UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________

FORM 10-Q

__________________________________________________________

(Mark One)

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

For the quarterly period ended June 30, 2013

OR

¨ 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  x    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 the registrant was required to submit and post such files).    Yes  x    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	x	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  x

On July 29, 2013, 121,872,113 Common Shares of Beneficial Interest, par value $0.001 per share, of Liberty Property Trust were outstanding.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2013 of Liberty Property Trust and Liberty Property Limited Partnership. Unless stated otherwise or the context otherwise requires, references to the “Trust” mean Liberty Property Trust and its consolidated subsidiaries; and references to the “Operating Partnership” mean Liberty Property Limited Partnership and its consolidated subsidiaries. The terms the “Company,” “we,” “our” and “us” mean the Trust and the Operating Partnership, collectively.

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, the Operating Partnership, a Pennsylvania limited partnership.

The Trust is the sole general partner and also a limited partner of the Operating Partnership, owning 97.0% of the common equity of the Operating Partnership at June 30, 2013. The common units of limited partnership interest in the Operating Partnership (the “Common Units”), other than those owned by the Trust, are exchangeable on a one-for-one basis (subject to anti-dilution protections) for the Trust's Common Shares of Beneficial Interest, $0.001 par value per share (the “Common Shares”). The Company had issued several series of Cumulative Redeemable Preferred Units of the Operating Partnership (the “Preferred Units"). The outstanding Preferred Units of each series were exchangeable on a one-for-one basis after stated dates into a corresponding series of Cumulative Redeemable Preferred Shares of the Trust except for the Series I-2 Preferred Units, which are not convertible or exchangeable into any other securities. The Preferred Units, except for the Series I-2 Preferred Units, were redeemed during the six months ended June 30, 2013. The ownership of the holders of Common and Preferred Units is reflected in the Trust's financial statements as “noncontrolling interest-operating partnership” both in mezzanine equity and as a component of total equity. The ownership of the holders of Common and Preferred Units not owned by the Trust is reflected in the Operating Partnership's financial statements as “limited partners' equity” both in mezzanine equity and as a component of total owners' equity.

The financial results of the Operating Partnership are consolidated into the financial statements of the Trust. The Trust has no significant assets other than its investment in the Operating Partnership. The Trust and the Operating Partnership are managed and operated as one entity. The Trust and the Operating Partnership have the same managers.

The Trust's sole business purpose is to act as the general partner of the Operating Partnership. Net proceeds from equity issuances by the Trust are then contributed to the Operating Partnership in exchange for partnership units. The Trust itself does not issue any indebtedness, but guarantees certain of the unsecured debt of the Operating Partnership.

We believe combining the quarterly reports on Form 10-Q of the Trust and the Operating Partnership into this single report results in the following benefits:

• enhances investors' understanding of the Trust and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

• eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the Company's disclosure applies to both the Trust and the Operating Partnership; and

• creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

To help investors understand the significant differences between the Trust and the Operating Partnership, this report presents the following separate sections for each of the Trust and the Operating Partnership:

• consolidated financial statements;

• the following notes to the consolidated financial statements;

◦ Income per Common Share of the Trust and Income per Common Unit of the Operating Partnership;

◦ Other Comprehensive Income (Loss) of the Trust and Other Comprehensive Income (Loss) of the Operating Partnership; and

◦ Noncontrolling Interests of the Trust and Limited Partners' Equity and Noncontrolling Interest of the Operating Partnership

This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Trust and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Trust and Operating Partnership are compliant with Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended.

2

Liberty Property Trust/Liberty Property Limited Partnership

Form 10-Q for the period ended June 30, 2013

Index		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated balance sheets of Liberty Property Trust at June 30, 2013 and December 31, 2012	5
	Consolidated statements of comprehensive income of Liberty Property Trust for the three months ended June 30, 2013 and June 30, 2012	6
	Consolidated statements of comprehensive income of Liberty Property Trust for the six months ended June 30, 2013 and June 30, 2012	7
	Consolidated statement of equity of Liberty Property Trust for the six months ended June 30, 2013	8
	Consolidated statements of cash flows of Liberty Property Trust for the six months ended June 30, 2013 and June 30, 2012	9
	Consolidated balance sheets of Liberty Property Limited Partnership at June 30, 2013 and December 31, 2012	10
	Consolidated statements of comprehensive income of Liberty Property Limited Partnership for the three months ended June 30, 2013 and June 30, 2012	11
	Consolidated statements of comprehensive income of Liberty Property Trust for the six months ended June 30, 2013 and June 30, 2012	12
	Consolidated statement of equity of Liberty Property Limited Partnership for the six months ended June 30, 2013	13
	Consolidated statements of cash flows of Liberty Property Limited Partnership for the six months ended June 30, 2013 and June 30, 2012	14
	Notes to consolidated financial statements of the Company	15
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

3

Index		Page
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures for Liberty Property Trust		43
Signatures for Liberty Property Limited Partnership		44
Exhibit Index		45
	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)
	XBRL Instance Document
	XBRL Taxonomy Extension Schema Document
	XBRL Taxonomy Extension Calculation Linkbase Document
	XBRL Taxonomy Extension Definition Linkbase Document
	XBRL Extension Labels Linkbase
	XBRL Taxonomy Extension Presentation Linkbase Document

4

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST

(Unaudited and in thousands, except share and unit amounts)

	June 30, 2013			December 31, 2012
ASSETS
Real estate:
Land and land improvements	$	978,101		$	899,801
Building and improvements	4,407,799			4,341,125
Less accumulated depreciation	(1,190,670		)	(1,164,756		)
Operating real estate	4,195,230			4,076,170
Development in progress	229,570			248,602
Land held for development	226,399			258,324
Net real estate	4,651,199			4,583,096
Cash and cash equivalents	61,679			38,356
Restricted cash	27,376			33,147
Accounts receivable	8,122			8,988
Deferred rent receivable	110,966			108,576
Deferred financing and leasing costs, net of accumulated amortization (2013, $137,652; 2012, $132,261)	142,442			137,359
Investments in and advances to unconsolidated joint ventures	175,314			169,021
Assets held for sale	—			7,880
Prepaid expenses and other assets	70,694			87,756
Total assets	$	5,247,792		$	5,174,179
LIABILITIES
Mortgage loans	$	307,087		$	302,855
Unsecured notes	2,259,142			2,258,751
Credit facility	145,000			92,000
Accounts payable	32,177			31,058
Accrued interest	20,006			20,164
Dividend and distributions payable	59,493			58,038
Other liabilities	156,356			185,956
Total liabilities	2,979,261			2,948,822
Noncontrolling interest - operating partnership - 301,483 preferred units outstanding as of June 30, 2013 and December 31, 2012	7,537			7,537
EQUITY
Shareholders’ equity
Common shares of beneficial interest, $.001 par value, 183,987,000 shares authorized; 122,783,015 (includes 1,249,909 in treasury) and 119,720,776 (includes 1,249,909 in treasury) shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively	123			119
Additional paid-in capital	2,802,908			2,687,701
Accumulated other comprehensive (loss) income	(1,767		)	2,900
Distributions in excess of net income	(551,102		)	(547,757		)
Common shares in treasury, at cost, 1,249,909 shares as of June 30, 2013 and December 31, 2012	(51,951		)	(51,951		)
Total shareholders’ equity	2,198,211			2,091,012
Noncontrolling interest – operating partnership
3,713,851 common units outstanding as of June 30, 2013 and December 31, 2012	59,765			60,223
1,290,000 preferred units outstanding as of December 31, 2012	—			63,264
Noncontrolling interest – consolidated joint ventures	3,018			3,321
Total equity	2,260,994			2,217,820
Total liabilities, noncontrolling interest - operating partnership and shareholders' equity	$	5,247,792		$	5,174,179

See accompanying notes.

5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF LIBERTY PROPERTY TRUST

(Unaudited and in thousands, except per share amounts)

	Three Months Ended
	June 30, 2013			June 30, 2012
OPERATING REVENUE
Rental	$	124,883		$	116,068
Operating expense reimbursement	53,221			48,426
Total operating revenue	178,104			164,494
OPERATING EXPENSE
Rental property	32,985			30,369
Real estate taxes	21,776			19,740
General and administrative	16,491			14,589
Depreciation and amortization	44,907			39,821
Total operating expenses	116,159			104,519
Operating income	61,945			59,975
OTHER INCOME (EXPENSE)
Interest and other income	2,371			2,265
Interest expense	(32,003		)	(30,328		)
Total other income (expense)	(29,632		)	(28,063		)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures	32,313			31,912
Gain on property dispositions	3,071			335
Income taxes	(660		)	(146		)
Equity in earnings of unconsolidated joint ventures	1,566			769
Income from continuing operations	36,290			32,870
Discontinued operations (including net gain on property dispositions of $7,625 and $2,981 for the three months ended June 30, 2013 and 2012, respectively)	6,953			4,810
Net income	43,243			37,680
Noncontrolling interest – operating partnership	(3,134		)	(3,569		)
Net income available to common shareholders	$	40,109		$	34,111
Net income	$	43,243		$	37,680
Other comprehensive income (loss)	40			(1,515		)
Total comprehensive income	43,283			36,165
Less: comprehensive income attributable to noncontrolling interest	(3,135		)	(3,522		)
Comprehensive income attributable to common shareholders	$	40,148		$	32,643
Earnings per common share
Basic:
Income from continuing operations	$	0.27		$	0.25
Income from discontinued operations	0.06			0.04
Income per common share – basic	$	0.33		$	0.29
Diluted:
Income from continuing operations	$	0.27		$	0.25
Income from discontinued operations	0.06			0.04
Income per common share – diluted	$	0.33		$	0.29
Distributions per common share	$	0.475		$	0.475
Weighted average number of common shares outstanding
Basic	120,081			116,683
Diluted	120,911			117,559
Amounts attributable to common shareholders
Income from continuing operations	$	33,362		$	29,449
Discontinued operations	6,747			4,662
Net income available to common shareholders	$	40,109		$	34,111

See accompanying notes.

6

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF LIBERTY PROPERTY TRUST

(Unaudited and in thousands, except per share amounts)

	Six Months Ended
	June 30, 2013			June 30, 2012
OPERATING REVENUE
Rental	$	247,658		$	232,289
Operating expense reimbursement	105,134			97,169
Total operating revenue	352,792			329,458
OPERATING EXPENSE
Rental property	64,533			59,906
Real estate taxes	42,900			39,651
General and administrative	36,321			31,781
Depreciation and amortization	89,524			80,187
Total operating expenses	233,278			211,525
Operating income	119,514			117,933
OTHER INCOME (EXPENSE)
Interest and other income	4,993			4,715
Interest expense	(63,729		)	(58,334		)
Total other income (expense)	(58,736		)	(53,619		)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures	60,778			64,314
Gain on property dispositions	4,871			858
Income taxes	(1,151		)	(324		)
Equity in earnings of unconsolidated joint ventures	3,323			1,685
Income from continuing operations	67,821			66,533
Discontinued operations (including net gain on property dispositions of $49,338 and $4,045 for the six months ended June 30, 2013 and 2012, respectively)	50,078			10,749
Net income	117,899			77,282
Noncontrolling interest – operating partnership	(6,551		)	(6,082		)
Net income available to common shareholders	$	111,348		$	71,200
Net income	$	117,899		$	77,282
Other comprehensive (loss) income	(4,812		)	802
Total comprehensive income	113,087			78,084
Less: comprehensive income attributable to noncontrolling interest	(6,406		)	(6,108		)
Comprehensive income attributable to common shareholders	$	106,681		$	71,976
Earnings per common share
Basic:
Income from continuing operations	$	0.53		$	0.52
Income from discontinued operations	0.40			0.09
Income per common share – basic	$	0.93		$	0.61
Diluted:
Income from continuing operations	$	0.53		$	0.52
Income from discontinued operations	0.40			0.09
Income per common share – diluted	$	0.93		$	0.61
Distributions per common share	$	0.95		$	0.95
Weighted average number of common shares outstanding
Basic	119,416			116,359
Diluted	120,229			117,165
Amounts attributable to common shareholders
Income from continuing operations	$	62,762		$	60,786
Discontinued operations	48,586			10,414
Net income available to common shareholders	$	111,348		$	71,200

See accompanying notes.

7

CONSOLIDATED STATEMENT OF EQUITY OF LIBERTY PROPERTY TRUST

(Unaudited and in thousands)

	COMMON SHARES OF BENEFICIAL INTEREST		ADDITIONAL PAID-IN CAPITAL		ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME			DISTRIBUTIONS IN EXCESS OF NET INCOME			COMMON SHARES HELD IN TREASURY			TOTAL LIBERTY PROPERTY TRUST SHAREHOLDERS’ EQUITY			NONCONTROLL- ING INTEREST - OPERATING PARTNERSHIP- COMMON UNITS			NONCONTROLL- ING INTEREST - OPERATING PARTNERSHIP – PREFERRED UNITS			NONCONTROLL- ING INTEREST - CONSOLIDATED JOINT VENTURES			TOTAL EQUITY
Balance at January 1, 2013	$	119	$	2,687,701	$	2,900		$	(547,757	)	$	(51,951	)	$	2,091,012		$	60,223		$	63,264		$	3,321		$	2,217,820
Net proceeds from the issuance of common shares	4		108,848		—			—			—			108,852			—			—			—			108,852
Net income	—		—		—			111,348			—			111,348			3,432			3,119			—			117,899
Distributions	—		—		—			(114,693		)	—			(114,693		)	(3,745		)	(1,883		)	(303		)	(120,624		)
Share-based compensation	—		6,359		—			—			—			6,359			—			—			—			6,359
Foreign currency translation adjustment	—		—		(4,667		)	—			—			(4,667		)	(145		)	—			—			(4,812		)
Redemption of noncontrolling interest - preferred units	—		—		—			—			—			—			—			(63,264		)	—			(63,264		)
Excess of preferred unit redemption over carrying amount	—		—		—			—			—			—			—			(1,236		)	—			(1,236		)
Balance at June 30, 2013	$	123	$	2,802,908	$	(1,767	)	$	(551,102	)	$	(51,951	)	$	2,198,211		$	59,765		$	—		$	3,018		$	2,260,994

See accompanying notes.

8

CONSOLIDATED STATEMENTS OF CASH FLOWS OF LIBERTY PROPERTY TRUST

(Unaudited and in thousands)

	Six Months Ended
	June 30, 2013			June 30, 2012
OPERATING ACTIVITIES
Net income	$	117,899		$	77,282
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	90,956			82,963
Amortization of deferred financing costs	2,348			2,397
Equity in earnings of unconsolidated joint ventures	(3,323		)	(1,685		)
Distributions from unconsolidated joint ventures	470			208
Gain on property dispositions	(54,209		)	(4,903		)
Share-based compensation	6,359			6,437
Changes in operating assets and liabilities:
Restricted cash	5,478			24,101
Accounts receivable	875			(4,241		)
Deferred rent receivable	(4,197		)	(3,398		)
Prepaid expenses and other assets	1,477			(1,526		)
Accounts payable	1,161			12,196
Accrued interest	(158		)	1,049
Other liabilities	(18,727		)	(30,230		)
Net cash provided by operating activities	146,409			160,650
INVESTING ACTIVITIES
Investment in operating properties - acquisitions	(133,500		)	(29,294		)
Investment in operating properties - other	(24,104		)	(27,898		)
Investments in and advances to unconsolidated joint ventures	(8,153		)	(2,575		)
Distributions from unconsolidated joint ventures	4,975			5,472
Net proceeds from disposition of properties/land	124,453			214,877
Net proceeds from (advances on) public reimbursement receivable/escrow	10,845			(78		)
Investment in development in progress	(47,843		)	(97,062		)
Investment in land held for development	(13,586		)	(10,791		)
Investment in deferred leasing costs	(15,166		)	(14,448		)
Net cash (used in) provided by investing activities	(102,079		)	38,203
FINANCING ACTIVITIES
Net proceeds from issuance of common shares	108,852			31,234
Redemption of preferred units	(64,500		)	(221,000		)
Proceeds from unsecured notes	—			400,000
Proceeds from mortgage loans	6,738			17,311
Repayments of mortgage loans	(2,506		)	(26,960		)
Proceeds from credit facility	269,550			453,200
Repayments on credit facility	(216,550		)	(592,600		)
Payment of deferred financing costs	(8		)	(4,272		)
Distribution paid on common shares	(113,241		)	(110,731		)
Distribution paid on units/to consolidated joint venture partners	(5,827		)	(10,130		)
Net cash used in financing activities	(17,492		)	(63,948		)
Net increase in cash and cash equivalents	26,838			134,905
(Decrease) increase in cash and cash equivalents related to foreign currency translation	(3,515		)	1,013
Cash and cash equivalents at beginning of period	38,356			18,204
Cash and cash equivalents at end of period	$	61,679		$	154,122

See accompanying notes.

9

CONSOLIDATED BALANCE SHEETS OF

LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands, except unit amounts)

	June 30, 2013			December 31, 2012
ASSETS
Real estate:
Land and land improvements	$	978,101		$	899,801
Building and improvements	4,407,799			4,341,125
Less accumulated depreciation	(1,190,670		)	(1,164,756		)
Operating real estate	4,195,230			4,076,170
Development in progress	229,570			248,602
Land held for development	226,399			258,324
Net real estate	4,651,199			4,583,096
Cash and cash equivalents	61,679			38,356
Restricted cash	27,376			33,147
Accounts receivable	8,122			8,988
Deferred rent receivable	110,966			108,576
Deferred financing and leasing costs, net of accumulated amortization (2013, $137,652; 2012, $132,261)	142,442			137,359
Investments in and advances to unconsolidated joint ventures	175,314			169,021
Assets held for sale	—			7,880
Prepaid expenses and other assets	70,694			87,756
Total assets	$	5,247,792		$	5,174,179
LIABILITIES
Mortgage loans	$	307,087		$	302,855
Unsecured notes	2,259,142			2,258,751
Credit facility	145,000			92,000
Accounts payable	32,177			31,058
Accrued interest	20,006			20,164
Distributions payable	59,493			58,038
Other liabilities	156,356			185,956
Total liabilities	2,979,261			2,948,822
Limited partners' equity - 301,483 preferred units outstanding as of June 30, 2013 and December 31, 2012	7,537			7,537
OWNERS’ EQUITY
General partner’s equity - 121,533,106 (net of 1,249,909 treasury units) and 118,470,867 (net of 1,249,909 treasury units) common units outstanding as of June 30, 2013 and December 31, 2012, respectively	2,198,211			2,091,012
Limited partners’ equity – 3,713,851 common units outstanding as of June 30, 2013 and December 31, 2012	59,765			60,223
Limited partners’ equity – 1,290,000 preferred units outstanding as of December 31, 2012	—			63,264
Noncontrolling interest – consolidated joint ventures	3,018			3,321
Total owners’ equity	2,260,994			2,217,820
Total liabilities, limited partners' equity and owners’ equity	$	5,247,792		$	5,174,179

See accompanying notes.

10

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF

LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands, except per unit amounts)

	Three Months Ended
	June 30, 2013			June 30, 2012
OPERATING REVENUE
Rental	$	124,883		$	116,068
Operating expense reimbursement	53,221			48,426
Total operating revenue	178,104			164,494
OPERATING EXPENSE
Rental property	32,985			30,369
Real estate taxes	21,776			19,740
General and administrative	16,491			14,589
Depreciation and amortization	44,907			39,821
Total operating expenses	116,159			104,519
Operating income	61,945			59,975
OTHER INCOME (EXPENSE)
Interest and other income	2,371			2,265
Interest expense	(32,003		)	(30,328		)
Total other income (expense)	(29,632		)	(28,063		)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures	32,313			31,912
Gain on property dispositions	3,071			335
Income taxes	(660		)	(146		)
Equity in earnings of unconsolidated joint ventures	1,566			769
Income from continuing operations	36,290			32,870
Discontinued operations (including net gain on property dispositions of $7,625 and $2,981 for the three months ended June 30, 2013 and 2012, respectively)	6,953			4,810
Net income	43,243			37,680
Preferred unit distributions	(672		)	(2,444		)
Excess of preferred unit redemption over carrying amount	(1,236		)	(40		)
Income available to common unitholders	$	41,335		$	35,196
Net income	$	43,243		$	37,680
Other comprehensive income (loss)	40			(1,515		)
Total comprehensive income	$	43,283		$	36,165
Earnings per common unit
Basic:
Income from continuing operations	$	0.27		$	0.25
Income from discontinued operations	0.06			0.04
Income per common unit - basic	$	0.33		$	0.29
Diluted:
Income from continuing operations	$	0.27		$	0.25
Income from discontinued operations	0.06			0.04
Income per common unit - diluted	$	0.33		$	0.29
Distributions per common unit	$	0.475		$	0.475
Weighted average number of common units outstanding
Basic	123,795			120,450
Diluted	124,625			121,326
Net income allocated to general partners	$	40,109		$	34,111
Net income allocated to limited partners	$	3,134		$	3,569

See accompanying notes.

11

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF

LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands, except per unit amounts)

	Six Months Ended
	June 30, 2013			June 30, 2012
OPERATING REVENUE
Rental	$	247,658		$	232,289
Operating expense reimbursement	105,134			97,169
Total operating revenue	352,792			329,458
OPERATING EXPENSE
Rental property	64,533			59,906
Real estate taxes	42,900			39,651
General and administrative	36,321			31,781
Depreciation and amortization	89,524			80,187
Total operating expenses	233,278			211,525
Operating income	119,514			117,933
OTHER INCOME (EXPENSE)
Interest and other income	4,993			4,715
Interest expense	(63,729		)	(58,334		)
Total other income (expense)	(58,736		)	(53,619		)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures	60,778			64,314
Gain on property dispositions	4,871			858
Income taxes	(1,151		)	(324		)
Equity in earnings of unconsolidated joint ventures	3,323			1,685
Income from continuing operations	67,821			66,533
Discontinued operations (including net gain on property dispositions of $49,338 and $4,045 for the six months ended June 30, 2013 and 2012, respectively)	50,078			10,749
Net income	117,899			77,282
Preferred unit distributions	(1,883		)	(7,479		)
Excess of preferred unit redemption over carrying amount	(1,236		)	3,689
Income available to common unitholders	$	114,780		$	73,492
Net income	$	117,899		$	77,282
Other comprehensive (loss) income	(4,812		)	801
Total comprehensive income	$	113,087		$	78,083
Earnings per common unit
Basic:
Income from continuing operations	$	0.53		$	0.52
Income from discontinued operations	0.40			0.09
Income per common unit - basic	$	0.93		$	0.61
Diluted:
Income from continuing operations	$	0.53		$	0.52
Income from discontinued operations	0.40			0.09
Income per common unit - diluted	$	0.93		$	0.61
Distributions per common unit	$	0.95		$	0.95
Weighted average number of common units outstanding
Basic	123,130			120,147
Diluted	123,943			120,953
Net income allocated to general partners	$	111,348		$	71,200
Net income allocated to limited partners	$	6,551		$	6,082

See accompanying notes.

12

CONSOLIDATED STATEMENT OF OWNERS’ EQUITY OF LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands)

	GENERAL PARTNER’S EQUITY			LIMITED PARTNERS’ EQUITY  – COMMON UNITS			LIMITED PARTNERS’ EQUITY  – PREFERRED UNITS			NONCONTROLLING INTEREST – CONSOLIDATED JOINT VENTURES			TOTAL OWNERS’ EQUITY
Balance at January 1, 2013	$	2,091,012		$	60,223		$	63,264		$	3,321		$	2,217,820
Contributions from partners	115,211			—			—			—			115,211
Distributions to partners	(114,693		)	(3,745		)	(1,883		)	(303		)	(120,624		)
Foreign currency translation adjustment	(4,667		)	(145		)	—			—			(4,812		)
Net income	111,348			3,432			3,119			—			117,899
Redemption of limited partners' preferred units	—			—			(63,264		)	—			(63,264		)
Excess of preferred unit redemption over carrying amount	—			—			(1,236		)	—			(1,236		)
Balance at June 30, 2013	$	2,198,211		$	59,765		$	—		$	3,018		$	2,260,994

See accompanying notes.

13

CONSOLIDATED STATEMENTS OF CASH FLOWS OF

LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands)

	Six Months Ended
	June 30, 2013			June 30, 2012
OPERATING ACTIVITIES
Net income	$	117,899		$	77,282
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	90,956			82,963
Amortization of deferred financing costs	2,348			2,397
Equity in earnings of unconsolidated joint ventures	(3,323		)	(1,685		)
Distributions from unconsolidated joint ventures	470			208
Gain on property dispositions	(54,209		)	(4,903		)
Share-based compensation	6,359			6,437
Changes in operating assets and liabilities:
Restricted cash	5,478			24,101
Accounts receivable	875			(4,241		)
Deferred rent receivable	(4,197		)	(3,398		)
Prepaid expenses and other assets	1,477			(1,526		)
Accounts payable	1,161			12,196
Accrued interest	(158		)	1,049
Other liabilities	(18,727		)	(30,230		)
Net cash provided by operating activities	146,409			160,650
INVESTING ACTIVITIES
Investment in operating properties - acquisitions	(133,500		)	(29,294		)
Investment in operating properties - other	(24,104		)	(27,898		)
Investments in and advances to unconsolidated joint ventures	(8,153		)	(2,575		)
Distributions from unconsolidated joint ventures	4,975			5,472
Net proceeds from disposition of properties/land	124,453			214,877
Net proceeds from (advances on) public reimbursement receivable/escrow	10,845			(78		)
Investment in development in progress	(47,843		)	(97,062		)
Investment in land held for development	(13,586		)	(10,791		)
Investment in deferred leasing costs	(15,166		)	(14,448		)
Net cash (used in) provided by investing activities	(102,079		)	38,203
FINANCING ACTIVITIES
Redemption of preferred units	(64,500		)	(221,000		)
Proceeds from unsecured notes	—			400,000
Proceeds from mortgage loans	6,738			17,311
Repayments of mortgage loans	(2,506		)	(26,960		)
Proceeds from credit facility	269,550			453,200
Repayments on credit facility	(216,550		)	(592,600		)
Payment of deferred financing costs	(8		)	(4,272		)
Capital contributions	108,852			31,234
Distributions to partners	(119,068		)	(120,861		)
Net cash used in financing activities	(17,492		)	(63,948		)
Net increase in cash and cash equivalents	26,838			134,905
(Decrease) increase in cash and cash equivalents related to foreign currency translation	(3,515		)	1,013
Cash and cash equivalents at beginning of period	38,356			18,204
Cash and cash equivalents at end of period	$	61,679		$	154,122

See accompanying notes.

14

Liberty Property Trust and Liberty Property Limited Partnership

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2013

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 its subsidiary, Liberty Property Limited Partnership, a Pennsylvania limited partnership (the “Operating Partnership” and, together 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 97.0% of the common equity of the Operating Partnership at June 30, 2013. 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. Unless otherwise indicated, the notes to the Consolidated Financial Statements apply to both the Trust and the Operating Partnership. The terms the "Company,” “we,” “our” and “us” mean the Trust and Operating Partnership collectively.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company 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 Company for the year ended December 31, 2012. 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 including reclassifying the accompanying consolidated balance sheets and statements of comprehensive income for assets held for sale and discontinued operations.

Principles of Consolidation

When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity (“VIE”).  If the entity is deemed a VIE, the Company then determines if the Company is deemed to be the primary beneficiary. The accounting standard for the consolidation of VIEs requires the Company to qualitatively assess if the Company was the primary beneficiary of the VIEs based on whether the Company had (i) the power to direct those matters that most significantly impacted the activities of the VIE and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.

The Company continuously assesses its determination of whether it is the primary beneficiary of a VIE, and whether or not the limited partners in an entity have substantive rights, more particularly if certain events occur that are likely to cause a change in the original determinations. The Company's assessment includes a review of applicable documents such as, but not limited to, applicable partnership agreements and management and leasing agreements to determine whether the Company has the ability to direct the business activities of the entities. The portion of the consolidated entities that is not owned by the Company is presented as non-controlling interest as of and during the periods consolidated. All intercompany accounts and transactions have been eliminated in consolidation.

The Company determined that Liberty/Parkway 8th & Walnut, LP is a VIE and should be consolidated as the Company is the primary beneficiary. This determination was based upon the Company's significant control over the final development and construction phases of the development property owned by the joint venture as well as the day to day management and operations of the property. The development property owned by the joint venture is expected to contain 153,000 square feet at a projected cost of $48.4 million. The Company has guaranteed the debt of Liberty/Parkway 8th & Walnut, LP which was approximately $41.3 million at June 30, 2013.

15

Note 2: Income per Common Share of the Trust

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

	For the Three Months Ended					For the Three Months Ended
	June 30, 2013					June 30, 2012
	Income (Numerator)		Weighted Average Shares (Denominator)	Per Share		Income (Numerator)		Weighted Average Shares (Denominator)	Per Share
Basic income from continuing operations
Income from continuing operations net of noncontrolling interest	$	33,362	120,081	$	0.27	$	29,449	116,683	$	0.25
Dilutive shares for long-term compensation plans	—		830			—		876
Diluted income from continuing operations
Income from continuing operations net of noncontrolling interest	$	33,362	120,911	$	0.27	$	29,449	117,559	$	0.25
Basic income from discontinued operations
Discontinued operations net of noncontrolling interest	$	6,747	120,081	$	0.06	$	4,662	116,683	$	0.04
Dilutive shares for long-term compensation plans	—		830			—		876
Diluted income from discontinued operations
Discontinued operations net of noncontrolling interest	$	6,747	120,911	$	0.06	$	4,662	117,559	$	0.04
Basic income per common share
Net income available to common shareholders	$	40,109	120,081	$	0.33	$	34,111	116,683	$	0.29
Dilutive shares for long-term compensation plans	—		830			—		876
Diluted income per common share
Net income available to common shareholders	$	40,109	120,911	$	0.33	$	34,111	117,559	$	0.29

16

	For the Six Months Ended					For the Six Months Ended
	June 30, 2013					June 30, 2012
	Income (Numerator)		Weighted Average Shares (Denominator)	Per Share		Income (Numerator)		Weighted Average Shares (Denominator)	Per Share
Basic income from continuing operations
Income from continuing operations net of noncontrolling interest	$	62,762	119,416	$	0.53	$	60,786	116,359	$	0.52
Dilutive shares for long-term compensation plans	—		813			—		806
Diluted income from continuing operations
Income from continuing operations net of noncontrolling interest	62,762		120,229	$	0.53	60,786		117,165	$	0.52
Basic income from discontinued operations
Discontinued operations net of noncontrolling interest	48,586		119,416	$	0.40	10,414		116,359	$	0.09
Dilutive shares for long-term compensation plans	—		813			—		806
Diluted income from discontinued operations
Discontinued operations net of noncontrolling interest	48,586		120,229	$	0.40	10,414		117,165	$	0.09
Basic income per common share
Net income available to common shareholders	111,348		119,416	$	0.93	71,200		116,359	$	0.61
Dilutive shares for long-term compensation plans	—		813			—		806
Diluted income per common share
Net income available to common shareholders	$	111,348	120,229	$	0.93	$	71,200	117,165	$	0.61

Dilutive shares for long-term compensation plans represent the unvested common shares outstanding during the periods as well as the dilutive effect of outstanding options. The amount of anti-dilutive options excluded from the computation of diluted income per common share for the three and six months ended June 30, 2013 were 625,000 and 773,000, respectively, as compared to 953,000 and 925,000, respectively, for the same periods in 2012.

During the three and six months ended June 30, 2013, 120,000 and 477,000 common shares were issued upon the exercise of options. During the year ended December 31, 2012, 841,000 common shares were issued upon the exercise of options.

17

Note 3: Income per Common Unit of the Operating Partnership

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

	For the Three Months Ended						For the Three Months Ended
	June 30, 2013						June 30, 2012
	Income (Numerator)			Weighted Average Units (Denominator)	Per Unit		Income (Numerator)			Weighted Average Units (Denominator)	Per Unit
Income from continuing operations	$	36,290					$	32,870
Less: Preferred unit distributions	(672		)				(2,444		)
Excess of preferred unit redemption over carrying amount	(1,236		)				(40		)
Basic income from continuing operations
Income from continuing operations available to common unitholders	$	34,382		123,795	$	0.27	$	30,386		120,450	$	0.25
Dilutive units for long-term compensation plans	—			830			—			876
Diluted income from continuing operations
Income from continuing operations available to common unitholders	$	34,382		124,625	$	0.27	$	30,386		121,326	$	0.25
Basic income from discontinued operations
Discontinued operations	$	6,953		123,795	$	0.06	$	4,810		120,450	$	0.04
Dilutive units for long-term compensation plans	—			830			—			876
Diluted income from discontinued operations
Discontinued operations	$	6,953		124,625	$	0.06	$	4,810		121,326	$	0.04
Basic income per common unit
Income available to common unitholders	$	41,335		123,795	$	0.33	$	35,196		120,450	$	0.29
Dilutive units for long-term compensation plans	—			830			—			876
Diluted income per common unit
Income available to common unitholders	$	41,335		124,625	$	0.33	$	35,196		121,326	$	0.29

18

	For the Six Months Ended						For the Six Months Ended
	June 30, 2013						June 30, 2012
	Income (Numerator)			Weighted Average Units (Denominator)	Per Unit		Income (Numerator)			Weighted Average Units (Denominator)	Per Unit
Income from continuing operations	$	67,821					$	66,533
Less: Preferred unit distributions	(1,883		)				(7,479		)
Excess of preferred unit (redemption over carrying amount) carrying amount over redemption	(1,236		)				3,689
Basic income from continuing operations
Income from continuing operations available to common unitholders	64,702			123,130	$	0.53	62,743			120,147	$	0.52
Dilutive units for long-term compensation plans	—			813			—			806
Diluted income from continuing operations
Income from continuing operations available to common unitholders	64,702			123,943	$	0.53	62,743			120,953	$	0.52
Basic income from discontinued operations
Discontinued operations	50,078			123,130	$	0.40	10,749			120,147	$	0.09
Dilutive units for long-term compensation plans	—			813			—			806
Diluted income from discontinued operations
Discontinued operations	50,078			123,943	$	0.40	10,749			120,953	$	0.09
Basic income per common unit
Income available to common unitholders	114,780			123,130	$	0.93	73,492			120,147	$	0.61
Dilutive units for long-term compensation plans	—			813			—			806
Diluted income per common unit
Income available to common unitholders	$	114,780		123,943	$	0.93	$	73,492		120,953	$	0.61

Dilutive units for long-term compensation plans represent the unvested common units outstanding during the periods as well as the dilutive effect of outstanding options. The amount of anti-dilutive options excluded from the computation of diluted income per common unit for the three and six months ended June 30, 2013 were 625,000 and 773,000, respectively, as compared to 953,000 and 925,000, respectively, for the same periods in 2012.

During the three and six months ended June 30, 2013, 120,000 and 477,000 common units were issued upon the exercise of options. During the year ended December 31, 2012, 841,000 common units were issued upon the exercise of options.

Note 4: Other Comprehensive Income (Loss) of the Trust

The functional currency of the Trust's United Kingdom operations is pounds sterling. The Trust translates the financial statements for the United Kingdom operations into US dollars. Gains and losses resulting from this translation are included in accumulated other comprehensive income (loss) as a separate component of shareholders' equity. A proportionate amount of gain or loss is allocated to noncontrolling interest - operating partnership - common units. Accumulated other comprehensive income (loss) consists solely of the foreign currency translation adjustments described above. Upon sale or upon complete or substantially complete liquidation of the Trust's foreign investment, the gain or loss on the sale will include the cumulative translation adjustments that have been previously recorded in accumulated other comprehensive income (loss) and noncontrolling interest - operating partnership - common units.

19

Note 5: Other Comprehensive Income (Loss) of the Operating Partnership

The functional currency of the Operating Partnership’s United Kingdom operations is pounds sterling. The Operating Partnership translates the financial statements for the United Kingdom operations into US dollars. Gains and losses resulting from this translation are included in general partner’s equity and limited partners’ equity – common units. Upon sale or upon complete or substantially complete liquidation of the Operating Partnership's 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 and limited partners’ equity – common units.

Note 6: 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 are considered the Company’s reportable segments:

REGIONS	MARKETS
Northeast	Southeastern PA; Lehigh/Central PA; New Jersey; Maryland
Central	Minnesota; Chicago/Milwaukee; Houston; Arizona
South	Richmond/Hampton Roads; Carolinas; Jacksonville; Orlando; South Florida; Tampa
Metro	Philadelphia; Metro Washington, D.C.
United Kingdom	County of Kent; West Midlands; Cambridge

The Company evaluates the performance of its reportable segments based on net operating income. Net operating income includes operating revenue from external customers, real estate taxes, amortization of lease transaction costs and other operating expenses which relate directly to the management and operation of the assets within each reportable segment.

The Company's accounting policies for the segments are the same as those used in the Company's consolidated financial statements. There are no material inter-segment transactions.

20

The operating information by reportable segment is as follows (in thousands):

		For the Three Months Ended						For the Six Months Ended
		June 30,						June 30,
		2013			2012			2013			2012
Operating revenue
	Northeast - Southeastern PA	$	40,389		$	41,690		$	81,443		$	83,885
	Northeast - Lehigh / Central PA	24,681			23,913			49,358			47,991
	Northeast - Other	14,660			14,454			30,054			31,854
	Central	34,129			28,827			66,529			60,971
	South	53,768			51,746			107,330			105,758
	Metro	9,824			8,236			19,587			16,424
	United Kingdom	1,120			1,104			2,220			2,265
Segment-level operating revenue		178,571			169,970			356,521			349,148
Reconciliation to total operating revenue
	Discontinued operations	(436		)	(5,281		)	(3,955		)	(19,663		)
	Other	(31		)	(195		)	226			(27		)
Total operating revenue		$	178,104		$	164,494		$	352,792		$	329,458
Net operating income
	Northeast - Southeastern PA	$	22,255		$	24,814		$	44,868		$	49,984
	Northeast - Lehigh / Central PA	16,550			16,558			33,218			32,753
	Northeast - Other	7,845			7,628			16,167			16,733
	Central	18,384			15,544			37,307			33,291
	South	33,341			31,316			66,658			63,971
	Metro	4,728			5,986			11,525			11,615
	United Kingdom	(321		)	(121		)	(455		)	(349		)
Segment-level net operating income		102,782			101,725			209,288			207,998
Reconciliation to income from continuing operations
	Interest expense (1)	(32,138		)	(30,911		)	(64,220		)	(61,815		)
	Depreciation/amortization expense (2)	(29,061		)	(25,812		)	(58,368		)	(51,464		)
	Gain on property dispositions	3,071			335			4,871			858
	Equity in earnings of unconsolidated joint ventures	1,566			769			3,323			1,685
	General and administrative expense (2)	(8,945		)	(8,936		)	(22,821		)	(20,486		)
	Discontinued operations excluding gain on property dispositions	672			(1,829		)	(740		)	(6,704		)
	Income taxes (2)	(645		)	(109		)	(1,136		)	(195		)
	Other	(1,012		)	(2,362		)	(2,376		)	(3,344		)
Income from continuing operations		$	36,290		$	32,870		$	67,821		$	66,533

(1) Includes interest on discontinued operations.

(2) Excludes costs which are included in determining segment-level net operating income.

21

During the six months ended June 30, 2013, the Company realized proceeds of $126.0 million from the sale of seven operating properties. The Company's total assets by reportable segment as of June 30, 2013 and December 31, 2012 were as follows (in thousands):

		June 30, 2013		December 31, 2012
Total assets
	Northeast - Southeastern PA	$	803,432	$	816,437
	Northeast - Lehigh / Central PA	779,078		780,182
	Northeast - Other	382,070		388,446
	Central	1,102,707		1,073,631
	South	1,435,576		1,455,805
	Metro	567,987		478,835
	United Kingdom	120,343		138,025
	Other	56,599		42,818
Total assets		$	5,247,792	$	5,174,179

Note 7: Accounting for the Impairment or Disposal of Long-Lived Assets

The operating results and gain on disposition of real estate for properties sold and held for sale are reflected in the consolidated statements of comprehensive income as discontinued operations. Prior period financial statements have been adjusted for discontinued operations. The proceeds from dispositions of operating properties for the three and six months ended June 30, 2013 were $51.4 million and $126.0 million, respectively, as compared to $204.3 million and $210.8 million, respectively, for the same periods in 2012.

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):

	For the Three Months Ended						For the Six Months Ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Revenues	$	436		$	5,281		$	3,955		$	19,663
Operating expenses	(656		)	(2,173		)	(1,634		)	(8,049		)
Interest and other income	3			304			13			643
Interest expense	(135		)	(583		)	(491		)	(3,481		)
Depreciation and amortization	(320		)	(1,000		)	(1,103		)	(2,072		)
Income (loss) before gain on property dispositions	(672		)	1,829			740			6,704
Gain on property dispositions	7,625			2,981			49,338			4,045
Income from discontinued operations	$	6,953		$	4,810		$	50,078		$	10,749

Interest expense is allocated to discontinued operations. The allocation of interest expense to discontinued operations was based on the ratio of net assets sold and held for sale (without continuing involvement) to the sum of total net assets plus consolidated debt.

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Asset Impairment

During the three and six months ended June 30, 2013, the Company recognized $535,000 in impairment charges. These impairments primarily related to the Company's South reportable segment and are included in discontinued operations in the Company’s consolidated statements of comprehensive income. During the three and six months ended June 30, 2012, the Company recognized impairment charges of $537,000 and $594,000, respectively. These impairments primarily related to the Company's Central reportable segment and are included in discontinued operations in the Company's consolidated statements of comprehensive income. The Company determined these impairments through a comparison of the aggregate future cash flows (including quoted offer prices, a Level I input according to the fair value hierarchy established by the FASB in Topic 820, “Fair Value Measurements and Disclosures") 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 were no additional valuation adjustments necessary at June 30, 2013.

Note 8: Investments in Unconsolidated Joint Ventures

In October 2012, Blythe Valley JV Sarl, a joint venture in which the Company held an interest, defaulted on its mortgage loan. The mortgage loan was secured by all of the operating properties and land of the joint venture. During the three months ended March 31, 2013, the lender appointed a receiver, effectively taking control of the assets securing its loan. During the year ended December 31, 2012 the joint venture recorded an impairment charge, the Company's share of which was sufficient to bring the Company's investment in the joint venture to zero.

Note 9: Continuous Equity Offering

The Company has a continuous equity offering program in place for up to $200 million of equity. During the three and six months ended June 30, 2013, the Company sold 1.2 million and 1.9 million common shares, respectively, through this program. The aggregate proceeds from the offering for the three and six months ended June 30, 2013 of $50.4 million and $75.0 million, respectively, were used to pay down outstanding borrowings under the Company's unsecured credit facility and for general corporate purposes.

Note 10: Noncontrolling Interests of the Trust

Noncontrolling interests in the accompanying financial statements represent the interests of the common and preferred units in the Operating Partnership not held by the Trust. In addition, noncontrolling interests include third-party ownership interests in consolidated joint venture investments.

Common units

The common units outstanding of the Operating Partnership not held by the Trust as of June 30, 2013 have the same economic characteristics as common shares of the Trust. The 3,713,851 outstanding common units of the Operating Partnership at such date not held by the Trust 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 3,713,851 outstanding common units based on the closing price of the common shares of the Trust at June 30, 2013 was $137.3 million.

Preferred units

The Trust had no outstanding cumulative redeemable preferred units of the Operating Partnership (the “Equity Preferred Units”) as of June 30, 2013. During the three months ended June 30, 2013, the Company redeemed $20.0 million of outstanding 7.00% Series E Cumulative Redeemable Preferred Units, $17.5 million of outstanding 6.65% Series F Cumulative Redeemable Preferred Units and $27.0 million of outstanding 6.70% Series G Cumulative Redeemable Preferred Units, all at par. In connection with these redemptions, the Company wrote off $1.2 million in origination costs. These amounts are included in noncontrolling interest - operating partnership in the Trust's consolidated statements of comprehensive income.

Note 11: Limited Partners' Equity and Noncontrolling Interest of the Operating Partnership

Limited partners' equity in the accompanying financial statements represents the interests of the common and preferred units in the Operating Partnership not held by the Trust. The Operating Partnership's noncontrolling interest includes third-party ownership interests in consolidated joint venture investments.

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Common units

Common units relates to limited partnership interests of the Operating Partnership issued in connection with the formation of the Operating Partnership and certain subsequent acquisitions. The common units outstanding as of June 30, 2013 have the same economic characteristics as common shares of the Trust. The 3,713,851 outstanding common units at such date are the limited partners' equity - common units held by persons and entities other than the Trust, the general partner of the Operating Partnership, which holds a number of common units equal to the number of outstanding common shares of beneficial interest. Both the common units held by the Trust and the common units held by persons and entities other than the Trust are counted in the weighted average number of common units outstanding during any given period. The common units share proportionately in the net income or loss and in any distributions of the Operating Partnership and are exchangeable into the same number of common shares of the Trust. The market value of the 3,713,851 outstanding common units at June 30, 2013 based on the closing price of the common shares of the Company at June 30, 2013 was $137.3 million.

Preferred units

The Operating Partnership had no outstanding cumulative redeemable preferred units as of June 30, 2013. During the three months ended June 30, 2013, the Company redeemed $20.0 million of outstanding 7.00% Series E Cumulative Redeemable Preferred Units, $17.5 million of outstanding 6.65% Series F Cumulative Redeemable Preferred Units and $27.0 million of outstanding 6.70% Series G Cumulative Redeemable Preferred Units, all at par. In connection with these redemptions, the Company wrote off $1.2 million in origination costs.

Note 12: Noncontrolling Interest - Operating Partnership/Limited Partners' Equity - Preferred Units

As of June 30, 2013, the following cumulative preferred units of the Operating Partnership were outstanding:

ISSUE	AMOUNT		UNITS	LIQUIDATION PREFERENCE	DIVIDEND RATE
	(in 000’s)
Series I-2	$	7,537	301	$25	6.25	%

The preferred units are callable at the holder's option at any time and are callable at the Operating Partnership's option after a stated period of time for cash.

Note 13: Disclosure of Fair Value of Financial Instruments

The following disclosure of estimated fair value was determined by management using available market information and appropriate valuation methodologies. However, considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the following estimates are not necessarily indicative of the amounts the Company could have realized on disposition of the financial instruments at June 30, 2013 and December 31, 2012. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The carrying value of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued interest, dividend and distributions payable and other liabilities are reasonable estimates of fair value because of the short-term nature of these instruments. The carrying value of the outstanding amounts under the Company's credit facility is also a reasonable estimate of fair value because interest rates float at a rate based on LIBOR.

The Company used a discounted cash flow model to determine the estimated fair value of its debt as of June 30, 2013.  This is a Level 3 fair value calculation. The inputs used in preparing the discounted cash flow model include actual maturity dates and scheduled cash flows as well as estimates for market value discount rates.  The Company updates the discounted cash flow model on a quarterly basis to reflect any changes in the Company's debt holdings and changes to discount rate assumptions.  

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The only significant unobservable input in the discounted cash flow model is the discount rate.  For the fair value of the Company's unsecured notes, the Company uses a discount rate based on the indicative new issue pricing provided by lenders.  For the Company's mortgage loans, the Company uses an estimate based on its knowledge of the mortgage market. The weighted average discount rate for the combined unsecured notes and mortgage loans used as of June 30, 2013 was approximately 3.63% compared to 2.87% at December 31, 2012. An increase in the discount rate used in the discounted cash flow model would result in a decrease to the fair value of the Company's long-term debt.  A decrease in the discount rate used in the discounted cash flow model would result in an increase to the fair value of the Company's long-term debt.

The following summarizes the changes in the fair value of the Company's long-term debt from December 31, 2012 to June 30, 2013 (in thousands):

	Carrying Value			Fair Value			Fair Value Above (Below) Carrying Value
Long-term debt at December 31, 2012 (1)	$	2,561,606		$	2,841,917		$	280,311
Payoffs and amortization of long-term debt (1)	(2,115		)	(2,115		)
New long-term debt (1)	6,738			6,738
Changes in fair value assumptions (1)				(154,305		)	(154,305		)
Long-term debt at June 30, 2013 (1)	$	2,566,229		$	2,692,235		$	126,006

(1) Does not include the Company's credit facility.

Note 14: Commitments and Contingencies

Environmental Matters

Substantially all of the Company's properties and land were subject to Phase I Environmental Assessments and when appropriate Phase II Environmental Assessments (collectively, the “Environmental Assessments”) obtained in contemplation of their acquisition by the Company. The Environmental Assessments did not reveal, nor is the Company aware of, any non-compliance with environmental laws, environmental liability or other environmental claim that the Company believes would likely have a material adverse effect on the Company.

Operating Ground Lease Agreements

Future minimum rental payments under the terms of all non-cancelable operating ground leases under which the Company is the lessee, as of June 30, 2013, were as follows (in thousands):

Year	Amount
2013	$	79
2014	158
2015	153
2016	153
2017	153
2018 through 2054	5,085
Total	$	5,781

Operating ground lease expense for the three and six months ended June 30, 2013 were $42,000 and $84,000, respectively, as compared to $41,000 and $81,000, respectively, for the same periods in 2012.

Legal Matters

From time to time, the Company is a party to a variety of legal proceedings, claims and assessments arising in the normal course of business. The Company believes that as of June 30, 2013 there were no legal proceedings, claims or assessments expected to have a material adverse effect on the Company’s business or financial statements.

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Other

As of June 30, 2013, the Company had letter of credit obligations of $4.9 million. The Company believes that the likelihood is remote that there will be a draw upon these letter of credit obligations.

As of June 30, 2013, the Company had 16 buildings under development. These buildings are expected to contain, when completed, a total of 5.8 million square feet of leasable space and represent an anticipated aggregate investment of $410.6 million. At June 30, 2013, development in progress totaled $229.6 million. In addition, as of June 30, 2013, the Company had invested $9.3 million in deferred leasing costs related to these development buildings.

As of June 30, 2013, the Company was committed to $11.8 million in improvements on certain buildings and land parcels.

As of June 30, 2013, the Company was committed to $42.4 million in future land purchases.

As of June 30, 2013, the Company was obligated to pay for tenant improvements not yet completed for a maximum of $31.6 million.

The Company maintains cash and cash equivalents at financial institutions. The combined account balances at each institution typically exceed FDIC insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company believes the risk is not significant.

Note 15: Supplemental Disclosure to Statements of Cash Flows

The following are supplemental disclosures to the statements of cash flows for the six months ended June 30, 2013 and 2012 (amounts in thousands):

	2013		2012
Write-off of fully depreciated property and deferred costs	$	17,784	$	12,783
Write-off of depreciated property and deferred costs due to sale	$	49,618	$	94,762
Write-off of origination costs relating to preferred unit redemptions	$	1,236	$	2,811

Amounts paid in cash for deferred leasing costs incurred in connection with signed leases with tenants are paid in conjunction with improving (acquiring) property, plant and equipment. Such costs are not contained within net real estate. However, they are integral to the completion of a tenant lease and ultimately are related to the improvement and thus the value of the Company’s property, plant and equipment. They are therefore included in investing activities in the Company’s statements of cash flows.

Note 16: Subsequent Events

On July 31, 2013, the Company entered into a definitive agreement to acquire all of the outstanding partnership interests in the operating partnership of the Cabot Industrial Value Fund III (the "Fund") for a purchase price of $1.475 billion. The Fund owns 23 million square feet of industrial properties.  The Company expects to finance the purchase price in part through the assumption of approximately $230 million in outstanding indebtedness and has received a commitment for a bridge loan of approximately $1.27 billion to finance the remainder of the purchase price, which it may replace with a combination of equity financing and permanent debt.

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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 June 30, 2013, the Company owned and operated 340 industrial and 238 office properties (the “Wholly Owned Properties in Operation”) totaling 66.8 million square feet. In addition, as of June 30, 2013, the Company owned 16 properties under development, which when completed are expected to comprise 5.8 million square feet (the “Wholly Owned Properties under Development”) and 1,259 acres of developable land, substantially all of which is zoned for commercial use. Additionally, as of June 30, 2013, the Company had an ownership interest, through unconsolidated joint ventures, in 46 industrial and 38 office properties totaling 13.7 million square feet (the “JV Properties in Operation” and, together with the Wholly Owned Properties in Operation, the “Properties in Operation”). The Company also has an ownership interest through unconsolidated joint ventures in 518 acres of developable land, substantially all of which is zoned for commercial use. The Company refers to the Wholly Owned Properties under Development and the Properties in Operation collectively as the "Properties."

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 maximizing rental rates and controlling costs. The Company pursues development opportunities that it believes will create value and yield acceptable returns. The Company also acquires properties that it believes will create long-term value, and disposes of properties that no longer fit within the Company’s strategic objectives or in situations where it can optimize cash proceeds. In the foreseeable future, the Company expects its strategy with respect to product and market selection to favor industrial and metro-office properties and markets with strong demographic and economic fundamentals.

The Company’s operating results depend primarily upon income from rental operations and are substantially influenced by rental demand for the Properties in Operation. During the six months ended June 30, 2013, the Company operated in a national economic environment characterized by high unemployment, low growth in GDP and low interest rates. Although this low interest rate environment has created opportunity for the Company to borrow money at a low rate of interest, the economy is in a state of transition and although the downward pressure on rents has lessened, the economy is still in a general state of recovery. During the three and six months ended June 30, 2013, straight line rents on renewal and replacement leases were on average 1.1%higher and 1.3% lower, respectively, than rents on expiring leases. The Company believes that straight line rents on renewal and replacement leases for 2013 will on average be 2% to 7% lower than rents on expiring leases. During the three and six months ended June 30, 2013, the Company successfully leased 7.1 million square feet and 12.4 million square feet, respectively, and, as of that date, attained occupancy of 93.0% for the Wholly Owned Properties in Operation and 92.2% for the JV Properties in Operation for a combined occupancy of 92.8% for the Properties in Operation. At December 31, 2012, occupancy for the Wholly Owned Properties in Operation was 92.5% and for the JV Properties in Operation was 90.2% for a combined occupancy for the Properties in Operation of 92.1%.

Consistent with its strategy, the Company intends to increase its investment in industrial and metro-office properties and decrease its investment in suburban office properties. For similar investment dollars, cash flow from industrial properties is generally less than cash flow generated from suburban office properties. Such transactions result in a reduction of net cash provided by operating activities. The Company anticipates that for 2013, in the aggregate, the net cash provided by operating activities, less customary capital expenditures and leasing transaction costs, will be less than dividend distributions.  The Company will continue to evaluate these circumstances in light of its dividend distribution policy.

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WHOLLY OWNED CAPITAL ACTIVITY

Acquisitions

During the three and six months ended June 30, 2013, the Company acquired one property for a Total Investment of $142.2 million. This property, which contains 291,000 square feet of leasable space, was 77.4% leased as of June 30, 2013.For 2013, the Company had anticipated that wholly owned property acquisitions would range from $100 million to $200 million. The Company continually evaluates opportunities that could bring the Total Investment in acquisitions above this range.  Such opportunities include both single asset and portfolio acquisitions.  In this regard, the Company has identified a portfolio opportunity and on July 31, 2013 it entered into a definitive agreement to acquire all of the outstanding partnership issues in the operating partnership of the Cabot Industrial Value Fund III (the "Fund") for a purchase price of $1.475 billion.  The Fund owns 23 million square feet of industrial properties.  The Company expects to finance the purchase price in part through the assumption of approximately $230 million in outstanding indebtedness and has received a commitment for a bridge loan of approximately $1.27 billion to finance the remainder of the purchase price, which it may replace with a combination of equity financing and permanent debt.

Dispositions

Disposition activity allows the Company to, among other things, (1) reduce its holdings in certain markets and product types within a market consistent with the Company's strategy; (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 June 30, 2013, the Company realized proceeds of $51.4 million from the sale of six properties representing 498,000 square feet. During six months ended June 30, 2013, the Company realized proceeds of $126.0 million from the sale of seven properties representing 939,000 square feet. For 2013, the Company anticipates that wholly owned property dispositions will range from $150 million to $250 million. Additionally, the Company evaluates opportunities that could bring disposition activity above the guidance range. Such opportunities include both single asset and portfolio dispositions. In conjunction with its planned acquisition of the Fund, the Company expects to dispose of an additional $150 million of operating properties.

Development

During the three months ended June 30, 2013, the Company brought into service one Wholly Owned Property under Development representing 139,000 square feet and a Total Investment of $28.1 million. During the six months ended June 30, 2013, the Company brought into service two Wholly Owned Properties under Development representing 347,000 square feet and a Total Investment of $108.2 million. During the three months ended June 30, 2013, the Company initiated five Wholly Owned Properties under Development with a projected Total Investment of $139.2 million. During the six months ended June 30, 2013, the Company initiated eight Wholly Owned Properties under Development with a projected Total Investment of $208.9 million. As of June 30, 2013, the Company had 16 Wholly Owned Properties under Development with a projected Total Investment of $410.6 million. For 2013, the Company anticipates that wholly owned development deliveries will total between $300 million and $400 million and that during 2013 it will commence development on properties with an expected aggregate Total Investment in a range from $300 million to $400 million.

“Total Investment” for a property is defined as the property's purchase price plus closing costs (in the case of acquisitions if vacant) and management's estimate, as determined at the time of acquisition, of the cost of necessary building improvements and lease transaction costs in the case of acquisitions, or land costs and land improvement, building improvement and lease transaction costs in the case of development projects, and, where appropriate, other development costs and carrying costs.

UNCONSOLIDATED JOINT VENTURE CAPITAL ACTIVITY

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

Acquisitions

During the three and six months ended June 30, 2013, none of the unconsolidated joint ventures in which the Company held an interest acquired any properties. The Company does not anticipate that any unconsolidated joint ventures in which the Company holds an interest will acquire any properties in 2013.

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Dispositions

During the three and six months ended June 30, 2013, none of the unconsolidated joint ventures in which the Company held an interest sold any properties. The Company does not anticipate that any unconsolidated joint ventures in which the Company holds an interest will dispose of any properties in 2013.

Development

During the three and six months ended June 30, 2013, none of the unconsolidated joint ventures in which the Company held an interest brought any properties into service or began any development activities. As of June 30, 2013, the Company has no unconsolidated joint venture properties under development. For 2013, the Company does not anticipate that any unconsolidated joint ventures in which the Company holds an interest will bring any development properties into service and anticipates that these joint ventures will commence development on properties with an expected Total Investment of approximately $10 million.

PROPERTIES IN OPERATION

The composition of the Company’s Properties in Operation as of June 30, 2013 and 2012 was as follows (square feet in thousands):

	Net Rent Per Square Foot(1)				Straight Line Rent and Operating Expense Reimbursement Per Square Foot(2)				Total Square Feet		Percent Occupied
	June 30,				June 30,				June 30,		June 30,
	2013		2012		2013		2012		2013	2012	2013		2012
Wholly Owned Properties in Operation:
Industrial-Distribution	$	4.44	$	4.46	$	5.76	$	5.85	39,417	35,660	95.8	%	93.8	%
Industrial-Flex	$	9.04	$	9.13	$	13.05	$	13.32	8,952	8,846	90.3	%	88.6	%
Office	$	15.28	$	14.71	$	23.74	$	22.65	18,478	18,649	88.1	%	88.7	%
	$	7.88	$	8.03	$	11.42	$	11.67	66,847	63,155	93.0	%	91.6	%
JV Properties in Operation: (3)
Industrial-Distribution	$	3.52	$	3.97	$	5.56	$	5.53	9,270	9,269	94.3	%	85.3	%
Industrial-Flex	$	24.70	$	26.42	$	22.93	$	28.00	151	151	69.5	%	96.0	%
Office	$	24.05	$	24.33	$	35.62	$	34.90	4,285	4,744	88.3	%	89.3	%
	$	9.85	$	11.25	$	14.71	$	15.92	13,706	14,164	92.2	%	86.7	%
Properties in Operation:
Industrial-Distribution	$	4.27	$	4.37	$	5.72	$	5.79	48,687	44,929	95.6	%	92.0	%
Industrial-Flex	$	9.24	$	9.45	$	13.18	$	13.59	9,103	8,997	89.9	%	88.7	%
Office	$	16.94	$	16.67	$	25.98	$	25.15	22,763	23,393	88.1	%	88.8	%
	$	8.21	$	8.59	$	11.98	$	12.41	80,553	77,319	92.8	%	90.7	%

(1) Net rent represents the contractual rent per square foot at June 30, 2013 or 2012 for tenants in occupancy. Net rent does not include the tenant's obligation to pay property operating expenses and real estate taxes. If a tenant at June 30, 2013 or 2012 was within a free rent period its rent would equal zero for the purposes of this metric.

(2) Straight line rent and operating expense reimbursement represents the straight line rent including operating expense recoveries per square foot at June 30, 2013 or 2012 for tenants in occupancy.

(3) JV Properties in Operation represents the 84 properties owned by unconsolidated joint ventures in which the Company has an interest.

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The table below details the leasing activity during the six months ended June 30, 2013:

	Six Months Ended
	June 30, 2013
	Total Square Feet
Vacancy Activity
Vacancy at January 1, 2013	6,449,115
Acquisition vacant space	65,693
Disposition vacant space	(331,941		)
Expirations	10,064,390
Property structural changes/other	(58,399		)
Leasing activity	(10,410,294		)
Vacancy at June 30, 2013	5,778,564
Leasing Transactions
Lease transaction costs per square foot (1)	$	3.25

(1) Transaction costs include tenant improvement and lease transaction costs.

Geographic segment data for the three and six months ended June 30, 2013 and 2012 are included in Note 6 to the Company’s financial statements.

Forward-Looking Statements

When used throughout this report, the words “believes,” “anticipates,” “estimates” 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 global, 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 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, 2012 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 six months ended June 30, 2013, there were no material changes to these policies.

Results of Operations

The following discussion is based on the consolidated financial statements of the Company. It compares the results of operations of the Company for the three and six months ended June 30, 2013 with the results of operations of the Company for the three and six months ended June 30, 2012. As a result of the varying levels of development, acquisition and disposition activities by the Company in 2013 and 2012, 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 consolidated financial statements and notes included elsewhere in this report.

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Comparison of Three and Six Months Ended June 30, 2013 to Three and Six Months Ended June 30, 2012

Overview

The Company’s average gross investment in operating real estate owned for the three months ended June 30, 2013increased to $5,304.3 million from $4,715.3 million for the three months ended June 30, 2012. For the six months ended June 30, 2013 the Company's average gross investment in operating real estate owned increased to $5,250.1 million from $4,656.4 million for the six months ended June 30, 2012. This increase in operating real estate resulted in increases in rental revenue, operating expense reimbursement, rental property expenses, real estate taxes and depreciation and amortization expense. Rental property expense includes utilities, insurance, janitorial, landscaping, snow removal and other costs necessary to maintain a property.

Total operating revenue increased to $178.1 million for the three months ended June 30, 2013 from $164.5 million for the three months ended June 30, 2012. The $13.6 millionincrease was primarily due to an increase in rental income, which was primarily due to the increase in average gross investment in operating real estate as well as an increase in termination fees, which totaled $736,000 for the three months ended June 30, 2013 compared to $593,000 for the same period in 2012. Total operating revenue increased to $352.8 million for the six months ended June 30, 2013 from $329.5 million for the six months ended June 30, 2012. The $23.3 millionincrease was primarily due to an increase in rental income, which was primarily due to the increase in average gross investment in operating real estate. This increase was partially offset by a decrease in termination fees, which totaled $1.3 million for the six months ended June 30, 2013 compared to $2.2 million for the same period in 2012.

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 and if a property is sold, related termination fees are included in discontinued operations. See “Other” below.

Segments

The Company evaluates the performance of the Wholly Owned Properties in Operation in terms of net operating income by reportable segment (see Note 6 to the Company’s financial statements for a reconciliation of this measure to income from continuing operations). The following table identifies changes to net operating income in reportable segments (dollars in thousands):

	Three Months Ended						Percentage Increase (Decrease)				Six Months Ended						Percentage Increase (Decrease)
	June 30,										June 30,
	2013			2012							2013			2012
Northeast
– Southeastern PA	$	22,255		$	24,814		(10.3	%)	(1	)	$	44,868		$	49,984		(10.2	%)	(1	)
– Lehigh/Central PA	16,550			16,558			—	%			33,218			32,753			1.4	%
– Other	7,845			7,628			2.8	%			16,167			16,733			(3.4	%)
Central	18,384			15,544			18.3	%	(2	)	37,307			33,291			12.1	%	(2	)
South	33,341			31,316			6.5	%			66,658			63,971			4.2	%
Metro	4,728			5,986			(21.0	%)	(3	)	11,525			11,615			(0.8	%)
United Kingdom	(321		)	(121		)	165.3	%			(455		)	(349		)	30.4	%
Segment-level net operating income	$	102,782		$	101,725		1.0	%			$	209,288		$	207,998		0.6	%

(1) The decrease was primarily due to the write-off of leasing transaction costs related to the early termination of a lease during the three months ended June 30, 2013.

(2) The increase was primarily due to an increase in average gross investment in operating real estate.

(3) The decrease was primarily due to acquisition costs incurred during the three months ended June 30, 2013. Similar costs were not incurred during the three months ended June 30, 2012.

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Same Store

Property level operating income, exclusive of termination fees, for the Same Store properties increased to $113.8 million for the three months ended June 30, 2013 compared to $113.3 million for the three months ended June 30, 2012 on a straight line basis (which recognizes rental revenue evenly over the life of the lease), and increased to $113.9 million for the three months ended June 30, 2013 compared to $112.0 million for the three months ended June 30, 2012 on a cash basis. Property level operating income, exclusive of termination fees, for the Same Store properties increased to $228.6 million for the six months ended June 30, 2013 compared to $226.8 million for the six months ended June 30, 2012 on a straight line basis, and increased to $228.1 million for the six months ended June 30, 2013 compared to $224.5 million for the six months ended June 30, 2012 on a cash basis.

The same store results were affected by changes in occupancy and rental rates as detailed below for the respective periods:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Average occupancy %	93.2		%	91.8		%	93.1		%	92.0		%
Average rental rate - cash basis (1)	$	7.96		$	7.98		$	7.96		$	8.00
Average rental rate - straight line rent and operating expense reimbursement (2)	$	11.51		$	11.46		$	11.55		$	11.46

(1) Represents the average contractual rent per square foot for the three or six months ended June 30, 2013 for tenants in occupancy in Same Store properties. Net rent does not include the tenant's obligation to pay property operating expenses and real estate taxes. If a tenant was within a free rent period its rent would equal zero for purposes of this metric.

(2) Straight line rent and operating expense reimbursement represents the average straight line rent including operating expense recoveries per square foot for the three or six months ended June 30, 2013 or 2012 for tenants in occupancy.

Management generally considers the performance of the Same Store properties to be a useful financial performance measure because the results are directly comparable from period to period. Management further believes that the performance comparison should exclude termination fees since they are more event-specific and are not representative of ordinary performance results. In addition, Same Store property level operating income 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 540 properties totaling approximately 61.2 million square feet owned on January 1, 2012. Acquisitions and completed development during the year ended December 31, 2012 and the six months ended June 30, 2013 are excluded from the Same Store properties. Acquisitions and completed development are included in Same Store when they have been purchased in the case of acquisitions, and are stabilized in the case of completed development, prior to the beginning of the earliest period presented in the comparison. The 50 properties sold during 2012 and the seven properties sold during the six months ended June 30, 2013 are also excluded.

Set forth below is a schedule comparing the property level operating income, on a straight line basis and on a cash basis, for the Same Store properties for the three and six months ended June 30, 2013 and 2012. 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” below), 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).

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	Three Months Ended						Six Months Ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Same Store:
Rental revenue	$	114,997		$	114,945		$	230,450		$	229,373
Operating expenses:
Rental property expense	31,545			30,744			62,998			61,351
Real estate taxes	19,576			19,069			38,864			38,399
Operating expense recovery	(49,969		)	(48,203		)	(100,061		)	(97,131		)
Unrecovered operating expenses	1,152			1,610			1,801			2,619
Property level operating income	113,845			113,335			228,649			226,754
Less straight line rent	(11		)	1,332			537			2,273
Cash basis property level operating income	$	113,856		$	112,003		$	228,112		$	224,481
Reconciliation of non-GAAP financial measure – Same Store:
Cash basis property level operating income	$	113,856		$	112,003		$	228,112		$	224,481
Straight line rent	(11		)	1,332			537			2,273
Property level operating income	113,845			113,335			228,649			226,754
Property level operating income (loss) - properties purchased or developed subsequent to January 1, 2012	8,762			457			15,435			908
Termination fees	736			593			1,275			2,239
General and administrative expense	(16,491		)	(14,589		)	(36,321		)	(31,781		)
Depreciation and amortization expense	(44,907		)	(39,821		)	(89,524		)	(80,187		)
Other income (expense)	(29,632		)	(28,063		)	(58,736		)	(53,619		)
Gain on property dispositions	3,071			335			4,871			858
Income taxes	(660		)	(146		)	(1,151		)	(324		)
Equity in earnings of unconsolidated joint ventures	1,566			769			3,323			1,685
Discontinued operations (1)	6,953			4,810			50,078			10,749
Net income	$	43,243		$	37,680		$	117,899		$	77,282

(1)Includes Termination Fees of $40,000 for the three and six months ended June 30, 2013 and $110,000 and $644,000 for the three and six months ended June 30, 2012, respectively.

General and Administrative

General and administrative expenses increased to $16.5 million for the three months ended June 30, 2013 compared to $14.6 million for the three months ended June 30, 2012 and increased to $36.3 million for the six months ended June 30, 2013 compared to $31.8 million for the six months ended June 30, 2012. These increases were primarily due to increases in acquisition-related expenditures and compensation. General and administrative expenses include salaries, wages and incentive compensation for general and administrative staff along with related costs, consulting, marketing, public company expenses, costs associated with the acquisition of properties and other general and administrative costs.

Depreciation and Amortization

Depreciation and amortization increased to $44.9 million for the three months ended June 30, 2013 from $39.8 million for the three months ended June 30, 2012 and increased to $89.5 million for the six months ended June 30, 2013 from $80.2 million for the six months ended June 30, 2012. These increases were primarily due to the increased investment in operating real estate.

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Interest Expense

Interest expense increased to $32.0 million for the three months ended June 30, 2013 from $30.3 million for the three months ended June 30, 2012. The increase was primarily due to the increase in the average debt outstanding to $2,637.5 million for the three months ended June 30, 2013 from $2,421.2 million for the three months ended June 30, 2012. This increase was partially offset by a decrease in the weighted average interest rate to 5.1% for the three months ended June 30, 2013 from 5.4% for the three months ended June 30, 2012 as well as an increase in interest capitalized during the three months ended June 30, 2013 due to an increase in development activity. Interest expense increased to $63.7 million for the six months ended June 30, 2013 from $58.3 million for the six months ended June 30, 2012. The increase was primarily due to the increase in the average debt outstanding to $2,644.1 million for the six months ended June 30, 2013 from $2,355.1 million for the six months ended June 30, 2012. This increase was partially offset by a decrease in the weighted average interest rate to 5.1% for the six months ended June 30, 2013 from 5.5% for the six months ended June 30, 2012 as well as an increase in interest capitalized during the six months ended June 30, 2013 due to an increase in development activity.

Interest expense allocated to discontinued operations for the three months ended June 30, 2013 and 2012 was $135,000 and $583,000, respectively, and for the six months ended June 30, 2013 and 2012 was $491,000 and $3.5 million, respectively. These decreases were due to the level of dispositions in 2013 and 2012.

Other

Gain on property dispositions increased to $3.1 million for the three months ended June 30, 2013 from $335,000 for the three months ended June 30, 2012 and increased to $4.9 million for the six months ended June 30, 2013 from $858,000 for the six months ended June 30, 2012.

Income from discontinued operations increased to $7.0 million for the three months ended June 30, 2013 from $4.8 million for the three months ended June 30, 2012 and increased to $50.1 million for the six months ended June 30, 2013 from $10.7 million for the six months ended June 30, 2012. These increases were primarily due to the gain recognized on sales which was $7.6 million for the three months ended June 30, 2013 compared to $3.0 million for the same period in 2012 and $49.3 million for the six months ended June 30, 2013 compared to $4.0 million for the same period in 2012.

As a result of the foregoing, the Company’s net income increased to $43.2 million for the three months ended June 30, 2013 from $37.7 million for the three months ended June 30, 2012 and increased to $117.9 million for the six months ended June 30, 2013 from $77.3 million for the six months ended June 30, 2012.

Liquidity and Capital Resources

Overview

The Company seeks to maintain a conservative balance sheet and pursue a strategy of financial flexibility. The Company expects to invest $200 million to $300 million to finance its investment in development properties in 2013. The Company's remaining 2013 debt maturities total approximately $7.5 million. The Company had anticipated that it would invest $100 million to $200 million in acquisitions in 2013. The Company evaluates opportunities that could bring acquisitions above this range.  Such opportunities include both single asset and portfolio transactions.  In this regard, the Company has identified a portfolio opportunity and on July 31, 2013 it entered into a definitive agreement to acquire all of the outstanding partnership interests in the operating partnership of the Cabot Industrial Value Fund III (the "Fund") for a purchase price of $1.475 billion.  The Fund owns 23 million square feet of industrial properties.  The Company expects to finance the purchase price in part through the assumption of approximately $230 million in outstanding indebtedness and has received a commitment for a bridge loan of approximately $1.27 billion which it may replace with a combination of equity financing and permanent debt. In addition, the Company expects to realize approximately $150 million to $250 million in proceeds from property sales in 2013. In conjunction with its planned acquisition of the Fund, the Company expects to dispose of an additional $150 million of operating properties. The Company believes that proceeds from property sales, its available cash, borrowing capacity from its Credit Facility (as defined below) and its other sources of capital including the public debt and equity markets will provide it with sufficient funds to satisfy these obligations.

Activity

As of June 30, 2013, the Company had cash and cash equivalents of $89.1 million, including $27.4 million in restricted cash.

Net cash provided by operating activities decreased to $146.4 million for the six months ended June 30, 2013 from $160.7 million for the six months ended June 30, 2012. This $14.3 million decrease was primarily due to a reduction in restricted cash during 2012 related to the distribution of land sales proceeds in the United Kingdom. There were no similar distributions during 2013.

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Net cash flow provided by operating activities is the primary source of liquidity to fund distributions to shareholders and for recurring capital expenditures and leasing transaction costs for the Company’s Wholly Owned Properties in Operation.

Net cash used in investing activities was $102.1 million for the six months ended June 30, 2013 compared to net cash provided by investing activities of $38.2 million for the six months ended June 30, 2012. This $140.3 million change primarily resulted from an increase in cash invested in acquisition properties as well as a decrease in net proceeds from the dispositions of properties/land and a decrease in investment in development in progress.

Net cash used in financing activities decreased to $17.5 million for the six months ended June 30, 2013 compared to $63.9 million for the six months ended June 30, 2012. This $46.4 million decrease was primarily due to debt and equity activity during the respective periods. The changes in common shares and net debt activity was reflective of the level of preferred unit redemptions as well as the level of investing activities during the respective periods. Net cash used in financing activities includes proceeds from the issuance of equity and debt, net of debt repayments, equity repurchases and distributions.

The Company sold 1.2 million and 1.9 million common shares, respectively, through its continuous offering program during the three and six months ended June 30, 2013. The aggregate proceeds for the three and six months ended June 30, 2013 of $50.4 million and $75.0 million, respectively, were used to pay down outstanding borrowings under the Company's unsecured credit facility and for general corporate purposes.

The Company funds its development activities and acquisitions with long-term capital sources and proceeds from the disposition of properties. For the six months ended June 30, 2013, a portion of these activities were funded through a $500 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., Standard and Poor’s Ratings Group and Fitch, Inc. Based on the Company’s existing ratings, the interest rate for borrowings under the Credit Facility at June 30, 2013 was LIBOR plus 107.5 basis points.

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 June 30, 2013, the Company’s debt to gross assets ratio was 42.1% and for the six months ended June 30, 2013, the fixed charge coverage ratio was 3.0x. Debt to gross assets equals total long-term debt and borrowings under the Credit Facility divided by total assets plus accumulated depreciation including accumulated depreciation on assets held for sale. The fixed charge coverage ratio equals income from continuing operations before gain on 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 June 30, 2013, $307.1 million in mortgage loans and $2,259.1 million in unsecured notes were outstanding with a weighted average interest rate of 5.20%. The interest rates on $2,550.2 million of mortgage loans and unsecured notes are fixed and range from 3.0% to 7.5%. The weighted average remaining term for the mortgage loans and unsecured notes is 5.7 years.

The scheduled principal amortization and maturities of the Company’s mortgage loans, unsecured notes and the Credit Facility and the related weighted average interest rates as of June 30, 2013 are as follows (in thousands, except percentages):

	MORTGAGES										WEIGHTED AVERAGE INTEREST RATE
	PRINCIPAL AMORTIZATION		PRINCIPAL MATURITIES		UNSECURED NOTES		CREDIT FACILITY		TOTAL
2013	$	3,016	$	4,506	$	—	$	—	$	7,522	5.56	%
2014	6,701		2,696		199,915		—		209,312		5.65	%
2015	6,326		44,469		315,813		145,000		511,608		3.99	%
2016	5,195		182,318		299,254		—		486,767		6.10	%
2017	4,074		2,349		295,769		—		302,192		6.60	%
2018	2,074		—		99,964		—		102,038		7.44	%
2019	2,078		3,121		—		—		5,199		3.62	%
2020	2,028		2,995		349,399		—		354,422		4.74	%
2021	1,947		—		—		—		1,947		4.78	%
2022 & thereafter	29,248		1,946		699,028		—		730,222		3.84	%
	$	62,687	$	244,400	$	2,259,142	$	145,000	$	2,711,229	4.98	%

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General

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 operating property dispositions. As a result, year over year comparison of Funds from operations reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, providing perspective not immediately apparent from net income. In addition, management believes that Funds from operations provides useful information to the investment community about the Company’s financial performance when compared to other REITs since Funds from operations is generally recognized as the standard for reporting the operating performance of a REIT. Funds from operations available to common shareholders is defined by NAREIT as net income (computed in accordance with generally accepted accounting principles (“GAAP”)), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Funds from operations available to common shareholders does not represent net income or cash flows from operations as defined by GAAP and does not necessarily indicate that cash flows will be sufficient to fund cash needs. It should not be considered as an alternative to net income as an indicator of the Company’s operating performance or to cash flows as a measure of liquidity. Funds from operations available to common shareholders also does not represent cash flows generated from operating, investing or financing activities as defined by GAAP.

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Funds from operations (“FFO”) available to common shareholders for the three and six months ended June 30, 2013 and 2012 are as follows (in thousands, except per share amounts):

	Three Months Ended						Six Months Ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Reconciliation of net income to FFO - basic:
Net income available to common shareholders	$	40,109		$	34,111		$	111,348		$	71,200
Basic - income available to common shareholders	40,109			34,111			111,348			71,200
Basic - income available to common shareholders per weighted average share	$	0.33		$	0.29		$	0.93		$	0.61
Adjustments:
Depreciation and amortization of unconsolidated joint ventures	3,301			3,554			6,698			7,170
Depreciation and amortization	44,804			40,420			89,776			81,466
Gain on property dispositions	(7,658		)	(2,979		)	(49,364		)	(4,083		)
Noncontrolling interest share in addback for depreciation and amortization and gain on property dispositions	(1,199		)	(1,264		)	(1,399		)	(2,637		)
Funds from operations available to common shareholders – basic	$	79,357		$	73,842		$	157,059		$	153,116
Basic Funds from operations available to common shareholders per weighted average share	$	0.66		$	0.63		$	1.32		$	1.32
Reconciliation of net income to FFO - diluted:
Net income available to common shareholders	$	40,109		$	34,111		$	111,348		$	71,200
Diluted - income available to common shareholders	40,109			34,111			111,348			71,200
Diluted - income available to common shareholders per weighted average share	$	0.33		$	0.29		$	0.93		$	0.61
Adjustments:
Depreciation and amortization of unconsolidated joint ventures	3,301			3,554			6,698			7,170
Depreciation and amortization	44,804			40,420			89,776			81,466
Gain on property dispositions	(7,658		)	(2,979		)	(49,364		)	(4,083		)
Noncontrolling interest less preferred share distributions and excess of carrying amount over preferred unit redemption	1,226			1,085			3,432			2,292
Funds from operations available to common shareholders - diluted	$	81,782		$	76,191		$	161,890		$	158,045
Diluted Funds from operations available to common shareholders per weighted average share	$	0.66		$	0.63		$	1.31		$	1.31
Reconciliation of weighted average shares:
Weighted average common shares - all basic calculations	120,081			116,683			119,416			116,359
Dilutive shares for long term compensation plans	830			876			813			806
Diluted shares for net income calculations	120,911			117,559			120,229			117,165
Weighted average common units	3,714			3,767			3,714			3,788
Diluted shares for Funds from operations calculations	124,625			121,326			123,943			120,953

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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. 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, 2012.

Item 4. Controls and Procedures

Controls and Procedures with respect to the Trust

(a) Evaluation of Disclosure Controls and Procedures

The Trust’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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the Trust’s Chief Executive Officer and Chief Financial Officer have concluded that the Trust’s disclosure controls and procedures, as of the end of the period covered by this report, were effective to provide reasonable assurance that information required to be disclosed by the Trust 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 Trust’s management, including its principal executive and principal financial officers, or persons performing similar function, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting

There were no changes in the Trust’s internal control over financial reporting during the quarter ended June 30, 2013 that have materially affected or are reasonably likely to materially affect the Trust’s internal control over financial reporting.

Controls and Procedures with respect to the Operating Partnership

(a) Evaluation of Disclosure Controls and Procedures

The Trust’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, on behalf of the Trust in its capacity as the general partner of the Operating Partnership, evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the Trust’s Chief Executive Officer and Chief Financial Officer have concluded that the Operating Partnership’s disclosure controls and procedures, as of the end of the period covered by this report, were effective to provide reasonable assurance that information required to be disclosed by the Operating Partnership 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 Trust’s management, including its principal executive and principal financial officers, or persons performing similar function, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting

There were no changes in the Operating Partnership’s internal control over financial reporting during the quarter ended June 30, 2013 that have materially affected or are reasonably likely to materially affect the Operating Partnership’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not a party to any material litigation as of June 30, 2013.

Item 1A. Risk Factors

We have entered into a definitive agreement to acquire all of the outstanding partnership interests in the operating partnership of the Cabot Industrial Value Fund III for a purchase price of $1.475 billion. The market price of our common shares and our earnings per share may decline as a result of the transaction.

The market price of our common share may decline as a result of, among other things, our proposed acquisition of all of the outstanding partnership interests in the operating partnership of the Cabot Industrial Value Fund III for a purchase price of $1.475 billion (the “Cabot Acquisition”) if we do not achieve the perceived benefits of the transaction as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the transaction on our financial results is not consistent with the expectations of financial or industry analysts. In addition, the failure to achieve expected benefits and unanticipated costs relating to the transaction could reduce our future financial performance.

The Cabot Acquisition is subject to a number of conditions which, if not satisfied or waived, would adversely impact our ability to complete the transaction, and unexpected delays in the consummation of the transaction could impact our ability to timely achieve benefits associated with the transaction.

The Cabot Acquisition is expected to close during October of 2013 assuming that all of the conditions in the purchase agreement are satisfied or waived. The partnership interest purchase agreement provides that either we or the Cabot sellers may terminate the purchase agreement if the acquisition has not occurred by October 16, 2013, subject to extension in certain circumstances (provided that this right will not be available to a party whose failure to fulfill its obligation under the purchase agreement or breach of its representations/warranties under the purchase agreement is the principal cause of the failure to close on or before this date).

The Cabot Acquisition is subject to certain closing conditions, including, among other things, (a) obtaining certain lender consents, and (b) the accuracy of the other parties' representations and warranties and compliance with covenants, subject in each case to materiality standards. There can be no assurance that any condition to the closing of the transaction will be satisfied or waived, if permitted, or that any event, development or change will not occur. Therefore, there can be no assurance with respect to the timing of the closing of the transaction or whether the transaction will be completed on the currently contemplated terms, other terms or at all.

Failure to complete the transaction could negatively impact our operations and business and financial results.

If the Cabot Acquisition is not completed for any reason, we may be subject to several risks, including, but not limited to, the following:

• the requirement that, under certain circumstances, including if the Cabot sellers terminate the agreement because we breach the purchase agreement, we may be required to forfeit a signing deposit of $25 million;

• the incurrence of substantial legal, accounting and financial advisory costs relating to the transaction that are payable whether or not the Cabot Acquisition is completed;

• we will have issued a significant number of additional common shares without realizing a corresponding increase in earnings and cash flow from acquiring the Cabot properties;

• the focus of our management being directed toward the Cabot Acquisition and integration planning instead of on our core business and other opportunities that could have been beneficial to us; and

• we will have broad authority to use the net proceeds of the offering of our common shares that we plan to conduct to fund a portion of the purchase price for the Cabot Acquisition for other general corporate purposes, including the acquisition and development of industrial and office properties, other opportunistic investments and the repayment of debt that may not be accretive to our results of operations.

If the Cabot Acquisition is not completed, these risks may materially adversely affect our business, financial condition, operating results and cash flows, including our ability to service debt and to make distributions to our stockholders.

If we are unable to successfully integrate the operations of the acquired properties, our business and financial results may be negatively affected.

39

The Cabot Acquisition poses risks associated with acquisition activities. Such risks include, without limitation, the following:

• the inability to successfully integrate the operations, maintain consistent standards, controls, policies and procedures, or realize the anticipated benefits of the Cabot Acquisition within the anticipated timeframe or at all;

• acquired properties may fail to perform as expected;

• certain acquired properties are located in new markets where we face risks associated with an incomplete knowledge or understanding of the local market, a limited number of established business relationships in the area and a relative unfamiliarity with local governmental and permitting procedures;

• diversion of our management's attention away from other business concerns; and

• the acquired properties may subject us to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle it, which could adversely affect our cash flow.

We cannot assure you that we will be able to complete the integration without encountering difficulties or that any such difficulties will not have a material adverse effect on us. Failure to realize the intended benefits of the Cabot Acquisition could have a material adverse effect on our financial condition, results of operations and the market price of our common shares.

As a result of the additional indebtedness incurred to consummate the Cabot Acquisition, we may experience a potential material adverse effect on our financial condition and results of operations.

The consummation of the Cabot Acquisition is not subject to a financing condition. We plan to fund the cash portion of the acquisition consideration through a combination of net proceeds from the offering of our common shares that we plan to conduct to fund a portion of the purchase price for the Cabot Acquisition and borrowings under a new term loan facility and/or a bridge loan facility, both of which we are in the process of finalizing. Our incurrence of new indebtedness could have adverse consequences on our business, such as:

• requiring us to use a substantial portion of our cash flow from operations to service our indebtedness, which would reduce the available cash flow to fund working capital, capital expenditures, development projects and other general corporate purposes and reduce cash for distributions;

• limiting our ability to obtain additional financing to fund our working capital needs, acquisitions, capital expenditures or other debt service requirements or for other purposes;

• increasing the costs of incurring additional debt;

• increasing our exposure to floating interest rates;

• limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions;

• restricting us from making strategic acquisitions, developing properties or exploiting business opportunities;

• restricting the way in which we conduct our business because of financial and operating covenants in the agreements governing our existing and future indebtedness;

• exposing us to potential events of default (if not cured or waived) under covenants contained in our debt instruments that could have a material adverse effect on our business, financial condition and operating results;

• increasing our vulnerability to a downturn in general economic conditions; and

• limiting our ability to react to changing market conditions in our industry.

The impact of any of these potential adverse consequences could have a material adverse effect on our results of operations, financial condition and liquidity.

We may engage in financing activities including sales of equity offerings that could be dilutive.

As part of our financing of the Cabot Acquisition, we plan to conduct a public offering of our common shares. After giving effect to the issuance of common shares in such offering, the receipt of the expected net proceeds and the use of those proceeds, such offering could have a dilutive effect on our expected earnings per share and funds from operations (or FFO) per share for the year ending December 31, 2013. The actual effect and amount cannot be determined at this time and will be based on numerous factors.

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

None.

Item 3. Defaults upon Senior Securities

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None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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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.)
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Extension Labels Linkbase.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

________________________

*    Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LIBERTY PROPERTY TRUST

/s/ WILLIAM P. HANKOWSKY	July 31, 2013
William P. Hankowsky	Date
Chairman of the Board of Trustees, President and Chief Executive Officer (Principal Executive Officer)
/s/ GEORGE J. ALBURGER, JR.	July 31, 2013
George J. Alburger, Jr.	Date
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

43

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LIBERTY PROPERTY LIMITED PARTNERSHIP

BY:	Liberty Property Trust
	General Partner
/s/ WILLIAM P. HANKOWSKY		July 31, 2013
William P. Hankowsky		Date
Chairman of the Board of Trustees, President and Chief Executive Officer (Principal Executive Officer)
/s/ GEORGE J. ALBURGER, JR.		July 31, 2013
George J. Alburger, Jr.		Date
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

44

EXHIBIT INDEX

EXHIBIT NO.
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.)
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Extension Labels Linkbase.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

______________________

45