An update has come out today on Liberty Property Trust (LRY), in which Zacks real estate investment trust (REIT) analyst Greg Sukenik is restating his Sell rating on the company.  We excerpted the following details:

'Third quarter funds from operations (FFO) was $0.01 above our estimates, as expenses were slightly lower than expected. LRY recently completed the $900+ million purchase of Republic Property Trust, an office REIT with assets in the D.C. area. Liberty paid a steep price to get into D.C., which is one of the best office markets in the country although, due to the high price, the acquisition will prove dilutive over the next several quarters.

'At 12.2x our 2007 estimates, Liberty is trading at a discount to pure play office and industrial peers. Office REITs in the Zacks coverage universe are trading at 16.9x 2007 FFO estimates, while industrial-based REITs are trading at 17.7x 2007 estimates. Shares have dropped about 22% over the past six months, which we attribute to a general REIT sell-off.

'While the current valuation is compelling for a Buy argument, Liberty only has marginal growth prospects in 2007 and 2008. We still rate LRY a Sell despite a low comparative valuation. We expect rental rates to remain flat through 2008, as the company has assets in office markets that still have high vacancies. The company has a large development pipeline that is only 41% pre-leased, which poses a real risk if the economy softens in 2008.

'The company is forecasting little to no FFO growth in 2008 as rental rates increases will be flat or possibly negative. LRY has a large concentration of assets in low barrier, slower growth markets where new supply can be added quickly. We are also wary of the price paid for RPB and think the company might have overpaid to get into Washington D.C. We are projecting a modest 1% FFO per share growth in 2007, and almost none in 2008, well below our estimates for office and industrial peers. We are setting our price target at 10.5x 2007 FFO estimates or $33.00 per share.'