Fitch Affirms Liberty Property Trust IDR at 'BBB+'; Outlook Stable.

NEW YORK -- Fitch Ratings has affirmed the following ratings for Liberty Property Trust (NYSE:LRY):

Liberty Property Trust

--Issuer Default Rating (IDR) at 'BBB+'.

Liberty Property Limited Partnership

--IDR at 'BBB+';

--Medium-term notes at 'BBB+';

--Senior unsecured notes at 'BBB+';

--Preferred operating units at 'BBB'.

The Rating Outlook is Stable.

Fitch's rating affirmations evidence LRY's moderate leverage, solid unencumbered asset and net operating income coverage, and suitable coverage of fixed charges.

Leverage remains appropriate for LRY's IDR, although it has increased over the past year. As of Dec. 31, 2007, debt to undepreciated book capital was 48.3%, compared to 43.1% as of Dec. 31, 2006. Including the effects of LRY's preferred operating units, leverage would be 53.1% and 47.1% as of Dec. 31, 2007 and 2006, respectively. Despite this increase in leverage, LRY's risk-adjusted capital ratio remains above 1.0 times (x) at a 'BBB' stress level.

The management team has demonstrated prudent balance sheet management, increasing the size of the unencumbered pool every year since 2003 and having total unencumbered real estate and total asset coverage of 2.0x and 2.3x, respectively, as of Dec. 31, 2007.

LRY has financial flexibility with demonstrated access to the capital markets during the past 12 months, and the company has approximately 22% of availability on its $600 million unsecured credit facility as of Dec. 31, 2007.

Also supporting the ratings are LRY's manageable lease expiration and debt maturity schedules. LRY has no more than 14% of its net rent expiring in any year until 2012, and, excluding the company's maturity of its revolving credit facility in 2010, has no more than 12% of it debt maturing in any given year.

Coverage metrics also remain appropriate for the rating category; however, they have been declining since 2003. For the year ended Dec. 31, 2007 fixed charge coverage was 1.8x compared to 2.0x for the same period a year ago. Placing pressure on this coverage metric has been an increase in LRY's tenant improvement, leasing transaction and non-reimbursed capital expenditure costs.

Recent leverage metrics are somewhat misleading for LRY given that the Comcast Center, a 1.25 million square foot property under development, is accounted for on-balance sheet. The $495 million development, which has been funded almost entirely with debt, will be contributed to a joint venture in the first half of 2008 upon completion, at which time the asset value and debt associated with the development will be transferred off balance sheet.

As of Dec. 31, 2007, excluding the effects of the Comcast Center on LRY's credit metrics, debt to undepreciated book capital would decline to 45.4% from 48.3%, and debt plus preferred operating units would decline to 50.6% from 53.1%, levels slightly elevated from a year ago, but still supportive of the company's 'BBB+' IDR.

Same-store net operating income performance was solid in the past year, recording growth in 2007 of 2.3% (GAAP basis) and 3.1% (cash basis), although this growth slowed meaningfully during 4Q 2007 and is expected to be flat in 2008. LRY has maintained its same-store portfolio occupancy rate above 91% since the beginning of 2006.

Offsetting factors do exist. LRY's adjusted funds from operation (AFFO) payout ratio has exceeded 100% for the past four years and there appear to be few near-term catalysts to reduce this ratio meaningfully, particularly in light of limited projected same store NOI growth in 2008. LRY also engages in speculative development, in low barrier-to-entry markets, which may begin to put a strain on the company's cash flow and liquidity should leasing velocity moderate during a weaker economic period.

Additionally, although LRY has a presence in several markets, a large percentage of its wholly-owned rental revenue is derived from the Pennsylvania/New Jersey region, accounting for 47.5% of annual net rent. One mitigant to this geographic concentration is the wholly owned rent derived by property type across the company's portfolio, which is relatively evenly split between office (57.4%) and industrial (42.6%). In addition, LRY's long-term presence in, and local knowledge of, markets comprising a large portion of the company's portfolio, offsets some of the geographic concentration.

Headquartered in Malvern, PA, LRY is a $5.9 billion (total undepreciated book capital as of Dec. 31, 2007) owner, manager and developer of suburban office and industrial properties located predominantly throughout the Mid-Atlantic, Southeastern and Midwestern states. The portfolio consists of approximately 73 million square feet and includes more than 740 properties.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.