, 2017.
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, 2017
 
September 30, 2016
 
Income (Numerator)
 
Weighted
Average Units
(Denominator)
 
Per Unit
 
Income
(Numerator)
 
Weighted
Average Units
(Denominator)
 
Per Unit
Net income - net of noncontrolling interest - consolidated joint ventures
$
61,084

 
 
 
 
 
$
55,677

 
 
 
 
Less: Preferred unit distributions
(118
)
 
 
 
 
 
(118
)
 
 
 
 
Net income available to common unitholders - basic
$
60,966

 
150,339

 
$
0.41

 
$
55,559

 
149,751

 
$
0.37

Dilutive units for long-term compensation plans

 
785

 
 
 

 
892

 
 
Net income available to common unitholders - diluted
$
60,966

 
151,124

 
$
0.40

 
$
55,559

 
150,643

 
$
0.37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended
 
For the Nine Months Ended
 
September 30, 2017
 
September 30, 2016
 
Income
(Numerator)
 
Weighted
Average Units
(Denominator)
 
Per Unit
 
Income
(Numerator)
 
Weighted
Average Units
(Denominator)
 
Per Unit
Net income - net of noncontrolling interest - consolidated joint ventures
$
158,026

 
 
 
 
 
$
165,684

 
 
 
 
Less: Preferred unit distributions
(354
)
 
 
 
 
 
(354
)
 
 
 
 
Net income available to common unitholders - basic
157,672

 
150,206

 
$
1.05

 
165,330

 
149,659

 
$
1.10

Dilutive units for long-term compensation plans

 
752

 
 
 

 
667

 
 
Net income available to common unitholders - diluted
$
157,672

 
150,958

 
$
1.04

 
$
165,330

 
150,326

 
$
1.10


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. There were no anti-dilutive options excluded from the computation of diluted income per common unit for the three and nine months ended September 30, 2017 as compared to 160,000 and 762,000, respectively, for the same periods in 2016.
During the three and nine months ended September 30, 2017, 79,000 and 167,000 common units, respectively, were issued upon exercise of options. During the year ended December 31, 2016, 369,000 common units were issued upon the exercise of options.

18


Share Repurchase
The Company’s Board of Trustees has authorized a share repurchase plan under which the Company may purchase up to $250 million of the Company’s outstanding common units through September 28, 2019. Purchases made pursuant to the program may 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. There were no purchases under the plan during the three or nine months ended September 30, 2017.
Note 4: Accumulated Other Comprehensive Loss
The following table sets forth the components of Accumulated Other Comprehensive Loss (in thousands):
 
 
As of and for the nine months ended September 30,
 
 
2017
 
2016
Foreign Currency Translation:
 
 
 
 
     Beginning balance
 
$
(56,767
)
 
$
(22,023
)
     Translation adjustment
 
16,314

 
(23,003
)
     Ending balance
 
(40,453
)
 
(45,026
)
 
 
 
 
 
Derivative Instruments:
 
 
 
 
     Beginning balance
 
(455
)
 
(865
)
     Unrealized gain (loss)
 
(25
)
 
(1,955
)
     Reclassification adjustment (1)
 
391

 
823

     Ending balance
 
(89
)
 
(1,997
)
Total accumulated other comprehensive loss
 
(40,542
)
 
(47,023
)
Less: portion included in noncontrolling interest – operating partnership
 
801

 
951

Total accumulated other comprehensive loss included in shareholders' equity/owners' equity
 
$
(39,741
)
 
$
(46,072
)

(1)
Amounts reclassified out of Accumulated Other Comprehensive Loss/General & Limited Partner's Equity into contractual interest expense.
Note 5: Real Estate
Information on the operating properties and land parcels the Company acquired during the three and nine months ended September 30, 2017 is as follows:
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
 
Number of Buildings
 
Acres of Developable Land
 
Leaseable Square Feet
 
Purchase Price (in thousands)
 
Number of Buildings
 
Acres of Developable Land
 
Leaseable Square Feet
 
Purchase Price (in thousands)
Carolinas/Richmond

 

 

 
$

 

 
11

 

 
$
1,242

Lehigh/Central PA

 

 

 

 

 
95

 

 
17,798

United Kingdom

 

 

 

 

 
35

 

 
12,550

Other:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Arizona

 

 

 

 

 
6

 

 
1,327

     Atlanta

 

 

 

 

 
80

 

 
2,867

     DC Metro

 

 

 

 

 
10

 

 
504

     New Jersey
2

 

 
205,116

 
25,599

 
2

 
17

 
205,116

 
29,301

     Southern California
1

 

 
149,275

 
16,650

 
2

 

 
249,855

 
35,760

 
3

 

 
354,391

 
$
42,249

 
4

 
254

 
454,971

 
$
101,349


19


Information on the operating properties and land parcels the Company sold or conveyed during the three and nine months ended September 30, 2017 is as follows:
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
 
Number of Buildings
 
Acres of Developable Land
 
Leaseable Square Feet
 
Gross Proceeds (in thousands)
 
Number of Buildings
 
Acres of Developable Land
 
Leaseable Square Feet
 
Gross Proceeds (in thousands)
Chicago/Minneapolis
2

 

 
104,994

 
$
5,817

 
3

 

 
136,110

 
$
8,917

Florida

 
5

 

 
10,620

 

 
16

 

 
13,256

Houston

 
19

 

 
2,275

 

 
26

 

 
4,270

Philadelphia

 

 

 

 

 
2

 

 
6,904

Southeastern PA
1

 

 
28,495

 
2,765

 
3

 
3

 
123,908

 
11,815

Other

 

 

 

 

 
6

 

 
3,739

 
3

 
24

 
133,489

 
$
21,477

 
6

 
53

 
260,018

 
$
48,901


During the three months ended September 30, 2017, a contingency related to a 2015 portfolio sale was settled and the Company recognized a deferred gain in the accompanying statements of comprehensive income in the amount of $14.3 million.

Pursuant to a purchase option contained in its lease agreement, a tenant exercised its option to purchase, for an aggregate purchase price of $249.0 million, two industrial buildings totaling 1.7 million square feet and 44 acres of land held for development with a total carrying value of $176.4 million. These properties and land are located in the Company's Lehigh/Central PA reportable segment. As of September 30, 2017 these assets and liabilities were classified as held for sale on the Company's consolidated balance sheet.

Additionally, the Company classified 9 acres of land held for development with a total carrying value of $1.1 million as assets held for sale due to an anticipated condemnation conveyance. The disposition is anticipated to occur in 2018. This land is located in the Company's Chicago-Minneapolis reportable segment.
Note 6: 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. During the nine months ended September 30, 2017, the Company realigned its reportable segments as follows:
Carolinas/Richmond;
Chicago/Minneapolis;
Florida;
Houston;
Lehigh/Central PA;
Philadelphia;
Southeastern PA; and
United Kingdom.
Certain other segments are aggregated into an "Other" category which includes the reportable segments: Arizona; Atlanta; Cincinnati/Columbus/Indianapolis; Dallas; DC Metro; New Jersey; and Southern California.
Comparative prior periods have been restated to reflect current segment disclosures.
The Company evaluates the performance of its reportable segments based on segment net operating income (“SNOI”). SNOI is defined as net operating income (rental revenue and operating expense reimbursements less rental property and real estate tax expenses) less 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.

20


The operating information by reportable segment is as follows (in thousands):
 
 
 
Three Months
 
Nine Months
 
 
 
Ended September 30,
 
Ended September 30,
 
 
 
2017
 
2016
 
2017
 
2016
Operating revenue
 
 
 
 
 
 
 
 
 
Carolinas/Richmond
 
$
18,910

 
$
17,292

 
$
55,192

 
$
49,226

 
Chicago/Minneapolis
 
16,147