e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009


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 of incorporation or organization)		(I.R.S. Employer Identification Number)

500 Chesterfield Parkway
Malvern, Pennsylvania		19355

(Address of Principal Executive Offices)		(Zip Code)

Registrants’ Telephone Number, Including Area Code (610) 648-1700

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the registrants were required to file such reports) and (2) have been subject to such filing requirements for the past ninety (90) days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files.)

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

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

Yes o No þ

On May 6, 2009, 105,564,575 Common Shares of Beneficial Interest, par value $0.001 per share, of Liberty Property Trust were outstanding.


Index		Page
Signatures for Liberty Property Limited Partnership			43

Exhibit Index			44
	STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
	CERTIFICATION OF CEO OF LIBERTY PROPERTY TRUST REQUIRED BY RULE 13A-14(A)
	CERTIFICATION OF CFO OF LIBERTY PROPERTY TRUST REQUIRED BY RULE 13A-14(A)
	CERTIFICATION OF CEO OF LIBERTY PROPERTY TRUST, IN ITS CAPACITY AS THE GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(A)
	CERTIFICATION OF CFO OF LIBERTY PROPERTY TRUST, IN ITS CAPACITY AS THE GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(A)
	CERTIFICATION OF CEO OF LIBERTY PROPERTY TRUST REQUIRED BY RULE 13A-14(B)
	CERTIFICATION OF CFO OF LIBERTY PROPERTY TRUST REQUIRED BY RULE 13A-14(B)
	CERTIFICATION OF CEO OF LIBERTY PROPERTY TRUST, IN ITS CAPACITY AS THE GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(B)
	CERTIFICATION OF CFO OF LIBERTY PROPERTY TRUST, IN ITS CAPACITY AS THE GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(B)

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST

(In thousands, except share amounts)


	March 31, 2009			December 31, 2008
	(Unaudited)
ASSETS
Real estate:
Land and land improvements	$	815,353		$	810,486
Building and improvements		4,268,952			4,245,427
Less accumulated depreciation		(1,015,130	)		(979,171	)


Operating real estate		4,069,175			4,076,742

Development in progress		260,520			245,463
Land held for development		201,419			209,551


Net real estate		4,531,114			4,531,756

Cash and cash equivalents		131,009			15,794
Restricted cash		33,072			39,726
Accounts receivable		6,406			12,985
Deferred rent receivable		87,785			84,916
Deferred financing and leasing costs, net of accumulated amortization (2009, $146,617; 2008, $140,206)		135,720			133,664
Investments in and advances to unconsolidated joint ventures		253,073			266,602
Assets held for sale		15,487			49,125
Prepaid expenses and other assets		79,028			82,467


Total assets	$	5,272,694		$	5,217,035


LIABILITIES
Mortgage loans	$	474,869		$	198,560
Unsecured notes		2,093,301			2,131,607
Credit facility		—			260,000
Accounts payable		40,054			32,481
Accrued interest		36,485			36,474
Dividend and distributions payable		51,350			48,858
Other liabilities		172,589			182,549


Total liabilities		2,868,648			2,890,529

EQUITY
Liberty Property Trust shareholders’ equity
Common shares of beneficial interest, $.001 par value, 183,987,000 shares authorized; 105,307,649 (includes 1,249,909 in treasury) and 100,034,404 (includes 1,249,909 in treasury) shares issued and outstanding as of March 31, 2009 and December 31, 2008, respectively		106			101
Additional paid-in capital		2,264,569			2,162,820
Accumulated other comprehensive loss		(6,682	)		(5,378	)
Distributions in excess of net income		(207,276	)		(185,721	)
Common shares in treasury, at cost, 1,249,909 shares as of March 31, 2009 and December 31, 2008		(51,951	)		(51,951	)


Total Liberty Property Trust shareholders’ equity		1,998,766			1,919,871

Noncontrolling interest — operating partnership 4,017,354 and 4,074,967 common units outstanding as of March 31, 2009 and
December 31, 2008, respectively 9,740,000 preferred units outstanding as of March 31, 2009 and December 31, 2008		404,514			405,505
Noncontrolling interest — consolidated joint ventures		766			1,130


Total equity		2,404,046			2,326,506


Total liabilities and equity	$	5,272,694		$	5,217,035

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST

(Unaudited and in thousands, except per share amounts)


	Three Months Ended
	March 31, 2009			March 31, 2008
OPERATING REVENUE
Rental	$	130,780		$	132,899
Operating expense reimbursement		58,440			56,571

Total operating revenue		189,220			189,470


OPERATING EXPENSE
Rental property		39,372			38,905
Real estate taxes		22,446			20,454
General and administrative		15,576			14,037
Depreciation and amortization		43,553			43,063

Total operating expenses		120,947			116,459


Operating income		68,273			73,011

OTHER INCOME (EXPENSE)
Interest and other income		3,106			3,091
Debt extinguishment gain		529			—
Interest expense		(38,429	)		(41,690	)

Total other income (expense)		(34,794	)		(38,599	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures		33,479			34,412
(Loss) gain on property dispositions		(294	)		641
Income taxes		(217	)		(484	)
Equity in earnings of unconsolidated joint ventures		417			377


Income from continuing operations		33,385			34,946

Discontinued operations (including net gain on property dispositions of $199 and $610 for the three months ended March 31, 2009 and 2008, respectively)		457			1,450


Net income		33,842			36,396
Noncontrolling interest — operating partnership		(6,317	)		(6,605	)
Noncontrolling interest — consolidated joint ventures		364			170


Net income available to common shareholders	$	27,889		$	29,961


Earnings per common share
Basic:
Income from continuing operations	$	0.28		$	0.31
Income from discontinued operations		—			0.02


Income per common share — basic	$	0.28		$	0.33


Diluted:
Income from continuing operations	$	0.28		$	0.31
Income from discontinued operations		—			0.02


Income per common share — diluted	$	0.28		$	0.33


Distributions per common share	$	0.475		$	0.625


Weighted average number of common shares outstanding
Basic		100,681			91,779
Diluted		100,960			91,943

Amounts attributable to common shareholders
Income from continuing operations	$	27,449		$	28,574
Discontinued operations		440			1,387

Net income available to common shareholders	$	27,889		$	29,961

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY OF LIBERTY PROPERTY TRUST

(IN THOUSANDS)


	Common					Accumulated									Total Liberty			Noncontrolling			Noncontrolling
	Shares of		Additional			Other			Distributions			Common			Property Trust			Interest –			Interest –
	Beneficial		Paid-In			Comprehensive			in Excess of			Shares Held			Shareholders’			Operating			Consolidated
	Interest		Capital			Loss			Net Income			in Treasury			Equity			Partnership			Joint Ventures			Total Equity
Balance at December 31, 2008, as previously reported	$	101	$	2,199,684		$	(5,378	)	$	(185,721	)	$	(51,951	)	$	1,956,735		$	—		$	—		$	1,956,735
Remeasurement — EITF Topic No. D-98		—		(36,864	)		—			—			—			(36,864	)		36,864			—			—
Reclassification upon the adoption of SFAS No. 160		—		—			—			—			—			—			368,641			1,130			369,771

Balance at December 31, 2008 as presented		101		2,162,820			(5,378	)		(185,721	)		(51,951	)		1,919,871			405,505			1,130			2,326,506
Net proceeds from the issuance of common shares		5		96,319			—			—			—			96,324			—			—			96,324
Net income		—		—			—			27,889			—			27,889			6,317			(364	)		33,842
Distributions		—		—			—			(49,444	)		—			(49,444	)		(7,308	)		—			(56,752	)
Noncash compensation		—		5,430			—			—			—			5,430			—			—			5,430
Foreign currency translation adjustment		—		—			(1,304	)		—			—			(1,304	)		—			—			(1,304	)


Balance at March 31, 2009	$	106	$	2,264,569		$	(6,682	)	$	(207,276	)	$	(51,951	)	$	1,998,766		$	404,514		$	766		$	2,404,046

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS OF LIBERTY PROPERTY TRUST

(Unaudited and in thousands)


	Three Months Ended
	March 31, 2009			March 31, 2008
OPERATING ACTIVITIES
Net income	$	33,842		$	36,396
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		43,491			43,659
Amortization of deferred financing costs		1,182			1,118
Equity in earnings of unconsolidated joint ventures		(416	)		(377	)
Gain on property dispositions		95			(1,251	)
Noncash compensation		7,252			1,994
Changes in operating assets and liabilities:
Restricted cash		6,418			(24,156	)
Accounts receivable		6,357			(2,932	)
Deferred rent receivable		(2,950	)		(4,937	)
Prepaid expenses and other assets		2,542			(9,685	)
Accounts payable		7,634			(2,166	)
Accrued interest		11			(500	)
Other liabilities		(5,230	)		2,159

Net cash provided by operating activities		100,228			39,322


INVESTING ACTIVITIES
Investment in properties		(15,566	)		(14,670	)
Investments in and advances to unconsolidated joint ventures		(125	)		(3,670	)
Distributions from unconsolidated joint ventures		13,848			1,455
Net proceeds from disposition of properties/land		44,353			291,688
Investment in development in progress		(27,771	)		(67,067	)
Investment in land held for development		(7,054	)		(6,102	)
Investment in deferred leasing costs		(5,724	)		(7,385	)

Net cash provided by investing activities		1,961			194,249


FINANCING ACTIVITIES
Net proceeds from issuance of common shares		94,508			12,790
Repayments of unsecured notes		(38,306	)		—
Proceeds from mortgage loans		317,424			—
Repayments of mortgage loans		(41,072	)		(7,084	)
Proceeds from credit facility		33,500			170,400
Repayments on credit facility		(293,500	)		(375,400	)
Increase in deferred financing costs		(4,734	)		—
Distribution paid on common shares		(46,923	)		(57,230	)
Distribution paid on units		(7,342	)		(8,070	)

Net cash provided by (used in) provided by financing activities		13,555			(264,594	)


Net increase (decrease) in cash and cash equivalents		115,744			(31,023	)
Decrease in cash and cash equivalents related to foreign currency translation		(529	)		(42	)
Cash and cash equivalents at beginning of period		15,794			37,989

Cash and cash equivalents at end of period	$	131,009		$	6,924

See accompanying notes.

Liberty Property Trust

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2009

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 Liberty Property Limited Partnership (the “Operating Partnership” and, collectively with the Trust and their consolidated subsidiaries, the “Company”). The Trust is the sole general partner and also a limited partner of the Operating Partnership, owning 96.3% of the common equity of the Operating Partnership at March 31, 2009. The Company provides leasing, property management, development, acquisition and other tenant-related services for a portfolio of industrial and office properties which are located principally within the Mid-Atlantic, Southeastern, Midwestern and Southwestern United States and the United Kingdom. See a description of the Company’s markets in Note 2 to the Company’s financial statements.

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, 2008. 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 the current period presentation.

Income per Common Share

The following table sets forth the computation of basic and diluted income per common share (in thousands except per share amounts):


	For the Three Months Ended March 31, 2009						For the Three Months Ended March 31, 2008
			Weighted						Weighted
			Average						Average
	Income		Shares				Income		Shares
	(Numerator)		(Denominator)		Per Share		(Numerator)		(Denominator)		Per Share
Basic income from continuing operations
Income from continuing operations net of noncontrolling interest	$	27,449		100,681	$	0.28	$	28,574		91,779	$	0.31

Dilutive shares for long-term compensation plans		—		279				—		164


Diluted income from continuing operations
Income from continuing operations net of noncontrolling interest and assumed conversions		27,449		100,960	$	0.28		28,574		91,943	$	0.31


Basic income from discontinued operations
Discontinued operations net of noncontrolling interest		440		100,681	$	—		1,387		91,779	$	0.02

Dilutive shares for long-term compensation plans		—		279				—		164


Diluted income from discontinued operations
Discontinued operations net of noncontrolling interest		440		100,960	$	—		1,387		91,943	$	0.02


	For the Three Months Ended March 31, 2009						For the Three Months Ended March 31, 2008
			Weighted						Weighted
			Average						Average
	Income		Shares				Income		Shares
	(Numerator)		(Denominator)		Per Share		(Numerator)		(Denominator)		Per Share
Basic income per common share
Net income available to common shareholders		27,889		100,681	$	0.28		29,961		91,779	$	0.33

Dilutive shares for long-term compensation plans		—		279				—		164


Diluted income per common share
Net income available to common shareholders and assumed conversions	$	27,889		100,960	$	0.28	$	29,961		91,943	$	0.33

The anti-dilutive options that were excluded from the computation of diluted income per common share for the three months ended March 31, 2009 and 2008 were 3,342,000 and 2,377,000, respectively.

Foreign Currency Translation

The functional currency of the Company’s United Kingdom operations is pounds sterling. The Company translates the financial statements for the United Kingdom operations into US dollars. Gains and losses resulting from this translation do not impact the results of operations and are included in accumulated other comprehensive loss as a separate component of shareholders’ equity. Accumulated other comprehensive loss consists solely of the foreign currency translation adjustments described. Other comprehensive loss for the three months ended March 31, 2009 was $1.3 million as compared to $0.1 million for the same period in 2008. Upon sale or upon complete or substantially complete liquidation of a foreign investment, the gain or loss on the sale will include the cumulative translation adjustments that have been previously recorded in accumulated other comprehensive loss.

SFAS No. 160

In December 2007, the FASB issued SFAS No. 160, “Accounting for Noncontrolling Interests” (“SFAS No. 160”). SFAS No. 160 requires a noncontrolling interest in a subsidiary to be reported as equity and the amount of consolidated net income attributable to the noncontrolling interest is required to be identified in the consolidated financial statements. The Company adopted SFAS No. 160 on January 1, 2009. Along with adopting SFAS No. 160, the Company retroactively adopted the measurement principles detailed in EITF Topic D-98, “Classification and Measurement of Redeemable Securities.” Redeemable noncontrolling interests are presented at the greater of their carrying amount or redemption value at the end of each reporting period.

Note 2: Segment Information

The Company operates its portfolio of properties primarily throughout the Mid-Atlantic, Southeastern, Midwestern and Southwestern 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
Northeast		Southeastern PA; Lehigh/Central PA; New Jersey
Midwest		Minnesota; Milwaukee; Chicago
Mid-Atlantic		Maryland; Carolinas; Richmond; Virginia Beach
South		Jacksonville; Orlando; Boca Raton; Tampa; Texas; Arizona
Philadelphia		Philadelphia; Northern Virginia/Washington, D.C.
United Kingdom		County of Kent; West Midlands

The Company’s reportable segments are distinct business units which 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 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 and real estate taxes. The accounting policies of the reportable segments are the same as those for the Company on a consolidated basis.

FOR THE THREE MONTHS ENDED MARCH 31, 2009


	Northeast
			Lehigh/
	Southeastern		Central										Phila-		United
	PA		PA		New Jersey		Midwest		Mid-atlantic		South		delphia		kingdom		Total
Operating revenue	$	47,366	$	25,162	$	9,369	$	20,990	$	34,823	$	45,674	$	4,735	$	1,101	$	189,220
Rental property expenses and real estate taxes		15,826		7,620		3,692		7,879		10,985		14,406		1,180		230		61,818


Property level operating income	$	31,540	$	17,542	$	5,677	$	13,111	$	23,838	$	31,268	$	3,555	$	871		127,402


Interest and other income		3,106
Debt extinguishment gain		529
Interest expense		(38,429	)
General and administrative		(15,576	)
Depreciation and amortization		(43,553	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures		33,479
Loss on property dispositions		(294	)
Income taxes		(217	)
Equity in earnings of unconsolidated joint ventures		417
Discontinued operations		457


Net income	$	33,842

FOR THE THREE MONTHS ENDED MARCH 31, 2008


	Northeast
			Lehigh/
	Southeastern		Central		New								Phila-		United
	PA		PA		Jersey		Midwest		Mid-atlantic		South		delphia		kingdom		Total
Operating revenue	$	44,127	$	24,209	$	9,085	$	20,188	$	35,258	$	40,171	$	15,388	$	1,044	$	189,470
Rental property expenses and real estate taxes		14,348		6,535		3,197		7,610		10,133		13,152		4,023		361		59,359


Property level operating income	$	29,779	$	17,674	$	5,888	$	12,578	$	25,125	$	27,019	$	11,365	$	683		130,111


Interest and other income		3,091
Interest expense		(41,690	)
General and administrative		(14,037	)
Depreciation and amortization		(43,063	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures		34,412
Gain on property dispositions		641
Income taxes		(484	)
Equity in earnings of unconsolidated joint ventures		377
Discontinued operations		1,450


Net income	$	36,396

Note 3: SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”

dispositions of operating properties with no continuing involvement for the three months ended March 31, 2009 were $34.8 million as compared to $3.4 million for the same period in 2008.

Below is a summary of the results of operations for the properties held for sale and disposed of through the respective disposition dates (in thousands):


	Three Months Ended
	March 31, 2009			March 31, 2008
Revenues	$	1,109		$	4,082
Operating expenses		(457	)		(1,516	)
Interest expense		(254	)		(772	)
Depreciation and amortization		(140	)		(954	)

Income before property dispositions	$	258		$	840

Five properties totaling 152,000 square feet located in the Company’s Northeast segment are considered to be held for sale as of March 31, 2009.

Interest expense is allocated to discontinued operations as permitted under EITF Issue 87-24, “Allocation of Interest to Discontinued Operations,” and such interest expense has been included in computing income from discontinued operations. The allocation of interest expense to discontinued operations was based on the ratio of net assets sold (without continuing involvement) to the sum of total net assets plus consolidated debt.

Asset Impairment

In accordance with SFAS No. 144, during the three months ended March 31, 2009, the Company recognized an impairment loss of $0.7 million. No impairment loss was recognized during the three months ended March 31, 2008. The impairment loss of $0.7 million was related to a portfolio of properties in the Mid-Atlantic segment, a property in the Midwest segment and land in the Northeast segment. For the three months ended March 31, 2009, $89,000 in impairment related to properties sold was included in discontinued operations in the Company’s statement of operations. The Company determined these impairments through a comparison of the aggregate future cash flows (including quoted offer prices) to be generated by the properties to the carrying value of the properties. The Company has evaluated each of the properties and land held for development and has determined that there are no additional valuation adjustments necessary at March 31, 2009.

Note 4: Joint Ventures

The Company has an interest in several unconsolidated joint ventures which are described in its 2008 Annual Report on
Form 10-K. Joint ventures in which the Company has an interest which were either formed or had significant activity during 2008 or 2009 are as follows:

Liberty/Commerz 1701 JFK Boulevard, LP

On April 13, 2006, the Company entered into a joint venture pursuant to which it sold an 80% interest in the equity of Comcast Center, a 1.25 million square foot office tower the Company was developing in Philadelphia, Pennsylvania. The transaction valued the property at $512 million. Upon signing the joint venture agreement and through March 30, 2008, the criteria for sale recognition in accordance with SFAS No. 66, “Accounting for the Sales of Real Estate” (“SFAS No. 66”) had not been met and the transaction was accounted for as a financing arrangement.

On March 31, 2008, a $324 million, ten-year secured permanent financing at a rate of 6.15% for Comcast Center was funded. The proceeds from this financing were used to pay down outstanding borrowings on the Company’s credit facility.

On March 31, 2008, all conditions for sale treatment as outlined in SFAS No. 66 were satisfied and the Company recognized the sale of Comcast Center to an unconsolidated joint venture. Profit on the transaction was deferred until the costs of the project could be reasonably estimated. Profit on the sale was recognized in the fourth quarter of 2008.

As of March 31, 2009, the Company had a $4.0 million receivable from this joint venture. This related party receivable is due to the funding of joint venture development costs and is reflected in investments in and advances to unconsolidated joint ventures in the Company’s consolidated balance sheet.

Note 5: Indebtedness

Mortgage Loans

During the three months ended March 31, 2009, the Company closed on mortgages totaling $317 million bearing interest at an average rate of 7.1%. The mortgages encumber certain of the Company’s operating properties with a net book value of $581.7 million. The net proceeds from these mortgages were used to pay down outstanding borrowings under the Company’s unsecured credit facility and for general corporate purposes.

In total, the Company has mortgage loans with maturities ranging from 2009 to 2017 that are collateralized by and in some instances cross-collateralized by properties with a net book value of $833.3 million.

Unsecured Notes

During the three months ended March 31, 2009, the Company repaid $20 million of 8.125% medium term unsecured notes.

During the three months ended March 31, 2009, the Company purchased $11.4 million of its 7.75% April 2009 senior unsecured notes and $6.9 million of its 8.50% August 2010 senior unsecured notes. These notes were purchased at a $0.5 million discount. The discount is included in net income as a debt extinguishment gain.

Note 6: Noncontrolling interests

Noncontrolling interests in the accompanying financial statements represent the interests of the common and preferred units in Liberty Property Limited Partnership not held by the Trust. In addition, noncontrolling interests include third-party ownership interests in consolidated joint venture investments. Pursuant to the Company’s adoption on January 1, 2009 of SFAS No. 160, which establishes and expands the accounting and reporting standards of minority interests to be recharacterized as noncontrolling interests in a subsidiary and the deconsolidation of a subsidiary, the Company is presenting its noncontrolling interests as equity for all periods presented in these financial statements.

The following details the change in minority interest form December 31, 2008, as reported in the Company’s Annual Report on Form 10-K at December 31, 2008.


				Noncontrolling		Noncontrolling
				interest -		Interest -
	Minority			Operating		Consolidated
	interest			Partnership		Joint Ventures
Balance at December 31, 2008, as previously reported	$	369,771		$	—	$	—
Remeasurement — EITF Topic No. D-98		36,864			—		—
Reclassification upon the adoption of SFAS No. 160		(406,635	)		405,505		1,130


Balance at December 31, 2008 as presented	$	—		$	405,505	$	1,130

Common units

The common units outstanding as of March 31, 2009 have the same economic characteristics as common shares of the Trust. The 4,017,354 common units share proportionately in the net income or loss and in any distributions of the Operating Partnership. The common units of the Operating Partnership not held by the Trust are redeemable at any time at the option of the holder. The Trust as the sole general partner of the Operating Partnership may at its option elect to settle the redemption in cash or through the exchange on a one-for-one basis with unregistered common shares of the Trust. The market value of the 4,017,354 common units based on the closing price of the shares of the Company at March 31, 2009 was $76.1 million.

Preferred units

The Company has outstanding the following Cumulative Redeemable Preferred Units of the Operating Partnership, (the “Preferred Units”):


Date of							Liquidation		Dividend			Redeemable
Issue		Issue	Amount		Units		Preference		Rate			As of		Exchangeable after
			(in 000’s)
	7/28/99	Series B	$	95,000		3,800	$	25		7.45	%		8/31/09	8/31/13 into Series B Cumulative Redeemable Preferred Shares of the Trust

	6/16/05	Series E	$	20,000		400	$	50		7.00	%		6/16/10	6/16/15 into Series E Cumulative Redeemable Preferred Shares of the Trust

	6/30/05	Series F	$	44,000		880	$	50		6.65	%		6/30/10	12/12/15 into Series F Cumulative Redeemable Preferred Shares of the Trust

	8/23/05	Series F	$	6,000		120	$	50		6.65	%		6/30/10	12/12/15 into Series F Cumulative Redeemable Preferred Shares of the Trust

	12/15/06	Series G	$	27,000		540	$	50		6.70	%		12/12/11	12/12/16 into Series G Cumulative Redeemable Preferred Shares of the Trust

	8/21/07	Series H	$	100,000		4,000	$	25		7.40	%		8/21/12	8/21/17 into Series H Cumulative Redeemable Preferred Shares of the Trust

The Preferred Units are callable at the Operating Partnership’s option after a stated period of time and are also redeemable at the holder’s option after a stated period of time. The Trust as the sole general partner of the Operating Partnership may at its option elect to settle the redemption for cash or through the exchange on a one-for-one basis with unregistered preferred shares of the Trust.

Note 7: Continuous Equity Offering

During the three months ended March 31, 2009, the Company sold common shares pursuant to its continuous offering program described in the Company’s Form 10-K for the year ended December 31, 2008. During the three months ended March 31, 2009, the Company sold 4.6 million common shares through this program. The net proceeds from the offering of $91.8 million were used to pay down outstanding borrowings under the Company’s unsecured credit facility and for general corporate purposes.

Note 8: Recently Issued Accounting Standards

SFAS No. 141(R)

In December 2007, the FASB issued SFAS No. 141(R), “Applying the Acquisition Method” (“SFAS No. 141(R)”). This statement changes the accounting for acquisitions specifically eliminating the step acquisition model, changing the recognition of contingent consideration from being recognized when it is probable to being recognized at the time of acquisition, disallowing the capitalization of transaction costs and delays when restructurings related to acquisitions can be recognized. The Company adopted the provisions of SFAS No. 141(R) on January 1, 2009. The adoption of this statement did not have a material effect on the Company’s financial position or results of operations.

FSP EITF 03-6-1

In June 2008, the FASB issued FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” The FSP clarifies that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company adopted the provisions of FSP EITF 03-6-1 on January 1, 2009. The adoption of this statement did not have a material effect on the Company’s calculation of earnings per share.

Note 9: Supplemental Disclosure to Statements of Cash Flows

The following are supplemental disclosures to the statements of cash flows for the three months ended March 31, 2009 and 2008 (amounts in thousands):


Non-cash activity	2009		2008
Write-off of fully depreciated property and deferred costs	$	881	$	1,264
Increase in investment in unconsolidated joint ventures		—		(35,172	)
Disposition of properties/development in progress		—		173,624
Disposition of deferred leasing/financing costs		—		12,526
Reduction of accounts receivable		—		7,854
Reduction of deferred rent receivable		—		6,580
Reduction of prepaid and other assets		—		38,486
Reduction of credit facility		—		(152,960	)
Reduction of other liabilities		—		(50,938	)

Note 10: Subsequent Events

In April 2009, the Company repaid $238.6 million of 7.75% senior unsecured notes.

From April 1, 2009 to May 6, 2009, the Company sold 1.4 million common shares through its continuous offering program. The net proceeds from the offering of $29.9 million were used to pay down outstanding borrowings under the $600 million Credit Facility and for general corporate purposes.

In April 2009, the Company’s Board of Trustees approved the expansion of the Company’s continuous offering program. In additional to the original program, the expansion allows for the sale of an additional $150 million in common shares.

CONDENSED CONSOLIDATED BALANCE SHEETS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP

(In thousands)


	March 31, 2009			December 31, 2008
	(Unaudited)
ASSETS
Real estate:
Land and land improvements	$	815,353		$	810,486
Building and improvements		4,268,952			4,245,427
Less accumulated depreciation		(1,015,130	)		(979,171	)


Operating real estate		4,069,175			4,076,742

Development in progress		260,520			245,463
Land held for development		201,419			209,551


Net real estate		4,531,114			4,531,756

Cash and cash equivalents		131,009			15,794
Restricted cash		33,072			39,726
Accounts receivable		6,406			12,985
Deferred rent receivable		87,785			84,916
Deferred financing and leasing costs, net of accumulated amortization (2009, $146,617; 2008, $140,206)		135,720			133,664
Investments in and advances to unconsolidated joint ventures		253,073			266,602
Assets held for sale		15,487			49,125
Prepaid expenses and other assets		79,028			82,467


Total assets	$	5,272,694		$	5,217,035


LIABILITIES
Mortgage loans	$	474,869		$	198,560
Unsecured notes		2,093,301			2,131,607
Credit facility		—			260,000
Accounts payable		40,054			32,481
Accrued interest		36,485			36,474
Distributions payable		51,350			48,858
Other liabilities		172,589			182,549


Total liabilities		2,868,648			2,890,529

Noncontrolling interest — consolidated joint ventures		766			1,130
Limited partners’ equity — preferred units, 9,740,000 preferred units outstanding as of March 31, 2009 and December 31, 2008		287,959			287,959
— common units, 4,017,354 and 4,074,967 common units outstanding as of March 31, 2009 and December 31, 2008, respectively		116,555			117,546

OWNERS’ EQUITY
General partner’s equity — common units, 105,307,649 and 100,034,404 units outstanding as of March 31, 2009 and December 31, 2008, respectively		1,998,766			1,919,871


Total liabilities and owners’ equity	$	5,272,694		$	5,217,035

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands, except per unit amounts)


	Three Months Ended
	March 31, 2009			March 31, 2008
OPERATING REVENUE
Rental	$	130,780		$	132,899
Operating expense reimbursement		58,440			56,571

Total operating revenue		189,220			189,470


OPERATING EXPENSE
Rental property		39,372			38,905
Real estate taxes		22,446			20,454
General and administrative		15,576			14,037
Depreciation and amortization		43,553			43,063

Total operating expenses		120,947			116,459


Operating income		68,273			73,011

OTHER INCOME (EXPENSE)
Interest and other income		3,106			3,091
Debt extinguishment gain		529			—
Interest expense		(38,429	)		(41,690	)

Total other income (expense)		(34,794	)		(38,599	)

Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures		33,479			34,412
(Loss) gain on property dispositions		(294	)		641
Income taxes		(217	)		(484	)
Equity in earnings of unconsolidated joint ventures		417			377


Income from continuing operations		33,385			34,946

Discontinued operations (including net gain on property dispositions of $199 and $610 for the three months ended March 31, 2009 and 2008, respectively)		457			1,450


Net income		33,842			36,396

Noncontrolling interest — consolidated joint ventures		364			170
Preferred unit distributions		(5,253	)		(5,253	)


Income available to common unitholders	$	28,953		$	31,313


Earnings per common unit
Basic:
Income from continuing operations	$	0.28		$	0.31
Income from discontinued operations		—			0.02


Income per common unit — basic	$	0.28		$	0.33


Diluted:
Income from continuing operations	$	0.28		$	0.31
Income from discontinued operations		—			0.02


Income per common unit — diluted	$	0.28		$	0.33


Distributions per common unit	$	0.475		$	0.625


Weighted average number of common units outstanding
Basic		104,702			95,969
Diluted		104,981			96,133

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands)


	Three Months Ended
	March 31, 2009			March 31, 2008
OPERATING ACTIVITIES
Net income	$	33,842		$	36,396
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		43,491			43,659
Amortization of deferred financing costs		1,182			1,118
Equity in earnings of unconsolidated joint ventures		(416	)		(377	)
Gain on property dispositions		95			(1,251	)
Noncash compensation		7,252			1,994
Changes in operating assets and liabilities:
Restricted cash		6,418			(24,156	)
Accounts receivable		6,357			(2,932	)
Deferred rent receivable		(2,950	)		(4,937	)
Prepaid expenses and other assets		2,542			(9,685	)
Accounts payable		7,634			(2,166	)
Accrued interest		11			(500	)
Other liabilities		(5,230	)		2,159

Net cash provided by operating activities		100,228			39,322


INVESTING ACTIVITIES
Investment in properties		(15,566	)		(14,670	)
Investments in and advances to unconsolidated joint ventures		(125	)		(3,670	)
Distributions from unconsolidated joint ventures		13,848			1,455
Net proceeds from disposition of properties/land		44,353			291,688
Investment in development in progress		(27,771	)		(67,067	)
Investment in land held for development		(7,054	)		(6,102	)
Investment in deferred leasing costs		(5,724	)		(7,385	)

Net cash provided by investing activities		1,961			194,249


FINANCING ACTIVITIES
Repayments of unsecured notes		(38,306	)		—
Proceeds from mortgage loans		317,424			—
Repayments of mortgage loans		(41,072	)		(7,084	)
Proceeds from credit facility		33,500			170,400
Repayments on credit facility		(293,500	)		(375,400	)
Increase in deferred financing costs		(4,734	)		—
Capital contributions		94,508			12,790
Distribution to partners		(54,265	)		(65,300	)

Net cash provided by (used in) financing activities		13,555			(264,594	)


Net increase (decrease) in cash and cash equivalents		115,744			(31,023	)
Decrease in cash and cash equivalents related to foreign currency translation		(529	)		(42	)
Cash and cash equivalents at beginning of period		15,794			37,989

Cash and cash equivalents at end of period	$	131,009		$	6,924

See accompanying notes.

Liberty Property Limited Partnership

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2009

Note 1: Organization and Basis of Presentation

Organization

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Operating Partnership and its 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, 2008. 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 the current period presentation.

Income per Common Unit

The following table sets forth the computation of basic and diluted income per common unit (in thousands, except per unit amounts):


	For the Three Months Ended March 31, 2009							For the Three Months Ended March 31, 2008
				Weighted							Weighted
	Income			Average Units				Income			Average Units
	(Numerator)			(Denominator)		Per Unit		(Numerator)			(Denominator)		Per Unit
Income from continuing operations	$	33,385						$	34,946
Add: Noncontrolling interest — consolidated joint ventures		364							170
Less: Preferred unit distributions		(5,253	)						(5,253	)


Basic income from continuing operations
Income from continuing operations available to common unitholders		28,496			104,702	$	0.28		29,863			95,969	$	0.31

Dilutive units for long-term compensation plans		—			279				—			164


Diluted income from continuing operations
Income from continuing operations available to common unitholders and assumed conversions		28,496			104,981	$	0.28		29,863			96,133	$	0.31


Basic income from discontinued operations
Discontinued operations		457			104,702	$	—		1,450			95,969	$	0.02

Dilutive units for long-term compensation plans		—			279				—			164


Diluted income from discontinued operations
Discontinued operations		457			104,981	$	—		1,450			96,133	$	0.02


Basic income per common unit
Income available to common unitholders		28,953			104,702	$	0.28		31,313			95,969	$	0.33


Diluted units for long-term compensation plans		—			279				—			164


Diluted income per common unit
Income available to common unitholders and assumed conversions	$	28,953			104,981	$	0.28	$	31,313			96,133	$	0.33

Foreign Currency Translation

The functional currency of the Company’s United Kingdom operations is pounds sterling. The Company translates the financial statements for the United Kingdom operations into US dollars. Gains and losses resulting from this translation do not impact the results of operations and are included in general partner’s equity — common units. Other comprehensive loss for the three months ended March 31, 2009 was $1.3 million compared to $0.1 million for the same period in 2008. Upon sale or upon complete or substantially complete liquidation of a foreign investment, the gain or loss on the sale will include the cumulative translation adjustments that have been previously recorded in general partner’s equity-common units.

SFAS No. 160

As of March 31, 2009, in connection with the Company’s preparation for the adoption of FASB Statement 160, the Company evaluated the requirements of EITF Topic No. D-98, Classification and Measurement of Redeemable Securities (“Topic D-98”), with respect to the presentation within the equity section of its balance sheets for redeemable equity securities. Although the Company had classified these securities within Owner’s Equity in its

previously issued consolidated financial statements, the Company has concluded that it is required to present these securities at their redemption value at each balance sheet date outside of Owner’s Equity. This adjustment affects only the balance sheet presentation of its equity accounts and has no impact on income or income per unit or on cash flows for any period presented. The table below summarizes the effects of the change on the equity accounts for the December 31, 2008 consolidated balance sheet.

As of December 31, 2008


	As Reported		Adjustment			As Adjusted
Noncontrolling interest — preferred units	$	—	$	287,959		$	287,959
Noncontrolling interest — common units		—		117,546			117,546

Owner’s Equity
General partner’s equity — common units	$	1,956,735	$	(36,864	)	$	1,919,871
Limited partners’ equity — preferred units		287,959		(287,959	)		—
Limited partners’ equity — common units		80,682		(80,682	)		—

Total Owner’s equity	$	2,325,376	$	(405,505	)	$	1,919,871

Note 2: Segment Information


Reportable Segments		Markets
Northeast		Southeastern PA; Lehigh/Central PA; New Jersey
Midwest		Minnesota; Milwaukee; Chicago
Mid-Atlantic		Maryland; Carolinas; Richmond; Virginia Beach
South		Jacksonville; Orlando; Boca Raton; Tampa; Texas; Arizona
Philadelphia		Philadelphia; Northern Virginia/Washington, D.C.
United Kingdom		County of Kent; West Midlands

FOR THE THREE MONTHS ENDED MARCH 31, 2009


	Northeast
			Lehigh/
	Southeastern		Central										Phila-		United
	PA		PA		New Jersey		Midwest		Mid-atlantic		South		delphia		kingdom		Total
Operating revenue	$	47,366	$	25,162	$	9,369	$	20,990	$	34,823	$	45,674	$	4,735	$	1,101	$	189,220
Rental property expenses and real estate taxes		15,826		7,620		3,692		7,879		10,985		14,406		1,180		230		61,818


Property level operating income	$	31,540	$	17,542	$	5,677	$	13,111	$	23,838	$	31,268	$	3,555	$	871		127,402


Interest and other income		3,106
Debt extinguishment gain		529
Interest expense		(38,429	)
General and administrative		(15,576	)
Depreciation and amortization		(43,553	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures		33,479
Loss on property dispositions		(294	)
Income taxes		(217	)
Equity in earnings of unconsolidated joint ventures		417
Discontinued operations		457


Net income	$	33,842

FOR THE THREE MONTHS ENDED MARCH 31, 2008


	Northeast
			Lehigh/
	Southeastern		Central		New								Phila-		United
	PA		PA		Jersey		Midwest		Mid-atlantic		South		delphia		kingdom		Total
Operating revenue	$	44,127	$	24,209	$	9,085	$	20,188	$	35,258	$	40,171	$	15,388	$	1,044	$	189,470
Rental property expenses and real estate taxes		14,348		6,535		3,197		7,610		10,133		13,152		4,023		361		59,359


Property level operating income	$	29,779	$	17,674	$	5,888	$	12,578	$	25,125	$	27,019	$	11,365	$	683		130,111


Interest and other income		3,091
Interest expense		(41,690	)
General and administrative		(14,037	)
Depreciation and amortization		(43,063	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures		34,412
Gain on property dispositions		641
Income taxes		(484	)
Equity in earnings of unconsolidated joint ventures		377
Discontinued operations		1,450


Net income	$	36,396

Note 3: SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”

In accordance with SFAS No. 144, the operating results and gain/(loss) on disposition of real estate for properties sold and held for sale are reflected in the condensed consolidated statements of operations as discontinued operations. Prior year financial statements have been adjusted for discontinued operations. The proceeds from dispositions of operating properties with no continuing involvement for the three months ended March 31, 2009 were $34.8 million as compared to $3.4 million for the same period in 2008.

Below is a summary of the results of operations for the properties held for sale and disposed of through the respective disposition dates (in thousands):


	Three Months Ended
	March 31, 2009			March 31, 2008
Revenues	$	1,109		$	4,082
Operating expenses		(457	)		(1,516	)
Interest expense		(254	)		(772	)
Depreciation and amortization		(140	)		(954	)

Income before property dispositions	$	258		$	840

Five properties totaling 152,000 square feet located in the Company’s Northeast segment are considered to be held for sale as of March 31, 2009.

Asset Impairment

Note 4: Joint Ventures

Liberty/Commerz 1701 JFK Boulevard, LP

On March 31, 2008, a $324 million, ten year secured permanent financing at a rate of 6.15% for Comcast Center was funded. The proceeds from this financing were used to pay down outstanding borrowings on the Company’s credit facility.

Note 5: Indebtedness

Mortgage Loans

Unsecured Notes

During the three months ended March 31, 2009, the Company repaid $20 million of 8.125% medium term unsecured notes.

Note 6: Noncontrolling interests

The following details the change in noncontrolling interests for the three months ended March 31, 2009.


	Noncontrolling			Limited			Limited
	interest –			partners’ equity			partners’ equity
	consolidated			– preferred			– common
	joint ventures			units			units
Balance at December 31, 2008 as presented	$	1,130		$	287,959		$	117,546
Net income		(364	)		5,253			1,064
Distributions		—			(5,253	)		(2,055	)


Balance at March 31, 2009	$	766		$	287,959		$	116,555

Common units

Preferred units

The Company has outstanding the following Cumulative Redeemable Preferred Units of the Operating Partnership, (the “Preferred Units”):


Date of							Liquidation		Dividend			Redeemable
Issue		Issue	Amount		Units		Preference		Rate			As of		Exchangeable after
			(in 000’s)
	7/28/99	Series B	$	95,000		3,800	$	25		7.45	%		8/31/09	8/31/13 into Series B Cumulative Redeemable Preferred Shares of the Trust

	6/16/05	Series E	$	20,000		400	$	50		7.00	%		6/16/10	6/16/15 into Series E Cumulative Redeemable Preferred Shares of the Trust

	6/30/05	Series F	$	44,000		880	$	50		6.65	%		6/30/10	12/12/15 into Series F Cumulative Redeemable Preferred Shares of the Trust

	8/23/05	Series F	$	6,000		120	$	50		6.65	%		6/30/10	12/12/15 into Series F Cumulative Redeemable Preferred Shares of the Trust

	12/15/06	Series G	$	27,000		540	$	50		6.70	%		12/12/11	12/12/16 into Series G Cumulative Redeemable Preferred Shares of the Trust

	8/21/07	Series H	$	100,000		4,000	$	25		7.40	%		8/21/12	8/21/17 into Series H Cumulative Redeemable Preferred Shares of the Trust

Note 7: Recently Issued Accounting Standards

SFAS No. 141(R)

FSP EITF 03-6-1

In June 2008, the FASB issued FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” The FSP clarifies that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company adopted the provisions of FSP EITF 03-6-1 on January 1, 2009. The adoption of this statement did not have a material effect on the Company’s calculation of earnings per unit.

Note 8: Supplemental Disclosure to Statements of Cash Flows

The following are supplemental disclosures to the statements of cash flows for the three months ended March 31, 2009 and 2008 (amounts in thousands):


	2009		2008
Non-cash activity
Write-off of fully depreciated property and deferred costs	$	881	$	1,264
Increase in investment in unconsolidated joint ventures		—		(35,172	)
Disposition of properties/development in progress		—		173,624
Disposition of deferred leasing/financing costs		—		12,526
Reduction of accounts receivable		—		7,854
Reduction of deferred rent receivable		—		6,580
Reduction of prepaid and other assets		—		38,486
Reduction of credit facility		—		(152,960	)
Reduction of other liabilities		—		(50,938	)

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

OVERVIEW

Liberty Property Trust (the “Trust”) is a self-administered and self-managed Maryland real estate investment trust (“REIT”). Substantially all of the Trust’s assets are owned directly or indirectly, and substantially all of the Trust’s operations are conducted directly or indirectly, by its subsidiary, Liberty Property Limited Partnership, a Pennsylvania limited partnership (the “Operating Partnership” and, collectively with the Trust and their consolidated subsidiaries, the “Company”).

The Company operates primarily in the Mid-Atlantic, Southeastern, Midwestern and Southwestern United States. Additionally, the Company owns certain assets in the United Kingdom.

As of March 31, 2009, the Company owned and operated 357 industrial and 292 office properties (the “Wholly Owned Properties in Operation”) totaling 63.6 million square feet. In addition, as of March 31, 2009, the Company owned 16 properties under development, which when completed are expected to comprise 3.1 million square feet (the “Wholly Owned Properties under Development”) and 1,344 acres of developable land, substantially all of which is zoned for commercial use. Additionally, as of March 31, 2009, the Company had an ownership interest, through unconsolidated joint ventures, in 46 industrial and 49 office properties totaling 13.1 million square feet (the “JV Properties in Operation” and, together with the Wholly Owned Properties in Operation, the “Properties in Operation”), four properties under development, which when completed are expected to comprise 1.4 million square feet (the “JV Properties under Development” and, together with the Wholly Owned Properties under Development, the “Properties under Development”). The Company also has an ownership interest through unconsolidated joint ventures in 630 acres of developable land, substantially all of which is zoned for commercial use.

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 and controlling costs. The Company’s operating results depend primarily upon income from rental operations and are substantially influenced by rental demand for the Properties in Operation. Over time, the Company pursued development opportunities that it believes will create value and yield acceptable returns. The Company also acquired properties that it believes will create long-term value, and disposed of properties that no longer fit within the Company’s strategic objectives or in situations where it can optimize cash proceeds. Current market conditions are not favorable for acquisitions and development and consequently the potential for growth in operating income from acquisitions and development is anticipated to be limited in 2009.

Recent uncertainty in the global credit markets and declines and weakness in the general economy have negatively impacted the Company’s business. The credit markets have become considerably less favorable than in the recent past and the Company has shifted its financing strategy to include more secured debt and equity sales in order to address its financing needs. Additionally, uncertainty about the pricing of commercial real estate and the absence of available financing to facilitate transactions has dramatically reduced the Company’s ability to rely on the proceeds from the sale of real estate to provide proceeds to fund investment opportunities.

Consistent with the dramatic slow down in the United States and world economies, rental demand for the Properties in Operation declined for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. Despite this trend, the Company successfully leased 2.8 million square feet during the three months ended March 31, 2009 and attained occupancy of 89.7% for the Wholly Owned Properties in Operation and 91.8% for the JV Properties in Operation for a combined occupancy of 90.1% for the Properties in Operation, all as of that date. At December 31, 2008, occupancy for the Wholly Owned Properties in Operation was 91.1% and for the JV Properties in Operation was 92.2% for a combined occupancy for the Properties in Operation of 91.3%.

GUIDANCE

The Company’s guidance for 2009 was originally developed in September 2008. It was premised on assumptions about the economy, the resulting demand for product and the availability of capital. The Company reviewed these assumptions and revised its original guidance in April 2009. The Company’s original and revised guidance for 2009 is as follows:


Category	2009 Original Guidance	2009 Revised Guidance
Wholly Owned Acquisitions	$—	$—
Wholly Owned Dispositions	$125 - $200 million	$125 - $200 million
Wholly Owned Development Deliveries	$250 - $350 million	$250 - $350 million
Joint Venture Acquisitions	$50 - $100 million	$50 - $100 million
Joint Venture Dispositions	$—	$—
Joint Venture Development Deliveries	$100 - $175 million	< $50 million
Average occupancy	(1%) – 1%	(2%) – 0%
Change in straight line rental rates	4% – 6%	(5%) – 0%

WHOLLY OWNED CAPITAL ACTIVITY

Acquisitions

During the three months ended March 31, 2009, conditions for the acquisition of properties were unsettled because of adverse events in the credit markets and the Company did not acquire any operating properties.

Dispositions

During the three months ended March 31, 2009, market conditions for dispositions were unsettled, which the Company again attributes to adverse conditions in the credit markets. Disposition activity allows the Company to, among other things, (1) reduce its holdings in certain markets and product types within a market; (2) lower the average age of the portfolio; (3) optimize the cash proceeds from the sale of certain assets; and (4) obtain funds for investment activities. During the three months ended March 31, 2009, the Company realized proceeds of $45.6 million from the sale of six operating properties representing 296,000 square feet and 0.3 acres of land.

Development

During the three months ended March 31, 2009, the Company brought into service one Wholly Owned Property under Development representing 90,000 square feet and a Total Investment, as defined below, of $15.7 million, and did not initiate any real estate development. As of March 31, 2009, the projected Total Investment of the Wholly Owned Properties under Development was $359.9 million.

Although the Company continues to pursue development opportunities, current market conditions are not favorable for development, and the Company currently anticipates only a modest amount of development starts in 2009. Furthermore, any 2009 development starts will be substantially pre-leased. The “Total Investment” for a Property is defined as the Property’s purchase price plus closing costs and management’s estimate, as determined at the time of acquisition, of the cost of necessary building improvements in the case of acquisitions, or land costs and land and building improvement costs in the case of development projects, and, where appropriate, other development costs and carrying costs.

JOINT VENTURE CAPITAL ACTIVITY

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

Acquisitions

During the three months ended March 31, 2009, none of the unconsolidated joint ventures in which the Company held an interest acquired any properties.

Dispositions

During the three months ended March 31, 2009, none of the unconsolidated joint ventures in which the Company held an interest disposed of any properties. .

Development

During the three months ended March 31, 2009, none of the unconsolidated joint ventures in which the Company held an interest brought any Properties under Development into service. As of March 31, 2009, the projected Total Investment of JV Properties under Development was $191.0 million.

PROPERTIES IN OPERATION

The composition of the Company’s Properties in Operation as of March 31, 2009 and 2008 is as follows (in thousands, except dollars and percentages):


	Net Rent
	Per Square Foot				Total Square Feet				Percent Occupied
	March 31				March 31				March 31
	2009		2008		2009		2008		2009			2008
Wholly Owned Properties in Operation:
Industrial-Distribution	$	4.52	$	4.45		30,706		28,265		87.9	%		93.4	%
Industrial-Flex	$	9.27	$	9.24		11,520		11,584		88.7	%		88.8	%
Office	$	14.18	$	14.05		21,367		21,497		93.0	%		91.3	%

	$	8.74	$	8.67		63,593		61,346		89.7	%		91.8	%


	Net Rent
	Per Square Foot				Total Square Feet				Percent Occupied
	March 31				March 31				March 31
	2009		2008		2009		2008		2009			2008
Joint Venture Properties in Operation:
Industrial-Distribution	$	4.23	$	4.07		8,316		8,020		93.0	%		94.2	%
Industrial-Flex	$	24.70	$	34.02		171		171		86.5	%		89.5	%
Office	$	23.86	$	24.99		4,582		4,240		89.9	%		93.8	%

	$	11.22	$	11.58		13,069		12,431		91.8	%		94.0	%


	Net Rent
	Per Square Foot				Total Square Feet				Percent Occupied
	March 31				March 31				March 31
	2009		2008		2009		2008		2009			2008
Properties in Operation:
Industrial-Distribution	$	4.46	$	4.36		39,022		36,285		88.9	%		93.6	%
Industrial-Flex	$	9.49	$	9.60		11,691		11,755		88.7	%		88.8	%
Office	$	15.84	$	15.89		25,949		25,737		92.5	%		91.7	%

	$	9.17	$	9.17		76,662		73,777		90.1	%		92.2	%

Geographic segment data for the three months ended March 31, 2009 and 2008 are included in Note 2 to the Company’s financial statements.

Forward-Looking Statements

When used throughout this report, the words “believes,” “anticipates” 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: the effect of national and regional economic conditions; rental demand; the Company’s ability to identify, and enter into agreements with suitable joint venture partners in situations where it believes such arrangements are advantageous; the Company’s ability to identify and secure additional properties and sites, both for itself and the joint ventures to which it is a party, that meet its criteria for acquisition or development; the current credit crisis and its impact on the availability and cost of capital; the effect of prevailing market interest rates; risks related to the integration of the operations of entities that we have acquired or may acquire; risks related to litigation; and other risks described from time to time in the Company’s filings with the 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, 2008 for a discussion of critical accounting policies which include capitalized costs, revenue recognition, allowance for doubtful accounts,

impairment of real estate, intangibles and investments in unconsolidated joint ventures. During the three months ended March 31, 2009, 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 months ended March 31, 2009 with the results of operations of the Company for the three months ended March 31, 2008. As a result of the varying levels of development, acquisition and disposition activities by the Company in 2009 and 2008, 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 Months Ended March 31, 2009 to Three Months Ended March 31, 2008

Overview

The Company’s average gross investment in operating real estate owned for the three months ended March 31, 2009 decreased to $5,049.7 million from $5,143.6 million for the three months ended March 31, 2008. This decrease in operating real estate owned resulted in a decrease in rental revenue. Despite this decrease, operating expense reimbursement, rental property expenses, real estate taxes and depreciation and amortization all increased.

Total operating revenue decreased to $189.2 million for the three months ended March 31, 2009 from $189.5 million for the three months ended March 31, 2008. This decrease in operating revenue was due to the operations of Comcast Center, which was wholly owned from January 1, 2008 to March 30, 2008 and then was sold into an unconsolidated joint venture in which the Company retains an interest. The decrease was also due to a decrease in “Termination Fees,” which totaled $0.3 million for the three months ended March 31, 2009 as compared to $1.3 million for the three months ended March 31, 2008. 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. These decreases were partially offset by acquisition and development buildings that came into service throughout 2008 and the three months ended March 31, 2009.

Segments

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

Property Level Operating Income:


	Three Months Ended
	March 31,				Percentage
	2009		2008		Increase (Decrease)
Northeast
- Southeastern PA	$	31,540	$	29,779		5.9	% (1)
- Lehigh/Central PA		17,542		17,674		(0.7	%)
- New Jersey		5,677		5,888		(3.6	%)
Midwest		13,111		12,578		4.2	% (2)
Mid-Atlantic		23,838		25,125		(5.1	%)(3)
South		31,268		27,019		15.7	% (1)
Philadelphia		3,555		11,365		(68.7	%)(4)
United Kingdom		871		683		27.5	% (5)


Total property level operating income	$	127,402	$	130,111		(2.1	%)


(1)		The increase for the three months ended March 31, 2009 versus the three months ended March 31, 2008 was due to an increase in average gross investment in operating real estate, an increase in occupancy, and an increase in rental rates.

(2)		The increase for the three months ended March 31, 2009 versus the three months ended March 31, 2008 was primarily due to an increase in average gross investment in operating real estate and an increase in rental rates. This increase was partially offset by a decrease in occupancy in 2009.

(3)		The decrease for the three months ended March 31, 2009 versus the three months ended March 31, 2008 was primarily due to a decrease in occupancy. This decrease was partially offset by an increase in average gross investment in operating real estate and an increase in rental rates in 2009.

(4)		The decrease for the three months ended March 31, 2009 versus the three months ended March 31, 2008 was due to the effect of Comcast Center operation during the relevant periods. Comcast Center was a wholly owned 1.25 million square foot property until March 30, 2008 when it was sold into an unconsolidated joint venture.

(5)		The increase for the three months ended March 31, 2009 versus the three months ended March 31, 2008 was due to an increase in occupancy and a decrease in operating expenses.

Same Store

Property level operating income, exclusive of Termination Fees, for the Same Store properties increased to $123.3 million for the three months ended March 31, 2009 from $120.9 million for the three months ended March 31, 2008, on a straight line basis (which recognizes rental revenue evenly over the life of the lease), and increased to $119.9 million for the three months ended March 31, 2009 from $117.8 million for the three months ended March 31, 2008 on a cash basis. These increases of 1.9% and 1.8%, respectively, are primarily due to an increase in rental rates.

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 and Same Store cash basis 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 631 properties totaling approximately 60.3 million square feet owned on January 1, 2008 and excluding properties sold through March 31, 2009.

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 years ended March 31, 2009 and 2008. Same Store property level operating income and cash basis property level operating income are non-GAAP measures and do not represent income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures because they do 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 considering the Company’s operating performance. Also, set forth below is a reconciliation of Same Store property level operating income and cash basis property level operating income to net income (in thousands).


	Three Months Ended
	March 31, 2009			March 31, 2008
Same Store:
Rental revenue	$	126,226		$	123,944
Operating expenses:
Rental property expense		39,222			37,444
Real estate taxes		21,065			19,376
Operating expense recovery		(57,342	)		(53,824	)

Unrecovered operating expenses		2,945			2,996


Property level operating income		123,281			120,948
Less straight line rent		3,399			3,198


Cash basis property level operating income	$	119,882		$	117,750


Reconciliation of non-GAAP financial measure — Same Store:
Cash basis property level operating income	$	119,882		$	117,750
Straight line rent		3,399			3,198

Property level operating income		123,281			120,948
Property level operating income — properties purchased or developed subsequent to January 1, 2008		4,291			8,172
Less: Property level operating income — properties held for sale at March 31, 2009		(470	)		(290	)
Termination fees		300			1,281
General and administrative expense		(15,576	)		(14,037	)
Depreciation and amortization expense		(43,553	)		(43,063	)
Other income (expense)		(34,794	)		(38,599	)
(Loss) gain on property dispositions		(294	)		641
Income taxes		(217	)		(484	)
Equity in earnings of unconsolidated joint ventures		417			377
Discontinued operations		457			1,450


Net income	$	33,842		$	36,396

General and Administrative

General and administrative expenses increased to $15.6 million for the three months ended March 31, 2009 compared to $14.0 million for the three months ended March 31, 2008. The increase was primarily due to the accelerated vesting of long term incentive compensation due to the years of service and age of certain employees.

Depreciation and Amortization

Depreciation and amortization increased to $43.6 million for the three months ended March 31, 2009 from $43.1 million for the three months ended March 31, 2008. The increase was primarily due to the increased investment in tenant improvement costs, which are depreciated over a shorter period than buildings.

Interest Expense

Interest expense decreased to $38.4 million for the three months ended March 31, 2009 from $41.7 million for the three months ended March 31, 2008. This decrease was related to a decrease in the average debt outstanding, which was $2,579.2 million for the three months ended March 31, 2009, compared to $3,055.7 million for the three months ended March 31, 2008. The effect of the decrease in the average debt outstanding was partially offset by an increase in the weighted average interest rate to 6.3% for the three months ended March 31, 2009 from 6.2% for the three months ended March 31, 2008, as well as a decrease in interest capitalized due to the decrease in development activity.

Interest expense allocated to discontinued operations for the three months ended March 31, 2009 and 2008 was $0.3 million and $0.8 million, respectively. This decrease was due to the decrease in the level of dispositions in 2009 compared to 2008.

Other

Gain (loss) on property dispositions decreased to a loss of $0.3 million for the three months ended March 31, 2009 from a gain of $0.6 million for the three months ended March 31, 2008. The decrease was primarily due to impairments recognized on certain of the Company’s properties in 2009.

During the three months ended March 31, 2009, the Company purchased $6.9 million principal amount of its August 2010 Senior Notes. These notes were purchased at a $0.5 million discount. The discount is included in net income as a debt extinguishment gain.

Income from discontinued operations decreased to $0.5 million for the three months ended March 31, 2009 from $1.5 million for the three months ended March 31, 2008. The decrease was due to lower operating income and the decrease in gains recognized on sales which were $0.2 million for the three months ended March 31, 2009 compared to $0.6 million for the three months ended March 31, 2008.

As a result of the foregoing, the Company’s net income decreased to $33.8 million for the three months ended March 31, 2009 from $36.4 million for the three months ended March 31, 2008.

Liquidity and Capital Resources

Overview

The Company has historically accessed capital primarily from the public unsecured debt markets. The uncertainty in the global credit market has negatively affected this market. As a result, the Company expects to be more reliant on other sources of capital to meet its maturing debt obligations and to complete its development pipeline. The Company believes that it has a significant amount of borrowing capacity available to it from its real estate assets which are generally unsecured. The Company believes that additional capital sources include sources such as proceeds to be realized from the sale of real estate assets. Finally, the Company may access $165 million in funds through the sale of common shares under its continuous equity offering program. The Company paid Citigroup Global Markets Inc., its agent under this program, an aggregate of $1.9 million in fees with respect to the common shares sold through this program during the three months ended March 31, 2009. The Company paid Citigroup Global Markets Inc., an additional $0.4 million in fees with respect to common shares sold through this program from April 1, 2009 to May 6, 2009. There is $15 million available from the initial $150 million program and the Company has expanded the program by an additional $150 million. During the first quarter, the Company raised $317.4 million from secured mortgage financings, it realized $45.6 million in proceeds from the sale of real estate and it raised net proceeds of $91.8 million from the sale of common shares.

Activity

As of March 31, 2009, the Company had cash and cash equivalents of $164.1 million, including $33.1 million in restricted cash.

Net cash flow provided by operating activities increased to $100.2 million for the three months ended March 31, 2009 from $39.3 million for the three months ended March 31, 2008. This $60.9 million increase was primarily due to a change in restricted cash and the timing of payments on account. The change in restricted cash is due to the restriction of funds in the United Kingdom for the payment of infrastructure costs. Net cash flow provided by operating activities 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 Wholly Owned Properties in Operation. In the fourth quarter of 2008, the Company reduced its quarterly dividend to $0.475 per share from $0.625 per share.

Net cash provided by investing activities was $2.0 million for the three months ended March 31, 2009 compared to $194.2 million for the three months ended March 31, 2008. This $192.2 million decrease primarily resulted from a decrease in net proceeds from the disposition of properties/land. Net cash from the disposition of properties for the three months ended March 31, 2008 was provided primarily through the sale of Comcast Center to an unconsolidated joint venture. The joint venture obtained the funds to purchase the property through the funding of a $324 million permanent financing. See Note 4 to the Company’s financial statements.

Net cash provided by financing activities was $13.6 million for the three months ended March 31, 2009 compared to net cash used of $264.6 million for the three months ended March 31, 2008. This $278.2 million change was primarily due to the decreased net borrowings during the three months ended March 31, 2009 due to decreased investment activity during 2009. Net cash provided by or used in financing activities includes proceeds from the issuance of equity and debt, net of debt repayments and equity repurchases 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 and proceeds from the disposition of properties. For the three months ended March 31, 2009, a portion of these activities were funded through a $600 million Credit Facility (the “Credit Facility”). The interest rate on borrowings under the Credit Facility fluctuates 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 Credit Facility is 65 basis points over LIBOR. The Credit Facility contains an accordion feature whereby the Company may borrow an additional $200 million. The Credit Facility expires in January 2010, and has a one-year extension option.

Additionally, the Company has entered into an agreement to fund its planned improvements for the Kings Hill Phase 2 land development project. At March 31, 2009, the Company had drawn £1.0 million from a £7 million revolving credit facility. The facility expires on November 22, 2011.

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 fixed charge coverage ratio. As of March 31, 2009 the Company’s debt to gross assets ratio was 40.8%, and for the three months ended March 31, 2009, the fixed charge coverage ratio was 2.5x. Debt to gross assets equals total long-term debt, borrowings under the Credit Facility divided by total assets plus accumulated depreciation. The fixed charge coverage ratio equals income from continuing operations before property dispositions, 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 March 31, 2009, $474.9 million in mortgage loans and $2,093.3 million in unsecured notes were outstanding with a weighted average interest rate of 6.58%. The interest rates on $2,415.9 million of mortgage loans and unsecured notes are fixed and range from 5.00% to 8.75%. For $152.3 million of mortgage loans, the interest rate floats at a spread to LIBOR. The interest rate on these loans at March 31, 2009 was 6.88%. The weighted average remaining term for the mortgage loans and unsecured notes is 4.9 years.

The scheduled principal amortization and maturities of the Company’s mortgage loans, unsecured notes outstanding and the Credit Facility and the related weighted average interest rates as of March 31, 2009 are as follows (in thousands, except percentages):


	MORTGAGES										WEIGHTED
	PRINCIPAL		PRINCIPAL		UNSECURED		CREDIT				AVERAGE
	AMORTIZATION		MATURITIES		NOTES		FACILITY		TOTAL		INTEREST RATE
2009 (9 months)	$	4,920	$	4,069	$	238,562	$	—	$	247,551		7.68	%
2010		6,530		4,736		169,739		—		181,005		8.34	%
2011		6,758		12,179		250,000		—		268,937		7.20	%
2012		4,711		180,612		235,000		—		420,323		6.64	%
2013		3,858		4,510		—		—		8,368		6.92	%
2014		4,352		2,684		200,000		—		207,036		5.66	%
2015		3,932		44,469		300,000		—		348,401		5.28	%
2016		2,461		182,318		300,000		—		484,779		4.65	%
2017		1,770		—		300,000		—		301,770		6.62	%
2018 & thereafter		—		—		100,000		—		100,000		7.50	%


	$	39,292	$	435,577	$	2,093,301	$	—	$	2,568,170		6.58	%

On April 15, 2009, the Company repaid $238.6 million of maturing unsecured notes.

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 and controlling costs.

The expiring square feet and annual net rent by year for the Properties in Operation as of March 31, 2009 are as follows (in thousands):


	Industrial-				Industrial-
	Distribution				Flex				Office				Total
	Square		Annual		Square		Annual		Square		Annual		Square		Annual
	Feet		Rent		Feet		Rent		Feet		Rent		Feet		Rent
Wholly Owned Properties in Operation:
2009 (9 months)		1,974	$	8,673		982	$	8,503		1,630	$	22,052		4,586	$	39,228
2010		3,543		16,737		1,753		16,445		2,907		41,166		8,203		74,348
2011		3,116		14,105		1,359		13,757		2,343		36,114		6,818		63,976
2012		4,683		23,256		1,550		15,281		2,203		37,896		8,436		76,433
2013		2,026		10,175		1,430		14,705		2,571		43,180		6,027		68,060
2014		2,137		11,412		734		8,201		2,420		37,622		5,291		57,235
Thereafter		9,498		53,271		2,409		28,652		5,801		105,432		17,708		187,355

TOTAL		26,977	$	137,629		10,217	$	105,544		19,875	$	323,462		57,069	$	566,635


	Industrial-				Industrial-
	Distribution				Flex				Office				Total
	Square		Annual		Square		Annual		Square		Annual		Square		Annual
	Feet		Rent		Feet		Rent		Feet		Rent		Feet		Rent
Joint Venture Properties in Operation:
2009 (9 months)		897	$	3,479		11	$	231		303	$	6,302		1,211	$	10,012
2010		1,392		5,560		24		662		410		8,711		1,826		14,933
2011		938		3,950		11		270		310		7,055		1,259		11,275
2012		329		1,598		63		1,533		179		4,223		571		7,354
2013		535		2,316		—		—		242		5,634		777		7,950
2014		1,078		4,981		2		63		335		9,333		1,415		14,377
Thereafter		2,562		13,695		37		915		2,339		76,369		4,938		90,979

TOTAL		7,731	$	35,579		148	$	3,674		4,118	$	117,627		11,997	$	156,880


	Industrial-				Industrial-
	Distribution				Flex				Office				Total
	Square		Annual		Square		Annual		Square		Annual		Square		Annual
	Feet		Rent		Feet		Rent		Feet		Rent		Feet		Rent
Properties in Operation:
2009 (9 months)		2,871	$	12,152		993	$	8,734		1,933	$	28,354		5,797	$	49,240
2010		4,935		22,297		1,777		17,107		3,317		49,877		10,029		89,281
2011		4,054		18,055		1,370		14,027		2,653		43,169		8,077		75,251
2012		5,012		24,854		1,613		16,814		2,382		42,119		9,007		83,787
2013		2,561		12,491		1,430		14,705		2,813		48,814		6,804		76,010
2014		3,215		16,393		736		8,264		2,755		46,955		6,706		71,612
Thereafter		12,060		66,966		2,446		29,567		8,140		181,801		22,646		278,334

TOTAL		34,708	$	173,208		10,365	$	109,218		23,993	$	441,089		69,066	$	723,515

The scheduled deliveries of the 4.4 million square feet of Properties under Development as of March 31, 2009 are as follows (dollars in thousands):


		Square Feet
	Scheduled	Industrial-		Industrial-						Percent			Total
	In-Service Date	Distribution		Flex		Office		Total		Leased			Investment
Wholly Owned Properties under Development	2nd Quarter 2009		920,400		126,000		78,120		1,124,520		54.5	%	$	74,253
	3rd Quarter 2009		100,000		68,700		333,006		501,706		13.6	%		88,723
	4th Quarter 2009		961,100		—		176,494		1,137,594		95.2	%		126,212
	2nd Quarter 2010		—		—		95,261		95,261		72.3	%		24,426
	4th Quarter 2010		—		—		211,236		211,236		50.8	%		46,245

	TOTAL		1,981,500		194,700		894,117		3,070,317		63.2	%	$	359,859


Joint Venture Properties under Development	4th Quarter 2009		725,000		—		—		725,000		69.0	%	$	35,825
	2nd Quarter 2010		463,636		—		176,394		640,030		3.2	%		155,220

	TOTAL		1,188,636		—		176,394		1,365,030		38.1	%	$	191,045


Total Properties under Development	TOTAL		3,170,136		194,700		1,070,511		4,435,347		55.5	%	$	550,904

The Company has an effective S-3 shelf registration statement on file with the SEC pursuant to which the Trust and the Operating Partnership may issue an unlimited amount of equity securities and 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 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 (“FFO”) available to common shareholders also does not represent cash flows generated from operating, investing or financing activities as defined by GAAP. Funds from operations available to common shareholders for the three months ended March 31, 2009 and 2008 are as follows (in thousands, except per share amounts):


	Three Months Ended
	March 31, 2009			March 31, 2008
Reconciliation of net income to FFO — basic

Net Income available to common shareholders	$	27,889		$	29,961

Basic — Income available to common shareholders		27,889			29,961
*Basic — income available to common shareholders per weighted average share*	$	0.28		$	0.33

Adjustments:
Depreciation and amortization of unconsolidated joint ventures		3,990			3,548
Depreciation and amortization		43,022			43,378
Gain on property dispositions		(308	)		(968	)
Noncontrolling interest share in addback for depreciation and amortization and gain on property dispositions		(1,737	)		(1,995	)

Funds from operations available to common shareholders — basic	$	72,856		$	73,924


*Basic Funds from operations available to common shareholders per weighted average share*	$	0.72		$	0.81

Reconciliation of net income to FFO — diluted:

Net Income available to common shareholders	$	27,889		$	29,961

Diluted — income available to common shareholders		27,889			29,961
*Diluted — income available to common shareholders per weighted average share*	$	0.28		$	0.33

Adjustments:
Depreciation and amortization of unconsolidated joint ventures		3,990			3,548
Depreciation and amortization		43,022			43,378
Gain on property dispositions		(308	)		(968	)
Noncontrolling interest less preferred share distributions		1,064			1,352


Funds from operations available to common shareholders - diluted	$	75,657		$	77,271


*Diluted Funds from operations available to common shareholders per weighted average share*	$	0.72		$	0.80

Reconciliation of weighted average shares:
Weighted average common shares — all basic calculations		100,681			91,779
Dilutive shares for long term compensation plans		279			164


Diluted shares for net income calculations		100,960			91,943
Weighted average common units		4,021			4,190


Diluted shares for Funds from operations calculations		104,981			96,133

Inflation

Inflation has remained relatively low in recent years, and as a result, it has not had a significant impact on the Company during this period. Through the early part of 2008, there was a dramatic increase in the price of oil and other commodities; such an increase, if it were to recommence, could result in an increase in inflation. However, weakness in the national and global economies has resulted in Federal Reserve Board action designed to discourage increases in interest rates. To the extent an increase in inflation would result in increased operating costs, such as 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, 2008.

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.

Changes in Internal Controls

There were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company has been substituted for Republic Property Trust, a Maryland real estate investment trust, and Republic Property Limited Partnership, a Delaware limited partnership, (together, “Republic”) as a party to certain litigation as a result of the Company’s acquisition of Republic on October 4, 2007. The litigation arises out of a dispute between Republic and certain parties, two of whom were members of Republic’s Board of Trustees and “founders” of Republic. The dispute includes claims arising from the termination of a development arrangement in West Palm Beach, Florida and an attempt by Republic to acquire a certain office property from an entity controlled by the aforementioned related parties pursuant to an option agreement entered into at the time of Republic’s formation. The litigation has been summarized in previous filings. Material developments in the litigation are summarized below.

As noted in prior filings, Republic filed a lawsuit against Messrs. Kramer and Grigg and Republic Properties Corporation in the United States District Court (“the Court”) for the District of Columbia. Republic Property Corporation, Messrs. Kramer and Grigg filed motions to dismiss this lawsuit. On March 31, 2008, the Court granted the motion to dismiss. The Company filed a motion for reconsideration of the grant of the motion to dismiss on April 14, 2008. On April 28, 2008, Republic Property Corporation and Messrs. Kramer and Grigg filed their opposition to the Company’s motion and on May 8, 2008 the Company replied to their opposition. On August 13, 2008, the Court denied the motion for reconsideration. The Company has appealed the Court’s decision. Oral agreement of this appeal is scheduled for May 12, 2009.

As noted in prior filings, Mr. Richard Kramer, Republic’s former Non-executive Chairman of the Board, filed a lawsuit against Republic in the United States District Court for the District of Maryland Southern Division, in which he sought advancement for legal fees incurred by him purportedly in connection with an independent counsel’s investigation with respect to certain matters involving Republic’s course of dealing in a West Palm Beach development project, as well as those fees incurred in filing and prosecuting this lawsuit. On May 3, 2007, Mr. Kramer voluntarily dismissed this case, and filed a nearly identical lawsuit against Republic in the Circuit Court of Baltimore County, Maryland. We filed a motion to dismiss or, in the alternative, motion for summary judgment, seeking the dismissal of Mr. Kramer’s lawsuit. Mr. Kramer filed a motion for summary judgment against the Company. On November 2, 2007 the Circuit Court denied Mr. Kramer’s motion for summary judgment and granted the Company’s motion to dismiss. Mr. Kramer appealed the Circuit Court’s judgment. On March 23, 2009, the Maryland Court of Appeals affirmed the judgment of the Circuit Court of Baltimore City.

As noted in prior filings, Republic filed a lawsuit against 25 Massachusetts Avenue Property LLC (the “Owner”) of Republic Square I in the Court of Chancery in the State of Delaware. The matter was tried in 2007. On April 7, 2008, the Court of Chancery issued an opinion concluding that neither party is entitled to relief and ordering that the Lis Pendens be lifted. On April 15, 2008, the Owner filed a notice of appeal from dismissal of its counterclaims. The parties fully briefed 25 Mass’ appeal to the Delaware Supreme Court, to which all appeals are made. Oral argument in this matter was made before the Delaware Supreme Court on November 12, 2008. On November 25, 2008, the Delaware Supreme Court remanded the matter to the Court of Chancery in order for the Court of Chancery to consider 25 Mass’ claimed breach of the Option Agreement based on (i) liability for breach of the implied duty of good faith and fair dealing; and (ii) liability for breach of the “further assurances” clause of the option agreement. On January 22, 2009 the Court of Chancery issued a Memorandum Opinion adhering to its original determination that 25 Mass’ counterclaim should be dismissed. On January 29, 2009 the Supreme Court of the State of Delaware set forth a schedule for supplemental memorandum to be filed by the parties. In accordance with the schedule, the matter was submitted to the Court for decision on briefs as of April 8, 2009. On April 20, 2009 the Court issued its opinion adopting the Court of Chancery’s Memorandum Opinions and dismissing 25 Mass’ claims. On April 24, 2009, 25 Mass filed a motion for Rehearing En Banc. On April 29, 2009 the Court denied 25 Mass’ motion for Rehearing En Banc.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in Item 1A of Part 1 “Risk Factors,” in our Form 10-K for the year ended December 31, 2008.

Item 6. Exhibits


12.1*		Statement Re: Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges.

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

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

31.3*		Certification 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*		Certification 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*		Certification 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*		Certification 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*		Certification 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*		Certification 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

12.1		Statement Re: Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges.

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

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

31.3		Certification 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		Certification 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		Certification 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		Certification 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		Certification 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		Certification 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.)


/s/ WILLIAM P. HANKOWSKY William P. Hankowsky		May 11, 2009 Date
President and Chief Executive Officer

/s/ GEORGE J. ALBURGER, JR.		May 11, 2009

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


/s/ WILLIAM P. HANKOWSKY William P. Hankowsky		May 11, 2009 Date
President and Chief Executive Officer

/s/ GEORGE J. ALBURGER, JR.		May 11, 2009

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


Index		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed consolidated balance sheets of Liberty Property Trust at March 31, 2009 and December 31, 2008		4

	Condensed consolidated statements of operations of Liberty Property Trust for the three months ended March 31, 2009 and March 31, 2008		5

	Condensed consolidated statement of equity of Liberty Property Trust for the three months ended March 31, 2009		6

	Condensed consolidated statements of cash flows of Liberty Property Trust for the three months ended March 31, 2009 and March 31, 2008		7

	Notes to condensed consolidated financial statements of Liberty Property Trust		8

	Condensed consolidated balance sheets of Liberty Property Limited Partnership at March 31, 2009 and December 31, 2008		15

	Condensed consolidated statements of operations of Liberty Property Limited Partnership for the three months ended March 31, 2009 and March 31, 2008		16

	Condensed consolidated statement of equity of Liberty Property Limited Partnership for the three months ended March 31, 2009		17

	Condensed consolidated statements of cash flows of Liberty Property Limited Partnership for the three months ended March 31, 2009 and March 31, 2008		18

	Notes to condensed consolidated financial statements of Liberty Property Limited Partnership		19

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		38

Item 4.	Controls and Procedures		38

PART II.	OTHER INFORMATION		39

Item 1.	Legal Proceedings		39

Item 1A.	Risk Factors		39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		40

Item 3.	Defaults Upon Senior Securities		40

Item 4.	Submission of Matters to a Vote of Security Holders		40

Item 5.	Other Information		40

Item 6.	Exhibits		41

Signatures for Liberty Property Trust			42


	General			Limited			Total
	Partner’s			Partner’s			Owner’s
	Equity			Equity			Equity
Balance at December 31, 2008, as previously reported	$	1,956,735		$	368,641		$	2,325,376
Reclassification upon the adoption of SFAS No. 160		(36,864	)		(368,641	)		(405,505	)


Balance at December 31, 2008 as presented		1,919,871			—			1,919,871
Contributions from partners		101,754			—			101,754
Distributions to partners		(49,444	)		—			(49,444	)
Foreign currency translation adjustment		(1,304	)		—			(1,304	)
Net income		27,889						27,889


Balance at March 31, 2009	$	1,998,766		$	—		$	1,998,766


	Three months ended
	March 31, 2009
Earnings before fixed charges:
Income before allocation of minority interest and income from investments in unconsolidated subsidiaries	$	46,816
Add: Interest expense		37,210
Depreciation expense on cap’d interest		310
Amortization of deferred financing costs		1,219


Earnings before fixed charges	$	85,555


Fixed charges:
Interest expense	$	37,210
Amortization of deferred financing charges		1,219
Capitalized interest		3,028


Fixed charges		41,457


Preferred share distributions		—
Preferred unit distributions		5,253


Combined fixed charges	$	46,710


Ratio of earnings to fixed charges		2.06


Ratio of earnings to combined fixed charges		1.83



Date: May 11, 2009	By:	/s/ WILLIAM P. HANKOWSKY
		William P. Hankowsky
		Chairman, President and Chief Executive Officer