e10vq

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, 2005


o		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		(I.R.S. Employer
of incorporation or organization)		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 ü NO

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ü NO

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes NO ü

On November 7, 2005, 88,242,496 Common Shares of Beneficial Interest, par value $.001 per share, of Liberty Property Trust were outstanding.

CONDENSED CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST
(In thousands, except share amounts)


	September 30, 2005			December 31, 2004
	(Unaudited)
ASSETS
Real estate:
Land and land improvements	$	637,864		$	625,035
Building and improvements		3,742,060			3,629,508
Less accumulated depreciation		(759,974	)		(695,410	)


Operating real estate		3,619,950			3,559,133

Development in progress		326,219			81,099
Land held for development		147,462			171,122


Net real estate		4,093,631			3,811,354

Cash and cash equivalents		43,209			33,667
Restricted cash		21,799			34,626
Accounts receivable		18,978			21,502
Deferred rent receivable		71,675			66,528
Deferred financing and leasing costs, net of accumulated amortization (2005, $108,963; 2004, $91,117)		115,780			107,148
Investments in unconsolidated joint ventures		33,319			24,372
Prepaid expenses and other assets		59,272			63,630


Total assets	$	4,457,663		$	4,162,827


LIABILITIES
Mortgage loans	$	257,765		$	366,171
Unsecured notes		1,755,000			1,455,000
Credit facility		289,000			312,000
Accounts payable		35,643			24,288
Accrued interest		26,739			34,994
Dividend payable		56,160			54,485
Other liabilities		148,126			111,764


Total liabilities		2,568,433			2,358,702

Minority interest		250,686			207,866

SHAREHOLDERS’ EQUITY
Common shares of beneficial interest, $.001 par value, 191,200,000 shares authorized, 87,868,575 (includes 59,100 in treasury) and 85,734,136 (includes 59,100 in treasury) shares issued and outstanding as of September 30, 2005 and December 31, 2004, respectively		87			86
Additional paid-in capital		1,788,730			1,708,573
Accumulated other comprehensive income		12,124			25,105
Unearned compensation		(9,530	)		(6,846	)
Distributions in excess of net income		(151,540	)		(129,332	)
Common shares in treasury, at cost, 59,100 shares as of September 30, 2005 and December 31, 2004		(1,327	)		(1,327	)


Total shareholders’ equity		1,638,544			1,596,259


Total liabilities and shareholders’ equity	$	4,457,663		$	4,162,827

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
(Unaudited and in thousands, except per share amounts)


	Three Months Ended
	September 30, 2005			September 30, 2004
OPERATING REVENUE
Rental	$	120,808		$	114,348
Operating expense reimbursement		51,646			46,678

Total operating revenue		172,454			161,026


OPERATING EXPENSE
Rental property		27,078			24,014
Real estate taxes		17,897			16,919
Utilities		10,998			9,195
General and administrative		9,175			8,529
Depreciation and amortization		37,410			32,957

Total operating expenses		102,558			91,614


Operating income		69,896			69,412

OTHER INCOME (EXPENSE)
Interest and other income		2,165			1,264
Interest expense		(33,317	)		(29,905	)

Total other income (expense)		(31,152	)		(28,641	)


Income before property dispositions, income taxes, minority interest and equity in earnings (loss) of unconsolidated joint ventures		38,744			40,771

Gain on property dispositions		21			128
Income taxes		(796	)		(532	)
Minority interest		(4,710	)		(4,331	)
Equity in earnings (loss) of unconsolidated joint ventures		231			(143	)


Income from continuing operations		33,490			35,893

Discontinued operations, net of minority interest (including net gain on property dispositions of $19,529 and $2,166 for the three months ended September 30, 2005 and 2004)		18,385			3,586


Net income	$	51,875		$	39,479


Earnings per common share
Basic:
Income from continuing operations	$	0.38		$	0.43
Income from discontinued operations		0.21			0.04


Income per common share – basic	$	0.59		$	0.47


Diluted:
Income from continuing operations	$	0.37		$	0.42
Income from discontinued operations		0.21			0.04


Income per common share – diluted	$	0.58		$	0.46


Distributions per common share	$	0.615		$	0.61


Weighted average number of common shares outstanding
Basic		87,443			84,877
Diluted		88,922			86,327

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
(Unaudited and in thousands, except per share amounts)


	Nine Months Ended
	September 30, 2005			September 30, 2004
OPERATING REVENUE
Rental	$	368,929		$	343,461
Operating expense reimbursement		149,307			134,975

Total operating revenue		518,236			478,436


OPERATING EXPENSE
Rental property		81,193			74,464
Real estate taxes		50,716			47,458
Utilities		29,799			25,259
General and administrative		26,861			24,988
Depreciation and amortization		109,136			97,342

Total operating expenses		297,705			269,511


Operating income		220,531			208,925

OTHER INCOME (EXPENSE)
Interest and other income		6,073			4,734
Interest expense		(99,260	)		(89,172	)

Total other income (expense)		(93,187	)		(84,438	)


Income before property dispositions, income taxes, minority interest and equity in earnings (loss) of unconsolidated joint ventures		127,344			124,487

Loss on property dispositions and impairment		(4,908	)		(280	)
Income taxes		(2,241	)		(1,379	)
Minority interest		(13,959	)		(13,407	)
Equity in earnings (loss) of unconsolidated joint ventures		2,433			(673	)


Income from continuing operations		108,669			108,748

Discontinued operations, net of minority interest (including net gain on property dispositions of $33,949 and $4,263 for the nine months ended September 30, 2005 and 2004)		33,364			6,758


Net income	$	142,033		$	115,506


Earnings per common share
Basic:
Income from continuing operations	$	1.26		$	1.29
Income from discontinued operations		0.38			0.08


Income per common share – basic	$	1.64		$	1.37


Diluted:
Income from continuing operations	$	1.23		$	1.27
Income from discontinued operations		0.38			0.08


Income per common share – diluted	$	1.61		$	1.35


Distributions per common share	$	1.835		$	1.82


Weighted average number of common shares outstanding
Basic		86,670			84,260
Diluted		88,128			85,747

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
OF LIBERTY PROPERTY TRUST
(Unaudited and in thousands)


	Nine Months Ended
	September 30, 2005			September 30, 2004
OPERATING ACTIVITIES
Net income	$	142,033		$	115,506
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		110,841			101,165
Amortization of deferred financing costs		3,527			2,928
Equity in earnings (loss) of unconsolidated joint ventures		(2,433	)		673
Distributions from unconsolidated joint ventures		4,544			682
Minority interest in net income		15,304			13,700
Gain on property dispositions		(29,041	)		(3,983	)
Noncash compensation		3,094			1,932
Changes in operating assets and liabilities:
Restricted cash		11,411			(6,511	)
Accounts receivable		2,422			(5,180	)
Deferred rent receivable		(5,147	)		(8,263	)
Prepaid expenses and other assets		(20,132	)		(15,478	)
Accounts payable		11,410			24,480
Accrued interest		(8,255	)		(11,049	)
Other liabilities		37,679			(4,132	)

Net cash provided by operating activities		277,257			206,470


INVESTING ACTIVITIES
Investment in properties		(219,032	)		(166,694	)
Investment in unconsolidated joint ventures		(13,335	)		(5,072	)
Proceeds from disposition of properties/land		147,000			13,780
Investment in development in progress		(167,404	)		(76,298	)
Investment in land held for development		(69,920	)		(22,358	)
Increase in deferred leasing costs		(27,162	)		(22,570	)

Net cash used in investing activities		(349,853	)		(279,212	)


FINANCING ACTIVITIES
Net proceeds from issuance of common shares		68,165			69,485
Net proceeds from the issuance of preferred units		48,686			—
Net proceeds from issuance of unsecured notes		296,424			197,517
Repayments of unsecured notes		—			(100,000	)
Net proceeds from mortgage loans		—			9,525
Repayments of mortgage loans		(126,768	)		(14,051	)
Proceeds from credit facility		461,650			298,056
Repayments on credit facility		(484,650	)		(219,956	)
Increase in deferred financing costs		(139	)		(275	)
Distributions to minority interests		(3,932	)		—
Distributions paid on common shares		(158,308	)		(152,350	)
Distributions paid on units		(15,284	)		(15,410	)

Net cash provided by financing activities		85,844			72,541


Increase (decrease) in cash and cash equivalents		13,248			(201	)
(Decrease) increase related to foreign currency translation		(3,706	)		167
Cash and cash equivalents at beginning of period		33,667			21,809

Cash and cash equivalents at end of period	$	43,209		$	21,775


SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Write-off of fully depreciated property and deferred costs	$	26,429		$	9,188
Acquisition of properties		(23,973	)		(11,305	)
Assumption of mortgage loans		23,973			11,305

See accompanying notes.

Liberty Property Trust

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 30, 2005

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 the Liberty Property Limited Partnership (the “Operating Partnership”) (the Trust, the Operating Partnership and their respective subsidiaries are referred to collectively as the “Company”). The Trust is the sole general partner and also a limited partner of the Operating Partnership, owning 96.2% and 95.9% of the common equity of the Operating Partnership at September 30, 2005 and 2004, respectively. The Company provides leasing, property management, development, acquisition and other tenant-related services for a portfolio of industrial and office properties that are located principally within the Mid-Atlantic, Southeastern and Midwestern United States and the United Kingdom.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Trust and its subsidiaries, including the Operating Partnership, 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 Trust and the Operating Partnership for the year ended December 31, 2004. 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. Certain amounts from prior periods have been reclassified to conform to current period presentation.

Income per Common Share

The following table sets forth the computation of basic and diluted income per common share for the three and nine months ended September 30, 2005 and 2004 (in thousands except per share amounts):


	For the Three Months Ended Sept. 30, 2005						For the Three Months Ended Sept. 30, 2004
			Weighted						Weighted
			Average						Average
	Income		Shares		Per		Income		Shares		Per
	(Numerator)		(Denominator)		Share		(Numerator)		(Denominator)		Share
Basic income from continuing operations
Income from continuing operations	$	33,490		87,443	$	0.38	$	35,893		84,877	$	0.43

Dilutive shares for long-term compensation plans		—		1,479				—		1,450


Diluted income from continuing operations
Income from continuing operations and assumed conversions		33,490		88,922	$	0.37		35,893		86,327	$	0.42


Basic income from discontinued operations
Discontinued operations net of minority interest		18,385		87,443	$	0.21		3,586		84,877	$	0.04

Dilutive shares for long-term compensation plans		—		1,479				—		1,450


Diluted income from discontinued operations
Discontinued operations net of minority interest		18,385		88,922	$	0.21		3,586		86,327	$	0.04


Basic income per common share
Net income		51,875		87,443	$	0.59		39,479		84,877	$	0.47

Dilutive shares for long-term compensation plans		—		1,479				—		1,450


Diluted income per common share
Net income and assumed conversions	$	51,875		88,922	$	0.58	$	39,479		86,327	$	0.46


	For the Nine Months Ended Sept. 30, 2005						For the Nine Months Ended Sept. 30, 2004
			Weighted						Weighted
			Average						Average
	Income		Shares		Per		Income		Shares		Per
	(Numerator)		(Denominator)		Share		(Numerator)		(Denominator)		Share
Basic income from continuing operations
Income from continuing operations	$	108,669		86,670	$	1.26	$	108,748		84,260	$	1.29

Dilutive shares for long-term compensation plans		—		1,458				—		1,487


Diluted income from continuing operations
Income from continuing operations and assumed conversions		108,669		88,128	$	1.23		108,748		85,747	$	1.27


Basic income from discontinued operations
Discontinued operations net of minority interest		33,364		86,670	$	0.38		6,758		84,260	$	0.08

Dilutive shares for long-term compensation plans		—		1,458				—		1,487


Diluted income from discontinued operations
Discontinued operations net of minority interest		33,364		88,128	$	0.38		6,758		85,747	$	0.08


Basic income per common share
Net income		142,033		86,670	$	1.64		115,506		84,260	$	1.37

Dilutive shares for long-term compensation plans		—		1,458				—		1,487


Diluted income per common share
Net income and assumed conversions	$	142,033		88,128	$	1.61	$	115,506		85,747	$	1.35

Stock Based Compensation

At September 30, 2005, the Company had a share-based employee compensation plan and an employee stock purchase plan, together, the “Plans.” Prior to 2003, the Company accounted for the Plans under the recognition and measurement provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Effective January 1, 2003, the Company adopted the fair value recognition provisions of the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” prospectively for all employee option awards granted, modified, or settled after January 1, 2003. Option awards under the Company’s plan vest over three years. Therefore, the cost related to share-based employee compensation included in the determination of net income for 2005 and 2004 is less than that which would have been recognized if the fair value based method had been applied to all option awards since the original effective date of SFAS No. 123. The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all Plans in each period (in thousands, except per share amount).


	Three Months Ended						Nine Months Ended
	Sept. 30, 2005			Sept. 30, 2004			Sept. 30, 2005			Sept. 30, 2004
Net income	$	51,875		$	39,479		$	142,033		$	115,506
Add: Share-based employee compensation expense included in reported net income		193			78			451			198
Deduct: Total share-based employee compensation expense determined under fair value based method for all awards		(193	)		(269	)		(581	)		(857	)


Pro forma net income	$	51,875		$	39,288		$	141,903		$	114,847


Income per common share:
Basic — as reported	$	0.59		$	0.47		$	1.64		$	1.37
Basic — pro forma	$	0.59		$	0.46		$	1.64		$	1.36

Diluted — as reported	$	0.58		$	0.46		$	1.61		$	1.35
Diluted — pro forma	$	0.58		$	0.46		$	1.61		$	1.34

Foreign Operations

The functional currency for the Company’s United Kingdom operation is pounds sterling. The financial statements for the United Kingdom operation are translated into US dollars prior to the consolidation of these financial statements with those of the Company. Gains and losses resulting from this translation are included in accumulated other comprehensive income as a separate component of shareholders’ equity. Other comprehensive loss was $2.6 million for the three months ended September 30, 2005 and $1.1 million for the three months ended September 30, 2004. Other comprehensive loss was $13.0 million for the nine months ended September 30, 2005 and other comprehensive income was $2.0 million for the nine months ended September 30, 2004. Upon sale or upon complete or substantially complete liquidation of a foreign investment, the gain or loss on the sale will include a portion of the cumulative translation adjustments that have been previously recorded in other comprehensive income. The cumulative translation adjustments generally are recognized when funds are repatriated to the United States.

Note 2: Segment Information

The Company operates its portfolio of properties primarily throughout the Mid-Atlantic, Southeastern and Midwestern United States. Additionally, the Company owns certain assets in the United Kingdom. The Company reviews the performance of the portfolio on a geographical basis. As such, the following regions are considered the Company’s reportable segments:


Reportable Segments		Markets
Delaware Valley		Southeastern Pennsylvania; New Jersey
Midwest		Lehigh Valley, Pennsylvania; Michigan; Minnesota; Milwaukee; Chicago
Mid-Atlantic		Maryland; Piedmont Triad, NC; Greenville, SC; Richmond; Virginia Beach
Florida		Jacksonville; Orlando; Boca Raton; Tampa; Texas
United Kingdom		County of Kent

The Company’s reportable segments are distinct business units that are each managed separately in order to concentrate market knowledge within a geographic area. Within these reportable segments, the Company derives its revenues from its two product types: industrial properties and office properties.

The Company evaluates the performance of the reportable segments based on property level operating income, which is calculated as rental revenue and operating expense reimbursement less rental property expenses, real estate taxes and utilities. The accounting policies of the reportable segments are the same as those for the Company on a consolidated basis. The operating information by segment is as follows (in thousands):


For the Three Months Ended September 30, 2005
	Delaware Valley				Midwest
	Southeastern				Lehigh								United
	Pennsylvania		Other		Valley		Other		Mid-Atlantic		Florida		Kingdom		Total
Operating revenue	$	47,525	$	9,957	$	22,779	$	30,875	$	31,532	$	25,240	$	4,546	$	172,454
Rental property expenses, real estate taxes and utilities		14,716		3,579		6,029		11,795		10,215		8,871		768		55,973

Property level operating income	$	32,809	$	6,378	$	16,750	$	19,080	$	21,317	$	16,369	$	3,778	$	116,481


Interest and other income																2,165
Interest expense																(33,317	)
General and administrative																(9,175	)
Depreciation and amortization																(37,410	)

Income before property dispositions, income taxes, minority interest and equity in earnings (loss) of unconsolidated joint ventures																38,744
Gain on property dispositions																21
Income taxes																(796	)
Minority interest																(4,710	)
Equity in earnings (loss) of unconsolidated joint ventures																231
Discontinued operations, net of minority interest																18,385


Net income															$	51,875


For the Three Months Ended September 30, 2004
	Delaware Valley				Midwest
	Southeastern				Lehigh								United
	Pennsylvania		Other		Valley		Other		Mid-Atlantic		Florida		Kingdom		Total
Operating revenue	$	45,934	$	8,725	$	18,699	$	29,492	$	30,298	$	22,827	$	5,051	$	161,026
Rental property expenses, real estate taxes and utilities		14,029		3,025		4,918		10,821		9,338		7,062		935		50,128

Property level operating income	$	31,905	$	5,700	$	13,781	$	18,671	$	20,960	$	15,765	$	4,116	$	110,898


Interest and other income																1,264
Interest expense																(29,905	)
General and administrative																(8,529	)
Depreciation and amortization																(32,957	)

Income before property dispositions, income taxes, minority interest and equity in earnings (loss) of unconsolidated joint ventures																40,771
Gain on property dispositions																128
Income taxes																(532	)
Minority interest																(4,331	)
Equity in earnings (loss) of unconsolidated joint ventures																(143	)
Discontinued operations, net of minority interest																3,586


Net income															$	39,479


For the Nine Months Ended September 30, 2005
	Delaware Valley				Midwest
	Southeastern				Lehigh								United
	Pennsylvania		Other		Valley		Other		Mid-Atlantic		Florida		Kingdom		Total
Operating revenue	$	149,551	$	28,868	$	66,238	$	90,792	$	92,544	$	73,970	$	16,273	$	518,236
Rental property expenses, real estate taxes and utilities		44,100		10,283		17,790		33,703		28,681		23,993		3,158		161,708

Property level operating income	$	105,451	$	18,585	$	48,448	$	57,089	$	63,863	$	49,977	$	13,115	$	356,528


Interest and other income																6,073
Interest expense																(99,260	)
General and administrative																(26,861	)
Depreciation and amortization																(109,136	)

Income before property dispositions, income taxes, minority interest and equity in earnings (loss) of unconsolidated joint ventures																127,344
Loss on property dispositions and impairment																(4,908	)
Income taxes																(2,241	)
Minority interest																(13,959	)
Equity in earnings (loss) of unconsolidated joint ventures																2,433
Discontinued operations, net of minority interest																33,364


Net income															$	142,033


For the Nine Months Ended September 30, 2004
	Delaware Valley				Midwest
	Southeastern				Lehigh								United
	Pennsylvania		Other		Valley		Other		Mid-Atlantic		Florida		Kingdom		Total
Operating revenue	$	140,406	$	25,230	$	55,159	$	87,964	$	87,267	$	67,842	$	14,568	$	478,436
Rental property expenses, real estate taxes and utilities		41,426		8,889		15,816		31,776		25,782		20,608		2,884		147,181

Property level operating income	$	98,980	$	16,341	$	39,343	$	56,188	$	61,485	$	47,234	$	11,684	$	331,255


Interest and other income																4,734
Interest expense																(89,172	)
General and administrative																(24,988	)
Depreciation and amortization																(97,342	)

Income before property dispositions, income taxes, minority interest and equity in earnings (loss) of unconsolidated joint ventures																124,487
Loss on property dispositions																(280	)
Income taxes																(1,379	)
Minority interest																(13,407	)
Equity in earnings (loss) of unconsolidated joint ventures																(673	)
Discontinued operations, net of minority interest																6,758


Net income															$	115,506

Note 3: SFAS No. 144, “Accounting For The Impairment Or Disposal Of Long-Lived Assets”

In accordance with SFAS No. 144, net income and gain/(loss) on the disposition of real estate are reflected in the consolidated statements of operations as discontinued operations. The proceeds from the disposition of properties for the three and nine months ended September 30, 2005 were $58.9 million and $151.9 million, respectively, as compared to $5.6 million, and $11.1 million, respectively, for the same periods in 2004. Below is a summary of the results of operations of the properties disposed of through the respective disposition dates (in thousands):


	Three Months Ended						Nine Months Ended
	Sept. 30, 2005			Sept. 30, 2004			Sept. 30, 2005			Sept. 30, 2004
Revenues	$	507		$	5,034		$	6,070		$	13,157
Operating expenses		(162	)		(1,339	)		(1,525	)		(3,802	)
Interest expense		(531	)		(980	)		(2,239	)		(2,886	)
Depreciation and amortization		(222	)		(1,141	)		(1,546	)		(3,681	)

(Loss) income before minority interest	$	(408	)	$	1,574		$	760		$	2,788

Gain or loss on disposition on sales of land and development properties continues to be reflected as a component of income from continuing operations.

In accordance with SFAS No. 144, during the nine months ended September 30, 2005, the Company recognized $4.7 million of impairment losses on various properties. The Company determined this impairment through a comparison of the aggregate future undiscounted cash flows expected to be generated by the properties to their carrying values.

Note 4: Preferred Units

On August 23, 2005, the Company issued an additional $6.0 million of 6.65% Series F Cumulative Redeemable Preferred Units. The proceeds from this offering were used to pay down the outstanding borrowings under the Company’s unsecured credit facility and for general corporate purposes.

Note 5: Impact of Recently Issued Accounting Standards

In December 2004, the Financial Accounting Standard Board (FASB) issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows (“SFAS No. 123R”). SFAS No. 123R requires the compensation cost relating to share-based payment transactions be recognized in financial statements and be measured based on the fair value of the equity instrument issued. SFAS No. 123R is effective as of the first annual reporting period beginning after June 15, 2005. Awards issued, modified, or settled after the effective date will be measured and recorded in accordance with SFAS No. 123R. Effective January 1, 2003, the company adopted the fair value recognition provisions of Statement No. 123. The Company does not anticipate that adoption of SFAS No. 123R will have a material impact on its results of operations or its financial position.

In June 2005, the FASB ratified its consensus in EITF Issue 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (Issue 04-5). The effective date for Issue 04-5 is June 29, 2005 for all new or modified partnerships and January 1, 2006 for all other partnerships. The adoption of the provisions of Issue 04-5 is not anticipated to have a material impact on the Company’s financial position or results of operations.

CONDENSED CONSOLIDATED BALANCE SHEETS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(In thousands)


	September 30, 2005			December 31, 2004
	(Unaudited)
ASSETS
Real estate:
Land and land improvements	$	637,864		$	625,035
Building and improvements		3,742,060			3,629,508
Less accumulated depreciation		(759,974	)		(695,410	)


Operating real estate		3,619,950			3,559,133

Development in progress		326,219			81,099
Land held for development		147,462			171,122


Net real estate		4,093,631			3,811,354

Cash and cash equivalents		43,209			33,667
Restricted cash		21,799			34,626
Accounts receivable		18,978			21,502
Deferred rent receivable		71,675			66,528
Deferred financing and leasing costs, net of accumulated amortization (2005, $108,963; 2004, $91,117)		115,780			107,148
Investments in unconsolidated joint ventures		33,319			24,372
Prepaid expenses and other assets		59,272			63,630


Total assets	$	4,457,663		$	4,162,827


LIABILITIES
Mortgage loans	$	257,765		$	366,171
Unsecured notes		1,755,000			1,455,000
Credit facility		289,000			312,000
Accounts payable		35,643			24,288
Accrued interest		26,739			34,994
Distribution payable		56,160			54,485
Other liabilities		148,126			111,764


Total liabilities		2,568,433			2,358,702

Minority interest		418			3,980

OWNERS’ EQUITY
General partner’s equity – common units		1,638,545			1,596,259
Limited partners’ equity – preferred units		184,657			135,471
– common units		65,610			68,415

Total owners’ equity		1,888,812			1,800,145


Total liabilities and owners’ equity	$	4,457,663		$	4,162,827

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands, except per unit amounts)


	Three Months Ended
	September 30, 2005			September 30, 2004
OPERATING REVENUE
Rental	$	120,808		$	114,348
Operating expense reimbursement		51,646			46,678

Total operating revenue		172,454			161,026


OPERATING EXPENSE
Rental property		27,078			24,014
Real estate taxes		17,897			16,919
Utilities		10,998			9,195
General and administrative		9,175			8,529
Depreciation and amortization		37,410			32,957

Total operating expenses		102,558			91,614


Operating income		69,896			69,412

OTHER INCOME (EXPENSE)
Interest and other income		2,165			1,264
Interest expense		(33,317	)		(29,905	)

Total other income (expense)		(31,152	)		(28,641	)


Income before property dispositions, income taxes, minority interest and equity in earnings (loss) of unconsolidated joint ventures		38,744			40,771

Gain on property dispositions		21			128
Income taxes		(796	)		(532	)
Minority interest		(15	)		164
Equity in earnings (loss) of unconsolidated joint ventures		231			(143	)


Income from continuing operations		38,185			40,388

Discontinued operations (including net gain on property dispositions of $19,529 and $2,166 for the three months ended September 30, 2005 and 2004)		19,121			3,740


Net income		57,306			44,128

Preferred unit distributions		(3,353	)		(2,960	)


Income available to common unitholders	$	53,953		$	41,168


Earnings per common unit
Basic:
Income from continuing operations	$	0.38		$	0.43
Income from discontinued operations		0.21			0.04


Income per common unit — basic	$	0.59		$	0.47


Diluted:
Income from continuing operations	$	0.37		$	0.42
Income from discontinued operations		0.21			0.04


Income per common unit — diluted	$	0.58		$	0.46


Distributions per common unit	$	0.615		$	0.61


Weighted average number of common units outstanding
Basic		90,961			88,545
Diluted		92,440			89,995

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands, except per unit amounts)


	Nine Months Ended
	September 30, 2005			September 30, 2004
OPERATING REVENUE
Rental	$	368,929		$	343,461
Operating expense reimbursement		149,307			134,975

Total operating revenue		518,236			478,436


OPERATING EXPENSE
Rental property		81,193			74,464
Real estate taxes		50,716			47,458
Utilities		29,799			25,259
General and administrative		26,861			24,988
Depreciation and amortization		109,136			97,342

Total operating expenses		297,705			269,511


Operating income		220,531			208,925

OTHER INCOME (EXPENSE)
Interest and other income		6,073			4,734
Interest expense		(99,260	)		(89,172	)

Total other income (expense)		(93,187	)		(84,438	)


Income before property dispositions, income taxes, minority interest and equity in earnings (loss) of unconsolidated joint ventures		127,344			124,487

Loss on property dispositions and impairment		(4,908	)		(280	)
Income taxes		(2,241	)		(1,379	)
Minority interest		(370	)		461
Equity in earnings (loss) of unconsolidated joint ventures		2,433			(673	)


Income from continuing operations		122,258			122,616

Discontinued operations (including net gain on property dispositions of $33,949 and $4,263 for the nine months ended September 30, 2005 and 2004)		34,709			7,051


Net income		156,967			129,667

Preferred unit distributions		(8,692	)		(9,168	)
Excess of preferred unit redemption over carrying amount		(500	)		—


Income available to common unitholders	$	147,775		$	120,499


Earnings per common unit
Basic:
Income from continuing operations	$	1.26		$	1.29
Income from discontinued operations		0.38			0.08


Income per common unit — basic	$	1.64		$	1.37


Diluted:
Income from continuing operations	$	1.23		$	1.27
Income from discontinued operations		0.38			0.08


Income per common unit — diluted	$	1.61		$	1.35


Distributions per common unit	$	1.835		$	1.82


Weighted average number of common units outstanding
Basic		90,237			87,939
Diluted		91,695			89,426

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands)


	Nine Months Ended
	September 30, 2005			September 30, 2004
OPERATING ACTIVITIES
Net income	$	156,967		$	129,667
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		110,841			101,165
Amortization of deferred financing costs		3,527			2,928
Equity in earnings (loss) of unconsolidated joint ventures		(2,433	)		673
Distributions from unconsolidated joint ventures		4,544			682
Minority interest in net income		370			(461	)
Gain on property dispositions		(29,041	)		(3,983	)
Noncash compensation		3,094			1,932
Changes in operating assets and liabilities:
Restricted cash		11,411			(6,511	)
Accounts receivable		2,422			(5,180	)
Deferred rent receivable		(5,147	)		(8,263	)
Prepaid expenses and other assets		(20,132	)		(15,478	)
Accounts payable		11,410			24,480
Accrued interest		(8,255	)		(11,049	)
Other liabilities		37,679			(4,132	)

Net cash provided by operating activities		277,257			206,470


INVESTING ACTIVITIES
Investment in properties		(219,032	)		(166,694	)
Investment in unconsolidated joint ventures		(13,335	)		(5,072	)
Proceeds from disposition of properties/land		147,000			13,780
Investment in development in progress		(167,404	)		(76,298	)
Investment in land held for development		(69,920	)		(22,358	)
Increase in deferred leasing costs		(27,162	)		(22,570	)

Net cash used in investing activities		(349,853	)		(279,212	)


FINANCING ACTIVITIES
Net proceeds from the issuance of preferred units		48,686			—
Net proceeds from issuance of unsecured notes		296,424			197,517
Repayments of unsecured notes		—			(100,000	)
Net proceeds from mortgage loans		—			9,525
Repayments of mortgage loans		(126,768	)		(14,051	)
Proceeds from credit facility		461,650			298,056
Repayments on credit facility		(484,650	)		(219,956	)
Increase in deferred financing costs		(139	)		(275	)
Capital contributions		68,165			69,485
Distributions to partners		(177,524	)		(167,760	)

Net cash provided by financing activities		85,844			72,541


Increase (decrease) in cash and cash equivalents		13,248			(201	)
(Decrease) increase related to foreign currency translation		(3,706	)		167
Cash and cash equivalents at beginning of period		33,667			21,809

Cash and cash equivalents at end of period	$	43,209		$	21,775


SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Write-off of fully depreciated property and deferred costs	$	26,429		$	9,188
Acquisition of properties		(23,973	)		(11,305	)
Assumption of mortgage loans		23,973			11,305

See accompanying notes.

Liberty Property Limited Partnership

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 30, 2005

Note 1: Organization and Basis of Presentation

Organization

Liberty Property Trust, (the “Trust”), the general partner of Liberty Property Limited Partnership, (the “Operating Partnership”) 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 the Operating Partnership (the Trust, the Operating Partnership and their respective subsidiaries are referred to collectively as, the “Company”). The Trust is the sole general partner and also a limited partner of the Operating Partnership, owning 96.2% and 95.9% of the common equity of the Operating Partnership at September 30, 2005 and 2004, respectively. The Company provides leasing, property management, development, acquisition and other tenant-related services for a portfolio of industrial and office properties that are located principally within the Mid-Atlantic, Southeastern and Midwestern United States and the United Kingdom.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Operating Partnership and its direct and indirect subsidiaries, 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 Trust and the Operating Partnership for the year ended December 31, 2004. 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. Certain amounts from prior periods have been reclassified to conform to current period presentation.

Income per Common Unit

The following table sets forth the computation of basic and diluted income per common unit for the three and nine months ended September 30, 2005 and September 30, 2004 (in thousands, except per unit amounts):


	For the Three Months Ended Sept. 30, 2005							For the Three Months Ended Sept. 30, 2004
				Weighted							Weighted
				Average							Average
	Income			Units		Per		Income			Units		Per
	(Numerator)			(Denominator)		Unit		(Numerator)			(Denominator)		Unit
Income from continuing operations	$	38,185						$	40,388
Less: Preferred unit distributions		(3,353	)						(2,960	)


Basic income from continuing operations
Income from continuing operations available to common unitholders		34,832			90,961	$	0.38		37,428			88,545	$	0.43

Dilutive units for long-term compensation plans		—			1,479				—			1,450


Diluted income from continuing operations
Income from continuing operations available to common unitholders and assumed conversions		34,832			92,440	$	0.37		37,428			89,995	$	0.42


Basic income from discontinued operations
Discontinued operations		19,121			90,961	$	0.21		3,740			88,545	$	0.04

Dilutive units for long-term compensation plans		—			1,479				—			1,450


Diluted income from discontinued operations
Discontinued operations		19,121			92,440	$	0.21		3,740			89,995	$	0.04


Basic income per common unit
Income available to common unitholders		53,953			90,961	$	0.59		41,168			88,545	$	0.47

Dilutive units for long-term compensation plans		—			1,479				—			1,450


Diluted income per common unit
Income available to common unitholders and assumed conversions	$	53,953			92,440	$	0.58	$	41,168			89,995	$	0.46


	For the Nine Months Ended September 30, 2005							For the Nine Months Ended September 30, 2004
				Weighted							Weighted
				Average							Average
	Income			Units		Per		Income			Units		Per
	(Numerator)			(Denominator)		Unit		(Numerator)			(Denominator)		Unit
Income from continuing operations	$	122,258						$	122,616
Less: Preferred unit distributions		(8,692	)						(9,168	)
Excess of preferred unit redemption over carrying amount		(500	)						—


Basic income from continuing operations
Income from continuing operations available to common unitholders		113,066			90,237	$	1.26		113,448			87,939	$	1.29

Dilutive units for long-term compensation plans		—			1,458				—			1,487


Diluted income from continuing operations
Income from continuing operations available to common unitholders and assumed conversions		113,066			91,695	$	1.23		113,448			89,426	$	1.27


Basic income from discontinued operations
Discontinued operations		34,709			90,237	$	0.38		7,051			87,939	$	0.08

Dilutive units for long-term compensation plans		—			1,458				—			1,487


Diluted income from discontinued operations
Discontinued operations		34,709			91,695	$	0.38		7,051			89,426	$	0.08


Basic income per common unit
Income available to common unitholders		147,775			90,237	$	1.64		120,499			87,939	$	1.37

Dilutive units for long-term compensation plans		—			1,458				—			1,487


Diluted income per common unit
Income available to common unitholders and assumed conversions	$	147,775			91,695	$	1.61	$	120,499			89,426	$	1.35

Foreign Operations

The functional currency for the Company’s United Kingdom operation is pounds sterling. The financial statements for the United Kingdom operation are translated into US dollars prior to the consolidation of these financial statements with those of the Company. Gains and losses resulting from this translation are included in accumulated other comprehensive income as a component of owners’ equity. Other comprehensive loss was $2.6 million for the three months ended September 30, 2005 and $1.1 million for the three months ended September 30, 2004. Other comprehensive loss was $13.0 million for the nine months ended September 30, 2005 and other comprehensive income was $2.0 million for the nine months ended September 30, 2004. Upon sale or upon complete or substantially complete liquidation of a foreign investment, the gain or loss on the sale will include a portion of the cumulative translation adjustments that have been previously recorded in other comprehensive income. The cumulative translation adjustments generally are recognized when funds are repatriated to the United States.

Note 2: Segment Information


Reportable Segments		Markets
Delaware Valley		Southeastern Pennsylvania; New Jersey
Midwest		Lehigh Valley, Pennsylvania; Michigan; Minnesota; Milwaukee; Chicago
Mid-Atlantic		Maryland; Piedmont Triad, NC; Greenville, SC; Richmond; Virginia Beach
Florida		Jacksonville; Orlando; Boca Raton; Tampa; Texas
United Kingdom		County of Kent


For the Three Months Ended September 30, 2005
	Delaware Valley				Midwest
	Southeastern				Lehigh								United
	Pennsylvania		Other		Valley		Other		Mid-Atlantic		Florida		Kingdom		Total
Operating revenue	$	47,525	$	9,957	$	22,779	$	30,875	$	31,532	$	25,240	$	4,546	$	172,454
Rental property expenses, real estate taxes and utilities		14,716		3,579		6,029		11,795		10,215		8,871		768		55,973

Property level operating income	$	32,809	$	6,378	$	16,750	$	19,080	$	21,317	$	16,369	$	3,778	$	116,481


Interest and other income																2,165
Interest expense																(33,317	)
General and administrative																(9,175	)
Depreciation and amortization																(37,410	)

Income before property dispositions, income taxes, minority interest and equity in earnings (loss) of unconsolidated joint ventures																38,744
Gain on property dispositions																21
Income taxes																(796	)
Minority interest																(15	)
Equity in earnings (loss) of unconsolidated joint ventures																231
Discontinued operations																19,121
Preferred unit distributions																(3,353	)


Income available to common unitholders															$	53,953


For the Three Months Ended September 30, 2004
	Delaware Valley				Midwest
	Southeastern				Lehigh								United
	Pennsylvania		Other		Valley		Other		Mid-Atlantic		Florida		Kingdom		Total

Operating revenue	$	45,934	$	8,725	$	18,699	$	29,492	$	30,298	$	22,827	$	5,051	$	161,026
Rental property expenses, real estate taxes and utilities		14,029		3,025		4,918		10,821		9,338		7,062		935		50,128

Property level operating income	$	31,905	$	5,700	$	13,781	$	18,671	$	20,960	$	15,765	$	4,116	$	110,898


Interest and other income																1,264
Interest expense																(29,905	)
General and administrative																(8,529	)
Depreciation and amortization																(32,957)

Income before property dispositions, income taxes, minority interest and equity in earnings (loss) of unconsolidated joint ventures																40,771
Gain on property dispositions																128
Income taxes																(532	)
Minority interest																164
Equity in earnings (loss) of unconsolidated joint ventures																(143	)
Discontinued operations																3,740
Preferred unit distributions																(2,960	)


Income available to common unitholders															$	41,168


For the Nine Months Ended September 30, 2005
	Delaware Valley				Midwest
	Southeastern				Lehigh								United
	Pennsylvania		Other		Valley		Other		Mid-Atlantic		Florida		Kingdom		Total
Operating revenue	$	149,551	$	28,868	$	66,238	$	90,792	$	92,544	$	73,970	$	16,273	$	518,236
Rental property expenses, real estate taxes and utilities		44,100		10,283		17,790		33,703		28,681		23,993		3,158		161,708

Property level operating income	$	105,451	$	18,585	$	48,448	$	57,089	$	63,863	$	49,977	$	13,115	$	356,528


Interest and other income																6,073
Interest expense																(99,260	)
General and administrative																(26,861	)
Depreciation and amortization																(109,136	)

Income before property dispositions, income taxes, minority interest and equity in earnings (loss) of unconsolidated joint ventures																127,344
Loss on property dispositions and impairment																(4,908	)
Income taxes																(2,241	)
Minority interest																(370	)
Equity in earnings (loss) of unconsolidated joint ventures																2,433
Discontinued operations																34,709
Preferred unit distributions																(8,692	)
Excess of preferred unit redemption over carrying amount																(500	)


Income available to common unitholders															$	147,775


For the Nine Months Ended September 30, 2004
	Delaware Valley				Midwest
	Southeastern				Lehigh								United
	Pennsylvania		Other		Valley		Other		Mid-Atlantic		Florida		Kingdom		Total
Operating revenue	$	140,406	$	25,230	$	55,159	$	87,964	$	87,267	$	67,842	$	14,568	$	478,436
Rental property expenses, real estate taxes and utilities		41,426		8,889		15,816		31,776		25,782		20,608		2,884		147,181

Property level operating income	$	98,980	$	16,341	$	39,343	$	56,188	$	61,485	$	47,234	$	11,684	$	331,255


Interest and other income																4,734
Interest expense																(89,172	)
General and administrative																(24,988	)
Depreciation and amortization																(97,342	)

Income before property dispositions, income taxes, minority interest and equity in earnings (loss) of unconsolidated joint ventures																124,487
Loss on property dispositions																(280	)
Income taxes																(1,379	)
Minority interest																461
Equity in earnings (loss) of unconsolidated joint ventures																(673	)
Discontinued operations																7,051
Preferred unit distributions																(9,168	)


Income available to common unitholders															$	120,499

Note 3: SFAS No. 144, “Accounting For The Impairment Or Disposal Of Long-Lived Assets”

In accordance with SFAS No. 144, net income and gain/(loss) on the disposition of real estate are reflected in the consolidated statements of operations as discontinued operations. The proceeds from the disposition of properties for the three and nine months ended September 30, 2005 were $58.9 million and $151.9 million, respectively, as compared to $5.6 million and $11.1 million, respectively, for the same periods in 2004. Below is a summary of the results of operations of the properties disposed of through the respective disposition dates (in thousands):


	Three Months Ended						Nine Months Ended
	Sept. 30, 2005			Sept. 30, 2004			Sept. 30, 2005			Sept. 30, 2004
Revenues	$	507		$	5,034		$	6,070		$	13,157
Operating expenses		(162	)		(1,339	)		(1,525	)		(3,802	)
Interest expense		(531	)		(980	)		(2,239	)		(2,886	)
Depreciation and amortization		(222	)		(1,141	)		(1,546	)		(3,681	)

Income before minority interest	$	(408	)	$	1,574		$	760		$	2,788

Gain or loss on disposition on sales of land and development properties continues to be reflected as a component of income from continuing operations.

Note 4: Preferred Units

Note 5: Impact of Recently Issued Accounting Standards

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company has an ownership interest in and operates 440 industrial and 288 office properties located primarily in the Mid-Atlantic, Southeastern and Midwestern United States (the “Properties in Operation”) totaling 62.6 million square feet. In addition, as of September 30, 2005, the Company had 27 properties under development (the “Properties under Development” and, together with the Properties in Operation, the “Properties”) and owned 1,467 acres of land, substantially all of which is zoned for commercial use. Included within the Properties and land above are 27 industrial properties comprising 3.2 million square feet and 268 acres of developable land owned by unconsolidated joint ventures.

The Company focuses on creating value for shareholders and increasing profitability and cash flow. With respect to its Properties in Operation, the Company endeavors to maintain high occupancy levels while increasing rental rates. The Company pursues development opportunities that it believes will create value and yield acceptable returns. The Company also acquires properties that it believes will create long-term value, and disposes of Properties that no longer fit within the Company’s strategic objectives or in situations where it can optimize cash proceeds. The Company’s operating results depend primarily upon income from rental operations and are substantially influenced by rental demand for the Properties in Operation.

In 2005, the Company continued to experience the effects of the generally slow real estate economy that has persisted since 2002. This economy has presented a particularly difficult real estate market for landlords. These circumstances impacted many aspects of the Company’s business.

Revenue from the Properties in Operation, which represents over 95% of the Company’s revenue, was subjected to market conditions characterized by an oversupply of leaseable space and soft demand. These conditions resulted in downward pressure on rental rates and upward pressure on lease transaction costs. In the face of these conditions, the Company successfully leased 5.0 million square feet during the three months ended September 30, 2005 and attained occupancy of 91.9% as of that date, which it believes represents performance that is substantially better than market. The Company believes that these trends for the Properties in Operation (i.e., oversupply of leaseable space, downward pressure on rents, upward pressure on transaction costs), which have persisted in 2003 and 2004, will continue in the aggregate for the remainder of 2005, notwithstanding improvements in some markets. Although rental rates in certain markets are starting to stabilize and the Company expects that there will be selected increases in rents on renewal or replacement leases, the Company believes that rents on renewal or replacement leases for 2006 generally will be less than rents on expiring leases.

Conditions in 2005 for the acquisition of properties continue to be very competitive. During the third quarter of 2005, however, the Company acquired two buildings representing 92,000 square feet and a Total Investment of $12.4 million. From January 1, 2005 through September 30, 2005, the Company acquired 16 buildings representing 2.4 million square feet of operating properties for an aggregate Total Investment of $200.5 million. These acquisitions generally served to increase the Company’s presence or balance the product mix in markets that the Company believes have growth potential. For 2005, the Company believes that the level of property acquisitions will be in the $270 million to $290 million range. For 2006, the Company believes that property acquisitions will be in the $250 million to $325 million range and, similar to 2005, certain of the acquired properties will be either vacant or underleased. The Company considers acquiring vacant or underleased properties where it believes that such properties are attractively priced and will positively contribute to earnings upon lease up and stabilization.

Dispositions of Properties that no longer fit within the Company’s strategic objectives or in situations where the Company can optimize cash proceeds have continued in 2005. During the third quarter of 2005, the Company realized proceeds of $58.9 million from the sale of eight operating properties representing 896,000 square feet and 4.9 acres of land. From January 1, 2005 through September 30, 2005, the Company realized aggregate proceeds of $151.9 million from the sale of 16 operating properties representing 1.6 million square feet and 4.9 acres of land. In addition, during the

three months ended March 31, 2005, an unconsolidated joint venture in which the Company has a 25% interest, sold three properties representing 397,000 square feet for proceeds to the joint venture of $21.1 million. The Company anticipates that dispositions will be in the $290 million to $310 million range for 2005 and will be in the $325 million to $375 million range in 2006. The increase in anticipated levels of dispositions in 2005 compared to previously reported levels is due to further identification by the Company of additional properties that meet the Company’s criteria as property sale candidates.

The Company periodically enters into joint venture relationships in connection with the execution of its real estate operating strategy. The Company is presently pursuing certain joint venture opportunities.

In 2005, the Company continued to pursue development opportunities. During the third quarter of 2005, the Company brought into service three development properties representing 257,000 square feet and a Total Investment of $19.1 million and initiated $120.4 million in real estate development. As of September 30, 2005, the total project cost of the development properties is expected to be $858.7 million. The development properties include the Comcast Center which is a 1.2 million square foot office tower located in Philadelphia’s central business district. During the third quarter, the Company announced that Comcast had leased an additional 338,000 square feet. In conjunction with this expansion, the Company elected to make certain modifications to the tower’s design, most notably the addition of a 56^th occupiable floor. These changes increased the projected costs of the tower to $459.6 million from $437.3 million. Comcast Corporation has signed leases for 873,000 square feet in total in this office tower for a term of 15¹/2 years. The Company believes that in 2005, it will bring into service from its development pipeline properties representing approximately $125 to $150 million of investment in operating real estate. In 2006, the Company will continue to pursue development opportunities and the Company believes that in 2006 it will bring into service from its development pipeline approximately $150 million of investment in operating real estate.

The composition of the Company’s Properties in Operation as of September 30, 2005 and 2004 is as follows (in thousands, except dollars and percentages):


	Net Rent
	Per Square Foot				Total Square Feet				Percent Occupied
	September 30,				September 30,				September 30,
	2005		2004		2005		2004		2005			2004
Industrial-Distribution	$	4.11	$	4.39		29,386		27,782		94.9	%		91.5	%
Industrial-Flex	$	8.62	$	8.75		13,152		13,316		91.9	%		91.1	%
Office	$	14.28	$	14.10		20,050		19,223		87.6	%		90.9	%

	$	8.16	$	8.43		62,588		60,321		91.9	%		91.2	%

Geographic segment data for the three months ended September 30, 2005 and 2004 are included in Note 2 to the Liberty Property Trust and Liberty Property Limited Partnership financial statements.

Forward-Looking Statements

When used throughout this report, the words “believes,” “anticipates,” “hopes” and “expects” and similar expressions are intended to identify forward-looking statements. Such statements indicate that assumptions have been used that are subject to a number of risks and uncertainties that could cause actual financial results or management plans and objectives to differ materially from those projected or expressed herein, including, among others the effect of national and regional economic conditions; rental demand; the Company’s ability to identify and secure additional properties and sites that meet its criteria for acquisition or development; the availability and cost of capital; the effect of prevailing market interest rates; and other risks described from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”). Given these uncertainties, readers are cautioned not to place undue reliance on such statements.

Critical Accounting Policies and Estimates

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 for a discussion of critical accounting policies which include capitalized costs, allowances for doubtful accounts, impairment of real estate and intangibles. During the three months ended September 30, 2005, there were no material changes to these policies.

Results of Operations

The following discussion is based on the consolidated financial statements of the Company. It compares the results of operations of the Company for the three and nine months ended September 30, 2005 with the results of operations of the Company for the three and nine months ended September 30, 2004. As a result of the varying levels of development, acquisition and disposition activities by the Company in 2005 and 2004, the overall operating results of the Company during such periods are not directly comparable. However, certain data, including the Same Store comparison, do lend themselves to direct comparison.

This information should be read in conjunction with the accompanying condensed consolidated financial statements and notes included elsewhere in this report.

Comparison of Three and Nine Months Ended September 30, 2005 to Three and Nine Months Ended September 30, 2004.

The Company’s average gross investment in operating real estate owned for the three months ended September 30, 2005 increased to $4,378.5 million from $4,085.8 million at September 30, 2004 and for the nine months ended September 30, 2005 increased to $4,326.1 million from $4,016.6 million for the nine months ended September 30, 2004. This increase resulted from the increased investment in real estate acquired or developed, partially offset by Property dispositions. This increased investment in operating real estate resulted in increases in rental revenue, rental property operating expenses, real estate taxes, utility costs and depreciation and amortization expense.

Total operating revenue increased to $172.5 million for the three months ended September 30, 2005 from $161.0 million for the three months ended September 30, 2004 and increased to $518.2 million for the nine months ended September 30, 2005 from $478.4 million for the nine months ended September 30, 2004. The $11.5 million increase during the three months ended September 30, 2005 compared to the same period in 2004 was primarily due to the net increase in investment in operating real estate. This increase was partially offset by a decrease in “Termination Fees” which totaled $1.8 million for the three months ended September 30, 2005 as compared to $2.7 million for the same period in 2004. The $39.8 million increase during the nine months ended September 30, 2005 compared to the nine months ended September 30, 2004 was primarily due to the net increase in investment in real estate. “Termination Fees” which totaled $15.6 million for the nine months ended September 30, 2005 as compared to $9.0 million for the nine months ended September 30, 2004 accounted for $6.6 million of the increase. “Termination Fees” are fees that the Company agrees to accept in consideration for permitting certain tenants to terminate their leases prior to the contractual expiration date. Termination Fees are included in rental revenue.

The Company evaluates the performance of the Properties in Operation by reportable segment (see Note 2 to the Company’s financial statements). The following table identifies changes in reportable segments (dollars in thousands):

Property level operating income:



	Three Months Ended									Nine Months Ended
	Sept. 30, 2005		Sept. 30, 2004		% inc (dec)					Sept. 30, 2005		Sept. 30, 2004		% inc (dec)
Delaware Valley
– SE Pennsylvania	$	32,809	$	31,905		2.8	%			$	105,451	$	98,980		6.5	%
– Other		6,378		5,700		11.9	%	(1	)		18,585		16,341		13.7	%	(1	)
Midwest
– Lehigh Valley		16,750		13,781		21.5	%	(2	)		48,448		39,343		23.1	%	(2	)
– Other		19,080		18,671		2.2	%				57,089		56,188		1.6	%
Mid-Atlantic		21,317		20,960		1.7	%				63,863		61,485		3.9	%
Florida		16,369		15,765		3.8	%				49,977		47,234		5.8	%
United Kingdom		3,778		4,116		(8.2	%)	(3	)		13,115		11,684		12.2	%	(4	)


Totals	$	116,481	$	110,898		5.0	%			$	356,528	$	331,255		7.6	%


(1)		The increases for both the three and nine month periods ended September 30, 2005 versus the three and nine months ended September 30, 2004 are primarily due to an increase in occupancy and increased investment in operating real estate for the respective periods.

(2)		The increases for both the three and nine month periods ended September 30, 2005 versus the three and nine months ended September 30, 2004 are due to increased investment in operating real estate for the respective periods.

(3)		The decrease for the three month period ended September 30, 2005 versus the three month period ended September 30, 2004 is primarily due to the decrease in occupancy related to the Termination Fees accepted during the six months ended June 30, 2005.

(4)		The increase for the nine month period ended September 30, 2005 versus the nine month period ended September 30, 2004 is primarily due to Termination Fees accepted during the nine month period ended September 30, 2005 of $1.6 million versus $0 for the same period of 2004.

Property level operating income, exclusive of Termination Fees, for the Same Store properties decreased to $103.4 million for the three months ended September 30, 2005 from $106.8 million for the three months ended September 30, 2004, on a straight line basis (which recognizes rental revenue evenly over the life of the lease) and decreased to $102.1 million for the three months ended September 30, 2005 from $104.4 million for the three months ended September 30, 2004 on a cash basis. These decreases are primarily due to a decrease in occupancy, particularly the occupancy of the office properties, which is the higher rent paying portion of the portfolio.

Property level operating income, exclusive of Termination Fees, for the Same Store properties decreased to $313.5 million for the nine months ended September 30, 2005 from $319.5 million for the nine months ended September 30, 2004 on a straight line basis and decreased to $309.1 million for the nine months ended September 30, 2005 from $311.4 million for the nine months ended September 30, 2004 on a cash basis. These decreases are primarily due to a decrease in occupancy.

Management generally considers the performance of the Same Store properties to be a useful financial performance measure because the results are directly comparable from period to period. Management further believes that the performance comparison should exclude Termination Fees since they are more event specific and are not representative of ordinary performance results. In addition, Same Store property level operating income exclusive of Termination Fees is considered, by management to be a more reliable indicator of the portfolio’s baseline performance. The Same Store properties consist of the 646 Properties totaling approximately 51.3 million square feet owned since January 1, 2004.

Set forth below is a schedule comparing the property level operating income, on a straight line basis and on a cash basis, for the Same Store properties for the three and nine months ended September 30, 2005 and 2004. Same Store property level operating income is a non-GAAP measure and does not represent income before property dispositions, income taxes and minority interest because it does not reflect the consolidated operations of the Company. Investors should review Same Store results, along with Funds from operations (see Liquidity and Capital Resources section), GAAP net income and cash flow from operating activities, investing activities and financing activities when trying to understand the Company’s operating performance. Also, set forth below is a reconciliation of Same Store property level operating income to net income (in thousands).


	Three Months Ended						Nine Months Ended
	Sept. 30, 2005			Sept. 30, 2004			Sept. 30, 2005			Sept. 30, 2004
Same Store:
Rental revenue	$	106,782		$	109,816		$	323,926		$	330,292

Operating expenses:
Rental property expense		35,126			32,352			104,629			97,970
Real estate taxes		15,772			16,216			46,225			46,125
Operating expense recovery		(47,535	)		(45,548	)		(140,437	)		(133,256	)

Unrecovered operating expenses		3,363			3,020			10,417			10,839


Property level operating income		103,419			106,796			313,509			319,453
Less straight line rent		1,307			2,431			4,441			8,034


Cash basis property level operating income	$	102,112		$	104,365		$	309,068		$	311,419


Reconciliation of non-GAAP financial measure:
Property level operating income — Same Store	$	103,419		$	106,796		$	313,509		$	319,453
Property level operating income — properties purchased or developed subsequent to January 1, 2004		11,256			1,387			27,468			2,844
Termination fees		1,806			2,715			15,551			8,958
General and administrative expense		(9,175	)		(8,529	)		(26,861	)		(24,988	)
Depreciation and amortization expense		(37,410	)		(32,957	)		(109,136	)		(97,342	)
Other income (expense)		(31,152	)		(28,641	)		(93,187	)		(84,438	)
Gain (loss) on property dispositions and impairment		21			128			(4,908	)		(280	)
Income taxes		(796	)		(532	)		(2,241	)		(1,379	)
Minority interest		(4,710	)		(4,331	)		(13,959	)		(13,407	)
Equity in earnings (loss) of unconsolidated joint ventures		231			(143	)		2,433			(673	)
Discontinued operations, net of minority interest		18,385			3,586			33,364			6,758


Net income	$	51,875		$	39,479		$	142,033		$	115,506

General and administrative expenses increased to $9.2 million for the three months ended September 30, 2005 from $8.5 million for the three months ended September 30, 2004 and increased to $26.9 million for the nine months ended September 30, 2005 from $25.0 million for the nine months ended September 30, 2004. Increases in salaries related to increases in personnel consistent with the increase in the number of properties and the size of the Company were offset by decreases in cancelled project costs.

Depreciation and amortization increased to $37.4 million for the three months ended September 30, 2005 from $33.0 million for the three months ended September 30, 2004 and increased to $109.1 million for the nine months ended September 20, 2005 from $97.3 million for the nine months ended September 30, 2004. The increases were primarily due to the increase in gross investment in operating real estate during the respective periods and particularly the increased investment in leasing costs, which are amortized over a shorter period than are buildings and improvements.

Interest expense increased to $33.3 million for the three months ended September 30, 2005 from $29.9 million for the three months ended September 30, 2004 and increased to $99.3 million for the nine months ended September 30, 2005 from $89.2 million for the nine months ended September 30, 2004. These increases were due to an increase in the average debt outstanding for the respective periods, which was $2,285.3 million for the three months ended September 30, 2005 as compared to $2,009.8 million for the three months ended September 30, 2004 and $2,239.1 million for the nine months ended September 30, 2005 as compared to $1,954.6 million for the nine months ended September 30, 2004. The effect of the increases in the average debt outstanding was partially offset by decreases in the weighted average interest rates for the periods to 6.53% for the three months ended September 30, 2005 from 6.67% in 2004 and to 6.58% for the nine months ended September 30, 2005 from 6.74% for the nine months ended September 30, 2004.

Costs directly related to the development of rental properties and land being readied for development are capitalized. Capitalized development costs include interest, development-related salaries, property taxes, insurance and other directly identifiable costs incurred during the period of development. Capitalized interest for the three months ended September 30, 2005 was $4.7 million as compared to $3.5 million for the three months ended September 30, 2004 and $12.6 million for the nine months ended September 30, 2005 as compared to $9.7 million for the same period in 2004. Capitalized development costs relating to salaries and benefits represent approximately 1% of the cost of the investment in development properties.

Income from discontinued operations increased to $18.4 million from $3.6 million for the three month period ended September 30, 2005 compared to the three month period ended September 30, 2004 and increased to $33.4 million from $6.8 million for the nine month period ended September 30, 2005 compared to the nine month period ended September 30, 2004. The increase for both comparable periods is due to an increase in the level of property dispositions during the respective periods.

As a result of the foregoing, the Company’s net income increased to $51.9 million for the three months ended September 30, 2005 from $39.5 million for the three months ended September 30, 2004 and increased to $142.0 million for the nine months ended September 30, 2005 from $115.5 million for the nine months ended September 30, 2004.

Liquidity and Capital Resources

As of September 30, 2005, the Company had cash and cash equivalents of $65.0 million, including $21.8 million in restricted cash.

Net cash flow provided by operating activities increased to $277.3 million for the nine months ended September 30, 2005 from $206.5 million for the nine months ended September 30, 2004. This $70.8 million increase was due to increased cash flow from operating properties due to the greater number of properties owned in 2005 compared to 2004 and also due to fluctuations in operating assets and liabilities during the respective periods. Net cash flow provided by operations is the primary source of liquidity to fund distributions to shareholders and for the recurring capital expenditures and leasing transaction costs for the Company’s Properties in Operation.

Net cash used in investing activities increased to $349.9 million for the nine months ended September 30, 2005 from $279.2 million for the nine months ended September 30, 2004. This $70.7 million increase primarily resulted from an increased investment in properties, land held for development, and development in progress compared to 2004, partially offset by an increase in proceeds from the disposition of properties and land.

Net cash provided by financing activities was $85.8 million for the nine months ended September 30, 2005 compared to $72.5 million used for the nine months ended September 30, 2004. This $13.3 million change was primarily due to the private placement of $50.0 million of 6.65% Series F Cumulative Redeemable Preferred Units, partially offset by net activity on the Company’s long term debt. Net cash provided by or used in financing activities includes proceeds from the issuance of equity and debt, net of debt repayments and shareholder distributions. Cash provided by financing activities is a source of capital utilized by the Company to fund investment activities.

The Company funds its development and acquisitions with long-term capital sources including proceeds from the disposition of Properties. For the nine months ended September 30, 2005, a significant portion of these activities were funded through a $450 million Credit Facility (the “$450 million Credit Facility”). The interest rate on borrowings under the credit facility fluctuate based upon ratings from Moody’s Investors Service, Inc. (“Moody’s”), Standard and Poor’s Ratings Group (“S&P”) and Fitch, Inc. (“Fitch”). The current ratings for the Company’s senior unsecured debt are Baa2, BBB and BBB from Moody’s, S&P and Fitch, respectively. At these ratings, the interest rate for borrowings under the $450 million Credit Facility is 70 basis points over LIBOR. The $450 million Credit Facility expires in January 2006, and has a one year extension option. The Company is in the process of negotiating a new credit facility to replace the $450 million Credit Facility upon its expiration.

The Company uses debt financing to lower its overall cost of capital in an attempt to increase the return to shareholders. The Company staggers its debt maturities and maintains debt levels it considers to be prudent. In determining its debt levels, the Company considers various financial measures including the debt to gross assets ratio and the earnings to fixed charge coverage ratio. As of September 30, 2005 the Company’s debt to gross assets ratio was 44.1%, and for the nine months ended September 30, 2005, the earnings to fixed charge coverage ratio was 2.6x. Debt to gross assets equals total long-term debt and borrowings under the $450 million Credit Facility divided by total assets plus accumulated depreciation. Earnings to fixed charges equals income from continuing operations before property dispositions and minority interest, including operating activity from discontinued operations, plus interest expense and depreciation and amortization, divided by interest expense, including capitalized interest, plus distributions on preferred units.

As of September 30, 2005, $257.8 million in mortgage loans and $1,755.0 million in unsecured notes were outstanding with a weighted average interest rate of 6.8%. The interest rates on $1,969.0 million of mortgage loans and unsecured notes are fixed and range from 5.125% to 9.75%. Interest rates on $43.8 million of mortgage loans float with the base rate of the respective lending bank or a municipal bond index. The weighted average remaining term for the mortgage loans and unsecured notes is 5.9 years.

The scheduled maturities and principal amortization of the Company’s mortgage loans, unsecured notes and borrowings under the $450 million Credit Facility and the related weighted average interest rates as of September 30, 2005 are as follows (dollars in thousands):


	MORTGAGES										WEIGHTED
	PRINCIPAL		PRINCIPAL		UNSECURED		CREDIT				AVERAGE
	AMORTIZATION		MATURITIES		NOTES		FACILITY		TOTAL		INTEREST RATE
2005 (3 months)	$	2,129	$	27,929	$	—	$	—	$	30,058		6.76	%
2006		7,360		66,288		100,000		289,000		462,648		5.29	%
2007		6,504		1,553		100,000		—		108,057		7.24	%
2008		5,664		45,330		—		—		50,994		6.62	%
2009		3,110		46,165		270,000		—		319,275		7.78	%
2010		2,120		4,747		200,000		—		206,867		8.41	%
2011		1,713		3,533		250,000		—		255,246		7.26	%
2012		684		32,936		235,000		—		268,620		6.47	%
2014		—		—		200,000		—		200,000		5.65	%
2015		—		—		300,000		—		300,000		5.13	%
2018		—		—		100,000		—		100,000		7.50	%

	$	29,284	$	228,481	$	1,755,000	$	289,000	$	2,301,765		6.52	%

The Company anticipates that it will refinance or retire these maturities through its available source of capital.

General

The Company has continued to focus on the performance of the Same Store portfolio. In addition, the Company has continued to pursue development and acquisition opportunities and the strategic disposition of certain properties. The Company endeavors to maintain high occupancy levels while increasing rental rates.

The expiring square feet and annual net rent by year for the Properties in Operation as of September 30, 2005 are as follows (in thousands):


	Industrial-				Industrial-
	Distribution				Flex				Office				Total
	Square		Annual		Square		Annual		Square		Annual		Square		Annual
	Feet		Net Rent		Feet		Net Rent		Feet		Net Rent		Feet		Net Rent
2005 (3 months)		524	$	2,444		378	$	2,755		476	$	6,177		1,378	$	11,376
2006		3,027		11,053		1,856		16,412		1,496		21,257		6,379		48,722
2007		3,767		16,555		2,141		20,336		2,180		31,231		8,088		68,122
2008		4,691		19,495		2,151		20,179		2,702		40,296		9,544		79,970
2009		3,591		16,899		1,636		15,197		2,864		45,389		8,091		77,485
2010		2,165		10,900		1,471		13,809		2,147		34,448		5,783		59,157
Thereafter		10,124		53,948		2,454		27,211		5,689		98,982		18,267		180,141

TOTAL		27,889	$	131,294		12,087	$	115,899		17,554	$	277,780		57,530	$	524,973

The Company believes that its existing sources of capital will provide sufficient funds to finance its continued development and acquisition activities. The scheduled deliveries of the 6.1 million square feet of Properties under Development as of September 30, 2005 are as follows (dollars in thousands):


	Square Feet
Scheduled	Industrial-		Industrial-						Percent			Total
In-Service Date	Distribution		Flex		Office		Total		Leased			Investment
4th Quarter 2005		1,149,600		45,600		100,000		1,295,200		98.3	%	$	89,737
1st Quarter 2006		607,752		—		102,000		709,752		90.9	%		38,211
2nd Quarter 2006		—		134,400		123,340		257,740		72.7	%		38,412
3rd Quarter 2006		130,000		83,200		187,600		400,800		65.1	%		42,593
4th Quarter 2006		—		48,000		169,770		217,770		22.2	%		35,048
1st Quarter 2007		—		79,600		76,700		156,300		33.9	%		17,627
2nd Quarter 2007		726,000		—		207,338		933,338		—			81,190
3rd Quarter 2007		800,000		—		110,000		910,000		—			56,302
Thereafter		—		—		1,247,845		1,247,845		71.8	%		459,566

TOTAL		3,413,352		390,800		2,324,593		6,128,745		54.9	%	$	858,686

The Company’s existing sources of capital include the public debt and equity markets, proceeds from Property dispositions, equity contributions by joint venture partners and net cash provided from operating activities. Additionally, the Company expects to incur variable rate debt, including borrowings under the $450 million Credit Facility, from time to time.

The Company has an effective S-3 shelf registration statement on file with the SEC (the “Shelf Registration Statement”). As of November 7, 2005, pursuant to the Shelf Registration Statement, the Trust had the capacity to issue up to $586.1 million in equity securities and the Operating Partnership had the capacity to issue up to $806.2 million in debt securities.

Calculation of Funds from Operations

The National Association of Real Estate Investment Trusts (“NAREIT”) has issued a standard definition for Funds from operations (as defined below). The SEC has agreed to the disclosure of this non-GAAP financial measure on a per share basis in its Release No. 34-47226, Conditions for Use of Non-GAAP Financial Measures. The Company believes that the calculation of Funds from operations is helpful to investors and management as it is a measure of the Company’s operating performance that excludes depreciation and amortization and gains and losses from property dispositions. As a result, year over year comparison of Funds from operations reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, providing perspective not immediately apparent from net income. In addition, management believes that Funds from operations provides useful information to the investment community about the Company’s financial performance when compared to other REITs since Funds from operations is generally recognized as the standard for reporting the operating performance of a REIT. Funds from operations available to common shareholders is defined by NAREIT as net income (computed in accordance with generally accepted accounting principles (“GAAP”)), excluding gains (or losses) from

sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Funds from operations available to common shareholders does not represent net income or cash flows from operations as defined by GAAP and does not necessarily indicate that cash flows will be sufficient to fund cash needs. It should not be considered as an alternative to net income as an indicator of the Company’s operating performance or to cash flows as a measure of liquidity.

Funds from operations available to common shareholders also does not represent cash flows generated from operating, investing or financing activities as defined by GAAP. Funds from operations (“FFO”) available to common shareholders for the three and nine months ended September 30, 2005, and 2004 are as follows (in thousands, except per share amounts):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
Basic — Income available to common shareholders	$	51,875		$	39,479		$	142,033		$	115,506
*Basic — income available to common shareholders per weighted average share*	$	.59		$	.47		$	1.64		$	1.37

Adjustments:
Depreciation and amortization of unconsolidated joint ventures		291			567			943			2,011
Depreciation and amortization		36,997			33,411			108,780			98,897
Gain on property dispositions		(19,550	)		(2,294	)		(35,157	)		(3,983	)
Minority interest share in addback for depreciation and amortization and gain on property dispositions		(683	)		(1,305	)		(2,894	)		(4,032	)

Funds from operations available to common shareholders — basic	$	68,930		$	69,858		$	213,705		$	208,399

*Basic Funds from operations available to common shareholders per weighted average share*	$	.79		$	.82		$	2.47		$	2.47

Reconciliation of net income to FFO — diluted:
Diluted — income available to common shareholders	$	51,875		$	39,479		$	142,033		$	115,506
*Diluted — income available to common shareholders per weighted average share*	$	.58		$	.46		$	1.61		$	1.35

Adjustments:
Depreciation and amortization of unconsolidated joint ventures		291			567			943			2,011
Depreciation and amortization		36,997			33,411			108,780			98,897
Gain on property dispositions		(19,550	)		(2,294	)		(35,157	)		(3,983	)
Minority interest less preferred share distributions		2,093			1,689			5,745			4,993

Funds from operations available to common shareholders — diluted	$	71,706		$	72,852		$	222,344		$	217,424

*Diluted Funds from operations available to common shareholders per weighted average share*	$	.78		$	.81		$	2.42		$	2.43

Reconciliation of weighted average shares:
Weighted average common shares — all basic calculations		87,443			84,877			86,670			84,260
Dilutive shares for long term compensation plans		1,479			1,450			1,458			1,487

Diluted shares for net income calculations		88,922			86,327			88,128			85,747
Weighted average common units		3,518			3,668			3,567			3,679

Diluted shares for Funds from operations calculations		92,440			89,995			91,695			89,426

Inflation

Inflation has remained relatively low during the last three years, and as a result, it has not had a significant impact on the Company during this period. The $450 million Credit Facility bears interest at a variable rate; therefore, the amount of interest payable under the $450 million Credit Facility is influenced by changes in short-term interest rates, which tend to be sensitive to inflation. To the extent an increase in inflation would result in increased operating costs, such as in insurance, real estate taxes and utilities, substantially all of the tenants’ leases require the tenants to absorb these costs as part of their rental obligations. In addition, inflation also may have the effect of increasing market rental rates.

Item 3: Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to the Company’s exposure to market risk since its Annual Report on Form 10-K for the year ended December 31, 2004.

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that its disclosure controls and procedures, as of the end of the period covered by this report, are functioning effectively to provide reasonable assurance that information required to be disclosed by the Company in its reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

It should be noted that the design of any system of controls is based in part on certain assumptions about the likelihood of future events. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute assurance, that the objectives of the control system will be met.

Changes in Internal Controls

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2005 that have materially affected or are reasonable likely to materially affect the Company’s internal control over financial reporting.

Part II: Other Information

Item 1.			Legal Proceedings

			None.

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

			On August 23, 2005, the Operating Partnership issued an additional 120,000 6.65% Series F Cumulative Redeemable Preferred Units of Limited Partnership Interest (the Series F “Units”). The aggregate sale price of the Series F Units was $6 million. The Series F Units were sold to an institutional investor in a private placement in reliance on the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. The Series F Units are convertible after ten years (or, under limited circumstances, a shorter period of time), on a one-for-one basis, into the 6.65% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest of the Trust (the “Preferred Shares”), which were authorized for issuance by the Trust in connection with this transaction. The Series F Units have identical rights, preferences and privileges as the Preferred Shares. The Series F Units do not include any mandatory redemption or sinking fund provisions. The holders of the Series F Units have certain rights to cause the Trust to register the Preferred Shares pursuant to the terms of a registration rights agreement entered into in connection with this private placement.

			The net proceeds of the sale of the Units were used to repay the borrowings under the Credit Facility and for general corporate purposes.

			In connection with the sale of the Series F Units, the Operating Partnership amended its Second Restated and Amended Agreement of Limited Partnership, as amended, pursuant to Amendment No. 1 to Sixth Amendment thereto filed as Exhibit 10.1 and filed Articles Supplementary to the Amended and Restated Declaration of Trust of the Trust creating the Series F Preferred Shares. The Articles Supplementary are filed as Exhibit 4.1 to this Report.

Item 3.			Defaults upon Senior Securities

			None.

Item 4.			Submission of Matters to a Vote of Security Holders

			None.

Item 5.			Other Information

			None.

Item 6.			Exhibits

	4.1		Articles Supplementary, as filed with the State Department of Assessments and Taxation of Maryland August 23, 2005. (Incorporated by reference to Exhibit 3(i) to the Current Report on Form 8-K of the Registrants, filed with the Securities and Exchange Commission on August 24, 2005.)

	10.1		Amendment No. 1 to the Sixth Amendment to the Second Amended and Restated Agreement of Limited Partnership of Liberty Property Limited Partnership. (Incorporated by reference to Exhibit 10 to the Current Report on Form 8-K of the Registrants, filed with the Securities and Exchange Commission on August 24, 2005.)

	31.1*		Certifications of the Chief Executive Officer of Liberty Property Trust required by Rule 13a-14(a) under the Securities Exchange Act of 1934.

	31.2*		Certifications of the Chief Financial Officer of Liberty Property Trust required by Rule 13a-14(a) under the Securities Exchange Act of 1934.

	31.3*		Certifications of the Chief Executive Officer of Liberty Property Trust, in its capacity as the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(a) under the Securities Exchange Act of 1934.

	31.4*		Certifications of the Chief Financial Officer of Liberty Property Trust, in its capacity as the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(a) under the Securities Exchange Act of 1934.

	32.1*		Certifications of the Chief Executive Officer of Liberty Property Trust required under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

	32.2*		Certifications of the Chief Financial Officer of Liberty Property Trust required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

	32.3*		Certifications of the Chief Executive Officer of Liberty Property Trust, in its capacity as the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

	32.4*		Certifications of the Chief Financial Officer of Liberty Property Trust, in its capacity as the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)


*		Filed herewith.

EXHIBIT INDEX


EXHIBIT NO.		DESCRIPTION
31.1		Certifications of the Chief Executive Officer of Liberty Property Trust required by Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2		Certifications of the Chief Financial Officer of Liberty Property Trust required by Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.3		Certifications of the Chief Executive Officer of Liberty Property Trust, in its capacity as the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.4		Certifications of the Chief Financial Officer of Liberty Property Trust, in its capacity as the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(a) under the Securities Exchange Act of 1934.

32.1		Certifications of the Chief Executive Officer of Liberty Property Trust required under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

32.2		Certifications of the Chief Financial Officer of Liberty Property Trust required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

32.3		Certifications of the Chief Executive Officer of Liberty Property Trust, in its capacity as the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

32.4		Certifications of the Chief Financial Officer of Liberty Property Trust, in its capacity as the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)


Index		Page
Part I.	Financial Information

Item 1.	Financial Statements (unaudited)

	Condensed consolidated balance sheets of Liberty Property Trust at September 30, 2005 and December 31, 2004		3

	Condensed consolidated statements of operations of Liberty Property Trust for the three months ended September 30, 2005 and September 30, 2004		4

	Condensed consolidated statements of operations of Liberty Property Trust for the nine months ended September 30, 2005 and September 30, 2004		5

	Condensed consolidated statements of cash flows of Liberty Property Trust for the nine months ended September 30, 2005 and September 30, 2004		6

	Notes to condensed consolidated financial statements of Liberty Property Trust		7

	Condensed consolidated balance sheets of Liberty Property Limited Partnership at September 30, 2005 and December 31, 2004		13

	Condensed consolidated statements of operations of Liberty Property Limited Partnership for the three months ended September 30, 2005 and September 30, 2004		14

	Condensed consolidated statements of operations of Liberty Property Limited Partnership for the nine months ended September 30, 2005 and September 30, 2004		15

	Condensed consolidated statements of cash flows of Liberty Property Limited Partnership for the nine months ended September 30, 2005 and September 30, 2004		16

	Notes to condensed consolidated financial statements of Liberty Property Limited Partnership		17

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		30

Item 4.	Controls and Procedures		30

Part II.	Other Information		31

Signatures for Liberty Property Trust			33

Signatures for Liberty Property Limited Partnership			34

Exhibit Index			35

	CERTIFICATIONS OF CEO REQUIRED BY RULE 13A-14(A)
	CERTIFICATIONS OF CFO REQUIRED BY RULE 13A-14(A)
	CERTIFICATIONS OF CEO REQUIRED BY RULE 13A-14(A)
	CERTIFICATIONS OF CFO REQUIRED BY RULE 13A-14(A)
	CERTIFICATIONS OF CEO REQUIRED BY RULE 13A-14(B)
	CERTIFICATIONS OF CFO REQUIRED BY RULE 13A-14(B)
	CERTIFICATIONS OF CEO REQUIRED BY RULE 13A-14(B)
	CERTIFICATIONS OF CFO REQUIRED BY RULE 13A-14(B)


/s/ WILLIAM P. HANKOWSKY				November 7, 2005

William P. Hankowsky				Date
President and Chief Executive Officer

/s/ GEORGE J. ALBURGER, JR.				November 7, 2005

George J. Alburger, Jr.				Date
Executive Vice President and Chief Financial Officer


/s/ WILLIAM P. HANKOWSKY				November 7, 2005

William P. Hankowsky				Date
President and Chief Executive Officer

/s/ GEORGE J. ALBURGER, JR.				November 7, 2005

George J. Alburger, Jr.				Date
Executive Vice President and Chief Financial Officer

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