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S&P Lowers Outlook on Liberty Property Trust (LPT) to Stable; Sees 'Persistently Difficult' Suburban Office Market Conditions

December 17, 2014 3:38 PM EST

Standard & Poor's Ratings Services today revised its outlook on Liberty Property Trust (NYSE: LPT) to stable from positive. We also affirmed the ratings, including the 'BBB' corporate credit rating on the company and 'BBB' issue-level rating on its senior unsecured notes.

"The outlook revision reflects our view that persistently difficult conditions in the suburban office market, along with increased development spending over the next 12 months, will delay improvement to key credit metrics," said credit analyst Michael Souers. "Our 'BBB' corporate credit rating on Liberty Property continues to reflect Standard & Poor's assessment of the company's business risk profile as "satisfactory" and financial risk profile as "intermediate"."

The outlook is stable. We expect improving performance trends in Liberty's industrial property business over the next 12 months, but expect difficult conditions in the company's suburban office markets to persist.

Downside scenario

We see limited downside risk to the ratings, unless development and acquisition activity accelerates significantly quicker than we anticipate, pushing debt to EBITDA to above 7.5x or FCC to below 2.1x on a sustained basis.

Upside scenario

We will continue to assess the company's overall growth strategy, financial policies, and operating performance prospects. With further demonstration of success in its portfolio repositioning efforts, and improvement of key credit metrics--including FCC sustainably in excess of 3.1x and debt to debt plus equity (undepreciated basis) of less than 40%--we could raise the rating. A successful portfolio repositioning could contribute to a favorable comparable rating analysis compared with its peers.



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