##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission
file numbers:
    1-13130 (Liberty Property Trust)1-13132 (Liberty Property Limited Partnership)
 
 LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP
 
 (Exact name of registrants as specified in their governing documents)
 MARYLAND(Liberty Property Trust)PENNSYLVANIA(Liberty Property Limited Partnership)
    
    23-7768996
23-2766549(State or other jurisdiction
of incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
 500 Chesterfield ParkwayMalvern, Pennsylvania
    
    19355(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants Telephone Number, Including Area Code (610) 648-1700
  þ o
  þ o o
  o þ




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##### 



Liberty Property Trust/Liberty Property Limited Partnership
Form 10-Q for the period ended March 31, 2006
 Index
    
    
    
    PagePart I.
    
    Financial InformationItem 1.
    
    Financial Statements (unaudited)Condensed consolidated balance sheets of Liberty Property Trust at March 31, 2006
and December 31, 2005
    
    
    3Condensed consolidated statements of operations of Liberty Property Trust for the
three months ended March 31, 2006 and March 31, 2005
    
    
    4Condensed consolidated statements of cash flows of Liberty Property Trust for the
three months ended March 31, 2006 and March 31, 2005
    
    
    5Notes to condensed consolidated financial statements of Liberty Property Trust
    
    
    6Condensed consolidated balance sheets of Liberty Property Limited Partnership at
March 31, 2006 and December 31, 2005
    
    
    13Condensed consolidated statements of operations of Liberty Property Limited
Partnership for the three months ended March 31, 2006 and March 31, 2005
    
    
    14Condensed consolidated statements of cash flows of Liberty Property Limited
Partnership for the three months ended March 31, 2006 and March 31, 2005
    
    
    15Notes to condensed consolidated financial statements of Liberty Property Limited
Partnership
    
    
    16Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    28Part II.
    
    Other Information
    
    
    29Signatures for Liberty Property Trust
    
    
    31Signatures for Liberty Property Limited Partnership
    
    
    32Exhibit Index
    
    
    33LIBERTY PROPERTY TRUST EXECUTIVE COMPENSATION PLANCERTIFICATIONS OF CEO OF LIBERTY PROPERTY TRUST RULE 13a-14(a)CERTIFICATIONS OF CFO OF LIBERTY PROPERTY TRUST RULE 13a-14(a)CERTIFICATIONS OF CEO AS GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIPCERTIFICATIONS OF CFO AS GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIPCERTIFICATIONS OF CEO OF LIBERTY PROPERTY TRUST RULE 13a-14(b)CERTIFICATIONS OF CFO OF LIBERTY PROPERTY TRUST RULE 13a-14(a)CERTIFICATIONS OF CEO AS GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIPCERTIFICATIONS OF CFO AS GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP
  2




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##### Table of Contents



Part I: Financial Information
 
 Item 1: Financial Statements
 
 CONDENSED CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST
 (In thousands, except share amounts)
 March 31, 2006
    
    
    December 31, 2005(Unaudited)ASSETSReal estate:Land and land improvements
    
    $
    638,838
    
    
    $
    629,962Building and improvements
    
    
    3,722,988
    
    
    
    3,730,481Less accumulated depreciation
    
    
    (766,465
    )
    
    
    (748,818
    )Operating real estate
    
    
    3,595,361
    
    
    
    3,611,625Development in progress
    
    
    353,190
    
    
    
    324,924Land held for development
    
    
    167,876
    
    
    
    158,653Net real estate
    
    
    4,116,427
    
    
    
    4,095,202Cash and cash equivalents
    
    
    43,133
    
    
    
    61,629Restricted cash
    
    
    19,376
    
    
    
    29,085Accounts receivable, net of allowance
    
    
    27,692
    
    
    
    14,761Deferred rent receivable
    
    
    70,144
    
    
    
    72,818Deferred financing and leasing costs, net of accumulated amortization
(2006, $112,472; 2005, $106,752)
    
    
    119,098
    
    
    
    121,085Investments in unconsolidated joint ventures
    
    
    34,416
    
    
    
    33,522Assets held for sale
    
    
    
    
    
    
    12,654Prepaid expenses and other assets
    
    
    71,849
    
    
    
    56,773Total assets
    
    $
    4,502,135
    
    
    $
    4,497,529LIABILITIESMortgage loans
    
    $
    217,837
    
    
    $
    238,728Unsecured notes
    
    
    1,755,000
    
    
    
    1,755,000Credit facility
    
    
    245,000
    
    
    
    255,450Accounts payable
    
    
    35,905
    
    
    
    32,919Accrued interest
    
    
    26,766
    
    
    
    34,892Dividend payable
    
    
    56,772
    
    
    
    56,490Other liabilities
    
    
    147,923
    
    
    
    161,735Total liabilities
    
    
    2,485,203
    
    
    
    2,535,214Minority interest
    
    
    254,829
    
    
    
    253,133SHAREHOLDERS EQUITYCommon shares of beneficial interest, $.001 par value, 191,200,000
shares authorized, 88,858,042 (includes 59,100 in treasury) and
88,415,764 (includes 59,100 in treasury) shares issued and
outstanding as of March 31, 2006 and December 31, 2005, respectively
    
    
    88
    
    
    
    88Additional paid-in capital
    
    
    1,815,713
    
    
    
    1,799,068Accumulated other comprehensive income
    
    
    10,361
    
    
    
    9,906Distributions in excess of net income
    
    
    (62,732
    )
    
    
    (98,553
    )Common shares in treasury, at cost, 59,100 shares as of March 31, 2006
and December 31, 2005
    
    
    (1,327
    )
    
    
    (1,327
    )Total shareholders equity
    
    
    1,762,103
    
    
    
    1,709,182Total liabilities and shareholders equity
    
    $
    4,502,135
    
    
    $
    4,497,529
  3




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##### Table of Contents



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
 (Unaudited and in thousands, except per share amounts)
 Three Months EndedMarch 31, 2006
    
    
    March 31, 2005OPERATING REVENUERental
    
    $
    117,940
    
    
    $
    113,585Operating expense reimbursement
    
    
    50,838
    
    
    
    48,430Total operating revenue
    
    
    168,778
    
    
    
    162,015OPERATING EXPENSERental property
    
    
    36,894
    
    
    
    37,334Real estate taxes
    
    
    17,664
    
    
    
    15,592General and administrative
    
    
    10,019
    
    
    
    8,290Depreciation and amortization
    
    
    36,693
    
    
    
    33,187Total operating expenses
    
    
    101,270
    
    
    
    94,403Operating income
    
    
    67,508
    
    
    
    67,612OTHER INCOME (EXPENSE)Interest and other income
    
    
    1,951
    
    
    
    1,892Interest expense
    
    
    (32,052
    )
    
    
    (30,272
    )Total other income (expense)
    
    
    (30,101
    )
    
    
    (28,380
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    37,407
    
    
    
    39,232Gain on property dispositions, including impairment
    
    
    45
    
    
    
    (280
    )Income taxes
    
    
    (375
    )
    
    
    (534
    )Minority interest
    
    
    (4,691
    )
    
    
    (4,139
    )Equity in earnings of unconsolidated joint ventures
    
    
    175
    
    
    
    2,020Income from continuing operations
    
    
    32,561
    
    
    
    36,299Discontinued operations, net of minority interest (including net gain on
property dispositions of $59,530 and $7,051 for the three months ended
March 31, 2006 and 2005, respectively)
    
    
    57,866
    
    
    
    9,302Net income
    
    $
    90,427
    
    
    $
    45,601Earnings per common shareBasic:Income from continuing operations
    
    $
    0.36
    
    
    $
    0.42Income from discontinued operations
    
    
    0.66
    
    
    
    0.11Income per common share  basic
    
    $
    1.02
    
    
    $
    0.53Diluted:Income from continuing operations
    
    $
    0.36
    
    
    $
    0.41Income from discontinued operations
    
    
    0.65
    
    
    
    0.11Income per common share  diluted
    
    $
    1.01
    
    
    $
    0.52Distributions per common share
    
    $
    0.615
    
    
    $
    0.61Weighted average number of common shares outstandingBasic
    
    
    88,326
    
    
    
    85,867Diluted
    
    
    89,876
    
    
    
    87,274
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##### Table of Contents



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
OF LIBERTY PROPERTY TRUST
 (Unaudited and in thousands)
 Three Months EndedMarch 31, 2006
    
    
    March 31, 2005OPERATING ACTIVITIESNet income
    
    $
    90,427
    
    
    $
    45,601Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    37,384
    
    
    
    35,386Amortization of deferred financing costs
    
    
    1,083
    
    
    
    1,152Equity in earnings of unconsolidated joint ventures
    
    
    (175
    )
    
    
    (2,020
    )Distributions from unconsolidated joint ventures
    
    
    366
    
    
    
    4,325Minority interest in net income
    
    
    6,983
    
    
    
    4,518Gain on property dispositions, including impairment
    
    
    (59,575
    )
    
    
    (6,771
    )Noncash compensation
    
    
    2,311
    
    
    
    1,486Changes in operating assets and liabilities:Restricted cash
    
    
    10,125
    
    
    
    16,484Accounts receivable
    
    
    (13,295
    )
    
    
    5,178Deferred rent receivable
    
    
    2,674
    
    
    
    (2,066
    )Prepaid expenses and other assets
    
    
    (15,627
    )
    
    
    (15,382
    )Accounts payable
    
    
    2,787
    
    
    
    (2,427
    )Accrued interest
    
    
    (8,126
    )
    
    
    (12,333
    )Other liabilities
    
    
    (14,281
    )
    
    
    (5,288
    )Net cash provided by operating activities
    
    
    43,061
    
    
    
    67,843INVESTING ACTIVITIESInvestment in properties
    
    
    (47,753
    )
    
    
    (64,619
    )Investment in unconsolidated joint ventures
    
    
    (673
    )
    
    
    (12,780
    )Proceeds from disposition of properties/land
    
    
    148,531
    
    
    
    28,429Investment in development in progress
    
    
    (68,772
    )
    
    
    (25,329
    )Investment in land held for development
    
    
    (11,198
    )
    
    
    (45,695
    )Increase in deferred leasing costs
    
    
    (5,244
    )
    
    
    (14,376
    )Net cash provided by (used in) investing activities
    
    
    14,891
    
    
    
    (134,370
    )FINANCING ACTIVITIESNet proceeds from issuance of common shares
    
    
    14,855
    
    
    
    22,291Net proceeds from issuance of unsecured notes
    
    
    
    
    
    
    296,424Repayments of mortgage loans
    
    
    (21,034
    )
    
    
    (4,239
    )Proceeds from credit facility
    
    
    86,050
    
    
    
    136,500Repayments on credit facility
    
    
    (96,500
    )
    
    
    (323,500
    )Increase in deferred financing costs
    
    
    (213
    )
    
    
    (6
    )Distributions paid on common shares
    
    
    (54,326
    )
    
    
    (52,248
    )Contributions from minority interests
    
    
    
    
    
    
    108Distributions paid on units
    
    
    (5,797
    )
    
    
    (4,927
    )Net cash (used in) provided by financing activities
    
    
    (76,965
    )
    
    
    70,403(Decrease) increase in cash and cash equivalents
    
    
    (19,013
    )
    
    
    3,876Increase (decrease) in cash and cash equivalents related to
foreign currency translation
    
    
    517
    
    
    
    (760
    )Cash and cash equivalents at beginning of period
    
    
    61,629
    
    
    
    33,667Cash and cash equivalents at end of period
    
    $
    43,133
    
    
    $
    36,783SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONSWrite-off of fully depreciated property and deferred costs
    
    $
    14,544
    
    
    $
    11,435Acquisition of properties
    
    
    
    
    
    
    (11,827
    )Assumption of mortgage loans
    
    
    
    
    
    
    11,827
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##### Table of Contents



Liberty Property Trust
 
 Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2006
 Note 1: Organization and Basis of Presentation
 Organization
  Basis of Presentation
  Income per Common Share
  For the Three Months Ended March 31, 2006
    
    
    For the Three Months Ended March 31, 2005Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    
    Shares
    
    
    Per
    
    
    Income
    
    
    Shares
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    ShareBasic income from continuing operationsIncome from continuing operations
    
    $
    32,561
    
    
    
    88,326
    
    
    $
    0.36
    
    
    $
    36,299
    
    
    
    85,867
    
    
    $
    0.42Dilutive shares for long-term
compensation plans
    
    
    
    
    
    
    1,550
    
    
    
    
    
    
    
    
    
    
    
    1,407Diluted income from continuing operationsIncome from continuing operations and
assumed conversions
    
    
    32,561
    
    
    
    89,876
    
    
    $
    0.36
    
    
    
    36,299
    
    
    
    87,274
    
    
    $
    0.41Basic income from discontinued operationsDiscontinued operations net of minority interest
    
    
    57,866
    
    
    
    88,326
    
    
    $
    0.66
    
    
    
    9,302
    
    
    
    85,867
    
    
    $
    0.11Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,550
    
    
    
    
    
    
    
    
    
    
    
    1,407Diluted income from discontinued operationsDiscontinued operations net of minority interest
    
    
    57,866
    
    
    
    89,876
    
    
    $
    0.65
    
    
    
    9,302
    
    
    
    87,274
    
    
    $
    0.11Basic income per common shareNet income
    
    
    90,427
    
    
    
    88,326
    
    
    $
    1.02
    
    
    
    45,601
    
    
    
    85,867
    
    
    $
    0.53Dilutive shares for long-term compensation
plans
    
    
    
    
    
    
    1,550
    
    
    
    
    
    
    
    
    
    
    
    1,407Diluted income per common shareNet income and assumed conversions
    
    $
    90,427
    
    
    
    89,876
    
    
    $
    1.01
    
    
    $
    45,601
    
    
    
    87,274
    
    
    $
    0.52
 6




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##### Table of Contents



Share Based Compensation
 Share-Based Payment Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation,
   Options:
    Three Months EndedMarch 31, 2005Income available to common shareholders
    
    $
    45,601Add: Share-based compensation expense
included in reported net income available to
common shareholders
    
    
    102Deduct: Total share-based employee compensation
expense determined under fair value based
method for all awards
    
    
    (225
    )Pro forma income available to common shareholders
    
    $
    45,478Income per common share:Basic  as reported
    
    $
    0.53Basic  pro forma
    
    $
    0.53Diluted  as reported
    
    $
    0.52Diluted  pro forma
    
    $
    0.52
  7




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##### Table of Contents



Three Months
    
    Three Months EndedEnded March 31, 2006
    
    March 31, 2005Risk-free interest rate
    
    
    4.7
    %
    
    
    4.5
    %Dividend yield
    
    
    5.8
    %
    
    
    6.1
    %Volatility factor
    
    
    0.190
    
    
    
    0.183Weighted-average expected life
    
    7 years
    
    8 years
  WeightedAverageOptions
    
    
    Exercise(000s)
    
    
    PriceOutstanding at January 1, 2006
    
    
    3,521
    
    
    $
    29.31Granted
    
    
    105
    
    
    
    48.54Exercised
    
    
    (44
    )
    
    
    30.62Forfeited
    
    
    
    
    
    
    Outstanding at March 31, 2006
    
    
    3,582
    
    
    $
    29.86Exercisable at March 31, 2006
    
    
    3,112
    
    
    $
    27.84
   Long Term Incentive Shares (LTI Shares)
    Weighted AvgShares
    
    
    Grant Date(000s)
    
    
    Fair valueNonvested at January 1, 2006
    
    
    253
    
    
    $
    39.10Granted
    
    
    64
    
    
    
    48.45Vested
    
    
    (50
    )
    
    
    37.12Forfeited
    
    
    
    
    
    
    Nonvested at March 31, 2006
    
    
    267
    
    
    $
    41.73
 8




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##### Table of Contents



Bonus Shares
  Employee Share Purchase Plan
  Foreign Currency Translation
  Note 2: Segment Information
  Reportable Segments
    
    MarketsDelaware Valley
    
    Southeastern Pennsylvania; New JerseyMidwest
    
    Lehigh Valley, Pennsylvania; Michigan; Minnesota; Milwaukee; ChicagoMid-Atlantic
    
    Maryland; Piedmont Triad, NC; Greenville, SC; Richmond; Virginia BeachFlorida
    
    Jacksonville; Orlando; Boca Raton; Tampa; TexasUnited Kingdom
    
    County of Kent
   9




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##### Table of Contents



For
the Three Months Ended March 31, 2006
 Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    45,119
    
    
    $
    9,831
    
    
    $
    24,801
    
    
    $
    32,315
    
    
    $
    30,552
    
    
    $
    25,295
    
    
    $
    865
    
    
    $
    168,778Rental property expenses
and real estate taxes
    
    
    14,413
    
    
    
    3,213
    
    
    
    6,105
    
    
    
    11,957
    
    
    
    10,009
    
    
    
    8,110
    
    
    
    751
    
    
    
    54,558Property level operating
income
    
    $
    30,706
    
    
    $
    6,618
    
    
    $
    18,696
    
    
    $
    20,358
    
    
    $
    20,543
    
    
    $
    17,185
    
    
    $
    114
    
    
    $
    114,220Interest and other income
    
    
    
    
    
    
    
    
    
    
    1,951Interest expense
    
    
    
    
    
    
    
    
    
    
    (32,052
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    (10,019
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    (36,693
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    37,407Gain on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    45Income taxes
    
    
    
    
    
    
    
    
    
    
    (375
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    (4,691
    )Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    175Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    57,866Net income
    
    
    
    
    
    
    
    
    
    $
    90,427
 For the Three Months Ended March 31, 2005
 Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    45,750
    
    
    $
    9,389
    
    
    $
    21,305
    
    
    $
    28,956
    
    
    $
    28,100
    
    
    $
    23,332
    
    
    $
    5,183
    
    
    $
    162,015Rental property expenses
and real estate taxes
    
    
    15,301
    
    
    
    3,597
    
    
    
    5,784
    
    
    
    10,833
    
    
    
    9,030
    
    
    
    7,248
    
    
    
    1,133
    
    
    
    52,926Property level operating
income
    
    $
    30,449
    
    
    $
    5,792
    
    
    $
    15,521
    
    
    $
    18,123
    
    
    $
    19,070
    
    
    $
    16,084
    
    
    $
    4,050
    
    
    $
    109,089Interest and other income
    
    
    
    
    
    
    
    
    
    
    1,892Interest expense
    
    
    
    
    
    
    
    
    
    
    (30,272
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    (8,290
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    (33,187
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    39,232Gain on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    (280
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    (534
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    (4,139
    )Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    2,020Discontinued operations, net of minority interest
    
    
    
    
    
    
    
    
    
    
    9,302Net income
    
    
    
    
    
    
    
    
    
    $
    45,601
 10




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##### Table of Contents



Note 3: SFAS No. 144, Accounting For The Impairment Or Disposal Of Long-Lived Assets
  Three Months EndedMarch 31, 2006
    
    
    March 31, 2005Revenues
    
    $
    1,724
    
    
    $
    9,912Operating expenses
    
    
    (247
    )
    
    
    (1,959
    )Interest expense
    
    
    (363
    )
    
    
    (3,175
    )Depreciation and amortization
    
    
    (486
    )
    
    
    (2,148
    )Income before property dispositions and minority interest
    
    $
    628
    
    
    $
    2,630
  Allocation of Interest to Discontinued Operations
 Note 4: Recently Issued Accounting Standards
 SFAS No. 153
 Accounting for Non-monetary Transactions
 EITF Issue No. 04-5
 Determining Whether a General
Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When
the Limited Partners Have Certain Rights
 11




---



##### Table of Contents



Note 5: Subsequent Events
 Comcast Center
   Accounting for the Sale of Real Estate,
 Chicago Joint Venture
  12




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##### Table of Contents



CONDENSED CONSOLIDATED BALANCE SHEETS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
 (In thousands)
 March 31, 2006
    
    
    December 31, 2005(Unaudited)ASSETSReal estate:Land and land improvements
    
    $
    638,838
    
    
    $
    629,962Building and improvements
    
    
    3,722,988
    
    
    
    3,730,481Less accumulated depreciation
    
    
    (766,465
    )
    
    
    (748,818
    )Operating real estate
    
    
    3,595,361
    
    
    
    3,611,625Development in progress
    
    
    353,190
    
    
    
    324,924Land held for development
    
    
    167,876
    
    
    
    158,653Net real estate
    
    
    4,116,427
    
    
    
    4,095,202Cash and cash equivalents
    
    
    43,133
    
    
    
    61,629Restricted cash
    
    
    19,376
    
    
    
    29,085Accounts receivable
    
    
    27,692
    
    
    
    14,761Deferred rent receivable, net of allowance
    
    
    70,144
    
    
    
    72,818Deferred financing and leasing costs, net of accumulated amortization
(2006, $112,472; 2005, $106,752)
    
    
    119,098
    
    
    
    121,085Investments in unconsolidated joint ventures
    
    
    34,416
    
    
    
    33,522Assets held for sale
    
    
    
    
    
    
    12,654Prepaid expenses and other assets
    
    
    71,849
    
    
    
    56,773Total assets
    
    $
    4,502,135
    
    
    $
    4,497,529LIABILITIESMortgage loans
    
    $
    217,837
    
    
    $
    238,728Unsecured notes
    
    
    1,755,000
    
    
    
    1,755,000Credit facility
    
    
    245,000
    
    
    
    255,450Accounts payable
    
    
    35,905
    
    
    
    32,919Accrued interest
    
    
    26,766
    
    
    
    34,892Distribution payable
    
    
    56,772
    
    
    
    56,490Other liabilities
    
    
    147,923
    
    
    
    161,735Total liabilities
    
    
    2,485,203
    
    
    
    2,535,214Minority interest
    
    
    377
    
    
    
    407OWNERS EQUITYGeneral partners equity  common units
    
    
    1,762,103
    
    
    
    1,709,182Limited partners equity  preferred units
    
    
    184,657
    
    
    
    184,657 common units
    
    
    69,795
    
    
    
    68,069Total owners equity
    
    
    2,016,555
    
    
    
    1,961,908Total liabilities and owners equity
    
    $
    4,502,135
    
    
    $
    4,497,529
  13




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##### Table of Contents



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
 (Unaudited and in thousands, except per unit amounts)
 Three Months EndedMarch 31, 2006
    
    
    March 31, 2005OPERATING REVENUERental
    
    $
    117,940
    
    
    $
    113,585Operating expense reimbursement
    
    
    50,838
    
    
    
    48,430Total operating revenue
    
    
    168,778
    
    
    
    162,015OPERATING EXPENSERental property
    
    
    36,894
    
    
    
    37,334Real estate taxes
    
    
    17,664
    
    
    
    15,592General and administrative
    
    
    10,019
    
    
    
    8,290Depreciation and amortization
    
    
    36,693
    
    
    
    33,187Total operating expenses
    
    
    101,270
    
    
    
    94,403Operating income
    
    
    67,508
    
    
    
    67,612OTHER INCOME (EXPENSE)Interest and other income
    
    
    1,951
    
    
    
    1,892Interest expense
    
    
    (32,052
    )
    
    
    (30,272
    )Total other income (expense)
    
    
    (30,101
    )
    
    
    (28,380
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    37,407
    
    
    
    39,232Gain on property dispositions, including impairment
    
    
    45
    
    
    
    (280
    )Income taxes
    
    
    (375
    )
    
    
    (534
    )Minority interest
    
    
    
    
    
    
    13Equity in earnings of unconsolidated joint ventures
    
    
    175
    
    
    
    2,020Income from continuing operations
    
    
    37,252
    
    
    
    40,451Discontinued operations (including net gain on property dispositions of
$59,530 and $7,051 for the three months ended March 31, 2006 and
2005, respectively)
    
    
    60,158
    
    
    
    9,681Net income
    
    
    97,410
    
    
    
    50,132Preferred unit distributions
    
    
    (3,401
    )
    
    
    (2,676
    )Income available to common unitholders
    
    $
    94,009
    
    
    $
    47,456Earnings per common unitBasic:Income from continuing operations
    
    $
    0.36
    
    
    $
    0.42Income from discontinued operations
    
    
    0.66
    
    
    
    0.11Income per common unit  basic
    
    $
    1.02
    
    
    $
    0.53Diluted:Income from continuing operations
    
    $
    0.36
    
    
    $
    0.41Income from discontinued operations
    
    
    0.65
    
    
    
    0.11Income per common unit  diluted
    
    $
    1.01
    
    
    $
    0.52Distributions per common unit
    
    $
    0.615
    
    
    $
    0.61Weighted average number of common units outstandingBasic
    
    
    91,844
    
    
    
    89,533Diluted
    
    
    93,394
    
    
    
    90,940
  14




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##### Table of Contents



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
 (Unaudited and in thousands)
 Three Months EndedMarch 31, 2006
    
    
    March 31, 2005OPERATING ACTIVITIESNet income
    
    $
    97,410
    
    
    $
    50,132Adjustments
to reconcile net income to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    37,384
    
    
    
    35,386Amortization of deferred financing costs
    
    
    1,083
    
    
    
    1,152Equity in earnings of unconsolidated joint ventures
    
    
    (175
    )
    
    
    (2,020
    )Distributions from unconsolidated joint ventures
    
    
    366
    
    
    
    4,325Minority interest in net income
    
    
    
    
    
    
    (13
    )Gain on property dispositions, including impairment
    
    
    (59,575
    )
    
    
    (6,771
    )Noncash compensation
    
    
    2,311
    
    
    
    1,486Changes in operating assets and liabilities:Restricted cash
    
    
    10,125
    
    
    
    16,484Accounts receivable
    
    
    (13,295
    )
    
    
    5,178Deferred rent receivable
    
    
    2,674
    
    
    
    (2,066
    )Prepaid expenses and other assets
    
    
    (15,627
    )
    
    
    (15,382
    )Accounts payable
    
    
    2,787
    
    
    
    (2,427
    )Accrued interest
    
    
    (8,126
    )
    
    
    (12,333
    )Other liabilities
    
    
    (14,281
    )
    
    
    (5,288
    )Net cash provided by operating activities
    
    
    43,061
    
    
    
    67,843INVESTING ACTIVITIESInvestment in properties
    
    
    (47,753
    )
    
    
    (64,619
    )Investment in unconsolidated joint ventures
    
    
    (673
    )
    
    
    (12,780
    )Proceeds from disposition of properties/land
    
    
    148,531
    
    
    
    28,429Investment in development in progress
    
    
    (68,772
    )
    
    
    (25,329
    )Investment in land held for development
    
    
    (11,198
    )
    
    
    (45,695
    )Increase in deferred leasing costs
    
    
    (5,244
    )
    
    
    (14,376
    )Net cash provided by (used in) investing activities
    
    
    14,891
    
    
    
    (134,370
    )FINANCING ACTIVITIESNet proceeds from issuance of unsecured notes
    
    
    
    
    
    
    296,424Repayments of mortgage loans
    
    
    (21,034
    )
    
    
    (4,239
    )Proceeds from credit facility
    
    
    86,050
    
    
    
    136,500Repayments on credit facility
    
    
    (96,500
    )
    
    
    (323,500
    )Increase in deferred financing costs
    
    
    (213
    )
    
    
    (6
    )Capital contributions
    
    
    14,855
    
    
    
    22,291Distributions to partners
    
    
    (60,123
    )
    
    
    (57,067
    )Net cash
(used in) provided by financing activities
    
    
    (76,965
    )
    
    
    70,403(Decrease) increase in cash and cash equivalents
    
    
    (19,013
    )
    
    
    3,876Increase (decrease) related to foreign currency translation
    
    
    517
    
    
    
    (760
    )Cash and cash equivalents at beginning of period
    
    
    61,629
    
    
    
    33,667Cash and cash equivalents at end of period
    
    $
    43,133
    
    
    $
    36,783SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONSWrite-off of fully depreciated property and deferred costs
    
    $
    14,544
    
    
    $
    11,435Acquisition of properties
    
    
    
    
    
    
    (11,827
    )Assumption of mortgage loans
    
    
    
    
    
    
    11,827
  15




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##### Table of Contents



Liberty Property Limited Partnership
 
 Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2006
 Note 1: Organization and Basis of Presentation
 Organization
  Basis of Presentation
  Income per Common Unit
  For the Three Months Ended March 31, 2006
    
    
    For the Three Months Ended March 31, 2005Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageIncome
    
    
    Units
    
    
    Per
    
    
    Income
    
    
    Units
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Unit
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    UnitIncome from continuing operations
    
    $
    37,252
    
    
    
    
    
    
    
    
    
    
    $
    40,451Less: Preferred unit distributions
    
    
    (3,401
    )
    
    
    
    
    
    
    
    
    
    
    (2,676
    )Basic income from continuing operationsIncome from continuing operations
available to common unitholders
    
    
    33,851
    
    
    
    91,844
    
    
    $
    0.36
    
    
    
    37,775
    
    
    
    89,533
    
    
    $
    0.42Dilutive units for long-term
compensation plans
    
    
    
    
    
    
    1,550
    
    
    
    
    
    
    
    
    
    
    
    1,407Diluted income from continuing operationsIncome from continuing operations available
to common unitholders and assumed
conversions
    
    
    33,851
    
    
    
    93,394
    
    
    $
    0.36
    
    
    
    37,775
    
    
    
    90,940
    
    
    $
    0.41Basic income from discontinued operationsDiscontinued operations
    
    
    60,158
    
    
    
    91,844
    
    
    $
    0.66
    
    
    
    9,681
    
    
    
    89,533
    
    
    $
    0.11Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,550
    
    
    
    
    
    
    
    
    
    
    
    1,407Diluted income from discontinued operationsDiscontinued operations
    
    
    60,158
    
    
    
    93,394
    
    
    $
    0.65
    
    
    
    9,681
    
    
    
    90,940
    
    
    $
    0.11Basic income per common unitIncome available to common unitholders
    
    
    94,009
    
    
    
    91,844
    
    
    $
    1.02
    
    
    
    47,456
    
    
    
    89,533
    
    
    $
    0.53Dilutive units for long-term compensation
plans
    
    
    
    
    
    
    1,550
    
    
    
    
    
    
    
    
    
    
    
    1,407Diluted income per common unitIncome available to common unitholders
and assumed conversions
    
    $
    94,009
    
    
    
    93,394
    
    
    $
    1.01
    
    
    $
    47,456
    
    
    
    90,940
    
    
    $
    0.52
 16




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##### Table of Contents



Foreign Currency Translation
  Note 2: Segment Information
  Reportable Segments
    
    MarketsDelaware Valley
    
    Southeastern Pennsylvania; New JerseyMidwest
    
    Lehigh Valley, Pennsylvania; Michigan; Minnesota; Milwaukee; ChicagoMid-Atlantic
    
    Maryland; Piedmont Triad, NC; Greenville, SC; Richmond; Virginia BeachFlorida
    
    Jacksonville; Orlando; Boca Raton; Tampa; TexasUnited Kingdom
    
    County of Kent
   For the Three Months Ended March 31, 2006
 Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    45,119
    
    
    $
    9,831
    
    
    $
    24,801
    
    
    $
    32,315
    
    
    $
    30,552
    
    
    $
    25,295
    
    
    $
    865
    
    
    $
    168,778Rental property expenses
and real estate taxes
    
    
    14,413
    
    
    
    3,213
    
    
    
    6,105
    
    
    
    11,957
    
    
    
    10,009
    
    
    
    8,110
    
    
    
    751
    
    
    
    54,558Property level operating
income
    
    $
    30,706
    
    
    $
    6,618
    
    
    $
    18,696
    
    
    $
    20,358
    
    
    $
    20,543
    
    
    $
    17,185
    
    
    $
    114
    
    
    $
    114,220Interest and other income
    
    
    
    
    
    
    
    
    
    
    1,951Interest expense
    
    
    
    
    
    
    
    
    
    
    (32,052
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    (10,019
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    (36,693
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    37,407Gain on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    45Income taxes
    
    
    
    
    
    
    
    
    
    
    (375
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    175Discontinued operations
    
    
    
    
    
    
    
    
    
    
    60,158Preferred unit distributions
    
    
    
    
    
    
    
    
    
    
    (3,401
    )Income available to common unitholders
    
    
    
    
    
    
    
    
    
    $
    94,009
 17




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##### Table of Contents



For the Three Months Ended March 31, 2005
 Delaware Valley
    
    
    MidwestSoutheastern
    
    
    
    
    
    
    Lehigh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitedPennsylvania
    
    
    Other
    
    
    Valley
    
    
    Other
    
    
    Mid-Atlantic
    
    
    Florida
    
    
    Kingdom
    
    
    TotalOperating revenue
    
    $
    45,750
    
    
    $
    9,389
    
    
    $
    21,305
    
    
    $
    28,956
    
    
    $
    28,100
    
    
    $
    23,332
    
    
    $
    5,183
    
    
    $
    162,015Rental property expenses
and real estate taxes
    
    
    15,301
    
    
    
    3,597
    
    
    
    5,784
    
    
    
    10,833
    
    
    
    9,030
    
    
    
    7,248
    
    
    
    1,133
    
    
    
    52,926Property level operating
income
    
    $
    30,449
    
    
    $
    5,792
    
    
    $
    15,521
    
    
    $
    18,123
    
    
    $
    19,070
    
    
    $
    16,084
    
    
    $
    4,050
    
    
    $
    109,089Interest and other income
    
    
    
    
    
    
    
    
    
    
    1,892Interest expense
    
    
    
    
    
    
    
    
    
    
    (30,272
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    (8,290
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    (33,187
    )Income before property dispositions, income taxes, minority interest
and equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    39,232Gain on property dispositions, including impairment
    
    
    
    
    
    
    
    
    
    
    (280
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    (534
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    13Equity in earnings of unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    2,020Discontinued operations
    
    
    
    
    
    
    
    
    
    
    9,681Preferred unit distributions
    
    
    
    
    
    
    
    
    
    
    (2,676
    )Income available to common unitholders
    
    
    
    
    
    
    
    
    
    $
    47,456
 Note 3: SFAS No. 144, Accounting For The Impairment Or Disposal Of Long-Lived
Assets
  Three Months EndedMarch 31, 2006
    
    
    March 31, 2005Revenues
    
    $
    1,724
    
    
    $
    9,912Operating expenses
    
    
    (247
    )
    
    
    (1,959
    )Interest expense
    
    
    (363
    )
    
    
    (3,175
    )Depreciation and amortization
    
    
    (486
    )
    
    
    (2,148
    )Income before property dispositions and minority interest
    
    $
    628
    
    
    $
    2,630
  Allocation of Interest to Discontinued Operations
 Note 4: Recently Issued Accounting Standards
 SFAS No. 153
 Accounting for Non-monetary Transactions
 18




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##### Table of Contents



EITF Issue No. 04-5
 Determining Whether a General
Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When
the Limited Partners Have Certain Rights
 Note 5: Subsequent Events
 Comcast Center
   Accounting for the Sale of Real Estate,
 Chicago Joint Venture
  19




---



##### Table of Contents



Item 2: Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Overview
        20




---



##### Table of Contents



Net RentPer Square Foot
    
    
    Total Square Feet
    
    
    Percent OccupiedMarch 31,
    
    
    March 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Industrial-Distribution
    
    $
    4.17
    
    
    $
    4.27
    
    
    
    30,967
    
    
    
    29,200
    
    
    
    92.9
    %
    
    
    93.3
    %Industrial-Flex
    
    $
    8.77
    
    
    $
    8.86
    
    
    
    12,545
    
    
    
    13,249
    
    
    
    92.9
    %
    
    
    89.7
    %Office
    
    $
    14.20
    
    
    $
    14.37
    
    
    
    20,351
    
    
    
    19,499
    
    
    
    88.9
    %
    
    
    89.5
    %$
    8.19
    
    
    $
    8.35
    
    
    
    63,863
    
    
    
    61,948
    
    
    
    91.6
    %
    
    
    91.3
    %
  Forward-Looking Statements
  Critical Accounting Policies and Estimates
  Results of Operations
   21




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##### Table of Contents



Comparison
of Three Months Ended March 31, 2006 to Three Months Ended
March 31, 2005.
     Three Months EndedMar. 31, 2006
    
    
    Mar. 31, 2005
    
    
    % inc (dec)Delaware Valley SE Pennsylvania
    
    $
    30,706
    
    
    $
    30,449
    
    
    
    0.8
    % Other
    
    
    6,618
    
    
    
    5,792
    
    
    
    14.3
    % (1)Midwest Lehigh Valley
    
    
    18,696
    
    
    
    15,521
    
    
    
    20.5
    % (2) Other
    
    
    20,358
    
    
    
    18,123
    
    
    
    12.3
    % (3)Mid-Atlantic
    
    
    20,543
    
    
    
    19,070
    
    
    
    7.7
    %Florida
    
    
    17,185
    
    
    
    16,084
    
    
    
    6.8
    %United Kingdom
    
    
    114
    
    
    
    4,050
    
    
    
    (97.2
    %) (4)Totals
    
    $
    114,220
    
    
    $
    109,089
    
    
    
    4.7
    %
 
 (1)
    
    The increase for the three month period ended March 31, 2006 versus the three months
ended March 31, 2005 is primarily due to an increase in occupancy.(2)
    
    The increase for the three month period ended March 31, 2006 versus the three months
ended March 31, 2005 is due to an increase in occupancy, higher termination fees and the
delivery of $59.1 million in completed development and a property acquisition of $29.4
million since March 31, 2005. Completed development and the acquisition contributed to
property level operating income for a full quarter in 2006 as compared to zero in 2005.(3)
    
    The increase for the three month period ended March 31, 2006 versus the three months
ended March 31, 2005 is primarily due to an increase in occupancy and the delivery of $21.9
million of completed development and property acquisitions of $115.5 million since March
31, 2005. Completed development and acquisitions contributed to property level operating
income for a full quarter in 2006 as compared to zero in 2005.(4)
    
    The decrease for the three month period ended March 31, 2006 versus the three months
ended March 31, 2005 is primarily due to the sale of 15 operating properties to a joint
venture in December 2005.   22




---



##### Table of Contents



Three Months EndedMarch 31, 2006
    
    
    March 31, 2005Same Store:Rental revenue
    
    $
    106,845
    
    
    $
    106,992Operating expenses:Rental property expense
    
    
    33,261
    
    
    
    34,345Real estate taxes
    
    
    16,022
    
    
    
    15,108Operating expense recovery
    
    
    (46,432
    )
    
    
    (45,729
    )Unrecovered operating expenses
    
    
    2,851
    
    
    
    3,724Property level operating income
    
    
    103,994
    
    
    
    103,268Less straight line rent
    
    
    1,729
    
    
    
    1,728Cash basis property level operating income
    
    $
    102,265
    
    
    $
    101,540Reconciliation of non-GAAP financial measure:Property level operating income  Same Store
    
    $
    103,994
    
    
    $
    103,268Property level operating income  properties purchased
or developed subsequent to January 1, 2005
    
    
    9,138
    
    
    
    3,822Termination fees
    
    
    1,088
    
    
    
    1,999General and administrative expense
    
    
    (10,019
    )
    
    
    (8,290
    )Depreciation and amortization expense
    
    
    (36,693
    )
    
    
    (33,187
    )Other income (expense)
    
    
    (30,101
    )
    
    
    (28,380
    )Gain on property dispositions, including impairment
    
    
    45
    
    
    
    (280
    )Income taxes
    
    
    (375
    )
    
    
    (534
    )Minority interest
    
    
    (4,691
    )
    
    
    (4,139
    )Equity in earnings of unconsolidated joint ventures
    
    
    175
    
    
    
    2,020Discontinued operations, net of minority interest
    
    
    57,866
    
    
    
    9,302Net income
    
    $
    90,427
    
    
    $
    45,601
 General and Administrative
  Depreciation and Amortization
  Interest Expense
  23




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##### Table of Contents



Other
    Liquidity and Capital Resources
       24




---



##### Table of Contents



MORTGAGES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    WEIGHTEDPRINCIPAL
    
    
    PRINCIPAL
    
    
    UNSECURED
    
    
    CREDIT
    
    
    
    
    
    
    AVERAGEAMORTIZATION
    
    
    MATURITIES
    
    
    NOTES
    
    
    FACILITY
    
    
    TOTAL
    
    
    INTEREST RATE2006 (9 months)
    
    $
    6,991
    
    
    $
    22,335
    
    
    $
    100,000
    
    
    $
    
    
    
    $
    129,326
    
    
    
    7.11
    %2007
    
    
    8,748
    
    
    
    1,553
    
    
    
    100,000
    
    
    
    
    
    
    
    110,301
    
    
    
    7.22
    %2008
    
    
    8,053
    
    
    
    45,259
    
    
    
    
    
    
    
    
    
    
    
    53,312
    
    
    
    6.61
    %2009
    
    
    5,652
    
    
    
    46,148
    
    
    
    270,000
    
    
    
    
    
    
    
    321,800
    
    
    
    7.77
    %2010
    
    
    4,827
    
    
    
    4,738
    
    
    
    200,000
    
    
    
    245,000
    
    
    
    454,565
    
    
    
    6.62
    %2011
    
    
    4,101
    
    
    
    10,730
    
    
    
    250,000
    
    
    
    
    
    
    
    264,831
    
    
    
    7.26
    %2012
    
    
    3,219
    
    
    
    32,911
    
    
    
    235,000
    
    
    
    
    
    
    
    271,130
    
    
    
    6.47
    %2013
    
    
    2,691
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,691
    
    
    
    6.00
    %2014
    
    
    2,857
    
    
    
    
    
    
    
    200,000
    
    
    
    
    
    
    
    202,857
    
    
    
    5.65
    %2015
    
    
    3,033
    
    
    
    
    
    
    
    300,000
    
    
    
    
    
    
    
    303,033
    
    
    
    5.13
    %2016 & thereafter
    
    
    3,991
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    103,991
    
    
    
    7.44
    %$
    54,163
    
    
    $
    163,674
    
    
    $
    1,755,000
    
    
    $
    245,000
    
    
    $
    2,217,837
    
    
    
    6.65
    %
  General
   Industrial-
    
    
    Industrial-Distribution
    
    
    Flex
    
    
    Office
    
    
    TotalSquare
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    Annual
    
    
    Square
    
    
    AnnualFeet
    
    
    Net Rent
    
    
    Feet
    
    
    Net Rent
    
    
    Feet
    
    
    Net Rent
    
    
    Feet
    
    
    Net Rent2006 (9 months)
    
    
    2,372
    
    
    $
    8,626
    
    
    
    1,157
    
    
    $
    9,440
    
    
    
    1,067
    
    
    $
    14,641
    
    
    
    4,596
    
    
    $
    32,7072007
    
    
    4,134
    
    
    
    17,479
    
    
    
    2,076
    
    
    
    19,332
    
    
    
    2,256
    
    
    
    31,214
    
    
    
    8,466
    
    
    
    68,0252008
    
    
    4,580
    
    
    
    19,178
    
    
    
    2,235
    
    
    
    20,809
    
    
    
    2,797
    
    
    
    41,264
    
    
    
    9,612
    
    
    
    81,2512009
    
    
    4,244
    
    
    
    19,374
    
    
    
    1,795
    
    
    
    17,089
    
    
    
    2,971
    
    
    
    46,561
    
    
    
    9,010
    
    
    
    83,0242010
    
    
    2,062
    
    
    
    10,059
    
    
    
    1,537
    
    
    
    14,433
    
    
    
    2,388
    
    
    
    37,464
    
    
    
    5,987
    
    
    
    61,9562011
    
    
    2,313
    
    
    
    10,148
    
    
    
    732
    
    
    
    8,272
    
    
    
    1,886
    
    
    
    30,665
    
    
    
    4,931
    
    
    
    49,085Thereafter
    
    
    9,073
    
    
    
    48,193
    
    
    
    2,117
    
    
    
    23,679
    
    
    
    4,724
    
    
    
    82,984
    
    
    
    15,914
    
    
    
    154,856TOTAL
    
    
    28,778
    
    
    $
    133,057
    
    
    
    11,649
    
    
    $
    113,054
    
    
    
    18,089
    
    
    $
    284,793
    
    
    
    58,516
    
    
    $
    530,904
  25




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##### Table of Contents



Square FeetScheduled
    
    Industrial-
    
    
    Industrial-
    
    
    
    
    
    
    
    
    
    
    Percent
    
    
    TotalIn-Service Date
    
    Distribution
    
    
    Flex
    
    
    Office
    
    
    Total
    
    
    Leased
    
    
    Investment2nd Quarter 2006
    
    
    24,576
    
    
    
    217,600
    
    
    
    173,360
    
    
    
    415,536
    
    
    
    99.2
    %
    
    $
    53,5373rd Quarter 2006
    
    
    130,000
    
    
    
    46,500
    
    
    
    256,412
    
    
    
    432,912
    
    
    
    89.9
    %
    
    
    54,4394th Quarter 2006
    
    
    
    
    
    
    48,000
    
    
    
    105,255
    
    
    
    153,255
    
    
    
    34.4
    %
    
    
    24,9521st Quarter 2007
    
    
    
    
    
    
    79,600
    
    
    
    154,416
    
    
    
    234,016
    
    
    
    28.9
    %
    
    
    29,9332nd Quarter 2007
    
    
    1,300,320
    
    
    
    
    
    
    
    129,638
    
    
    
    1,429,958
    
    
    
    3.5
    %
    
    
    95,4393rd Quarter 2007
    
    
    800,000
    
    
    
    96,000
    
    
    
    110,000
    
    
    
    1,006,000
    
    
    
    
    
    
    
    61,7161st Quarter 2008
    
    
    
    
    
    
    
    
    
    
    54,230
    
    
    
    54,230
    
    
    
    
    
    
    
    22,037Thereafter
    
    
    
    
    
    
    
    
    
    
    1,253,223
    
    
    
    1,253,223
    
    
    
    72.8
    %
    
    
    472,000TOTAL
    
    
    2,254,896
    
    
    
    487,700
    
    
    
    2,236,534
    
    
    
    4,979,130
    
    
    
    37.8
    %
    
    $
    814,053
   Calculation of Funds from Operations
  26




---



##### Table of Contents



Three Months EndedMarch 31,2006
    
    
    2005Reconciliation of net income to FFO  basic:Net Income
    
    $
    90,427
    
    
    $
    45,601Basic  Income available to common shareholders
    
    
    90,427
    
    
    
    45,601Basic  income available to common shareholders per weighted average share
    
    $
    1.02
    
    
    $
    .53Adjustments:Depreciation and amortization of unconsolidated joint ventures
    
    
    553
    
    
    
    366Depreciation and amortization
    
    
    36,591
    
    
    
    34,698Gain on property dispositions
    
    
    (59,646
    )
    
    
    (8,867
    )Minority interest share in addback for depreciation and amortization and gain on property dispositions
    
    
    857
    
    
    
    (1,024
    )Funds from operations available to common shareholders  basic
    
    $
    68,782
    
    
    $
    70,774Basic Funds from operations available to common shareholders per weighted average share
    
    $
    .78
    
    
    $
    .82Reconciliation of net income to FFO  diluted:Net Income
    
    $
    90,427
    
    
    $
    45,601Diluted  income available to common shareholders
    
    
    90,427
    
    
    
    45,601Diluted  income available to common shareholders per weighted average share
    
    $
    1.01
    
    
    $
    .52Adjustments:Depreciation and amortization of unconsolidated joint ventures
    
    
    553
    
    
    
    366Depreciation and amortization
    
    
    36,591
    
    
    
    34,698Gain on property dispositions
    
    
    (59,646
    )
    
    
    (8,867
    )Minority interest less preferred share distributions
    
    
    3,582
    
    
    
    1,855Funds from operations available to common shareholders  diluted
    
    $
    71,507
    
    
    $
    73,653Diluted Funds from operations available to common shareholders per weighted average share
    
    $
    .77
    
    
    $
    .81Reconciliation of weighted average shares:Weighted average common shares  all basic calculations
    
    
    88,326
    
    
    
    85,867Dilutive shares for long term compensation plans
    
    
    1,550
    
    
    
    1,407Diluted shares for net income calculations
    
    
    89,876
    
    
    
    87,274Weighted average common units
    
    
    3,518
    
    
    
    3,666Diluted shares for Funds from operations calculations
    
    
    93,394
    
    
    
    90,940
 Inflation
  
 Item 3: Quantitative and Qualitative Disclosures about Market Risk
  27




---



##### Table of Contents



Item 4: Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  28




---



##### Table of Contents



Part II: Other Information
            10.1 *
    
    Certain Elements of the Liberty Property Trust Executive Compensation Program.31.1 *
    
    Certifications of the Chief Executive Officer of Liberty Property Trust
required by Rule 13a-14(a) under the Securities Exchange Act of 1934.31.2 *
    
    Certifications of the Chief Financial Officer of Liberty Property Trust
required by Rule 13a-14(a) under the Securities Exchange Act of 1934.31.3 *
    
    Certifications of the Chief Executive Officer of Liberty Property Trust, in
its capacity as the general partner of Liberty Property Limited Partnership,
required by Rule 13a-14(a) under the Securities Exchange Act of 1934.31.4 *
    
    Certifications of the Chief Financial Officer of Liberty Property Trust, in
its capacity as the general partner of Liberty Property Limited Partnership,
required by Rule 13a-14(a) under the Securities Exchange Act of 1934.32.1 *
    
    Certifications of the Chief Executive Officer of Liberty Property Trust
required under Rule 13a-14(b) of the Securities Exchange Act of 1934, as
amended. (This exhibit shall not be deemed filed for purposes of Section 18
of the Securities Exchange Act of 1934, as amended, or otherwise subject to
the liability of that section. Further, this exhibit shall not be deemed to
be incorporated by reference into any filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended.)32.2 *
    
    Certifications of the Chief Financial Officer of Liberty Property Trust
required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as
amended. (This exhibit shall not be deemed filed for purposes of Section 18
of the Securities Exchange Act of 1934, as amended, or otherwise subject to
the liability of that section. Further, this exhibit shall not be deemed to
be incorporated by reference into any filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended.)
 29




---



##### Table of Contents



32.3 *
    
    Certifications of the Chief Executive Officer of Liberty Property
Trust, in its capacity as the general partner of Liberty Property
Limited Partnership, required by Rule 13a-14(b) under the
Securities Exchange Act of 1934, as amended. (This exhibit shall
not be deemed filed for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the
liability of that section. Further, this exhibit shall not be
deemed to be incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended.)32.4 *
    
    Certifications of the Chief Financial Officer of Liberty Property
Trust, in its capacity as the general partner of Liberty Property
Limited Partnership, required by Rule 13a-14(b) under the
Securities Exchange Act of 1934, as amended. (This exhibit shall
not be deemed filed for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the
liability of that section. Further, this exhibit shall not be
deemed to be incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended.)
 
 *
    
    Filed herewith. 30




---



##### Table of Contents



SIGNATURES
  LIBERTY PROPERTY TRUST/s/ WILLIAM P. HANKOWSKY
    
    May 9, 2006William P. Hankowsky
    
    DatePresident and Chief Executive Officer/s/ GEORGE J. ALBURGER, JR.
    
    May 9, 2006George J. Alburger, Jr.
    
    DateExecutive Vice President and Chief Financial Officer
 31




---



##### Table of Contents



SIGNATURES
  LIBERTY PROPERTY LIMITED PARTNERSHIPBY: Liberty Property TrustGeneral Partner/s/ WILLIAM P. HANKOWSKY
    
    May 9, 2006William P. Hankowsky
    
    DatePresident and Chief Executive Officer/s/ GEORGE J. ALBURGER, JR.
    
    May 9, 2006George J. Alburger, Jr.
    
    DateExecutive Vice President and Chief Financial Officer
 32




---



##### Table of Contents



EXHIBIT INDEX
 EXHIBIT NO.
    
    DESCRIPTION10.1
    
    Certain Elements of the Liberty Property Trust Executive Compensation Program.31.1
    
    Certifications of the Chief Executive Officer of Liberty Property Trust required by Rule
13a-14(a) under the Securities Exchange Act of 1934.31.2
    
    Certifications of the Chief Financial Officer of Liberty Property Trust required by Rule
13a-14(a) under the Securities Exchange Act of 1934.31.3
    
    Certifications of the Chief Executive Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(a) under
the Securities Exchange Act of 1934.31.4
    
    Certifications of the Chief Financial Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(a) under
the Securities Exchange Act of 1934.32.1
    
    Certifications of the Chief Executive Officer of Liberty Property Trust required under Rule
13a-14(b) of the Securities Exchange Act of 1934, as amended. (This exhibit shall not be
deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or otherwise subject to the liability of that section. Further, this exhibit shall not be
deemed to be incorporated by reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.)32.2
    
    Certifications of the Chief Financial Officer of Liberty Property Trust required by Rule
13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be
deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or otherwise subject to the liability of that section. Further, this exhibit shall not be
deemed to be incorporated by reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.)32.3
    
    Certifications of the Chief Executive Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(b) under
the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed filed
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liability of that section. Further, this exhibit shall not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.)32.4
    
    Certifications of the Chief Financial Officer of Liberty Property Trust, in its capacity as
the general partner of Liberty Property Limited Partnership, required by Rule 13a-14(b) under
the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed filed
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liability of that section. Further, this exhibit shall not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.)
 33