Form 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2009


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

For the transition period from to


Commission file numbers:		1-13130 (Liberty Property Trust)
		1-13132 (Liberty Property Limited Partnership)

LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP

(Exact name of registrants as specified in their governing documents)


MARYLAND (Liberty Property Trust) 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 Parkway
Malvern, Pennsylvania		19355

(Address of Principal Executive Offices)		(Zip Code)

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

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the registrants were required to file such reports) and (2) have been subject to such filing requirements for the past ninety (90) days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files.) Yes o No o

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


Large Accelerated Filer þ	Accelerated Filer o	Non-Accelerated Filer o	Smaller Reporting Company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

On August 5, 2009, 111,651,250 Common Shares of Beneficial Interest, par value $0.001 per share, of Liberty Property Trust were outstanding.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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


	June 30, 2009			December 31, 2008
	(Unaudited)
ASSETS
Real estate:
Land and land improvements	$	824,906		$	806,122
Building and improvements		4,301,270			4,218,839
Less accumulated depreciation		(1,040,218	)		(972,831	)


Operating real estate		4,085,958			4,052,130

Development in progress		215,155			245,463
Land held for development		222,324			209,551


Net real estate		4,523,437			4,507,144

Cash and cash equivalents		124,536			15,794
Restricted cash		40,351			39,726
Accounts receivable		6,636			12,985
Deferred rent receivable		89,291			83,498
Deferred financing and leasing costs, net of accumulated amortization (2009, $149,723; 2008, $139,346)		134,700			133,293
Investments in unconsolidated joint ventures		255,419			266,602
Assets held for sale		25,750			75,526
Prepaid expenses and other assets		74,369			82,467


Total assets	$	5,274,489		$	5,217,035


LIABILITIES
Mortgage loans	$	471,820		$	198,560
Unsecured notes		1,846,339			2,131,607
Credit facility		140,000			260,000
Accounts payable		35,262			32,481
Accrued interest		31,315			36,474
Dividend and distributions payable		54,057			48,858
Other liabilities		169,880			182,549


Total liabilities		2,748,673			2,890,529

EQUITY
Liberty Property Trust shareholders’ equity
Common shares of beneficial interest, $.001 par value, 183,987,000 shares authorized; 110,847,466 (includes 1,249,909 in treasury) and 100,034,404 (includes 1,249,909 in treasury) shares issued and outstanding as of June 30, 2009 and December 31, 2008, respectively		111			101
Additional paid-in capital		2,391,615			2,162,820
Accumulated other comprehensive income (loss)		4,120			(5,378	)
Distributions in excess of net income		(222,739	)		(185,721	)
Common shares in treasury, at cost, 1,249,909 shares as of June 30, 2009 and December 31, 2008		(51,951	)		(51,951	)


Total Liberty Property Trust shareholders’ equity		2,121,156			1,919,871

Noncontrolling interest – operating partnership
4,017,354 and 4,074,967 common units outstanding as of June 30, 2009 and December 31, 2008, respectively		115,991			117,546
9,740,000 preferred units outstanding as of June 30, 2009 and December 31, 2008		287,959			287,959
Noncontrolling interest – consolidated joint ventures		710			1,130


Total equity		2,525,816			2,326,506


Total liabilities and equity	$	5,274,489		$	5,217,035

See accompanying notes.

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


	Three Months Ended
	June 30, 2009			June 30, 2008
OPERATING REVENUE
Rental	$	130,846		$	123,557
Operating expense reimbursement		54,818			56,438

Total operating revenue		185,664			179,995


OPERATING EXPENSE
Rental property		35,368			35,534
Real estate taxes		22,119			22,961
General and administrative		11,659			13,047
Depreciation and amortization		42,571			42,508

Total operating expenses		111,717			114,050


Operating income		73,947			65,945

OTHER INCOME (EXPENSE)
Interest and other income		2,520			3,009
Debt extinguishment gain		563			—
Interest expense		(37,300	)		(36,330	)

Total other income (expense)		(34,217	)		(33,321	)

Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures		39,730			32,624
(Loss) gain on property dispositions		(2,050	)		835
Income taxes		(127	)		(580	)
Equity in earnings of unconsolidated joint ventures		1,192			1,010


Income from continuing operations		38,745			33,889

Discontinued operations (including net gain on property dispositions of $3,670 and $2,793 for the three months ended June 30, 2009 and 2008, respectively)		4,467			4,489


Net income		43,212			38,378
Noncontrolling interest – operating partnership		(6,597	)		(6,681	)
Noncontrolling interest – consolidated joint ventures		56			(68	)


Net income available to common shareholders	$	36,671		$	31,629


Earnings per common share
Basic:
Income from continuing operations	$	0.31		$	0.29
Income from discontinued operations		0.04			0.05


Income per common share – basic	$	0.35		$	0.34


Diluted:
Income from continuing operations	$	0.31		$	0.29
Income from discontinued operations		0.04			0.05


Income per common share – diluted	$	0.35		$	0.34


Distributions per common share	$	0.475		$	0.625


Weighted average number of common shares outstanding
Basic		105,768			92,322
Diluted		106,245			92,701

Amounts attributable to common shareholders
Income from continuing operations	$	32,362		$	27,333
Discontinued operations		4,309			4,296

Net income available to common shareholders	$	36,671		$	31,629

See accompanying notes.

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


	Six Months Ended
	June 30, 2009			June 30, 2008
OPERATING REVENUE
Rental	$	260,045		$	254,847
Operating expense reimbursement		112,773			112,513

Total operating revenue		372,818			367,360


OPERATING EXPENSE
Rental property		74,515			74,219
Real estate taxes		44,244			43,104
General and administrative		27,222			27,083
Depreciation and amortization		85,705			85,174

Total operating expenses		231,686			229,580


Operating income		141,132			137,780

OTHER INCOME (EXPENSE)
Interest and other income		5,624			6,096
Debt extinguishment gain		1,092			—
Interest expense		(75,420	)		(77,679	)

Total other income (expense)		(68,704	)		(71,583	)

Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures		72,428			66,197
(Loss) gain on property dispositions		(2,344	)		1,476
Income taxes		(344	)		(1,064	)
Equity in earnings of unconsolidated joint ventures		1,609			1,387


Income from continuing operations		71,349			67,996

Discontinued operations (including net gain on property dispositions of $3,869 and $3,403 for the six months ended June 30, 2009 and 2008, respectively)		5,705			6,778


Net income		77,054			74,774
Noncontrolling interest – operating partnership		(12,914	)		(13,286	)
Noncontrolling interest – consolidated joint ventures		420			102


Net income available to common shareholders	$	64,560		$	61,590


Earnings per common share
Basic:
Income from continuing operations	$	0.58		$	0.60
Income from discontinued operations		0.05			0.07


Income per common share – basic	$	0.63		$	0.67


Diluted:
Income from continuing operations	$	0.57		$	0.60
Income from discontinued operations		0.05			0.07


Income per common share – diluted	$	0.62		$	0.67


Distributions per common share	$	0.95		$	1.25


Weighted average number of common shares outstanding
Basic		103,244			92,001
Diluted		103,625			92,248

Amounts attributable to common shareholders
Income from continuing operations	$	59,062		$	55,105
Discontinued operations		5,498			6,485

Net income available to common shareholders	$	64,560		$	61,590

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY OF LIBERTY PROPERTY TRUST
(UNAUDITED AND IN THOUSANDS)


	Common				Accumulated									Total Liberty			Noncontrolling			Noncontrolling
	Shares of		Additional		Other			Distributions			Common			Property Trust			Interest –			Interest –
	Beneficial		Paid-In		Comprehensive			in Excess of			Shares Held			Shareholders’			Operating			Consolidated
	Interest		Capital		Income (Loss)			Net Income			in Treasury			Equity			Partnership			Joint Ventures			Total Equity

Balance at December 31, 2008	$	101	$	2,162,820	$	(5,378	)	$	(185,721	)	$	(51,951	)	$	1,919,871		$	405,505		$	1,130		$	2,326,506

Net proceeds from the issuance of common shares		10		221,505		–			–			–			221,515			–			–			221,515

Net income		–		–		–			64,560			–			64,560			12,914			(420	)		77,054

Distributions		–		–		–			(101,578	)		–			(101,578	)		(14,469	)		–			(116,047	)

Noncash compensation		–		7,290		–			–			–			7,290			–			–			7,290

Foreign currency translation adjustment		–		–		9,498			–			–			9,498			–			–			9,498


Balance at June 30, 2009	$	111	$	2,391,615	$	4,120		$	(222,739	)	$	(51,951	)	$	2,121,156		$	403,950		$	710		$	2,525,816

See accompanying notes.

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


	Six Months Ended
	June 30, 2009			June 30, 2008
OPERATING ACTIVITIES
Net income	$	77,054		$	74,774
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		86,306			87,374
Amortization of deferred financing costs		2,439			2,227
Equity in earnings of unconsolidated joint ventures		(1,607	)		(1,387	)
Distributions from unconsolidated joint ventures		663			—
Gain on property dispositions		(1,526	)		(4,879	)
Noncash compensation		9,790			5,603
Changes in operating assets and liabilities:
Restricted cash		970			(19,818	)
Accounts receivable		6,208			(248	)
Deferred rent receivable		(5,677	)		(7,195	)
Prepaid expenses and other assets		8,958			(10,831	)
Accounts payable		2,979			5,800
Accrued interest		(5,159	)		(1,909	)
Other liabilities		(15,795	)		(15,979	)

Net cash provided by operating activities		165,603			113,532


INVESTING ACTIVITIES
Investment in properties		(37,318	)		(37,752	)
Investments in unconsolidated joint ventures		(4,017	)		(7,506	)
Distributions from unconsolidated joint ventures		18,379			3,161
Net proceeds from disposition of properties/land		80,333			304,563
Investment in development in progress		(48,774	)		(138,035	)
Investment in land held for development		(26,980	)		(18,717	)
Investment in deferred leasing costs		(12,125	)		(14,271	)

Net cash (used in) provided by investing activities		(30,502	)		91,443


FINANCING ACTIVITIES
Net proceeds from issuance of common shares		218,970			32,124
Repayments of unsecured notes		(285,268	)		—
Proceeds from mortgage loans		317,213			—
Repayments of mortgage loans		(44,121	)		(35,673	)
Proceeds from credit facility		199,150			344,150
Repayments on credit facility		(319,150	)		(439,150	)
Increase in deferred financing costs		(5,743	)		—
Distribution paid on common shares		(96,350	)		(114,867	)
Distribution paid on units		(14,452	)		(15,941	)

Net cash used in financing activities		(29,751	)		(229,357	)


Net increase (decrease) in cash and cash equivalents		105,350			(24,382	)
Increase (decrease) in cash and cash equivalents related to foreign currency translation		3,392			(28	)
Cash and cash equivalents at beginning of period		15,794			37,989

Cash and cash equivalents at end of period	$	124,536		$	13,579

See accompanying notes.

Liberty Property Trust

Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2009

Note 1: Organization and Basis of Presentation

Organization

Liberty Property Trust (the “Trust”) is a self-administered and self-managed Maryland real estate investment trust (a “REIT”). Substantially all of the Trust’s assets are owned directly or indirectly, and substantially all of the Trust’s operations are conducted directly or indirectly, by Liberty Property Limited Partnership (the “Operating Partnership” and, collectively with the Trust and their consolidated subsidiaries, the “Company”). The Trust is the sole general partner and also a limited partner of the Operating Partnership, owning 96.5% of the common equity of the Operating Partnership at June 30, 2009. The Company provides leasing, property management, development, acquisition and other tenant-related services for a portfolio of industrial and office properties which are located principally within the Mid-Atlantic, Southeastern, Midwestern and Southwestern United States and the United Kingdom. See a description of the Company’s markets in Note 2 to the Company’s financial statements.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Trust and its subsidiaries, including the Operating Partnership, have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of the Trust and the Operating Partnership for the year ended December 31, 2008, as amended. 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.

Subsequent events have been evaluated through August 7, 2009, the date of issuance of these interim financial statements.

Income per Common Share

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


	For the Three Months Ended June 30, 2009						For the Three Months Ended June 30, 2008
			Weighted						Weighted
			Average						Average
	Income		Shares				Income		Shares
	(Numerator)		(Denominator)		Per Share		(Numerator)		(Denominator)		Per Share
Basic income from continuing operations
Income from continuing operations net of noncontrolling interest	$	32,362		105,768	$	0.31	$	27,333		92,322	$	0.29

Dilutive shares for long-term compensation plans		—		477				—		379


Diluted income from continuing operations
Income from continuing operations net of noncontrolling interest and assumed conversions		32,362		106,245	$	0.31		27,333		92,701	$	0.29


Basic income from discontinued operations
Discontinued operations net of noncontrolling interest		4,309		105,768	$	0.04		4,296		92,322	$	0.05

Dilutive shares for long-term compensation plans		—		477				—		379


Diluted income from discontinued operations
Discontinued operations net of noncontrolling interest		4,309		106,245	$	0.04		4,296		92,701	$	0.05


Basic income per common share
Net income available to common shareholders		36,671		105,768	$	0.35		31,629		92,322	$	0.34

Dilutive shares for long-term compensation plans		—		477				—		379


Diluted income per common share
Net income available to common shareholders and assumed conversions	$	36,671		106,245	$	0.35	$	31,629		92,701	$	0.34


	For the Six Months Ended June 30, 2009						For the Six Months Ended June 30, 2008
			Weighted						Weighted
			Average						Average
	Income		Shares				Income		Shares
	(Numerator)		(Denominator)		Per Share		(Numerator)		(Denominator)		Per Share
Basic income from continuing operations
Income from continuing operations net of noncontrolling interest	$	59,062		103,244	$	0.58	$	55,105		92,001	$	0.60

Dilutive shares for long-term compensation plans		—		381				—		247


Diluted income from continuing operations
Income from continuing operations net of noncontrolling interest and assumed conversions		59,062		103,625	$	0.57		55,105		92,248	$	0.60


Basic income from discontinued operations
Discontinued operations net of noncontrolling interest		5,498		103,244	$	0.05		6,485		92,001	$	0.07

Dilutive shares for long-term compensation plans		—		381				—		247


Diluted income from discontinued operations
Discontinued operations net of noncontrolling interest		5,498		103,625	$	0.05		6,485		92,248	$	0.07


Basic income per common share
Net income available to common shareholders		64,560		103,244	$	0.63		61,590		92,001	$	0.67

Dilutive shares for long-term compensation plans		—		381				—		247


Diluted income per common share
Net income available to common shareholders and assumed conversions	$	64,560		103,625	$	0.62	$	61,590		92,248	$	0.67

The amount of anti-dilutive options that were excluded from the computation of diluted income per common share for the three months ended June 30, 2009 and 2008 were 2,666,000 and 846,000, respectively, and were 2,857,000 and 876,000 for the six months ended June 30, 2009 and 2008, respectively.

Foreign Currency Translation

The functional currency of the Company’s United Kingdom operations is pounds sterling. The Company translates the financial statements for the United Kingdom operations into US dollars. Gains and losses resulting from this translation do not impact the results of operations and are included in accumulated other comprehensive income (loss) as a separate component of shareholders’ equity. Accumulated other comprehensive income (loss) consists solely of the foreign currency translation adjustments described. Other comprehensive income for the three months ended June 30, 2009 was $10.8 million as compared to $0.5 million for the same period in 2008 and was $9.5 million for the six months ended June 30, 2009 as compared to $0.3 million for the same period in 2008. Upon sale or upon complete or substantially complete liquidation of the Company’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).

SFAS No. 160

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

Note 2: Segment Information

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


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

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

The Company evaluates performance of the reportable segments based on property level operating income, which is calculated as rental revenue and operating expense reimbursement less rental property expenses and real estate taxes. The accounting policies of the reportable segments are the same as those for the Company on a consolidated basis.

FOR THE THREE MONTHS ENDED JUNE 30, 2009


	Northeast
			Lehigh/
	Southeastern		Central		New								Phila-		United
	PA		PA		Jersey		Midwest		Mid-Atlantic		South		delphia		Kingdom		Total
Operating revenue	$	45,729	$	24,683	$	7,808	$	21,056	$	33,651	$	46,554	$	5,048	$	1,135	$	185,664
Rental property expenses and real estate taxes		14,169		6,440		2,941		7,908		9,343		15,233		1,193		260		57,487


Property level operating income	$	31,560	$	18,243	$	4,867	$	13,148	$	24,308	$	31,321	$	3,855	$	875		128,177


Interest and other income																		2,520
Debt extinguishment gain																		563
Interest expense																		(37,300	)
General and administrative																		(11,659	)
Depreciation and amortization																		(42,571	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures																		39,730
Loss on property dispositions																		(2,050	)
Income taxes																		(127	)
Equity in earnings of unconsolidated joint ventures																		1,192
Discontinued operations																		4,467


Net income																	$	43,212

FOR THE THREE MONTHS ENDED JUNE 30, 2008


	Northeast
			Lehigh/
	Southeastern		Central		New								Phila-		United
	PA		PA		Jersey		Midwest		Mid-Atlantic		South		delphia		Kingdom		Total
Operating revenue	$	43,265	$	24,767	$	7,939	$	20,969	$	34,467	$	42,435	$	4,745	$	1,408	$	179,995
Rental property expenses and real estate taxes		13,763		7,311		3,166		7,974		9,566		15,011		1,447		257		58,495


Property level operating income	$	29,502	$	17,456	$	4,773	$	12,995	$	24,901	$	27,424	$	3,298	$	1,151		121,500


Interest and other income																		3,009
Interest expense																		(36,330	)
General and administrative																		(13,047	)
Depreciation and amortization																		(42,508	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures																		32,624
Gain on property dispositions																		835
Income taxes																		(580	)
Equity in earnings of unconsolidated joint ventures																		1,010
Discontinued operations																		4,489


Net income																	$	38,378

FOR THE SIX MONTHS ENDED JUNE 30, 2009


	Northeast
			Lehigh/
	Southeastern		Central		New								Phila-		United
	PA		PA		Jersey		Midwest		Mid-Atlantic		South		delphia		Kingdom		Total
Operating revenue	$	93,095	$	49,845	$	15,857	$	42,046	$	67,903	$	92,053	$	9,783	$	2,236	$	372,818
Rental property expenses and real estate taxes		29,996		14,060		6,340		15,764		20,148		29,588		2,373		490		118,759


Property level operating income	$	63,099	$	35,785	$	9,517	$	26,282	$	47,755	$	62,465	$	7,410	$	1,746		254,059


Interest and other income																		5,624
Debt extinguishment gain																		1,092
Interest expense																		(75,420	)
General and administrative																		(27,222	)
Depreciation and amortization																		(85,705	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures																		72,428
Loss on property dispositions																		(2,344	)
Income taxes																		(344	)
Equity in earnings of unconsolidated joint ventures																		1,609
Discontinued operations																		5,705


Net income																	$	77,054

FOR THE SIX MONTHS ENDED JUNE 30, 2008


	Northeast
			Lehigh/
	Southeastern		Central		New								Phila-		United
	PA		PA		Jersey		Midwest		Mid-Atlantic		South		delphia		Kingdom		Total
Operating revenue	$	87,392	$	48,976	$	15,705	$	41,157	$	69,127	$	82,418	$	20,133	$	2,452	$	367,360
Rental property expenses and real estate taxes		28,111		13,846		6,076		15,553		19,536		28,113		5,470		618		117,323


Property level operating income	$	59,281	$	35,130	$	9,629	$	25,604	$	49,591	$	54,305	$	14,663	$	1,834		250,037


Interest and other income																		6,096
Interest expense																		(77,679	)
General and administrative																		(27,083	)
Depreciation and amortization																		(85,174	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures																		66,197
Gain on property dispositions																		1,476
Income taxes																		(1,064	)
Equity in earnings of unconsolidated joint ventures																		1,387
Discontinued operations																		6,778


Net income																	$	74,774

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

In accordance with SFAS No. 144, the operating results and gain/(loss) on disposition of real estate for properties sold and held for sale are reflected in the condensed consolidated statements of operations as discontinued operations. Prior period financial statements have been adjusted for discontinued operations. The proceeds from dispositions of operating properties with no continuing involvement for the three and six months ended June 30, 2009 were $34.7 million and $69.5 million, respectively, as compared to $5.3 million and $8.7 million, respectively, for the same periods in 2008.

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


	Three Months Ended						Six Months Ended
	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008
Revenues	$	1,875		$	6,512		$	5,052		$	12,703
Operating expenses		(333	)		(2,408	)		(1,349	)		(4,456	)
Interest expense		(300	)		(996	)		(863	)		(2,109	)
Depreciation and amortization		(445	)		(1,412	)		(1,004	)		(2,763	)

Income before property dispositions	$	797		$	1,696		$	1,836		$	3,375

Two properties totaling 478,000 square feet located in the Company’s Northeast segment are considered to be held for sale as of June 30, 2009. One held for sale property was sold subsequent to June 30, 2009 for proceeds of $11 million.

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

Asset Impairment

In accordance with SFAS No. 144, during the three months ended June 30, 2009, the Company recognized impairment losses of $3.8 million. No impairment losses were recognized during the three months ended June 30, 2008. The impairment losses of $3.8 million were related to a property in the Northeast segment, a property in the Midwest segment and a property in the Philadelphia segment. For the three months ended June 30, 2009, $1.4 million in impairment related to properties sold was included in discontinued operations in the Company’s statement of operations. During the six months ended June 30, 2009, the Company recognized impairment losses of $4.5 million. No impairment losses were recognized during the six months ended June 30, 2008. The impairment losses of $4.5 million were related to a property in the Northeast segment, two properties in the Midwest segment, a portfolio of properties in the Mid-Atlantic segment, a property in the Philadelphia segment and land in the Northeast segment. For the six months ended June 30, 2009, $1.5 million in impairment related to properties sold was included in discontinued operations in the Company’s statement of operations. The Company determined these impairments through a comparison of the aggregate future cash flows (including quoted offer prices) to be generated by the properties to the carrying value of the properties. The Company has evaluated each of the properties and land held for development and has determined that there are no additional valuation adjustments necessary at June 30, 2009.

Note 4: Joint Ventures

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

Liberty/Commerz 1701 JFK Boulevard, LP

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

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

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

As of June 30, 2009, the Company had a $3.3 million receivable from this joint venture. This related party receivable is due to the funding of joint venture development costs and is reflected in investments in unconsolidated joint ventures in the Company’s consolidated balance sheet.

Note 5: Indebtedness

Mortgage Loans

During the three months ended June 30, 2009, the Company did not close on any mortgages. During the six months ended June 30, 2009, the Company closed on mortgages totaling $317 million bearing interest at a weighted average rate of 7.1%. The mortgages encumber certain of the Company’s operating properties with a net book value of $580.4 million at June 30, 2009. The net proceeds from these mortgages were used to pay down outstanding borrowings under the Company’s unsecured credit facility and for general corporate purposes.

In total, as of June 30, 2009, the Company had mortgage loans with maturities ranging from 2009 to 2017 that were collateralized by and in some instances cross-collateralized by properties with a net book value of $820.6 million.

Unsecured Notes

During the three months ended June 30, 2009, the Company repaid $238.6 million of 7.75% senior unsecured notes due April 2009. During the six months ended June 30, 2009, the Company also repaid $20 million of 8.125% medium term unsecured notes due January 2009.

During the three months ended June 30, 2009, the Company purchased $3.5 million of its 7.25% March 2011 senior unsecured notes and $4.9 million of its 6.375% August 2012 senior unsecured notes. During the six months ended June 30, 2009, the Company also purchased $11.4 million of its 7.75% April 2009 senior unsecured notes and $6.9 million of its 8.50% August 2010 senior unsecured notes. These notes were purchased at discounts of $0.6 million and $1.1 million for the three and six months ended June 30, 2009, respectively. These discounts are included in net income as a debt extinguishment gain.

Note 6: Noncontrolling interests

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

Common units

The common units outstanding as of June 30, 2009 have the same economic characteristics as common shares of the Trust. The 4,017,354 common units share proportionately in the net income or loss and in any distributions of the Operating Partnership. The common units of the Operating Partnership not held by the Trust are redeemable at any time at the option of the holder. The Trust as the sole general partner of the Operating Partnership may at its option elect to settle the redemption in cash or through the exchange on a one-for-one basis with unregistered common shares of the Trust. The market value of the 4,017,354 common units based on the closing price of the shares of the Company at June 30, 2009 was $92.6 million.

Preferred units

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


Date of						Liquidation		Dividend			Redeemable
Issue	Issue	Amount		Units		Preference		Rate			As of		Exchangeable after
		(in 000’s)
7/28/99	Series B	$	95,000		3,800	$	25		7.45	%		8/31/09	8/31/13 into Series B Cumulative Redeemable Preferred Shares of the Trust
6/16/05	Series E	$	20,000		400	$	50		7.00	%		6/16/10	6/16/15 into Series E Cumulative Redeemable Preferred Shares of the Trust
6/30/05	Series F	$	44,000		880	$	50		6.65	%		6/30/10	12/12/15 into Series F Cumulative Redeemable Preferred Shares of the Trust
8/23/05	Series F	$	6,000		120	$	50		6.65	%		6/30/10	12/12/15 into Series F Cumulative Redeemable Preferred Shares of the Trust
12/15/06	Series G	$	27,000		540	$	50		6.70	%		12/12/11	12/12/16 into Series G Cumulative Redeemable Preferred Shares of the Trust
8/21/07	Series H	$	100,000		4,000	$	25		7.40	%		8/21/12	8/21/17 into Series H Cumulative Redeemable Preferred Shares of the Trust

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

Note 7: Continuous Equity Offering

During the three and six months ended June 30, 2009, the Company sold common shares pursuant to its continuous offering program described in the Company’s Form 10-K for the year ended December 31, 2008, as amended. In April 2009, the Company’s Board of Trustees approved the expansion of the Company’s continuous offering program. In addition to the original program, the expansion allowed for the sale of an additional $150 million in common shares. During the three and six months ended June 30, 2009, the Company sold 5.5 million and 10.0 million common shares, respectively, through this program. The net proceeds from the offering of $122.2 million and $214.0 million for the three and six months ended June 30, 2009, respectively, were used for general corporate purposes, including the funding of maturing senior note obligations.

Note 8: Disclosure of Fair Value of Financial Instruments

Effective April 2009, the Company adopted FASB Staff Position SFAS 107-1 and Accounting Principles Board (APB) Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” The FSP amends SFAS 107 to require disclosures about fair value of financial instruments in both interim and annual financial statements. This FSP also amends APB 28 to require those disclosures in summarized financial information at interim reporting periods.

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, 2009 and December 31, 2008. 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, dividends and distributions payable and other liabilities are reasonable estimates of fair value because of the short-term nature of these instruments. The fair value of the Company’s long-term debt is less than the aggregate carrying value by approximately $260.3 million and $713.1 million at June 30, 2009 and December 31, 2008, respectively. The fair value of the Company’s long-term debt is estimated using actual trading prices (where available) and using discounted cash flow analysis based on the borrowing rates currently available to the Company for loans with similar terms and maturities where actual trading prices are not available.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of June 30, 2009 and December 31, 2008. Although as of the date of this report, management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since June 30, 2009 and current estimates of fair value may differ significantly from the amounts presented herein.

Note 9: Recently Issued Accounting Standards

SFAS No. 141(R)

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

FSP EITF 03-6-1

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

Note 10: 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, 2009 and 2008 (amounts in thousands):


Non-cash activity	2009		2008
Write-off of fully depreciated property and deferred costs	$	17,476	$	6,578
Increase in investments in unconsolidated joint ventures		—		(35,172	)
Disposition of properties/development in progress		—		173,624
Disposition of deferred leasing/financing costs		—		12,526
Reduction of accounts receivable		—		7,854
Reduction of deferred rent receivable		—		6,580
Reduction of prepaid and other assets		—		38,486
Reduction of credit facility		—		(152,960	)
Reduction of other liabilities		—		(50,938	)

Note 11: Subsequent Events

From July 1, 2009 to August 5, 2009, the Company sold 2.8 million common shares through its continuous offering program. The net proceeds from the offering of $69.2 million were used to pay down outstanding borrowings under the $600 million Credit Facility and for general corporate purposes, including the funding of maturing senior note obligations.

CONDENSED CONSOLIDATED BALANCE SHEETS OF

LIBERTY PROPERTY LIMITED PARTNERSHIP

(In thousands)


	June 30, 2009			December 31, 2008
	(Unaudited)
ASSETS
Real estate:
Land and land improvements	$	824,906		$	806,122
Building and improvements		4,301,270			4,218,839
Less accumulated depreciation		(1,040,218	)		(972,831	)


Operating real estate		4,085,958			4,052,130

Development in progress		215,155			245,463
Land held for development		222,324			209,551


Net real estate		4,523,437			4,507,144

Cash and cash equivalents		124,536			15,794
Restricted cash		40,351			39,726
Accounts receivable		6,636			12,985
Deferred rent receivable		89,291			83,498
Deferred financing and leasing costs, net of accumulated amortization (2009, $149,723; 2008, $139,346)		134,700			133,293
Investments in unconsolidated joint ventures		255,419			266,602
Assets held for sale		25,750			75,526
Prepaid expenses and other assets		74,369			82,467


Total assets	$	5,274,489		$	5,217,035


LIABILITIES
Mortgage loans	$	471,820		$	198,560
Unsecured notes		1,846,339			2,131,607
Credit facility		140,000			260,000
Accounts payable		35,262			32,481
Accrued interest		31,315			36,474
Distributions payable		54,057			48,858
Other liabilities		169,880			182,549


Total liabilities		2,748,673			2,890,529

Limited partners’ equity — preferred units, 9,740,000 preferred units outstanding as of June 30, 2009 and December 31, 2008		287,959			287,959
— common units, 4,017,354 and 4,074,967 common units outstanding as of June 30, 2009 and December 31, 2008, respectively		115,991			117,546

EQUITY
General partner’s equity — common units, 110,847,466 and 100,034,404 units outstanding as of June 30, 2009 and December 31, 2008, respectively		2,121,156			1,919,871
Noncontrolling interest — consolidated joint ventures		710			1,130


Total equity		2,121,866			1,921,001


Total liabilities, limited partners’ equity and equity	$	5,274,489		$	5,217,035

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands, except per unit amounts)


	Three Months Ended
	June 30, 2009			June 30, 2008
OPERATING REVENUE
Rental	$	130,846		$	123,557
Operating expense reimbursement		54,818			56,438

Total operating revenue		185,664			179,995


OPERATING EXPENSE
Rental property		35,368			35,534
Real estate taxes		22,119			22,961
General and administrative		11,659			13,047
Depreciation and amortization		42,571			42,508

Total operating expenses		111,717			114,050


Operating income		73,947			65,945

OTHER INCOME (EXPENSE)
Interest and other income		2,520			3,009
Debt extinguishment gain		563			—
Interest expense		(37,300	)		(36,330	)

Total other income (expense)		(34,217	)		(33,321	)

Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures		39,730			32,624
(Loss) gain on property dispositions		(2,050	)		835
Income taxes		(127	)		(580	)
Equity in earnings of unconsolidated joint ventures		1,192			1,010


Income from continuing operations		38,745			33,889

Discontinued operations (including net gain on property dispositions of $3,670 and $2,793 for the three months ended June 30, 2009 and 2008, respectively)		4,467			4,489


Net income		43,212			38,378

Noncontrolling interest — consolidated joint ventures		56			(68	)
Preferred unit distributions		(5,253	)		(5,253	)


Income available to common unitholders	$	38,015		$	33,057


Earnings per common unit
Basic:
Income from continuing operations	$	0.31		$	0.29
Income from discontinued operations		0.04			0.05


Income per common unit — basic	$	0.35		$	0.34


Diluted:
Income from continuing operations	$	0.31		$	0.29
Income from discontinued operations		0.04			0.05


Income per common unit — diluted	$	0.35		$	0.34


Distributions per common unit	$	0.475		$	0.625


Weighted average number of common units outstanding
Basic		109,785			96,512
Diluted		110,262			96,891

See accompanying notes.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Unaudited and in thousands, except per unit amounts)


	Six Months Ended
	June 30, 2009			June 30, 2008
OPERATING REVENUE
Rental	$	260,045		$	254,847
Operating expense reimbursement		112,773			112,513

Total operating revenue		372,818			367,360


OPERATING EXPENSE
Rental property		74,515			74,219
Real estate taxes		44,244			43,104
General and administrative		27,222			27,083
Depreciation and amortization		85,705			85,174

Total operating expenses		231,686			229,580


Operating income		141,132			137,780

OTHER INCOME (EXPENSE)
Interest and other income		5,624			6,096
Debt extinguishment gain		1,092			—
Interest expense		(75,420	)		(77,679	)

Total other income (expense)		(68,704	)		(71,583	)

Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures		72,428			66,197
(Loss) gain on property dispositions		(2,344	)		1,476
Income taxes		(344	)		(1,064	)
Equity in earnings of unconsolidated joint ventures		1,609			1,387


Income from continuing operations		71,349			67,996

Discontinued operations (including net gain on property dispositions of $3,869 and $3,403 for the six months ended June 30, 2009 and 2008, respectively)		5,705			6,778


Net income		77,054			74,774

Noncontrolling interest — consolidated joint ventures		420			102
Preferred unit distributions		(10,506	)		(10,506	)


Income available to common unitholders	$	66,968		$	64,370


Earnings per common unit
Basic:
Income from continuing operations	$	0.58		$	0.60
Income from discontinued operations		0.05			0.07


Income per common unit — basic	$	0.63		$	0.67


Diluted:
Income from continuing operations	$	0.57		$	0.60
Income from discontinued operations		0.05			0.07


Income per common unit — diluted	$	0.62		$	0.67


Distributions per common unit	$	0.95		$	1.25


Weighted average number of common units outstanding
Basic		107,263			96,191
Diluted		107,644			96,438

See accompanying notes.

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


	Six Months Ended
	June 30, 2009			June 30, 2008
OPERATING ACTIVITIES
Net income	$	77,054		$	74,774
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		86,306			87,374
Amortization of deferred financing costs		2,439			2,227
Equity in earnings of unconsolidated joint ventures		(1,607	)		(1,387	)
Distributions from unconsolidated joint ventures		663			—
Gain on property dispositions		(1,526	)		(4,879	)
Noncash compensation		9,790			5,603
Changes in operating assets and liabilities:
Restricted cash		970			(19,818	)
Accounts receivable		6,208			(248	)
Deferred rent receivable		(5,677	)		(7,195	)
Prepaid expenses and other assets		8,958			(10,831	)
Accounts payable		2,979			5,800
Accrued interest		(5,159	)		(1,909	)
Other liabilities		(15,795	)		(15,979	)

Net cash provided by operating activities		165,603			113,532


INVESTING ACTIVITIES
Investment in properties		(37,318	)		(37,752	)
Investments in and advances to unconsolidated joint ventures		(4,017	)		(7,506	)
Distributions from unconsolidated joint ventures		18,379			3,161
Net proceeds from disposition of properties/land		80,333			304,563
Investment in development in progress		(48,774	)		(138,035	)
Investment in land held for development		(26,980	)		(18,717	)
Investment in deferred leasing costs		(12,125	)		(14,271	)

Net cash (used in) provided by investing activities		(30,502	)		91,443


FINANCING ACTIVITIES
Repayments of unsecured notes		(285,268	)		—
Proceeds from mortgage loans		317,213			—
Repayments of mortgage loans		(44,121	)		(35,673	)
Proceeds from credit facility		199,150			344,150
Repayments on credit facility		(319,150	)		(439,150	)
Increase in deferred financing costs		(5,743	)		—
Capital contributions		218,970			32,124
Distribution to partners		(110,802	)		(130,808	)

Net cash used in financing activities		(29,751	)		(229,357	)


Net increase (decrease) in cash and cash equivalents		105,350			(24,382	)
Decrease in cash and cash equivalents related to foreign currency translation		3,392			(28	)
Cash and cash equivalents at beginning of period		15,794			37,989

Cash and cash equivalents at end of period	$	124,536		$	13,579

See accompanying notes.

Liberty Property Limited Partnership

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2009

Note 1: Organization and Basis of Presentation

Organization

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Operating Partnership and its subsidiaries have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of the Trust and the Operating Partnership for the year ended December 31, 2008, as amended. 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.

Subsequent events have been evaluated through August 7, 2009, the date of issuance of these interim financial statements.

Income per Common Unit

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


	For the Three Months Ended June 30, 2009							For the Three Months Ended June 30, 2008
				Weighted							Weighted
	Income			Average Units				Income			Average Units
	(Numerator)			(Denominator)		Per Unit		(Numerator)			(Denominator)		Per Unit
Income from continuing operations	$	38,745						$	33,889
Add: Noncontrolling interest — consolidated joint ventures		56							(68	)
Less: Preferred unit distributions		(5,253	)						(5,253	)


Basic income from continuing operations
Income from continuing operations available to common unitholders		33,548			109,785	$	0.31		28,568			96,512	$	0.29

Dilutive units for long-term compensation plans		—			477				—			379


Diluted income from continuing operations
Income from continuing operations available to common unitholders and assumed conversions		33,548			110,262	$	0.31		28,568			96,891	$	0.29


Basic income from discontinued operations
Discontinued operations		4,467			109,785	$	0.04		4,489			96,512	$	0.05

Dilutive units for long-term compensation plans		—			477				—			379


Diluted income from discontinued operations
Discontinued operations		4,467			110,262	$	0.04		4,489			96,891	$	0.05


Basic income per common unit
Income available to common unitholders		38,015			109,785	$	0.35		33,057			96,512	$	0.34


Diluted units for long-term compensation plans		—			477				—			379


Diluted income per common unit
Income available to common unitholders and assumed conversions	$	38,015			110,262	$	0.35	$	33,057			96,891	$	0.34


	For the Six Months Ended June 30, 2009							For the Six Months Ended June 30, 2008
				Weighted							Weighted
	Income			Average Units				Income			Average Units
	(Numerator)			(Denominator)		Per Unit		(Numerator)			(Denominator)		Per Unit
Income from continuing operations	$	71,349						$	67,996
Add: Noncontrolling interest — consolidated joint ventures		420							102
Less: Preferred unit distributions		(10,506	)						(10,506	)


Basic income from continuing operations
Income from continuing operations available to common unitholders		61,263			107,263	$	0.58		57,592			96,191	$	0.60

Dilutive units for long-term compensation plans		—			381				—			247


Diluted income from continuing operations
Income from continuing operations available to common unitholders and assumed conversions		61,263			107,644	$	0.57		57,592			96,438	$	0.60


Basic income from discontinued operations
Discontinued operations		5,705			107,263	$	0.05		6,778			96,191	$	0.07

Dilutive units for long-term compensation plans		—			381				—			247


Diluted income from discontinued operations
Discontinued operations		5,705			107,644	$	0.05		6,778			96,438	$	0.07


Basic income per common unit
Income available to common unitholders		66,968			107,263	$	0.63		64,370			96,191	$	0.67

Diluted units for long-term compensation plans		—			381				—			247


Diluted income per common unit
Income available to common unitholders and assumed conversions	$	66,968			107,644	$	0.62	$	64,370			96,438	$	0.67

Foreign Currency Translation

The functional currency of the Company’s United Kingdom operations is pounds sterling. The Company translates the financial statements for the United Kingdom operations into US dollars. Gains and losses resulting from this translation do not impact the results of operations and are included in general partner’s equity — common units. Other comprehensive income for the three months ended June 30, 2009 was $10.8 million as compared to $0.5 million for the same period in 2008 and was $9.5 million for the six months ended June 30, 2009 as compared to $0.3 million for the same period in 2008. Upon sale or upon complete or substantially complete liquidation of the Company’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-common units.

SFAS No. 160

Note 2: Segment Information


Reportable Segments		Markets

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

FOR THE THREE MONTHS ENDED JUNE 30, 2009


	Northeast
			Lehigh/
	Southeastern		Central		New								Phila-		United
	PA		PA		Jersey		Midwest		Mid-Atlantic		South		delphia		Kingdom		Total
Operating revenue	$	45,729	$	24,683	$	7,808	$	21,056	$	33,651	$	46,554	$	5,048	$	1,135	$	185,664
Rental property expenses and real estate taxes		14,169		6,440		2,941		7,908		9,343		15,233		1,193		260		57,487


Property level operating income	$	31,560	$	18,243	$	4,867	$	13,148	$	24,308	$	31,321	$	3,855	$	875		128,177


Interest and other income																		2,520
Debt extinguishment gain																		563
Interest expense																		(37,300	)
General and administrative																		(11,659	)
Depreciation and amortization																		(42,571	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures																		39,730
Loss on property dispositions																		(2,050	)
Income taxes																		(127	)
Equity in earnings of unconsolidated joint ventures																		1,192
Discontinued operations																		4,467


Net income																	$	43,212

FOR THE THREE MONTHS ENDED JUNE 30, 2008


	Northeast
			Lehigh/
	Southeastern		Central		New								Phila-		United
	PA		PA		Jersey		Midwest		Mid-Atlantic		South		delphia		Kingdom		Total
Operating revenue	$	43,265	$	24,767	$	7,939	$	20,969	$	34,467	$	42,435	$	4,745	$	1,408	$	179,995
Rental property expenses and real estate taxes		13,763		7,311		3,166		7,974		9,566		15,011		1,447		257		58,495


Property level operating income	$	29,502	$	17,456	$	4,773	$	12,995	$	24,901	$	27,424	$	3,298	$	1,151		121,500


Interest and other income																		3,009
Interest expense																		(36,330	)
General and administrative																		(13,047	)
Depreciation and amortization																		(42,508	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures																		32,624
Gain on property dispositions																		835
Income taxes																		(580	)
Equity in earnings of unconsolidated joint ventures																		1,010
Discontinued operations																		4,489


Net income																	$	38,378

FOR THE SIX MONTHS ENDED JUNE 30, 2009


	Northeast
			Lehigh/
	Southeastern		Central		New								Phila-		United
	PA		PA		Jersey		Midwest		Mid-Atlantic		South		delphia		Kingdom		Total
Operating revenue	$	93,095	$	49,845	$	15,857	$	42,046	$	67,903	$	92,053	$	9,783	$	2,236	$	372,818
Rental property expenses and real estate taxes		29,996		14,060		6,340		15,764		20,148		29,588		2,373		490		118,759


Property level operating income	$	63,099	$	35,785	$	9,517	$	26,282	$	47,755	$	62,465	$	7,410	$	1,746		254,059


Interest and other income																		5,624
Debt extinguishment gain																		1,092
Interest expense																		(75,420	)
General and administrative																		(27,222	)
Depreciation and amortization																		(85,705	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures																		72,428
Loss on property dispositions																		(2,344	)
Income taxes																		(344	)
Equity in earnings of unconsolidated joint ventures																		1,609
Discontinued operations																		5,705


Net income																	$	77,054

FOR THE SIX MONTHS ENDED JUNE 30, 2008


	Northeast
			Lehigh/
	Southeastern		Central		New								Phila-		United
	PA		PA		Jersey		Midwest		Mid-Atlantic		South		delphia		Kingdom		Total
Operating revenue	$	87,392	$	48,976	$	15,705	$	41,157	$	69,127	$	82,418	$	20,133	$	2,452	$	367,360
Rental property expenses and real estate taxes		28,111		13,846		6,076		15,553		19,536		28,113		5,470		618		117,323


Property level operating income	$	59,281	$	35,130	$	9,629	$	25,604	$	49,591	$	54,305	$	14,663	$	1,834		250,037


Interest and other income																		6,096
Interest expense																		(77,679	)
General and administrative																		(27,083	)
Depreciation and amortization																		(85,174	)


Income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures																		66,197
Gain on property dispositions																		1,476
Income taxes																		(1,064	)
Equity in earnings of unconsolidated joint ventures																		1,387
Discontinued operations																		6,778


Net income																	$	74,774

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

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


	Three Months Ended						Six Months Ended
	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008

Revenues	$	1,875		$	6,512		$	5,052		$	12,703
Operating expenses		(333	)		(2,408	)		(1,349	)		(4,456	)
Interest expense		(300	)		(996	)		(863	)		(2,109	)
Depreciation and amortization		(445	)		(1,412	)		(1,004	)		(2,763	)

Income before property dispositions	$	797		$	1,696		$	1,836		$	3,375

Asset Impairment

Note 4: Joint Ventures

Liberty/Commerz 1701 JFK Boulevard, LP

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

Note 5: Indebtedness

Mortgage Loans

Unsecured Notes

Note 6: Limited partnership interests

Limited partnership interests in the accompanying financial statements represents the interests of the common and preferred units in Liberty Property Limited Partnership not held by the Trust.

The following details the change in limited partners’ equity for the six months ended June 30, 2009.


	Limited			Limited
	partners’ equity			partners’ equity
	– preferred			– common
	units			units

Balance at December 31, 2008	$	287,959		$	117,546
Net income		10,506			2,408
Distributions		(10,506	)		(3,963	)


Balance at June 30, 2009	$	287,959		$	115,991

Common units

The common units outstanding as of June 30, 2009 have the same economic characteristics as common shares of the Trust. The 4,017,354 common units share proportionately in the net income or loss and in any distributions of the Operating Partnership. The common units of the Operating Partnership not held by the Trust are redeemable at any time at the option of the holder. The Trust as the sole general partner of the Operating Partnership may at its option elect to settle the redemption in cash or through the exchange on a one-for-one basis with unregistered common shares of the Trust. The market value of the 4,017,354 common units based on the closing price of the shares of the Company at June 30, 2009 was $92.6 million.

Preferred units

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


Date of						Liquidation		Dividend			Redeemable
Issue	Issue	Amount		Units		Preference		Rate			As of		Exchangeable after
		(in 000’s)
7/28/99	Series B	$	95,000		3,800	$	25		7.45	%		8/31/09	8/31/13 into Series B Cumulative Redeemable Preferred Shares of the Trust
6/16/05	Series E	$	20,000		400	$	50		7.00	%		6/16/10	6/16/15 into Series E Cumulative Redeemable Preferred Shares of the Trust
6/30/05	Series F	$	44,000		880	$	50		6.65	%		6/30/10	12/12/15 into Series F Cumulative Redeemable Preferred Shares of the Trust
8/23/05	Series F	$	6,000		120	$	50		6.65	%		6/30/10	12/12/15 into Series F Cumulative Redeemable Preferred Shares of the Trust
12/15/06	Series G	$	27,000		540	$	50		6.70	%		12/12/11	12/12/16 into Series G Cumulative Redeemable Preferred Shares of the Trust
8/21/07	Series H	$	100,000		4,000	$	25		7.40	%		8/21/12	8/21/17 into Series H Cumulative Redeemable Preferred Shares of the Trust

Note 7: Continuous Equity Offering

During the three and six months ended June 30, 2009, the Trust sold common shares pursuant to its continuous offering program described in the Company’s Form 10-K for the year ended December 31, 2008, as amended. In April 2009, the Company’s Board of Trustees approved the expansion of the Trust’s continuous offering program. In addition to the original program, the expansion allowed for the sale of an additional $150 million in common shares. During the three and six months ended June 30, 2009, the Trust sold 5.5 million and 10.0 million common shares, respectively, through this program. The net proceeds from the offering of $122.2 million and $214.0 million for the three and six months ended June 30, 2009, respectively, were used for general corporate purposes, including the funding of maturing senior note obligations.

Note 8: Disclosure of Fair Value of Financial Instruments

Note 9: Recently Issued Accounting Standards

SFAS No. 141(R)

FSP EITF 03-6-1

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

Note 10: 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, 2009 and 2008 (amounts in thousands):


Non-cash activity	2009		2008
Write-off of fully depreciated property and deferred costs	$	17,476	$	6,578
Increase in investments in unconsolidated joint ventures		—		(35,172	)
Disposition of properties/development in progress		—		173,624
Disposition of deferred leasing/financing costs		—		12,526
Reduction of accounts receivable		—		7,854
Reduction of deferred rent receivable		—		6,580
Reduction of prepaid and other assets		—		38,486
Reduction of credit facility		—		(152,960	)
Reduction of other liabilities		—		(50,938	)

Note 11: Subsequent Events

From July 1, 2009 to August 5, 2009, Liberty Property Trust sold 2.8 million common shares through its continuous offering program. The net proceeds from the offering of $69.2 million were used to pay down outstanding borrowings under the $600 million Credit Facility and for general corporate purposes, including the funding of maturing senior note obligations.

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, 2009, the Company owned and operated 353 industrial and 289 office properties (the “Wholly Owned Properties in Operation”) totaling 64.3 million square feet. In addition, as of June 30, 2009, the Company owned 14 properties under development, which are expected to comprise 2.0 million square feet when completed (the “Wholly Owned Properties under Development”) and 1,365 acres of developable land, substantially all of which is zoned for commercial use. Additionally, as of June 30, 2009, the Company had an ownership interest, through unconsolidated joint ventures, in 46 industrial and 49 office properties totaling 13.1 million square feet (the “JV Properties in Operation” and, collectively with the Wholly Owned Properties in Operation, the “Properties in Operation”), four properties under development, which are expected to comprise 1.4 million square feet when completed (the “JV Properties under Development” and, collectively with the Wholly Owned Properties under Development, the “Properties under Development”). The Company also has an ownership interest through unconsolidated joint ventures in 630 acres of developable land, substantially all of which is zoned for commercial use.

The Company focuses on creating value for shareholders and increasing profitability and cash flow. With respect to its Properties in Operation, the Company endeavors to maintain high occupancy levels while increasing rental rates and controlling costs. The Company’s operating results depend primarily upon income from rental operations and are substantially influenced by rental demand for the Properties in Operation. As a general matter, the Company pursues development opportunities that it believes will create value and yield acceptable returns. The Company also has historically acquired properties that it believes will create long-term value, and disposed of properties that no longer fit within the Company’s strategic objectives or in situations where it can optimize cash proceeds. Current market conditions are not favorable for acquisitions, dispositions and development and consequently the Company’s potential for growth in operating income from acquisitions and development is anticipated to be limited in 2009.

Current conditions in the global credit markets and declines and weakness in the general economy have negatively impacted the Company’s business. Although the credit markets have shown some improvement recently, conditions in the credit markets, and in particular the unsecured credit markets, remain considerably less favorable than they had been prior to the credit crisis and the Company has shifted its financing strategy to include more secured debt and equity sales in order to address its financing needs. Additionally, uncertainty about the pricing of commercial real estate and the absence of available financing to facilitate transactions has dramatically reduced the Company’s ability to rely on the proceeds from the sale of real estate to provide proceeds to fund investment opportunities.

Consistent with the dramatic slowdown in the United States and world economies, rental demand for the Properties in Operation declined for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008. Despite this trend, the Company successfully leased 4.2 million square feet during the three months ended June 30, 2009 and attained occupancy of 89.6% for the Wholly Owned Properties in Operation and 88.4% for the JV Properties in Operation for a combined occupancy of 89.4% for the Properties in Operation, all as of that date. At December 31, 2008, occupancy for the Wholly Owned Properties in Operation was 91.1% and for the JV Properties in Operation was 92.2% for a combined occupancy for the Properties in Operation of 91.3%. The Company believes that straight line rents on renewal and replacement leases for 2009 will decrease between 0% and 5% compared to rents on expiring leases. Furthermore, the Company believes that average occupancy for its Properties in Operation will decrease by no more than 2% for 2009 compared to 2008.

WHOLLY OWNED CAPITAL ACTIVITY

Acquisitions

During the six months ended June 30, 2009, conditions for the acquisition of properties were unsettled because of adverse events in the credit markets and the Company did not acquire any operating properties and does not anticipate doing so for the remainder of 2009.

Dispositions

During the six months ended June 30, 2009, market conditions for dispositions were unsettled, which the Company again attributes to adverse conditions in the credit markets. Disposition activity allows the Company to, among other things, (1) reduce its holdings in certain markets and product types within a market; (2) lower the average age of the portfolio; (3) optimize the cash proceeds from the sale of certain assets; and (4) obtain funds for investment activities. During the three months ended June 30, 2009, the Company realized proceeds of $34.7 million from the sale of 10 operating properties representing 461,000 square feet. During the six months ended June 30, 2009, the Company realized proceeds of $80.3 million from the sale of 16 operating properties representing 757,000 square feet and 0.3 acres of land. For 2009, the Company believes that it will dispose of $125 million to $200 million of operating properties.

Development

During the three months ended June 30, 2009, the Company brought into service three Wholly Owned Properties under Development representing 1.1 million square feet and a Total Investment, as defined below, of $73.6 million, and initiated $12.3 million in real estate development. During the six months ended June 30, 2009, the Company brought into service four Wholly Owned Properties under Development representing 1.2 million square feet and a Total Investment, as defined below, of $89.3 million, and initiated $12.3 million in real estate development. As of June 30, 2009, the projected Total Investment of the Wholly Owned Properties under Development was $297.0 million. For 2009, the Company believes that it will bring into service from its development pipeline approximately $250 million to $350 million of Total Investment in operating real estate.

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

JOINT VENTURE CAPITAL ACTIVITY

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

Acquisitions

During the three and six months ended June 30, 2009, none of the unconsolidated joint ventures in which the Company held an interest acquired any properties. For 2009, the Company believes that property acquisitions by unconsolidated joint ventures in which the Company has an interest will be in the $50 million to $100 million range.

Dispositions

During the three and six months ended June 30, 2009, none of the unconsolidated joint ventures in which the Company held an interest disposed of any properties and the Company does not anticipate doing so for the remainder of 2009.

Development

During the three and six months ended June 30, 2009, none of the unconsolidated joint ventures in which the Company held an interest brought any Properties under Development into service. As of June 30, 2009, the projected Total Investment of JV Properties under Development was $190.7 million. For 2009, the Company expects unconsolidated joint ventures in which it holds an interest to bring into service up to $50 million of Total Investment in operating properties.

PROPERTIES IN OPERATION

The composition of the Company’s Properties in Operation as of June 30, 2009 and 2008 was as follows (in thousands, except dollars and percentages):


	Net Rent
	Per Square Foot				Total Square Feet				Percent Occupied
	June 30				June 30				June 30
	2009		2008		2009		2008		2009			2008
Wholly Owned Properties in Operation:
Industrial-Distribution	$	4.34	$	4.48		31,502		27,083		88.5	%		93.6	%
Industrial-Flex	$	9.18	$	9.37		11,497		10,240		87.9	%		88.6	%
Office	$	14.35	$	14.18		21,272		19,732		92.1	%		91.6	%

	$	8.60	$	8.71		64,271		57,055		89.6	%		92.0	%


	Net Rent
	Per Square Foot				Total Square Feet				Percent Occupied
	June 30				June 30				June 30
	2009		2008		2009		2008		2009			2008
Joint Venture Properties in Operation:
Industrial-Distribution	$	4.23	$	4.09		8,316		7,786		87.7	%		97.1	%
Industrial-Flex	$	27.86	$	33.97		171		153		81.3	%		89.5	%
Office	$	25.00	$	25.26		4,575		4,240		89.9	%		92.6	%

	$	11.91	$	11.83		13,062		12,179		88.4	%		95.4	%


	Net Rent
	Per Square Foot				Total Square Feet				Percent Occupied
	June 30				June 30				June 30
	2009		2008		2009		2008		2009			2008
Properties in Operation:
Industrial-Distribution	$	4.32	$	4.39		39,818		34,869		88.3	%		94.3	%
Industrial-Flex	$	9.43	$	9.73		11,668		10,393		87.8	%		88.6	%
Office	$	16.20	$	16.14		25,847		23,972		91.7	%		91.8	%

	$	9.15	$	9.26		77,333		69,234		89.4	%		92.5	%

Geographic segment data for the three and six months ended June 30, 2009 and 2008 are included in Note 2 to the Company’s financial statements.

Forward-Looking Statements

When used throughout this report, the words “believes,” “anticipates” and “expects” and similar expressions are intended to identify forward-looking statements. Such statements indicate that assumptions have been used that are subject to a number of risks and uncertainties that could cause actual financial results or management plans and objectives to differ materially from those projected or expressed herein, including: the effect of national and regional economic conditions; rental demand; the Company’s ability to identify, and enter into agreements with suitable joint venture partners in situations where it believes such arrangements are advantageous; the Company’s ability to identify and secure additional properties and sites, both for itself and the joint ventures to which it is a party, that meet its criteria for acquisition or development; the current credit crisis and its impact on the availability and cost of capital; the effect of prevailing market interest rates; risks related to the integration of the operations of entities that we have acquired or may acquire; risks related to litigation; and other risks described from time to time in the Company’s filings with the SEC. Given these uncertainties, readers are cautioned not to place undue reliance on such statements.

Critical Accounting Policies and Estimates

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, as amended, for a discussion of critical accounting policies which include capitalized costs, revenue recognition, allowance for doubtful accounts, impairment of real estate, intangibles and investments in unconsolidated joint ventures. During the three months ended June 30, 2009, there were no material changes to these policies.

Results of Operations

The following discussion is based on the consolidated financial statements of the Company. It compares the results of operations of the Company for the three and six months ended June 30, 2009 with the results of operations of the Company for the three and six months ended June 30, 2008. As a result of the varying levels of development, acquisition and disposition activities by the Company in 2009 and 2008, the overall operating results of the Company during such periods are not directly comparable. However, certain data, including the Same Store comparison, do lend themselves to direct comparison.

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

Comparison of Three and Six Months Ended June 30, 2009 to Three and Six Months Ended June 30, 2008

Overview

The Company’s average gross investment in operating real estate owned for the three months ended June 30, 2009 increased to $5,038.8 million from $4,972.1 million for the three months ended June 30, 2008. This increase in operating real estate resulted in increases in rental revenue, operating expense reimbursement and depreciation and amortization expense. Rental property expenses and real estate taxes were relatively unchanged. For the six months ended June 30, 2009, the Company’s average gross investment in real estate owned increased to $5,030.5 million from $5,010.3 million for the six months ended June 30, 2008. This increase in operating real estate resulted in increases in rental revenue, operating expense reimbursement, rental property expense, real estate taxes, and depreciation and amortization expense.

Total operating revenue increased to $185.7 million for the three months ended June 30, 2009 from $180.0 million for the three months ended June 30, 2008 and increased to $372.8 million for the six months ended June 30, 2009 from $367.4 million for the six months ended June 30, 2008. The $5.7 million increase during the three months ended June 30, 2009 compared to the same period in 2008 was primarily due to the increase in investment in operating real estate and the increase in operating revenue from the Same Store group of properties, discussed below, and an increase in “Termination Fees,” which totaled $1.0 million for the three months ended June 30, 2009 as compared to $0.7 million for the same period in 2008. The $5.4 million increase during the six months ended June 30, 2009 compared to the same period in 2008 was primarily due to the increase in investment in operating real estate and the increase in operating revenue from the Same Store group of properties, discussed below. These increases were offset by a decrease in “Termination Fees”, which totaled $1.4 million for the six months ended June 30, 2009 as compared to $1.9 million for the same period in 2008. Termination Fees are fees that the Company agrees to accept in consideration for permitting certain tenants to terminate their leases prior to the contractual expiration date. Termination Fees are included in rental revenue.

Segments

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

Property Level Operating Income:


	Three Months Ended				Percentage			Six Months Ended				Percentage
	June 30,				Increase			June 30,				Increase
	2009		2008		(Decrease)			2009		2008		(Decrease)

Northeast
— Southeastern PA	$	31,560	$	29,502		7.0	%(1)	$	63,099	$	59,281		6.4	%(1)
— Lehigh/Central PA		18,243		17,456		4.5	%(2)		35,785		35,130		1.9	%
— New Jersey		4,867		4,773		2.0	%		9,517		9,629		(1.2	%)
Midwest		13,148		12,995		1.2	%		26,282		25,604		2.6	%
Mid-Atlantic		24,308		24,901		(2.4	%)		47,755		49,591		(3.7	%)(3)
South		31,321		27,424		14.2	%(1)		62,465		54,305		15.0	%(1)

Philadelphia		3,855		3,298		16.9	%(4)		7,410		14,663		(49.5	%)(5)
United Kingdom		875		1,151		(24.0	%)(6)		1,746		1,834		(4.8	%)(6)


Total property level operating income	$	128,177	$	121,500		5.5	%	$	254,059	$	250,037		1.6	%


(1)		The increase for the three and six months ended June 30, 2009 versus the three and six months ended June 30, 2008 was primarily due to an increase in average gross investment in operating real estate, an increase in occupancy and an increase in rental rates.

(2)		The increase for the three months ended June 30, 2009 versus the three months ended June 30, 2008 was primarily due to an increase in average gross investment in operating real estate. This increase was partially offset by a decrease in occupancy and a decrease in rental rates in 2009.

(3)		The decrease for the six months ended June 30, 2009 versus the six months ended June 30, 2008 was primarily due to a decrease in occupancy. This decrease was partially offset by an increase in average gross investment in operating real estate and an increase in rental rates in 2009.

(4)		The increase for the three months ended June 30, 2009 versus the three months ended June 30, 2008 was primarily due to an increase in average gross investment in operating real estate and an increase in rental rates. This increase was partially offset by a decrease in occupancy in 2009.

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

(6)		The decrease for the three and six months ended June 30, 2009 versus the three and six months ended June 30, 2008 was primarily due to a decrease in average gross investment in operating real estate and a decrease in rental rates. This decrease was partially offset by an increase in occupancy in 2009.

Same Store

Property level operating income, exclusive of Termination Fees, for the Same Store properties increased to $122.8 million for the three months ended June 30, 2009 from $121.3 million for the three months ended June 30, 2008, on a straight line basis (which recognizes rental revenue evenly over the life of the lease), and increased to $119.4 million for the three months ended June 30, 2009 from $118.7 million for the three months ended June 30, 2008 on a cash basis. These increases of 1.2% and 0.5%, respectively, are primarily due to an increase in rental rates and an increase in occupancy in the office portfolio.

Property level operating income, exclusive of Termination Fees, for the Same Store properties increased to $245.3 million for the six months ended June 30, 2009 from $241.4 million for the six months ended June 30, 2008, on a straight line basis (which recognizes rental revenue evenly over the life of the lease), and increased to $238.4 million for the six months ended June 30, 2009 from $235.6 million for the six months ended June 30, 2008 on a cash basis. These increases of 1.6% and 1.2%, respectively, are primarily due to an increase in rental rates and an increase in occupancy in the office portfolio.

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 622 properties totaling approximately 59.8 million square feet owned on January 1, 2008, excluding properties sold through June 30, 2009.

Set forth below is a schedule comparing the property level operating income, on a straight line basis and on a cash basis, for the Same Store properties for the three and six months ended June 30, 2009 and 2008. Same Store property level operating income and cash basis property level operating income are non-GAAP measures and do not represent income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures because they do not reflect the consolidated operations of the Company. Investors should review Same Store results, along with Funds from operations (see “Liquidity and Capital Resources” section), GAAP net income and cash flow from operating activities, investing activities and financing activities when considering the Company’s operating performance. Also, set forth below is a reconciliation of Same Store property level operating income and cash basis property level operating income to net income (in thousands).


	Three Months Ended						Six Months Ended
	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008
Same Store:
Rental revenue	$	125,295		$	123,374		$	250,609		$	246,443
Operating expenses:
Rental property expense		35,163			36,302			74,071			73,536
Real estate taxes		20,955			22,328			41,850			41,582
Operating expense recovery		(53,652	)		(56,577	)		(110,566	)		(110,085	)

Unrecovered operating expenses		2,466			2,053			5,355			5,033


Property level operating income		122,829			121,321			245,254			241,410
Less straight line rent		3,436			2,573			6,851			5,769


Cash basis property level operating income	$	119,393		$	118,748		$	238,403		$	235,641


Reconciliation of non-GAAP financial measure — Same Store:
Cash basis property level operating income	$	119,393		$	118,748		$	238,403		$	235,641
Straight line rent		3,436			2,573			6,851			5,769

Property level operating income		122,829			121,321			245,254			241,410

Property level operating income — properties purchased or developed subsequent to January 1, 2008		5,354			577			9,569			8,797
Less: Property level operating income — properties held for sale at June 30, 2009		(1,058	)		(1,059	)		(2,116	)		(2,112	)
Termination fees		1,052			661			1,352			1,942
General and administrative expense		(11,659	)		(13,047	)		(27,222	)		(27,083	)
Depreciation and amortization expense		(42,571	)		(42,508	)		(85,705	)		(85,174	)
Other income (expense)		(34,217	)		(33,321	)		(68,704	)		(71,583	)
(Loss) gain on property dispositions		(2,050	)		835			(2,344	)		1,476
Income taxes		(127	)		(580	)		(344	)		(1,064	)
Equity in earnings of unconsolidated joint ventures		1,192			1,010			1,609			1,387
Discontinued operations		4,467			4,489			5,705			6,778


Net income	$	43,212		$	38,378		$	77,054		$	74,774

General and Administrative

General and administrative expenses decreased to $11.7 million for the three months ended June 30, 2009 compared to $13.0 million for the three months ended June 30, 2008. The decrease was primarily due to decreases in compensation expenses. General and administrative expenses increased to $27.2 million for the six months ended June 30, 2009 compared to $27.1 million for the six months ended June 30, 2008 as decreases in compensation expenses were offset by an increase due to accelerated vesting of long term incentive compensation due to the years of service and age of certain employees.

Depreciation and Amortization

Depreciation and amortization increased to $42.6 million for the three months ended June 30, 2009 from $42.5 million for the three months ended June 30, 2008 and $85.7 million for the six months ended June 30, 2009 from $85.2 million for the six months ended June 30, 2008. The increase was primarily due to the increased investment in tenant improvement costs, which are depreciated over a shorter period than buildings.

Interest Expense

Interest expense increased to $37.3 million for the three months ended June 30, 2009 from $36.3 million for the three months ended June 30, 2008. This increase was related to an increase in the weighted average interest rate to 6.4% for the three months ended June 30, 2009 from 6.0% for the three months ended June 30, 2008 and a decrease in interest capitalized due to the decrease in development activity. The effect of the increase in the weighted average interest rate was partially offset by a decrease in the average debt outstanding to $2,513.2 million for the three months ended June 30, 2009 from $2,696.8 million for the three months ended June 30, 2008. Interest expense decreased to $75.4 million for the six months ended June 30, 2009 from $77.7 million for the six months ended June 30, 2008. This decrease was related to a decrease in the average debt outstanding, which was $2,538.8 million for the six months ended June 30, 2009, compared to $2,949.6 million for the six months ended June 30, 2008. The effect of the decrease in the average debt outstanding was partially offset by an increase in the weighted average interest rate to 6.3% for the six months ended June 30, 2009 from 6.2% for the six months ended June 30, 2008, as well as a decrease in interest capitalized due to the decrease in development activity.

Interest expense allocated to discontinued operations for the three months ended June 30, 2009 and 2008 was $0.3 million and $1.0 million, respectively, and for the six months ended June 30, 2009 and 2008 was $0.9 million and $2.1 million, respectively. These decreases were due to the decrease in the level of dispositions in 2009 compared to 2008.

Other

(Loss) gain on property dispositions decreased to a loss of $2.1 million for the three months ended June 30, 2009 from a gain of $0.8 million for the three months ended June 30, 2008 and to a loss of $2.3 million for the six months ended June 30, 2009 from a gain of $1.5 million for the six months ended June 30, 2008. The decreases for the three-month and six-month periods were primarily due to impairments recognized on certain of the Company’s properties in 2009 in connection with sales activities.

During the three months ended June 30, 2009, the Company purchased $3.5 million principal amount of its 7.25% March 2011 senior unsecured notes and $4.9 million principal amount of its 6.375% August 2012 senior unsecured notes. These notes were purchased at a $0.6 million discount. During the six months ended June 30, 2009, the Company purchased $6.9 million principal amount of its 8.50% August 2010 senior unsecured notes, $3.5 million principal amount of its 7.25% March 2011 senior unsecured notes and $4.9 million principal amount of its 6.375% August 2012 senior unsecured notes. These notes were purchased at a $1.1 million discount. These discounts are included in net income as a debt extinguishment gain.

Income from discontinued operations remained relatively unchanged at $4.5 million for the three months ended June 30, 2009 and the three months ended June 30, 2008 and decreased to $5.7 million for the six months ended June 30, 2009 from $6.8 million for the six months ended June 30, 2008. The decrease for the six month periods was due to lower operating income and was partially offset by an increase in gains recognized on sales which were $3.9 million for the six months ended June 30, 2009 compared to $3.4 million for the six months ended June 30, 2008.

As a result of the foregoing, the Company’s net income increased to $43.2 million for the three months ended June 30, 2009 from $38.4 million for the three months ended June 30, 2008 and increased to $77.1 million for the six months ended June 30, 2009 from $74.8 million for the six months ended June 30, 2008.

Liquidity and Capital Resources

Overview

The Company has historically accessed capital primarily from the public unsecured debt markets. The uncertainty in the global credit market has negatively affected this market. As a result, the Company expects to access multiple sources of capital to meet its maturing debt obligations and to complete its development pipeline. The Company believes that it has a significant amount of borrowing capacity available to it from its real estate assets which are generally unsecured. The Company believes that additional capital sources include sources such as proceeds to be realized from the sale of real estate assets. Finally, the Company has accessed the equity markets through the sale of common shares under its continuous equity offering program. The $300 million program was fully sold as of August 5, 2009. The Company paid Citigroup Global Markets Inc. and UBS Securities LLC, its agents under this program, an aggregate of $2.5 million in fees with respect to the common shares sold through this program during the three months ended June 30, 2009. The Company paid these agents an additional $1.4 million in fees with respect to common shares sold through this program from July 1, 2009 to August 5, 2009. During the six months ended June 30, 2009, the Company raised $317.4 million from secured mortgage financings, it realized $80.3 million in proceeds from the sale of real estate and it raised net proceeds of $214.0 million from the sale of common shares.

Activity

As of June 30, 2009, the Company had cash and cash equivalents of $164.9 million, including $40.4 million in restricted cash.

Net cash flow provided by operating activities increased to $165.6 million for the six months ended June 30, 2009 from $113.5 million for the six months ended June 30, 2008. This $52.1 million increase was primarily due to a change in restricted cash and the change in other receivables during the respective periods. The change in restricted cash is due to the release of restriction of funds in the United Kingdom for the payment of infrastructure costs. There was no similar activity during the first half of 2009. Net cash flow provided by operating activities is the primary source of liquidity to fund distributions to shareholders and for the recurring capital expenditures and leasing transaction costs for the Company’s Wholly Owned Properties in Operation. In the fourth quarter of 2008, the Company reduced its quarterly dividend to $0.475 per share from $0.625 per share.

Net cash used by investing activities was $30.5 million for the six months ended June 30, 2009 compared to net cash provided of $91.4 million for the six months ended June 30, 2008. This $121.9 million decrease primarily resulted from a decrease in net proceeds from the disposition of properties/land offset by a reduction in investment in development in progress. Net cash from the disposition of properties for the six months ended June 30, 2008 was provided primarily through the sale of Comcast Center to an unconsolidated joint venture. The joint venture obtained the funds to purchase the property through the funding of a $324 million permanent financing. See Note 4 to the Company’s financial statements.

Net cash used in financing activities was $29.8 million for the six months ended June 30, 2009 compared to $229.4 million for the six months ended June 30, 2008. This $199.6 million decrease was primarily due to the net proceeds from the issuance of shares pursuant to the Company’s continuous equity offering program. See Note 7 to the Company’s financial statements. Net cash provided by or used in financing activities includes proceeds from the issuance of equity and debt, net of debt repayments, equity repurchases and shareholder distributions. Cash provided by financing activities is a source of capital utilized by the Company to fund investment activities.

The Company funds its development and acquisitions with long-term capital sources and proceeds from the disposition of properties. For the three months ended June 30, 2009, a portion of these activities were funded through a $600 million Credit Facility (the “Credit Facility”). The interest rate on borrowings under the Credit Facility fluctuates based upon ratings from Moody’s Investors Service, Inc. (“Moody’s”), Standard and Poor’s Ratings Group (“S&P”) and Fitch, Inc. (“Fitch”). The current ratings for the Company’s senior unsecured debt are Baa2, BBB and BBB+ from Moody’s, S&P and Fitch, respectively. At these ratings, the interest rate for borrowings under the Credit Facility is 65 basis points over LIBOR. The Credit Facility contains an accordion feature whereby the Company may borrow an additional $200 million. The Credit Facility expires in January 2010, and has a one-year extension option.

Additionally, the Company has entered into an agreement to fund its planned improvements for the Kings Hill Phase 2 land development project. At June 30, 2009, the Company had drawn £2.5 million from a £7 million revolving credit facility. The facility expires on November 22, 2011.

The Company uses debt financing to lower its overall cost of capital in an attempt to increase the return to shareholders. The Company staggers its debt maturities and maintains debt levels it considers to be prudent. In determining its debt levels, the Company considers various financial measures including the debt to gross assets ratio and the fixed charge coverage ratio. As of June 30, 2009 the Company’s debt to gross assets ratio was 38.9%, and for the six months ended June 30, 2009, the fixed charge coverage ratio was 2.6x. Debt to gross assets equals total long-term debt, borrowings under the Credit Facility divided by total assets plus accumulated depreciation. The fixed charge coverage ratio equals income from continuing operations before property dispositions, including operating activity from discontinued operations, plus interest expense and depreciation and amortization, divided by interest expense, including capitalized interest, plus distributions on preferred units.

As of June 30, 2009, $471.8 million in mortgage loans and $1,846.3 million in unsecured notes were outstanding with a weighted average interest rate of 6.46%. The interest rates on $2,163.3 million of mortgage loans and unsecured notes are fixed and range from 5.00% to 8.75%. For $154.9 million of mortgage loans, the interest rate floats at a spread to LIBOR. The interest rate on these loans at June 30, 2009 was 6.78%. The weighted average remaining term for the mortgage loans and unsecured notes is 5.2 years.

The scheduled principal amortization and maturities of the Company’s mortgage loans, unsecured notes outstanding and the Credit Facility and the related weighted average interest rates as of June 30, 2009 are as follows (in thousands, except percentages):


	MORTGAGES												WEIGHTED
	PRINCIPAL		PRINCIPAL			UNSECURED		CREDIT					AVERAGE
	AMORTIZATION		MATURITIES			NOTES		FACILITY			TOTAL		INTEREST RATE
2009 (6 months)	$	3,204	$	42		$	—	$	—		$	3,246		6.52	%
2010		6,530		4,736			169,739		140,000	(1)		321,005		4.74	%
2011		6,758		14,873			246,500		—			268,131		7.19	%
2012		4,711		180,612	(2)		230,100		—			415,423		6.64	%
2013		3,858		4,510			—		—			8,368		6.95	%
2014		4,352		2,684			200,000		—			207,036		5.66	%
2015		3,932		44,469			300,000		—			348,401		5.28	%
2016		2,461		182,318			300,000		—			484,779		4.86	%
2017		1,770		—			300,000		—			301,770		6.62	%
2018 & thereafter		—		—			100,000		—			100,000		7.50	%


	$	37,576	$	434,244		$	1,846,339	$	140,000		$	2,458,159		6.14	%


(1)		The Credit Facility expires on January 16, 2010 and has a one year renewal option.

(2)		There are two one — year extensions for $147,737 of mortgages.

On April 15, 2009, the Company repaid $238.6 million of maturing 7.75% April 2009 senior unsecured notes.

General

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

The expiring square feet and annual net rent by year for the Properties in Operation as of June 30, 2009 are as follows (in thousands):


	Industrial-				Industrial-
	Distribution				Flex				Office				Total
Wholly Owned Properties	Square		Annual		Square		Annual		Square		Annual		Square		Annual
in Operation:	Feet		Rent		Feet		Rent		Feet		Rent		Feet		Rent

2009 (6 months)		1,664	$	6,881		680	$	5,840		969	$	11,947		3,313	$	24,668
2010		3,443		16,149		1,767		16,464		2,794		39,295		8,004		71,908
2011		3,178		14,343		1,291		12,392		2,287		35,029		6,756		61,764
2012		4,699		22,885		1,487		14,530		2,224		37,991		8,410		75,406
2013		2,065		10,369		1,495		15,331		2,574		43,142		6,134		68,842
2014		2,510		12,931		848		9,474		2,607		40,843		5,965		63,248
Thereafter		10,322		58,173		2,541		30,888		6,146		111,403		19,009		200,464

TOTAL		27,881	$	141,731		10,109	$	104,919		19,601	$	319,650		57,591	$	566,300


	Industrial-				Industrial-
	Distribution				Flex				Office				Total
Joint Venture Properties	Square		Annual		Square		Annual		Square		Annual		Square		Annual
in Operation:	Feet		Rent		Feet		Rent		Feet		Rent		Feet		Rent

2009 (6 months)		414	$	1,563		—	$	—		143	$	3,358		557	$	4,921
2010		1,349		5,331		24		759		425		9,518		1,798		15,608
2011		1,174		4,649		11		310		415		10,431		1,600		15,390
2012		373		1,788		63		1,758		179		4,602		615		8,148
2013		303		1,392		—		—		242		5,774		545		7,166
2014		1,103		5,087		5		149		342		9,555		1,450		14,791
Thereafter		2,581		13,761		36		1,049		2,366		78,178		4,983		92,988

TOTAL		7,297	$	33,571		139	$	4,025		4,112	$	121,416		11,548	$	159,012


	Industrial-				Industrial-
	Distribution				Flex				Office				Total
Properties	Square		Annual		Square		Annual		Square		Annual		Square		Annual
in Operation:	Feet		Rent		Feet		Rent		Feet		Rent		Feet		Rent

2009 (6 months)		2,078	$	8,444		680	$	5,840		1,112	$	15,305		3,870	$	29,589
2010		4,792		21,480		1,791		17,223		3,219		48,813		9,802		87,516
2011		4,352		18,992		1,302		12,702		2,702		45,460		8,356		77,154
2012		5,072		24,673		1,550		16,288		2,403		42,593		9,025		83,554
2013		2,368		11,761		1,495		15,331		2,816		48,916		6,679		76,008
2014		3,613		18,018		853		9,623		2,949		50,398		7,415		78,039
Thereafter		12,903		71,934		2,577		31,937		8,512		189,581		23,992		293,452

TOTAL		35,178	$	175,302		10,248	$	108,944		23,713	$	441,066		69,139	$	725,312

The scheduled deliveries of the 3.4 million square feet of Properties under Development as of June 30, 2009 are as follows (dollars in thousands):


		Square Feet
	Scheduled	Industrial-		Industrial-						Percent			Total
	In-Service Date	Distribution		Flex		Office		Total		Leased			Investment
Wholly Owned Properties under Development	3rd Quarter 2009		100,000		68,700		332,711		501,411		15.4	%	$	88,546
	4th Quarter 2009		961,100		—		176,494		1,137,594		96.1	%		125,417
	2nd Quarter 2010		—		—		170,261		170,261		90.9	%		36,764
	4th Quarter 2010		—		—		211,236		211,236		50.8	%		46,224

	TOTAL		1,061,100		68,700		890,702		2,020,502		70.9	%	$	296,951


Joint Venture Properties under Development	3rd Quarter 2009		500,000		—		—		500,000		100.0	%	$	24,150
	4th Quarter 2009		225,000		—		—		225,000		40.7	%		11,675
	2nd Quarter 2010		463,636		—		—		463,636		—			25,085
	3rd Quarter 2010		—		—		176,058		176,058		26.0	%		129,815

	TOTAL		1,188,636		—		176,058		1,364,694		46.7	%	$	190,725


Total Properties under Development	TOTAL		2,249,736		68,700		1,066,760		3,385,196		61.1	%	$	487,676

The Company has an effective S-3 shelf registration statement on file with the SEC pursuant to which the Trust and the Operating Partnership may issue an unlimited amount of equity securities and debt securities.

Calculation of Funds from Operations

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

Funds from operations (“FFO”) available to common shareholders also does not represent cash flows generated from operating, investing or financing activities as defined by GAAP. Funds from operations available to common shareholders for the three and six months ended June 30, 2009 and 2008 are as follows (in thousands, except per share amounts):


	Three Months Ended						Six Months Ended
	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008
Reconciliation of net income to FFO — basic

Net Income available to common shareholders	$	36,671		$	31,629		$	64,560		$	61,590

Basic — Income available to common shareholders		36,671			31,629			64,560			61,590
*Basic — income available to common shareholders per weighted average share*	$	0.35		$	0.34		$	0.63		$	0.67

Adjustments:
Depreciation and amortization of unconsolidated joint ventures		4,132			4,329			8,122			7,877
Depreciation and amortization		42,364			43,252			85,386			86,630
Gain on property dispositions		(5,067	)		(3,164	)		(5,375	)		(4,132	)
Noncontrolling interest share in addback for depreciation and amortization and gain on property dispositions		(1,467	)		(1,914	)		(3,204	)		(3,909	)

Funds from operations available to common shareholders — basic	$	76,633		$	74,132		$	149,489		$	148,056


*Basic Funds from operations available to common shareholders per weighted average share*	$	0.72		$	0.80		$	1.45		$	1.61

Reconciliation of net income to FFO — diluted:

Net Income	$	36,671		$	31,629		$	64,560		$	61,590

Diluted — income available to common shareholders		36,671			31,629			64,560			61,590
*Diluted — income available to common shareholders per weighted average share*	$	0.35		$	0.34		$	0.62		$	0.67

Adjustments:
Depreciation and amortization of unconsolidated joint ventures		4,132			4,329			8,122			7,877
Depreciation and amortization		42,364			43,252			85,386			86,630
Gain on property dispositions		(5,067	)		(3,164	)		(5,375	)		(4,132	)
Noncontrolling interest less preferred share distributions		1,345			1,428			2,409			2,780


Funds from operations available to common shareholders — diluted	$	79,445		$	77,474		$	155,102		$	154,745


*Diluted Funds from operations available to common shareholders per weighted average share*	$	0.72		$	0.80		$	1.44		$	1.60

Reconciliation of weighted average shares:
Weighted average common shares — all basic calculations		105,768			92,322			103,244			92,001
Dilutive shares for long term compensation plans		477			379			381			247


Diluted shares for net income calculations		106,245			92,701			103,625			92,248
Weighted average common units		4,017			4,190			4,019			4,190


Diluted shares for Funds from operations calculations		110,262			96,891			107,644			96,438

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, 2008, as amended.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Controls

There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

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

As noted in prior filings, Republic filed a lawsuit against 25 Massachusetts Avenue Property LLC (the “Owner”) of Republic Square I in the Court of Chancery in the State of Delaware. The matter was tried in 2007. On April 7, 2008, the Court of Chancery issued an opinion concluding that neither party is entitled to relief and ordering that the Lis Pendens be lifted. On April 15, 2008, the Owner filed a notice of appeal from dismissal of its counterclaims. On April 20, 2009, the Court issued its opinion dismissing 25 Mass’ claims. On April 24, 2009, 25 Mass filed a motion for Rehearing En Banc. On April 29, 2009, the Court denied 25 Mass’ motion for Rehearing En Banc.

On December 12, 2008, 25 Mass filed a complaint in the Superior Court for the District of Columbia, alleging that 25 Mass had entered a purchase and sale agreement with a third party for the sale of Republic Square I, and that Republic’s lawsuit and its Lis Pendens, described above and in previous filings, prevented a closing by which Republic Square I could be sold under the terms of that purchase and sale agreement. The December 12, 2008 lawsuit alleges that by so doing, Republic committed tortuous interference with contract, tortuous interference with prospective contractual relations, malicious prosecution, abuse of process and a violation of the Washington D.C. Lis Pendens statute. The filed complaint seeks “no less than $85 million” in compensatory damages, and “no less than $85 million” in punitive damages, and attorneys’ fees for an improperly filed Lis Pendens under Washington D.C. Code § 42-1207(d). In April 2009, following the decision of the Supreme Court of the State of Delaware, 25 Mass voluntarily dismissed with prejudice all of its claims in this matter with the exception of its claim based on a claim of malicious prosecution. We believe that this claim is without merit and intend to defend vigorously against this litigation.

While management currently believes that resolving these matters will not have a material adverse impact on our financial position of our results of operations, the litigation noted above is subject to inherent uncertainties and management’s view of these matters may change in the future. Were an unfavorable final outcome to occur, there exists the possibility of a material adverse impact on our financial position and the results of operations for the period in which the effect becomes capable of being reasonably estimated.

Item 1A. Risk Factors

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

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

None.

Item 3. Defaults upon Senior Securities

None.

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

At the 2009 Annual Meeting of Shareholders of the Trust, held on May 21, 2009, the following matters were approved by the requisite vote of the Shareholders, as follows.

Management’s nominees, William P. Hankowsky, David L. Lingerfelt and Jose Mejia, were elected to fill the three available positions as Class II trustees. Voting (expressed in number of shares) was as follows: Mr. Hankowsky: 81,615,868 for, 802,177 against or withheld and no abstentions or broker non-votes; Mr. Lingerfelt: 82,162,967 for, 255,170 against or withheld and no abstentions or broker non-votes; and Mr. Mejia: 82,239,816 for, 178,230 against or withheld and no abstentions or broker non-votes.

The shareholders approved a proposal to ratify the selection of Ernst & Young LLP as the Trust’s independent registered public accounting firm for 2009. Voting (expressed in number of shares) was as follows: 83,527,816 for, 291,722 against and 49,093 abstentions or broker non-votes.

The shareholders approved a proposal to amend and restate the Liberty Property Trust Amended and Restated Share Incentive Plan (the “Share Incentive Plan”) to increase the 865,431 shares currently remaining available for issuance under the Share Incentive Plan by 8,300,000 shares, and to make other specified changes. Voting (expressed in number of shares) was as follows: 68,919,798 for; 8,870,897 against and 126,294 abstentions or broker non-votes.

Item 5. Other Information

None.

Item 6. Exhibits


	10.1			Liberty Property Trust Amended and Restated Share Incentive Plan as amended effective May 21, 2009 (Incorporated by reference to Appendix B to the Registrant’s Definitive Proxy Statement for the Annual Meeting of Shareholders held on May 21, 2009, filed with the Commission on April 17, 2009.

	10.2*			Form of 2009 Long Term Incentive Plan Target Unit Award Agreement.

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

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

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

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

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

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

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

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

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


*		Filed herewith.

EXHIBIT INDEX


EXHIBIT
NO.		DESCRIPTION

	10.2	Form of 2009 Long Term Incentive Plan Target Unit Award Agreement.

	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.)


Index	Page

PART I. FINANCIAL INFORMATION		4

Item 1. Financial Statements (Unaudited)		4

Condensed consolidated balance sheets of Liberty Property Trust at June 30, 2009 and December 31, 2008		4

Condensed consolidated statements of operations of Liberty Property Trust for the three months ended June 30, 2009 and June 30, 2008		5

Condensed consolidated statements of operations of Liberty Property Trust for the six months ended June 30, 2009 and June 30, 2008		6

Condensed consolidated statement of equity of Liberty Property Trust for the six months ended June 30, 2009		7

Condensed consolidated statements of cash flows of Liberty Property Trust for the six months ended June 30, 2009 and June 30, 2008		8

Notes to condensed consolidated financial statements of Liberty Property Trust		9

Condensed consolidated balance sheets of Liberty Property Limited Partnership at June 30, 2009 and December 31, 2008		19

Condensed consolidated statements of operations of Liberty Property Limited Partnership for the three months ended June 30, 2009 and June 30, 2008		20

Condensed consolidated statements of operations of Liberty Property Limited Partnership for the six months ended June 30, 2009 and June 30, 2008		21

Condensed consolidated statement of equity of Liberty Property Limited Partnership for the six months ended June 30, 2009		22

Condensed consolidated statements of cash flows of Liberty Property Limited Partnership for the six months ended June 30, 2008 and June 30, 2008		23

Notes to condensed consolidated financial statements of Liberty Property Limited Partnership		24

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		34

Item 3. Quantitative and Qualitative Disclosures about Market Risk		46

Item 4. Controls and Procedures		46


/s/ WILLIAM P. HANKOWSKY William P. Hankowsky President and Chief Executive Officer		August 7, 2009 Date

/s/ GEORGE J. ALBURGER, JR. George J. Alburger, Jr. Executive Vice President and Chief Financial Officer		August 7, 2009 Date


Index	Page

PART II. OTHER INFORMATION		47

Item 1. Legal Proceedings		47

Item 1A. Risk Factors		47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		47

Item 3. Defaults Upon Senior Securities		48

Item 4. Submission of Matters to a Vote of Security Holders		48

Item 5. Other Information		48

Item 6. Exhibits		49

Signatures for Liberty Property Trust		50

Signatures for Liberty Property Limited Partnership		51

Exhibit Index		52

Exhibit 10.2
Exhibit 12.1
Exhibit 31.1
Exhibit 31.2
Exhibit 31.3
Exhibit 31.4
Exhibit 32.1
Exhibit 32.2
Exhibit 32.3
Exhibit 32.4


	General
	Partner’s			Noncontrolling
	Equity			Interest			Total Equity

Balance at December 31, 2008	$	1,919,871		$	1,130		$	1,921,001
Contributions from partners		228,805			—			228,805
Distributions to partners		(101,578	)		—			(101,578	)
Foreign currency translation adjustment		9,498			—			9,498
Net income (does not include $12,914 related to limited partners’ equity)		64,560			(420	)		64,140


Balance at June 30, 2009	$	2,121,156		$	710		$	2,121,866


BY: Liberty Property Trust General Partner

/s/ WILLIAM P. HANKOWSKY William P. Hankowsky President and Chief Executive Officer		August 7, 2009 Date

/s/ GEORGE J. ALBURGER, JR. George J. Alburger, Jr. Executive Vice President and Chief Financial Officer		August 7, 2009 Date