LIBERTY PROPERTY TRUST (Form: 10-Q, Received: 08/01/2012 15:18:38)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________

FORM 10-Q

__________________________________________________________

(Mark One)



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

For the quarterly period ended June 30, 2012



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

For the transition period from to

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

1-13132 (Liberty Property Limited Partnership)

__________________________________________________________

LIBERTY PROPERTY TRUST

LIBERTY PROPERTY LIMITED PARTNERSHIP

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

__________________________________________________________



MARYLAND (Liberty Property Trust)	23-7768996
PENNSYLVANIA (Liberty Property Limited Partnership)	23-2766549
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

500 Chesterfield Parkway Malvern, Pennsylvania	19355
(Address of Principal Executive Offices)	(Zip Code)

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

__________________________________________________________

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

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

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



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

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

On July 27, 2012 , 117,840,465 Common Shares of Beneficial Interest, par value $0.001 per share, of Liberty Property Trust were outstanding.

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2012 of Liberty Property Trust and Liberty Property Limited Partnership. Unless stated otherwise or the context otherwise requires, references to the "Trust,” mean Liberty Property Trust and its consolidated subsidiaries; and references to the “Operating Partnership” mean Liberty Property Limited Partnership and its consolidated subsidiaries. The terms the “Company,” “we,” “our” or “us” mean the Trust and the Operating Partnership, collectively.

The Trust is a self-administered and self-managed Maryland real estate investment trust (a “REIT”). Substantially all of the Trust's assets are owned directly or indirectly, and substantially all of the Trust's operations are conducted directly or indirectly, by its subsidiary, the Operating Partnership, a Pennsylvania limited partnership.

The Trust is the sole general partner and also a limited partner of the Operating Partnership, owning 96.9% of the common equity of the Operating Partnership at June 30, 2012 . The common units of limited partnership interest in the Operating Partnership (the “Common Units”), other than those owned by the Trust, are exchangeable on a one-for-one basis (subject to anti-dilution protections) for the Trust's Common Shares of Beneficial Interest, $0.001 par value per share (the "Common Shares"). The Company has issued several series of Cumulative Redeemable Preferred Units of the Operating Partnership (the "Preferred Units"). The outstanding Preferred Units of each series are exchangeable on a one-for-one basis after stated dates into a corresponding series of Cumulative Redeemable Preferred Shares of the Trust except for the Series I-2 Preferred Units, which are not convertible or exchangeable into any other securities. The ownership of the holders of Common and Preferred Units is reflected on the Trust's financial statements as "noncontrolling interest - operating partnership" in mezzanine equity and as a component of total equity as "noncontrolling interest - operating partnership."

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

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

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


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


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


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

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


•	consolidated financial statements;


•	the following notes to the consolidated financial statements;


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


◦	Other Comprehensive Income of the Trust and Other Comprehensive Income of the Operating Partnership; and


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

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

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Liberty Property Trust/Liberty Property Limited Partnership

Form 10-Q for the period ended June 30, 2012



Index		Page

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Consolidated balance sheets of Liberty Property Trust at June 30, 2012 and December 31, 2011	5

	Consolidated statements of income of Liberty Property Trust for the three months ended June 30, 2012 and June 30, 2011	6

	Consolidated statements of income of Liberty Property Trust for the six months ended June 30, 2012 and June 30, 2011	7

	Consolidated statement of equity of Liberty Property Trust for the six months ended June 30, 2012	8

	Consolidated statements of cash flows of Liberty Property Trust for the six months ended June 30, 2012 and June 30, 2011	9

	Consolidated balance sheets of Liberty Property Limited Partnership at June 30, 2012 and December 31, 2011	10

	Consolidated statements of income of Liberty Property Limited Partnership for the three months ended June 30, 2012 and June 30, 2011	11

	Consolidated statements of income of Liberty Property Limited Partnership for the six months ended June 30, 2012 and June 30, 2011	12

	Consolidated statement of owners' equity of Liberty Property Limited Partnership for the six months ended June 30, 2012	13

	Consolidated statements of cash flows of Liberty Property Limited Partnership for the six months ended June 30, 2012 and June 30, 2011	14

	Notes to consolidated financial statements of the Company	15

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

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Controls and Procedures	37

PART II.	OTHER INFORMATION	38

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Table of Contents



Index		Page

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

Signatures for Liberty Property Trust		40

Signatures for Liberty Property Limited Partnership		41

Exhibit Index		42

	STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES

	SECOND SUPPLEMENTAL INDENTURE, DATED AS OF JUNE 11, 2012, BETWEEN THE OPERATING PARTNERSHIP, AS ISSUER, AND U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, SUPPLEMENTING THE SENIOR INDENTURE, DATED AS OF SEPTEMBER 22, 2010, BETWEEN THE OPERATING PARTNERSHIP, , AS OBLIGOR, AND U.S. BANK NATINOAL ASSOCIATION, AS TRUSTEE, AND RELATING TO $400,000,000 PRINCIPAL AMOUNT OF 4.125% SENIOR NOTES DUE 2022 OF LIBERTY PROPERTY LIMITED PARTNERSHIP.

	CERTIFICATION OF CEO OF LIBERTY PROPERTY TRUST REQUIRED BY RULE 13A-14(A)

	CERTIFICATION OF CFO OF LIBERTY PROPERTY TRUST REQUIRED BY RULE 13A-14(A)

	CERTIFICATION OF CEO OF LIBERTY PROPERTY TRUST, IN ITS CAPACITY AS THE GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(A)

	CERTIFICATION OF CFO OF LIBERTY PROPERTY TRUST, IN ITS CAPACITY AS THE GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(A)

	CERTIFICATION OF CEO OF LIBERTY PROPERTY TRUST REQUIRED BY RULE 13A-14(B)

	CERTIFICATION OF CFO OF LIBERTY PROPERTY TRUST REQUIRED BY RULE 13A-14(B)

	CERTIFICATION OF CEO OF LIBERTY PROPERTY TRUST, IN ITS CAPACITY AS THE GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(B)

	CERTIFICATION OF CFO OF LIBERTY PROPERTY TRUST, IN ITS CAPACITY AS THE GENERAL PARTNER OF LIBERTY PROPERTY LIMITED PARTNERSHIP, REQUIRED BY RULE 13A-14(B)

	XBRL Instance Document

	XBRL Taxonomy Extension Schema Document

	XBRL Taxonomy Extension Calculation Linkbase Document

	XBRL Taxonomy Extension Definition Linkbase Document

	XBRL Extension Labels Linkbase

	XBRL Taxonomy Extension Presentation Linkbase Document

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST

(In thousands, except share and unit amounts)



	June 30, 2012			December 31, 2011
	(Unaudited)
ASSETS
Real estate:
Land and land improvements	$	861,373		$	855,213
Building and improvements	4,146,819			4,109,783
Less accumulated depreciation	(1,116,593		)	(1,058,283		)
Operating real estate	3,891,599			3,906,713
Development in progress	198,472			88,848
Land held for development	222,090			219,375
Net real estate	4,312,161			4,214,936
Cash and cash equivalents	154,122			18,204
Restricted cash	39,604			63,659
Accounts receivable	12,424			8,192
Deferred rent receivable	106,243			103,002
Deferred financing and leasing costs, net of accumulated amortization (2012, $133,448; 2011, $123,822)	133,150			130,160
Investments in and advances to unconsolidated joint ventures	173,336			174,687
Assets held for sale	—			200,647
Prepaid expenses and other assets	77,272			76,186
Total assets	$	5,008,312		$	4,989,673
LIABILITIES
Mortgage loans	$	281,170		$	290,819
Unsecured notes	2,192,643			1,792,643
Credit facility	—			139,400
Accounts payable	35,600			23,418
Accrued interest	25,196			24,147
Dividend and distributions payable	57,610			56,958
Other liabilities	176,656			194,995
Total liabilities	2,768,875			2,522,380
Noncontrolling interest - operating partnership - 301,483 preferred units outstanding as of June 30, 2012 and December 31, 2011	7,537			7,537
EQUITY
Liberty Property Trust shareholders’ equity
Common shares of beneficial interest, $.001 par value, 183,987,000 shares authorized; 118,794,699 (includes 1,249,909 in treasury) and 117,352,353 (includes 1,249,909 in treasury) shares issued and outstanding as of June 30, 2012 and December 31, 2011, respectively	119			117
Additional paid-in capital	2,656,174			2,617,355
Accumulated other comprehensive income (loss)	346			(429		)
Distributions in excess of net income	(501,719		)	(461,498		)
Common shares in treasury, at cost, 1,249,909 shares as of June 30, 2012 and December 31, 2011	(51,951		)	(51,951		)
Total Liberty Property Trust shareholders’ equity	2,102,969			2,103,594
Noncontrolling interest – operating partnership
3,740,246 and 3,808,746 common units outstanding as of June 30, 2012 and December 31, 2011, respectively	61,891			64,428
1,290,000 and 9,740,000 preferred units outstanding as of June 30, 2012 and December 31, 2011, respectively	63,265			287,959
Noncontrolling interest – consolidated joint ventures	3,775			3,775
Total equity	2,231,900			2,459,756
Total liabilities, noncontrolling interest - operating partnership and equity	$	5,008,312		$	4,989,673

See accompanying notes.

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CONSOLIDATED STATEMENTS OF INCOME OF LIBERTY PROPERTY TRUST

(Unaudited and in thousands, except per share amounts)



	Three Months Ended
	June 30, 2012			June 30, 2011
OPERATING REVENUE
Rental	$	119,202		$	116,193
Operating expense reimbursement	49,997			48,234
Total operating revenue	169,199			164,427
OPERATING EXPENSE
Rental property	31,386			28,543
Real estate taxes	20,569			19,592
General and administrative	14,619			13,255
Depreciation and amortization	40,733			38,554
Total operating expenses	107,307			99,944
Operating income	61,892			64,483
OTHER INCOME (EXPENSE)
Interest and other income	2,567			2,340
Interest expense	(30,834		)	(29,358		)
Total other income (expense)	(28,267		)	(27,018		)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures	33,625			37,465
Gain on property dispositions	335			302
Income taxes	(146		)	(63		)
Equity in earnings of unconsolidated joint ventures	769			1,109
Income from continuing operations	34,583			38,813
Discontinued operations (including net gain on property dispositions of $2,981 and $50,157 for the three months ended June 30, 2012 and 2011, respectively)	3,097			54,028
Net income	37,680			92,841
Noncontrolling interest – operating partnership	(3,569		)	(8,120		)
Noncontrolling interest – consolidated joint ventures	—			257
Net income available to common shareholders	$	34,111		$	84,978
Net income	$	37,680		$	92,841
Other comprehensive (loss) income	(1,515		)	39
Comprehensive income	36,165			92,880
Less: comprehensive income attributable to noncontrolling interest	(3,522		)	(8,121		)
Comprehensive income attributable to common shareholders	$	32,643		$	84,759
Earnings per common share
Basic:
Income from continuing operations	$	0.26		$	0.28
Income from discontinued operations	0.03			0.46
Income per common share – basic	$	0.29		$	0.74
Diluted:
Income from continuing operations	$	0.26		$	0.28
Income from discontinued operations	0.03			0.46
Income per common share – diluted	$	0.29		$	0.74
Distributions per common share	$	0.475		$	0.475
Weighted average number of common shares outstanding
Basic	116,683			114,623
Diluted	117,559			115,406
Amounts attributable to common shareholders
Income from continuing operations	$	31,110		$	32,717
Discontinued operations	3,001			52,261
Net income available to common shareholders	$	34,111		$	84,978

See accompanying notes.

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME OF LIBERTY PROPERTY TRUST

(Unaudited and in thousands, except per share amounts)



	Six Months Ended
	June 30, 2012			June 30, 2011
OPERATING REVENUE
Rental	$	238,593		$	230,718
Operating expense reimbursement	100,293			99,595
Total operating revenue	338,886			330,313
OPERATING EXPENSE
Rental property	61,791			60,254
Real estate taxes	41,309			39,039
General and administrative	31,823			29,203
Depreciation and amortization	82,014			77,546
Total operating expenses	216,937			206,042
Operating income	121,949			124,271
OTHER INCOME (EXPENSE)
Interest and other income	5,328			4,928
Interest expense	(60,109		)	(62,200		)
Total other income (expense)	(54,781		)	(57,272		)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures	67,168			66,999
Gain on property dispositions	858			1,463
Income taxes	(324		)	(613		)
Equity in earnings of unconsolidated joint ventures	1,685			1,643
Income from continuing operations	69,387			69,492
Discontinued operations (including net gain on property dispositions of $4,045 and $50,627 for the six months ended June 30, 2012 and 2011, respectively)	7,895			58,292
Net income	77,282			127,784
Noncontrolling interest – operating partnership	(6,082		)	(14,355		)
Noncontrolling interest – consolidated joint ventures	—			458
Net income available to common shareholders	$	71,200		$	113,887
Net income	$	77,282		$	127,784
Other comprehensive income	801			2,183
Comprehensive income	78,083			129,967
Less: comprehensive income attributable to noncontrolling interest	(6,108		)	(14,427		)
Comprehensive income attributable to common shareholders	$	71,975		$	115,540
Earnings per common share
Basic:
Income from continuing operations	$	0.54		$	0.51
Income from discontinued operations	0.07			0.49
Income per common share – basic	$	0.61		$	1.00
Diluted:
Income from continuing operations	$	0.54		$	0.50
Income from discontinued operations	0.07			0.49
Income per common share – diluted	$	0.61		$	0.99
Distributions per common share	$	0.95		$	0.95
Weighted average number of common shares outstanding
Basic	116,359			114,285
Diluted	117,165			115,087
Amounts attributable to common shareholders
Income from continuing operations	$	63,551		$	57,513
Discontinued operations	7,649			56,374
Net income available to common shareholders	$	71,200		$	113,887

See accompanying notes.

Table of Contents

CONSOLIDATED STATEMENT OF EQUITY OF LIBERTY PROPERTY TRUST

(Unaudited and in thousands)



	COMMON SHARES OF BENEFICIAL INTEREST		ADDITIONAL PAID-IN CAPITAL		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)			DISTRIBUTIONS IN EXCESS OF NET INCOME			COMMON SHARES HELD IN TREASURY			TOTAL LIBERTY PROPERTY TRUST SHAREHOLDERS’ EQUITY			NONCONTROLL- ING INTEREST - OPERATING PARTNERSHIP- COMMON			NONCONTROLL- ING INTEREST - OPERATING PARTNERSHIP – PREFERRED			NONCONTROLL- ING INTEREST - CONSOLIDATED JOINT VENTURES		TOTAL EQUITY
Balance at January 1, 2012	$	117	$	2,617,355	$	(429	)	$	(461,498	)	$	(51,951	)	$	2,103,594		$	64,428		$	287,959		$	3,775	$	2,459,756
Net proceeds from the issuance of common shares	2		31,232		—			—			—			31,234			—			—			—		31,234
Net income	—		—		—			71,200			—			71,200			2,292			3,790			—		77,282
Distributions	—		—		—			(111,421		)	—			(111,421		)	(3,705		)	(7,484		)	—		(122,610		)
Share-based compensation	—		6,437		—			—			—			6,437			—			—			—		6,437
Foreign currency translation adjustment	—		—		775			—			—			775			26			—			—		801
Redemption of noncontrolling interests – common units	—		1,150		—			—			—			1,150			(1,150		)	—			—		—
Redemption of noncontrolling interest - preferred units	—		—		—			—			—			—			—			(224,689		)	—		(224,689		)
Excess of preferred unit carrying amount over redemption	—		—		—			—			—			—			—			3,689			—		3,689
Balance at June 30, 2012	$	119	$	2,656,174	$	346		$	(501,719	)	$	(51,951	)	$	2,102,969		$	61,891		$	63,265		$	3,775	$	2,231,900

See accompanying notes.

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CONSOLIDATED STATEMENTS OF CASH FLOWS OF LIBERTY PROPERTY TRUST

(Unaudited and in thousands)



	Six Months Ended
	June 30, 2012			June 30, 2011
OPERATING ACTIVITIES
Net income	$	77,282		$	127,784
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	82,963			86,795
Amortization of deferred financing costs	2,397			2,735
Equity in earnings of unconsolidated joint ventures	(1,685		)	(1,643		)
Distributions from unconsolidated joint ventures	208			305
Gain on property dispositions	(4,903		)	(52,090		)
Share-based compensation	6,437			6,172
Changes in operating assets and liabilities:
Restricted cash	24,101			(462		)
Accounts receivable	(4,241		)	(879		)
Deferred rent receivable	(3,398		)	(4,526		)
Prepaid expenses and other assets	(1,526		)	16,803
Accounts payable	12,196			4,921
Accrued interest	1,049			(5,446		)
Other liabilities	(30,230		)	(13,754		)
Net cash provided by operating activities	160,650			166,715
INVESTING ACTIVITIES
Investment in operating properties - acquisitions	(29,294		)	(34,151		)
Investment in operating properties - other	(27,898		)	(33,107		)
Investments in and advances to unconsolidated joint ventures	(2,575		)	(8,382		)
Distributions from unconsolidated joint ventures	5,472			6,391
Net proceeds from disposition of properties/land	214,877			264,419
Net advances on public reimbursement receivable/escrow	(78		)	(56,395		)
Investment in development in progress	(97,062		)	(10,310		)
Investment in land held for development	(10,791		)	(5,116		)
Investment in deferred leasing costs	(14,448		)	(10,844		)
Net cash provided by investing activities	38,203			112,505
FINANCING ACTIVITIES
Net proceeds from issuance of common shares	31,234			24,580
Redemption of preferred units	(221,000		)	—
Proceeds from unsecured notes	400,000			—
Repayments of unsecured notes	—			(246,500		)
Proceeds from mortgage loans	17,311			—
Repayments of mortgage loans	(26,960		)	(26,976		)
Proceeds from credit facility	453,200			283,000
Repayments on credit facility	(592,600		)	(250,000		)
Increase in deferred financing costs	(4,272		)	(13		)
Distribution paid on common shares	(110,731		)	(108,881		)
Distribution paid on units	(10,130		)	(14,442		)
Net cash used in financing activities	(63,948		)	(339,232		)
Net increase (decrease) in cash and cash equivalents	134,905			(60,012		)
Increase in cash and cash equivalents related to foreign currency translation	1,013			1,498
Cash and cash equivalents at beginning of period	18,204			108,409
Cash and cash equivalents at end of period	$	154,122		$	49,895

See accompanying notes.

Table of Contents

CONSOLIDATED BALANCE SHEETS OF

LIBERTY PROPERTY LIMITED PARTNERSHIP

(In thousands, except unit amounts)



	June 30, 2012			December 31, 2011
	(Unaudited)
ASSETS
Real estate:
Land and land improvements	$	861,373		$	855,213
Building and improvements	4,146,819			4,109,783
Less accumulated depreciation	(1,116,593		)	(1,058,283		)
Operating real estate	3,891,599			3,906,713
Development in progress	198,472			88,848
Land held for development	222,090			219,375
Net real estate	4,312,161			4,214,936
Cash and cash equivalents	154,122			18,204
Restricted cash	39,604			63,659
Accounts receivable	12,424			8,192
Deferred rent receivable	106,243			103,002
Deferred financing and leasing costs, net of accumulated amortization (2012, $133,448; 2011, $123,822)	133,150			130,160
Investments in and advances to unconsolidated joint ventures	173,336			174,687
Assets held for sale	—			200,647
Prepaid expenses and other assets	77,272			76,186
Total assets	$	5,008,312		$	4,989,673
LIABILITIES
Mortgage loans	$	281,170		$	290,819
Unsecured notes	2,192,643			1,792,643
Credit facility	—			139,400
Accounts payable	35,600			23,418
Accrued interest	25,196			24,147
Distributions payable	57,610			56,958
Other liabilities	176,656			194,995
Total liabilities	2,768,875			2,522,380
Limited partners' equity - 301,483 preferred units outstanding as of June 30, 2012 and December 31, 2011	7,537			7,537
OWNERS’ EQUITY
General partner’s equity - 117,544,790 (net of 1,249,909 treasury units) and 116,102,444 (net of 1,249,909 treasury units) common units outstanding as of June 30, 2012 and December 31, 2011, respectively	2,102,969			2,103,594
Limited partners’ equity – 3,740,246 and 3,808,746 common units outstanding as of June 30, 2012 and December 31, 2011, respectively	61,891			64,428
Limited partners’ equity – 1,290,000 and 9,740,000 preferred units outstanding as of June 30, 2012 and December 31, 2011, respectively	63,265			287,959
Noncontrolling interest – consolidated joint ventures	3,775			3,775
Total owners’ equity	2,231,900			2,459,756
Total liabilities, limited partners' equity and owners’ equity	$	5,008,312		$	4,989,673

See accompanying notes.

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME OF

LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands, except per unit amounts)



	Three Months Ended
	June 30, 2012			June 30, 2011
OPERATING REVENUE
Rental	$	119,202		$	116,193
Operating expense reimbursement	49,997			48,234
Total operating revenue	169,199			164,427
OPERATING EXPENSE
Rental property	31,386			28,543
Real estate taxes	20,569			19,592
General and administrative	14,619			13,255
Depreciation and amortization	40,733			38,554
Total operating expenses	107,307			99,944
Operating income	61,892			64,483
OTHER INCOME (EXPENSE)
Interest and other income	2,567			2,340
Interest expense	(30,834		)	(29,358		)
Total other income (expense)	(28,267		)	(27,018		)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures	33,625			37,465
Gain on property dispositions	335			302
Income taxes	(146		)	(63		)
Equity in earnings of unconsolidated joint ventures	769			1,109
Income from continuing operations	34,583			38,813
Discontinued operations (including net gain on property dispositions of $2,981 and $50,157 for the three months ended June 30, 2012 and 2011, respectively)	3,097			54,028
Net income	37,680			92,841
Noncontrolling interest – consolidated joint ventures	—			257
Preferred unit distributions	(2,444		)	(5,253		)
Excess of preferred unit redemption over carrying amount	(40		)	—
Income available to common unitholders	$	35,196		$	87,845
Net income	$	37,680		$	92,841
Other comprehensive income	(1,515		)	39
Comprehensive income	$	36,165		$	92,880
Earnings per common unit
Basic:
Income from continuing operations	$	0.26		$	0.28
Income from discontinued operations	0.03			0.46
Income per common unit - basic	$	0.29		$	0.74
Diluted:
Income from continuing operations	$	0.26		$	0.28
Income from discontinued operations	0.03			0.46
Income per common unit - diluted	$	0.29		$	0.74
Distributions per common unit	$	0.475		$	0.475
Weighted average number of common units outstanding
Basic	120,450			118,549
Diluted	121,326			119,332
Net income allocated to general partners	$	34,111		$	84,978
Net income allocated to limited partners	$	3,569		$	8,120

See accompanying notes.

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CONSOLIDATED STATEMENTS OF INCOME OF

LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands, except per unit amounts)



	Six Months Ended
	June 30, 2012			June 30, 2011
OPERATING REVENUE
Rental	$	238,593		$	230,718
Operating expense reimbursement	100,293			99,595
Total operating revenue	338,886			330,313
OPERATING EXPENSE
Rental property	61,791			60,254
Real estate taxes	41,309			39,039
General and administrative	31,823			29,203
Depreciation and amortization	82,014			77,546
Total operating expenses	216,937			206,042
Operating income	121,949			124,271
OTHER INCOME (EXPENSE)
Interest and other income	5,328			4,928
Interest expense	(60,109		)	(62,200		)
Total other income (expense)	(54,781		)	(57,272		)
Income before gain on property dispositions, income taxes and equity in earnings of unconsolidated joint ventures	67,168			66,999
Gain on property dispositions	858			1,463
Income taxes	(324		)	(613		)
Equity in earnings of unconsolidated joint ventures	1,685			1,643
Income from continuing operations	69,387			69,492
Discontinued operations (including net gain on property dispositions of $4,045 and $50,627 for the six months ended June 30, 2012 and 2011, respectively)	7,895			58,292
Net income	77,282			127,784
Noncontrolling interest – consolidated joint ventures	—			458
Preferred unit distributions	(7,479		)	(10,506		)
Excess of preferred unit carrying amount over redemption	3,689			—
Income available to common unitholders	$	73,492		$	117,736
Net income	$	77,282		$	127,784
Other comprehensive income	801			2,183
Comprehensive income	$	78,083		$	129,967
Earnings per common unit
Basic:
Income from continuing operations	$	0.54		$	0.51
Income from discontinued operations	0.07			0.49
Income per common unit - basic	$	0.61		$	1.00
Diluted:
Income from continuing operations	$	0.54		$	0.50
Income from discontinued operations	0.07			0.49
Income per common unit - diluted	$	0.61		$	0.99
Distributions per common unit	$	0.95		$	0.95
Weighted average number of common units outstanding
Basic	120,147			118,212
Diluted	120,953			119,014
Net income allocated to general partners	$	71,200		$	113,887
Net income allocated to limited partners	$	6,082		$	14,355

See accompanying notes.

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CONSOLIDATED STATEMENT OF OWNERS’ EQUITY OF LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands)



	GENERAL PARTNER’S EQUITY			LIMITED PARTNERS’ EQUITY – COMMON UNITS			LIMITED PARTNERS’ EQUITY – PREFERRED UNITS			NONCONTROLLING INTEREST – CONSOLIDATED JOINT VENTURES		TOTAL OWNERS’ EQUITY
Balance at January 1, 2012	$	2,103,594		$	64,428		$	287,959		$	3,775	$	2,459,756
Contributions from partners	37,671			—			—			—		37,671
Distributions to partners	(111,421		)	(3,705		)	(7,484		)	—		(122,610		)
Foreign currency translation adjustment	775			26			—			—		801
Net income	71,200			2,292			3,790			—		77,282
Redemption of limited partners common units for common shares	1,150			(1,150		)	—			—		—
Redemption of limited partners' preferred units	—			—			(224,689		)	—		(224,689		)
Excess of preferred unit carrying amount over redemption	—			—			3,689			—		3,689
Balance at June 30, 2012	$	2,102,969		$	61,891		$	63,265		$	3,775	$	2,231,900

See accompanying notes.

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CONSOLIDATED STATEMENTS OF CASH FLOWS OF

LIBERTY PROPERTY LIMITED PARTNERSHIP

(Unaudited and in thousands)



	Six Months Ended
	June 30, 2012			June 30, 2011
OPERATING ACTIVITIES
Net income	$	77,282		$	127,784
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	82,963			86,795
Amortization of deferred financing costs	2,397			2,735
Equity in earnings of unconsolidated joint ventures	(1,685		)	(1,643		)
Distributions from unconsolidated joint ventures	208			305
Gain on property dispositions	(4,903		)	(52,090		)
Share-based compensation	6,437			6,172
Changes in operating assets and liabilities:
Restricted cash	24,101			(462		)
Accounts receivable	(4,241		)	(879		)
Deferred rent receivable	(3,398		)	(4,526		)
Prepaid expenses and other assets	(1,526		)	16,803
Accounts payable	12,196			4,921
Accrued interest	1,049			(5,446		)
Other liabilities	(30,230		)	(13,754		)
Net cash provided by operating activities	160,650			166,715
INVESTING ACTIVITIES
Investment in operating properties - acquisitions	(29,294		)	(34,151		)
Investment in operating properties - other	(27,898		)	(33,107		)
Investments in and advances to unconsolidated joint ventures	(2,575		)	(8,382		)
Distributions from unconsolidated joint ventures	5,472			6,391
Net proceeds from disposition of properties/land	214,877			264,419
Net advances on public reimbursement receivable/escrow	(78		)	(56,395		)
Investment in development in progress	(97,062		)	(10,310		)
Investment in land held for development	(10,791		)	(5,116		)
Investment in deferred leasing costs	(14,448		)	(10,844		)
Net cash provided by investing activities	38,203			112,505
FINANCING ACTIVITIES
Redemption of preferred units	(221,000		)	—
Proceeds from unsecured notes	400,000			—
Repayments of unsecured notes	—			(246,500		)
Proceeds from mortgage loans	17,311			—
Repayments of mortgage loans	(26,960		)	(26,976		)
Proceeds from credit facility	453,200			283,000
Repayments on credit facility	(592,600		)	(250,000		)
Increase in deferred financing costs	(4,272		)	(13		)
Capital contributions	31,234			24,580
Distributions to partners	(120,861		)	(123,323		)
Net cash used in financing activities	(63,948		)	(339,232		)
Net increase (decrease) in cash and cash equivalents	134,905			(60,012		)
Increase in cash and cash equivalents related to foreign currency translation	1,013			1,498
Cash and cash equivalents at beginning of period	18,204			108,409
Cash and cash equivalents at end of period	$	154,122		$	49,895

See accompanying notes.

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Liberty Property Trust and Liberty Property Limited Partnership

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2012

Note 1: Organization and Basis of Presentation

Organization

Liberty Property Trust (the “Trust”) is a self-administered and self-managed Maryland real estate investment trust (a “REIT”). Substantially all of the Trust’s assets are owned directly or indirectly, and substantially all of the Trust’s operations are conducted directly or indirectly, by its subsidiary, Liberty Property Limited Partnership, a Pennsylvania limited partnership (the “Operating Partnership” and, together with the Trust and their consolidated subsidiaries, the “Company”). The Trust is the sole general partner and also a limited partner of the Operating Partnership, owning 96.9% of the common equity of the Operating Partnership at June 30, 2012 . The Company provides leasing, property management, development, acquisition, and other tenant-related services for a portfolio of industrial and office properties which are located principally within the Mid-Atlantic, Southeastern, Midwestern and Southwestern United States and the United Kingdom. Unless otherwise indicated, the notes to the Consolidated Financial Statements apply to both the Trust and the Operating Partnership. The terms the "Company,” “we,” “our” or “us” mean the Trust and Operating Partnership collectively.

Basis of Presentation

The accompanying unaudited consolidated financial statements of Company have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2011 . In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial statements for these interim periods have been included. The results of interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. Certain amounts from prior periods have been reclassified to conform to the current period presentation including reclassifying the accompanying consolidated statements of income for discontinued operations.

Recently Issued Accounting Standards

ASU 2011-04

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, “ Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and IFRS ” (“ASU 2011-04”), which amends Accounting Standards Codification ("ASC") 820, “ Fair Value Measurement ” to converge US GAAP and International Financial Reporting Standards (“IFRS”) requirements for measuring accounts at fair value, including the disclosures regarding these measurements. ASU 2011-04 was effective for the Company beginning January 1, 2012. The Company's adoption of ASU 2011-04 did not have a material impact on its financial position or results of operations.

ASU 2011-05

In June 2011, the FASB issued ASU 2011-05, “ Comprehensive Income (Topic 220), Presentation of Comprehensive Income ” (“ASU 2011-05”), which will lead to converging guidance under US GAAP and IFRS related to presentation of comprehensive income. ASU 2011-05 was effective for the Company beginning January 1, 2012 and the provisions of ASU 2011-05 were adopted retrospectively. In adopting ASU 2011-05, the Company is required to disclose the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The Company's adoption of ASU 2011-05 did not have a material impact on its financial position or results of operations.

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Note 2: Income per Common Share of the Trust

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



	For the Three Months Ended					For the Three Months Ended
	June 30, 2012					June 30, 2011
	Income (Numerator)		Weighted Average Shares (Denominator)	Per Share		Income (Numerator)		Weighted Average Shares (Denominator)	Per Share
Basic income from continuing operations
Income from continuing operations net of noncontrolling interest	$	31,110	116,683	$	0.26	$	32,717	114,623	$	0.28
Dilutive shares for long-term compensation plans	—		876			—		783
Diluted income from continuing operations
Income from continuing operations net of noncontrolling interest	31,110		117,559	$	0.26	32,717		115,406	$	0.28
Basic income from discontinued operations
Discontinued operations net of noncontrolling interest	3,001		116,683	$	0.03	52,261		114,623	$	0.46
Dilutive shares for long-term compensation plans	—		876			—		783
Diluted income from discontinued operations
Discontinued operations net of noncontrolling interest	3,001		117,559	$	0.03	52,261		115,406	$	0.46
Basic income per common share
Net income available to common shareholders	34,111		116,683	$	0.29	84,978		114,623	$	0.74
Dilutive shares for long-term compensation plans	—		876			—		783
Diluted income per common share
Net income available to common shareholders	$	34,111	117,559	$	0.29	$	84,978	115,406	$	0.74

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	For the Six Months Ended					For the Six Months Ended
	June 30, 2012					June 30, 2011
	Income (Numerator)		Weighted Average Shares (Denominator)	Per Share		Income (Numerator)		Weighted Average Shares (Denominator)	Per Share
Basic income from continuing operations
Income from continuing operations net of noncontrolling interest	$	63,551	116,359	$	0.54	$	57,513	114,285	$	0.51
Dilutive shares for long-term compensation plans	—		806			—		802
Diluted income from continuing operations
Income from continuing operations net of noncontrolling interest	63,551		117,165	$	0.54	57,513		115,087	$	0.50
Basic income from discontinued operations
Discontinued operations net of noncontrolling interest	7,649		116,359	$	0.07	56,374		114,285	$	0.49
Dilutive shares for long-term compensation plans	—		806			—		802
Diluted income from discontinued operations
Discontinued operations net of noncontrolling interest	7,649		117,165	$	0.07	56,374		115,087	$	0.49
Basic income per common share
Net income available to common shareholders	71,200		116,359	$	0.61	113,887		114,285	$	1.00
Dilutive shares for long-term compensation plans	—		806			—		802
Diluted income per common share
Net income available to common shareholders	$	71,200	117,165	$	0.61	$	113,887	115,087	$	0.99

Dilutive shares for long-term compensation plans represent the unvested common shares outstanding during the year as well as the dilutive effect of outstanding options. The amounts of anti-dilutive options that were excluded from the computation of diluted income per common share for the three and six months ended June 30, 2012 were 953,000 and 925,000 , respectively, as compared to 965,000 and 1,119,000 , respectively, for the same periods in 2011 .

During the three and six months ended June 30, 2012 , 162,000 and 511,000 common shares, respectively, were issued upon the exercise of options. During the year ended December 31, 2011 , 256,000 common shares were issued upon the exercise of options.

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Note 3: Income per Common Unit of the Operating Partnership

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



	For the Three Months Ended						For the Three Months Ended
	June 30, 2012						June 30, 2011
	Income (Numerator)			Weighted Average Units (Denominator)	Per Unit		Income (Numerator)			Weighted Average Units (Denominator)	Per Unit
Income from continuing operations net of noncontrolling interest	$	34,583					$	39,070
Less: Preferred unit distributions	(2,444		)				(5,253		)
Excess of preferred unit redemption over carrying amount	(40		)				—
Basic income from continuing operations
Income from continuing operations available to common unitholders	32,099			120,450	$	0.26	33,817			118,549	$	0.28
Dilutive units for long-term compensation plans	—			876			—			783
Diluted income from continuing operations
Income from continuing operations available to common unitholders	32,099			121,326	$	0.26	33,817			119,332	$	0.28
Basic income from discontinued operations
Discontinued operations	3,097			120,450	$	0.03	54,028			118,549	$	0.46
Dilutive units for long-term compensation plans	—			876			—			783
Diluted income from discontinued operations
Discontinued operations	3,097			121,326	$	0.03	54,028			119,332	$	0.46
Basic income per common unit
Income available to common unitholders	35,196			120,450	$	0.29	87,845			118,549	$	0.74
Dilutive units for long-term compensation plans	—			876			—			783
Diluted income per common unit
Income available to common unitholders	$	35,196		121,326	$	0.29	$	87,845		119,332	$	0.74

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	For the Six Months Ended						For the Six Months Ended
	June 30, 2012						June 30, 2011
	Income (Numerator)			Weighted Average Units (Denominator)	Per Unit		Income (Numerator)			Weighted Average Units (Denominator)	Per Unit
Income from continuing operations net of noncontrolling interest	$	69,387					$	69,950
Less: Preferred unit distributions	(7,479		)				(10,506		)
Excess of preferred unit carrying amount over redemption	3,689						—
Basic income from continuing operations
Income from continuing operations available to common unitholders	65,597			120,147	$	0.54	59,444			118,212	$	0.51
Dilutive units for long-term compensation plans	—			806			—			802
Diluted income from continuing operations
Income from continuing operations available to common unitholders	65,597			120,953	$	0.54	59,444			119,014	$	0.50
Basic income from discontinued operations
Discontinued operations	7,895			120,147	$	0.07	58,292			118,212	$	0.49
Dilutive units for long-term compensation plans	—			806			—			802
Diluted income from discontinued operations
Discontinued operations	7,895			120,953	$	0.07	58,292			119,014	$	0.49
Basic income per common unit
Income available to common unitholders	73,492			120,147	$	0.61	117,736			118,212	$	1.00
Dilutive units for long-term compensation plans	—			806			—			802
Diluted income per common unit
Income available to common unitholders	$	73,492		120,953	$	0.61	$	117,736		119,014	$	0.99

Dilutive units for long-term compensation plans represent the unvested common units outstanding during the year as well as the dilutive effect of outstanding options. The amounts of anti-dilutive options that were excluded from the computation of diluted income per common unit for the three and six months ended June 30, 2012 were 953,000 and 925,000 , respectively, as compared to 965,000 and 1,119,000 , respectively, for the same periods in 2011 .

During the three and six months ended June 30, 2012 , 162,000 and 511,000 common units, respectively, were issued upon the exercise of options. During the year ended December 31, 2011 , 256,000 common units were issued upon the exercise of options.

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

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

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

The functional currency of the Operating Partnership’s United Kingdom operations is pounds sterling. The Operating Partnership translates the financial statements for the United Kingdom operations into US dollars. Gains and losses resulting from this translation are included in other comprehensive income (loss) within general partner’s equity – common units and limited partners’ equity-common units. Upon sale or upon complete or substantially complete liquidation of the Operating Partnership's foreign investment, the gain or loss on the sale will include the cumulative translation adjustments that have been previously recorded in general partner’s equity-common units and limited partners’ equity – common units.

Note 6: Segment Information

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



REGIONS	MARKETS

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

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

The Company's accounting policies for the segments are the same as those used in the Company's Consolidated Financial Statements. There are no material inter-segment transactions.

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



		For the Three Months Ended						For the Six Months Ended
		June 30,						June 30,
		2012			2011			2012			2011
Operating revenue
	Northeast - Southeastern PA	$	41,690		$	42,809		$	83,885		$	88,073
	Northeast - Lehigh / Central PA	23,913			24,739			47,991			52,939
	Northeast - Other	14,454			17,436			31,854			35,729
	Central	28,827			31,342			60,971			63,035
	South	51,746			56,854			105,758			113,218
	Metro	8,236			6,951			16,424			14,100
	United Kingdom	1,104			1,083			2,265			2,213
Segment-level operating revenue		169,970			181,214			349,148			369,307

Reconciliation to total operating revenue
	Discontinued operations	(576		)	(16,886		)	(10,235		)	(39,095		)
	Other	(195		)	99			(27		)	101
Total operating revenue		$	169,199		$	164,427		$	338,886		$	330,313

Net operating income
	Northeast - Southeastern PA	$	24,814		$	25,571		$	49,984		$	51,095
	Northeast - Lehigh / Central PA	16,558			16,417			32,753			33,866
	Northeast - Other	7,628			9,063			16,733			18,258
	Central	15,544			17,390			33,291			34,863
	South	31,316			34,090			63,971			68,092
	Metro	5,986			5,044			11,615			11,001
	United Kingdom	(121		)	(234		)	(349		)	(284		)
Segment-level net operating income		101,725			107,341			207,998			216,891

Reconciliation to income from continuing operations
	Interest expense (1)	(30,911		)	(32,203		)	(61,815		)	(68,372		)
	Depreciation/amortization expense (2)	(25,812		)	(25,677		)	(51,464		)	(54,083		)
	Gain on property dispositions	335			302			858			1,463
	Equity in earnings of unconsolidated joint ventures	769			1,109			1,685			1,643
	General and administrative expense (2)	(8,936		)	(7,606		)	(20,486		)	(18,055		)
	Discontinued operations excluding gain on property dispositions	(116		)	(3,871		)	(3,850		)	(7,665		)
	Income taxes	(146		)	(63		)	(324		)	(613		)
	Other	(2,325		)	(519		)	(3,215		)	(1,717		)
Income from continuing operations		$	34,583		$	38,813		$	69,387		$	69,492


(1)	Includes interest on discontinued operations.


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

During the six months ended June 30, 2012, the Company realized proceeds of $215.1 million from the sale of 56 operating properties and 58 acres of land. The Company's total assets by reportable segment as of June 30, 2012 and December 31, 2011 are as follows (in thousands):

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		As of
		June 30, 2012		December 31, 2011
Total assets
	Northeast - Southeastern PA	$	828,053	$	842,779
	Northeast - Lehigh / Central PA	758,785		716,772
	Northeast - Other	380,854		424,005
	Central	939,847		991,776
	South	1,363,067		1,448,849
	Metro	435,500		383,725
	United Kingdom	141,586		144,558
	Other	160,620		37,209
Total assets		$	5,008,312	$	4,989,673

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

The operating results and gain/(loss) on disposition of real estate for properties sold and held for sale are reflected in the consolidated statements of income as discontinued operations. Prior period financial statements have been adjusted for discontinued operations. The proceeds from dispositions of operating properties for the three and six months ended June 30, 2012 were $ 204.3 million and $210.8 million , respectively, as compared to $266.0 million and $269.7 million , respectively, for the same periods in 2011 .

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



	For the Three Months Ended						For the Six Months Ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Revenues	$	576		$	16,886		$	10,235		$	39,095
Operating expenses	(297		)	(7,033		)	(4,464		)	(16,670		)
Interest and other income	2			58			30			154
Interest expense	(77		)	(2,845		)	(1,706		)	(6,172		)
Depreciation and amortization	(88		)	(3,195		)	(245		)	(8,742		)
Income before gain on property dispositions	116			3,871			3,850			7,665
Gain on property dispositions	2,981			50,157			4,045			50,627
Income from discontinued operations	$	3,097		$	54,028		$	7,895		$	58,292

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

Asset Impairment

During the three months ended June 30, 2012 , the Company recognized $537,000 in impairment charges. During the six months ended June 30, 2012 , the Company recognized $594,000 in impairment charges. These impairments primarily related to the Company's Central reportable segment and are included in discontinued operations in the Company’s consolidated statements of income. The Company determined these impairments through a comparison of the aggregate future cash flows (including quoted offer prices, a Level I input according to the fair value hierarchy established by the FASB in Topic 820, “ Fair Value Measurements and Disclosures ”) to be generated by the property 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, 2012 . During the three and six months ended June 30, 2011 , the Company recognized impairment charges of $4.2 million and $4.7 million , respectively, related to properties in the Central reportable segment. These impairments are included in discontinued operations in the Company's consolidated statements of income.

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Note 8: Noncontrolling Interests of the Trust

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

Common units

The common units outstanding of the Operating Partnership not held by the Trust as of June 30, 2012 have the same economic characteristics as common shares of the Trust. The 3,740,246 outstanding common units of the Operating Partnership not held by the Trust share proportionately in the net income or loss and in any distributions of the Operating Partnership. The common units of the Operating Partnership not held by the Trust are redeemable at any time at the option of the holder. The Trust, as the sole general partner of the Operating Partnership, may at its option elect to settle the redemption in cash or through the exchange on a one-for-one basis with unregistered common shares of the Trust. The market value of the 3,740,246 outstanding common units based on the closing price of the common shares of the Company at June 30, 2012 was $ 137.8 million .

Preferred units

The Trust had outstanding the following cumulative redeemable preferred units of the Operating Partnership (the “Equity Preferred Units”) as of June 30, 2012 :



ISSUE	AMOUNT		UNITS	LIQUIDATION PREFERENCE		DIVIDEND RATE		REDEEMABLE AS OF	EXCHANGEABLE AFTER
	(in 000’s)
Series E	$	20,000	400		$50	7.00	%	6/16/2010	6/16/15 into Series E Cumulative Redeemable Preferred Shares of the Trust
Series F	$	17,500	350		$50	6.65	%	6/30/2010	12/12/15 into Series F Cumulative Redeemable Preferred Shares of the Trust
Series G	$	27,000	540		$50	6.70	%	12/15/2011	12/15/16 into Series G Cumulative Redeemable Preferred Shares of the Trust

The Equity Preferred Units are callable at the Operating Partnership’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.

During the six months ended June 30, 2012 , the Company redeemed $32.5 million of outstanding 6.65% Series F Cumulative Redeemable Preferred Units for $26.0 million . Also, the Company redeemed $95.0 million of outstanding 7.45% Series B Cumulative Redeemable Preferred Units and $100.0 million of outstanding 7.40% Series H Cumulative Redeemable Preferred Units at par. In connection with these redemptions, during the three months ended June 30, 2012 , the Company recognized a $40,000 charge relating to the excess of preferred unit redemption over carrying amount. For the six months ended June 30, 2012 , the Company recognized a $3.7 million net gain relating to the excess of preferred unit carrying amount over redemption price net of certain costs. These amounts are included in Noncontrolling interest - Operating Partnership in the Trust's consolidated statements of income.

Note 9: Limited Partners' Equity of the Operating Partnership

Common units

General and limited partners' equity - common units relates to limited partnership interests of the Operating Partnership issued in connection with the formation of the Operating Partnership and certain subsequent acquisitions. The common units outstanding as of June 30, 2012 have the same economic characteristics as common shares of the Trust. The 3,740,246 outstanding common units are the limited partners' equity - common units held by persons and entities other than the Trust, the general partner of the Operating Partnership, which holds a number of common units equal to the number of outstanding common shares of beneficial interest. Both the common units held by the Trust and the common units held by persons and entities other than the Trust are counted in the weighted average number of common units outstanding during any given period. The common units share proportionately in the net income or loss and in any distributions of the Operating Partnership and are exchangeable into the same number of common shares of the Trust. The market value of the 3,740,246 outstanding common units at June 30, 2012 based on the closing price of the common shares of the Company at June 30, 2012 was $ 137.8 million .

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Preferred units

The following are the Equity Preferred Units as of June 30, 2012 :



ISSUE	AMOUNT		UNITS	LIQUIDATION PREFERENCE		DIVIDEND RATE		REDEEMABLE AS OF	EXCHANGEABLE AFTER
	(in 000's)
Series E	$	20,000	400		$50	7.00	%	6/16/2010	6/16/15 into Series E Cumulative Redeemable Preferred Shares of the Trust
Series F	$	17,500	350		$50	6.65	%	6/30/2010	12/12/15 into Series F Cumulative Redeemable Preferred Shares of the Trust
Series G	$	27,000	540		$50	6.70	%	12/15/2011	12/15/16 into Series G Cumulative Redeemable Preferred Shares of the Trust

The Equity Preferred Units are callable at the Operating Partnership'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 10: Noncontrolling Interest - Operating Partnership/Limited Partners' Equity - Preferred Units

As of June 30, 2012 , the following cumulative preferred units of the Operating Partnership were outstanding:



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

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

Note 11: Indebtedness

Mortgage Loans

During the six months ended June 30, 2012, the Company used proceeds from its unsecured credit facility together with available cash on hand to repay mortgage loans totaling $ 24.4 million bearing interest at an average rate of 7.47% .

During the six months ended June 30, 2012, the Company closed on a mortgage with $45.0 million of available funds bearing interest at 4.84% . As of June 30, 2012, there was $17.3 million outstanding on this loan. The net proceeds from this mortgage were used for construction costs on a property under development.

Unsecured Notes

During the six months ended June 30, 2012, the Company issued $400 million of 10-year , 4.125% senior unsecured notes. The net proceeds from this issuance were used to repay borrowings under the Company's Credit Facility and for general corporate purposes.

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Note 12: Disclosure of Fair Value of Financial Instruments

The following disclosure of estimated fair value was determined by management using available market information and appropriate valuation methodologies. However, considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the following estimates are not necessarily indicative of the amounts the Company could have realized on disposition of the financial instruments at June 30, 2012 and December 31, 2011 . The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

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

The Company used a discounted cash flow model to determine the estimated fair value of its debt as of June 30, 2012 . This is a Level 3 fair value calculation. The inputs used in preparing the discounted cash flow model include actual maturity dates and scheduled cash flows as well as estimates for market value discount rates. The Company updates the discounted cash flow model on a quarterly basis to reflect any changes in the Company's debt holdings and changes to discount rate assumptions.

The only significant unobservable input in the discounted cash flow model is the discount rate. For the fair value of the Company's unsecured notes, the Company uses a discount rate based on the indicative new issue pricing provided by lenders. For the Company's mortgage loans, the Company uses an estimate based on its knowledge of the mortgage market. The weighted average discount rate for the combined unsecured notes and mortgage loans used as of June 30, 2012 was approximately 3.55% . An increase in the discount rate used in the discounted cash flow model would result in a decrease to the fair value of the Company's long-term debt. A decrease in the discount rate used in the discounted cash flow model would result in an increase to the fair value of the Company's long-term debt.

The following summarizes the changes in the fair value of the Company's long-term debt from December 31, 2011 to June 30, 2012 (in thousands):



	Carrying Value			Fair Value			Fair Value Above (Below) Carrying Value
Long-term debt at December 31, 2011 (1)	$	2,083,462		$	2,215,219		$	131,757

Payoffs and amortization of long-term debt	(26,960		)	(26,960		)
New long-term debt	417,311			417,311
Changes in fair value assumptions				71,382			71,382

Long-term debt at June 30, 2012 (1)	$	2,473,813		$	2,676,952		$	203,139

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

Disclosure of fair value of financial instruments is based on pertinent information available to management as of June 30, 2012 and December 31, 2011 . 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, 2012 and current estimates of fair value may differ significantly from the amounts presented herein.

Note 13: Commitments and Contingencies

Environmental Matters

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

Operating Ground Lease Agreements

Future minimum rental payments under the terms of all non-cancelable operating ground leases under which the Company is the lessee, as of June 30, 2012 , were as follows (in thousands):

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Year	Amount
2012	$	79
2013	163
2014	158
2015	153
2016	153
2017 though 2054	5,237
Total	$	5,943

Operating ground lease expense during the three and six months ended June 30, 2012 were $41,000 and $81,000 , respectively, as compared to $65,000 and $142,000 , respectively, for the same periods in 2011 .

Legal Matters

From time to time, the Company is a party to a variety of legal proceedings, claims and assessments arising in the normal course of business. The Company believes that as of June 30, 2012 there were no legal proceedings, claims or assessments expected to have a material adverse effect on the Company’s business or financial statements.

Other

As of June 30, 2012 , the Company had miscellaneous guarantees related to its unconsolidated joint ventures for up to a maximum of $229,000 .

As of June 30, 2012 , the Company had letter of credit obligations of $6.3 million related to development requirements. The Company believes that it is remote that there will be a draw upon these letter of credit obligations.

As of June 30, 2012 , the Company had initiated the development of 13 buildings. These buildings are expected to contain a total of 3.3 million square feet of leasable space and represent an anticipated aggregate investment of $310.1 million . At June 30, 2012 , Development in progress totaled $198.5 million . In addition, as of June 30, 2012 , the Company invested $6.3 million in deferred leasing costs related to these development buildings. Also, the Company has a signed commitment for a build-to-suit development not yet commenced for $30.3 million .

As of June 30, 2012 , the Company was committed to $2.4 million in improvements on certain buildings and land parcels.

As of June 30, 2012 , the Company was obligated to pay for tenant improvements not yet completed for a maximum of $24.9 million .

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

Note 14: 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, 2012 and 2011 (amounts in thousands):



	2012		2011
Write-off of fully depreciated property and deferred costs	$	12,783	$	9,595
Write-off of depreciated property and deferred costs due to sale	$	94,762	$	90,087
Write-off of origination costs relating to preferred unit redemptions	$	2,811	$	—

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

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

OVERVIEW

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

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

As of June 30, 2012 , the Company owned and operated 315 industrial and 239 office properties (the “Wholly Owned Properties in Operation”) totaling 63.2 million square feet. In addition, as of June 30, 2012 , the Company owned 13 properties under development, which when completed are expected to comprise 3.3 million square feet (the “Wholly Owned Properties under Development”) and 1,407 acres of developable land, substantially all of which is zoned for commercial use. Additionally, as of June 30, 2012 , the Company had an ownership interest, through unconsolidated joint ventures, in 47 industrial and 49 office properties totaling 14.2 million square feet (the “JV Properties in Operation” and, together with the Wholly Owned Properties in Operation, the “Properties in Operation”). The Company also has an ownership interest through unconsolidated joint ventures in 615 acres of developable land, substantially all of which is zoned for commercial use. The Company refers to the Wholly Owned Properties under Development and the Properties in Operation collectively as the "Properties."

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

The Company’s operating results depend primarily upon income from rental operations and are substantially influenced by rental demand for the Properties in Operation. The economic disruption which commenced in 2008 persists to some extent. Its manifestations, including the Euro Crisis, create uncertainties with respect to business planning generally. This uncertainty can have an adverse effect on our business to the extent that it can delay tenant business decisions or influence tenant decisions regarding expansion. Rental demand for the Properties in Operation remained relatively flat for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011 . During the three months ended June 30, 2012 , the Company successfully leased 5.4 million square feet and, as of that date, attained occupancy of 91.6% for the Wholly Owned Properties in Operation and 86.7% for the JV Properties in Operation for a combined occupancy of 90.7% for the Properties in Operation. During the three months ended June 30, 2012 , straight line rents on renewal and replacement leases were on average 0.9% lower than rents on expiring leases. At December 31, 2011 , occupancy for the Wholly Owned Properties in Operation was 91.9% and for the JV Properties in Operation was 88.7% for a combined occupancy for the Properties in Operation of 91.3% .

Consistent with its strategy, the Company has been an active seller of suburban office properties and it has acquired or commenced development of industrial and metro-office properties. The Company anticipates that the foregoing activity will result in a decline in net cash provided by operating activities until the acquisition properties are stabilized and the development properties are completed and leased. Although the Company anticipates that its investment focus for the remainder of 2012 will be more on acquisitions than dispositions, the Company anticipates that, for 2012 in the aggregate, the net cash provided by operating activities, less customary capital expenditures and leasing transaction costs, will be less than dividend distributions. The Company will continue to evaluate these circumstances in light of its dividend distribution policy.

WHOLLY OWNED CAPITAL ACTIVITY

Acquisitions

During the three and six months ended June 30, 2012 , the Company acquired four properties for a Total Investment of $33.2 million . These properties, which contain 602,900 square feet of leasable space, were 58.0% leased as of June 30, 2012 . For 2012, the Company anticipates that wholly owned property acquisitions will range from $100 million to $300 million and believes that certain of its acquired properties will be either vacant or underleased.

Dispositions

Disposition activity allows the Company to, among other things, (1) reduce its holdings in certain markets and product types within

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a market consistent with the Company's strategy; (2) lower the average age of the portfolio; (3) optimize the cash proceeds from the sale of certain assets; and (4) obtain funds for investment activities. During the three months ended June 30, 2012 , the Company realized proceeds of $ 208.6 million from the sale of 54 operating properties representing 2.7 million square feet and 58 acres of land. During the six months ended June 30, 2012 , the Company realized proceeds of $215.1 million from the sale of 56 operating properties representing 2.8 million square feet and 58 acres of land. For 2012, the Company anticipates that wholly owned property dispositions will range from $250 million to $350 million.

Development

During the three and six months ended June 30, 2012 , the Company brought into service one Wholly Owned Property under Development representing 128,000 square feet and a Total Investment of $6.6 million . During the three months ended June 30, 2012 , the Company initiated three Wholly Owned Properties under Development with a projected Total Investment of $23.5 million . During the six months ended June 30, 2012 , the Company initiated four Wholly Owned Properties under Development with a projected Total Investment of $31.2 million. As of June 30, 2012 , the Company had 13 Wholly Owned Properties under Development with a projected Total Investment of $ 310.1 million . For 2012, the Company anticipates that wholly owned development deliveries will total between $30 million and $70 million and that during 2012 it will commence development on properties with an expected aggregate Total Investment in a range from $200 million to $300 million.

“Total Investment” for a property is defined as the property’s purchase price plus closing costs (in the case of acquisitions if vacant) and management’s estimate, as determined at the time of acquisition, of the cost of necessary building improvements 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.

UNCONSOLIDATED JOINT VENTURE CAPITAL ACTIVITY

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

Acquisitions

During the three and six months June 30, 2012 , none of the unconsolidated joint ventures in which the Company held an interest acquired any properties. The Company does not anticipate that any unconsolidated joint ventures in which the Company holds an interest will acquire any properties in 2012.

Dispositions

During the three and six months ended June 30, 2012 , none of the unconsolidated joint ventures in which the Company held an interest sold any properties. The Company does not anticipate that any unconsolidated joint ventures in which the Company holds an interest will dispose of any properties in 2012.

Development

During the three and six months ended June 30, 2012 , none of the unconsolidated joint ventures in which the Company held an interest brought any properties into service or began any development activities. As of June 30, 2012 , the Company has no unconsolidated joint venture properties under development. The Company does not anticipate that any unconsolidated joint ventures in which the Company holds an interest will bring any development properties into service or begin any development activities in 2012.

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PROPERTIES IN OPERATION

The composition of the Company’s Properties in Operation as of June 30, 2012 and 2011 was as follows (square feet in thousands):



	Net Rent Per Square Foot ⁽¹⁾				Straight Line Rent and Operating Expense Reimbursement Per Square Foot ⁽²⁾				Total Square Feet		Percent Occupied
	June 30,				June 30,				June 30,		June 30,
	2012		2011		2012		2011		2012	2011	2012		2011
Wholly Owned Properties in Operation:
Industrial-Distribution	$	4.44	$	4.54	$	5.83	$	5.84	35,434	32,440	93.8	%	90.8	%
Industrial-Flex	$	9.09	$	9.13	$	13.23	$	13.07	9,072	10,053	88.9	%	88.5	%
Office	$	14.71	$	14.24	$	22.65	$	22.03	18,649	20,378	88.7	%	91.3	%
	$	8.03	$	8.43	$	11.67	$	12.26	63,155	62,871	91.6	%	90.6	%
JV Properties in Operation:
Industrial-Distribution	$	3.97	$	3.91	$	5.53	$	5.61	9,269	9,269	85.3	%	82.5	%
Industrial-Flex	$	24.56	$	27.81	$	27.59	$	26.30	171	171	91.2	%	81.9	%
Office	$	24.39	$	23.85	$	34.94	$	34.60	4,724	4,724	89.4	%	89.4	%
	$	11.25	$	11.20	$	15.92	$	16.05	14,164	14,164	86.7	%	84.8	%
Properties in Operation:
Industrial-Distribution	$	4.35	$	4.41	$	5.77	$	5.79	44,703	41,709	92.0	%	89.0	%
Industrial-Flex	$	9.39	$	9.42	$	13.50	$	13.27	9,243	10,224	88.9	%	88.4	%
Office	$	16.68	$	16.02	$	25.15	$	24.36	23,373	25,102	88.8	%	91.0	%
	$	8.59	$	8.91	$	12.41	$	12.92	77,319	77,035	90.7	%	89.5	%

(1) Net rent represents the contractual rent per square foot at June 30, 2012 or 2011 for tenants in occupancy. Net rent does not include the tenant's obligation to pay property operating expenses and real estate taxes. If a tenant at June 30, 2012 or 2011 was within a free rent period its rent would equal zero for the purposes of this metric.

(2) Straight line rent and operating expense reimbursement represents the straight line rent including operating expense recoveries per square foot at June 30, 2012 or 2011 for tenants in occupancy.

Geographic segment data for the three and six months ended June 30, 2012 and 2011 are included in Note 6 to the Company’s financial statements.

Forward-Looking Statements

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

Critical Accounting Policies and Estimates

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 for a discussion of critical accounting policies which include capitalized costs, revenue recognition, allowance for doubtful accounts, impairment of real estate, intangibles and investments in unconsolidated joint ventures. During the six months ended June 30, 2012 , there were no material changes to these policies.

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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, 2012 with the results of operations of the Company for the three and six months ended June 30, 2011 . As a result of the varying levels of development, acquisition and disposition activities by the Company in 2012 and 2011 , the overall operating results of the Company during such periods are not directly comparable. However, certain data, including the Same Store comparison, do lend themselves to direct comparison.

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

Comparison of Three and Six Months Ended June 30, 2012 to Three and Six Months Ended June 30, 2011

Overview

The Company’s average gross investment in operating real estate owned for the three months ended June 30, 2012 increased to $ 4,985.8 million from $ 4,682.4 million for the three months ended June 30, 2011 . This increase in operating real estate resulted in increases in rental revenue, operating expense reimbursement, rental property expenses, real estate taxes and depreciation and amortization expense. Rental property expense includes utilities, insurance, janitorial, landscaping, snow removal and other costs necessary to maintain a property. For the six months ended June 30, 2012 , the Company's average gross investment in operating real estate owned increased to $4,975.4 million from $4,671.4 million for the six months ended June 30, 2011 . This increase in operating real estate resulted in increases in rental revenue, operating expense reimbursement, rental property expenses, real estate taxes and depreciation and amortization expense.

Total operating revenue increased to $ 169.2 million for the three months ended June 30, 2012 from $ 164.4 million for the three months ended June 30, 2011 . The $ 4.8 million increase was primarily due to an increase in rental income, which was primarily due to the increase in average gross investment in operating real estate. This increase was partially offset by a decrease in termination fees, which totaled $593,000 for the three months ended June 30, 2012 compared to $1.6 million for the same period in 2011 . Total operating revenue increased to $338.9 million for the six months ended June 30, 2012 from $330.3 million for the six months ended June 30, 2011 . The $8.6 million increase was primarily due to an increase in rental income, which was primarily due to the increase in average gross investment in operating real estate as well as an increase in termination fees, which totaled $2.2 million for the six months ended June 30, 2012 as compared to $1.9 million for the same period in 2011 .

Termination fees are fees that the Company agrees to accept in consideration for permitting certain tenants to terminate their leases prior to the contractual expiration date. Termination fees are included in rental revenue and if a property is sold, related termination fees are included in discontinued operations. See “Other” below.

Segments

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



	THREE MONTHS ENDED						PERCENTAGE INCREASE (DECREASE)				SIX MONTHS ENDED						PERCENTAGE INCREASE (DECREASE)
	June 30,										June 30,
	2012			2011							2012			2011
Northeast
– Southeastern PA	$	24,814		$	25,571		(3.0	%)			$	49,984		$	51,095		(2.2	%)
– Lehigh/Central PA	16,558			16,417			0.9	%			32,753			33,866			(3.3	%)
– Other	7,628			9,063			(15.8	%)	(1	)	16,733			18,258			(8.4	%)
Central	15,544			17,390			(10.6	%)	(1	)	33,291			34,863			(4.5	%)
South	31,316			34,090			(8.1	%)			63,971			68,092			(6.1	%)
Metro	5,986			5,044			18.7	%	(2	)	11,615			11,001			5.6	%
United Kingdom	(121		)	(234		)	(48.3	%)			(349		)	(284		)	22.9	%
Total net operating income	$	101,725		$	107,341		(5.2	%)			$	207,998		$	216,891		(4.1	%)

(1) The decrease is primarily due to the sale of a portfolio of properties during the three months ended June 30, 2012.

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

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Same Store

Property level operating income, exclusive of termination fees, for the Same Store properties decreased to $ 112.8 million for the three months ended June 30, 2012 compared to $ 113.9 million for the three months ended June 30, 2011 on a straight line basis (which recognizes rental revenue evenly over the life of the lease), and $ 111.6 million for the three months ended June 30, 2012 compared to $ 112.3 million for the three months ended June 30, 2011 on a cash basis. Property level operating income, exclusive of Termination Fees, for the Same Store properties decreased to $ 226.1 million for the six months ended June 30, 2012 from $ 227.8 million for the six months ended June 30, 2011 , on a straight line basis, and decreased to $ 224.2 million for the six months ended June 30, 2012 from $ 224.5 million for the six months ended June 30, 2011 on a cash basis.

The same store results were affected by one-time reductions in certain operating expense items during the three and six months ended June 30, 2011 that did not recur during the same period in 2012, decreases in cash and straight line rental rates and an increase in occupancy. The following details the Same Store occupancy and rental rates for the respective periods:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
Average occupancy %	92.6		%	91.3		%	92.7		%	91.1		%
Average rental rate - cash basis ⁽¹⁾	$	8.27		$	8.39		$	8.32		$	8.40
Average rental rate - straight line basis ⁽²⁾	$	12.01		$	12.07		$	12.01		$	12.06

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

(2) Straight line rent and operating expense reimbursement represents the average straight line rent including operating expense recoveries per square foot for the three or six months ended June 30, 2012 or 2011 for tenants in occupancy.

Management generally considers the performance of the Same Store properties to be a useful financial performance measure because the results are directly comparable from period to period. Management further believes that the performance comparison should exclude termination fees since they are more event-specific and are not representative of ordinary performance results. In addition, Same Store property level operating income and Same Store cash basis property level operating income exclusive of termination fees is considered by management to be a more reliable indicator of the portfolio’s baseline performance. The Same Store properties consist of the 528 properties totaling approximately 58.2 million square feet owned on January 1, 2011 . Acquisitions and completed development during the year ended December 31, 2011 and the six months ended June 30, 2012 are excluded from the Same Store properties. Acquisitions and completed development are included in Same Store when they have been purchased in the case of acquisitions, and are stabilized in the case of completed development, prior to the beginning of the earliest period presented in the comparison. The 62 properties sold during 2011 and the 56 properties sold during the six months ended June 30, 2012 are also excluded.

Set forth below is a schedule comparing the property level operating income, on a straight line basis and on a cash basis, for the Same Store properties for the three and six months ended June 30, 2012 and 2011 . Same Store property level operating income and cash basis property level operating income are non-GAAP measures and do not represent income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures because they do not reflect the consolidated operations of the Company. Investors should review Same Store results, along with Funds from operations (see “Liquidity and Capital Resources” below), GAAP net income and cash flow from operating activities, investing activities and financing activities when considering the Company’s operating performance. Also set forth below is a reconciliation of Same Store property level operating income and cash basis property level operating income to net income (in thousands).

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	Three Months Ended						Six Months Ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Same Store:
Rental revenue	$	114,036		$	114,297		$	227,568		$	228,401
Operating expenses:
Rental property expense	30,734			29,555			60,886			62,251
Real estate taxes	18,852			19,127			37,934			38,103
Operating expense recovery	(48,356		)	(48,278		)	(97,315		)	(99,755		)
Unrecovered operating expenses	1,230			404			1,505			599
Property level operating income	112,806			113,893			226,063			227,802
Less straight line rent	1,160			1,609			1,834			3,265
Cash basis property level operating income	$	111,646		$	112,284		$	224,229		$	224,537
Reconciliation of non-GAAP financial measure – Same Store:
Cash basis property level operating income	$	111,646		$	112,284		$	224,229		$	224,537
Straight line rent	1,160			1,609			1,834			3,265
Property level operating income	112,806			113,893			226,063			227,802
Property level operating income - properties purchased or developed subsequent to January 1, 2011	3,845			758			7,484			1,340
Termination fees	593			1,641			2,239			1,878
General and administrative expense	(14,619		)	(13,255		)	(31,823		)	(29,203		)
Depreciation and amortization expense	(40,733		)	(38,554		)	(82,014		)	(77,546		)
Other income (expense)	(28,267		)	(27,018		)	(54,781		)	(57,272		)
Gain on property dispositions	335			302			858			1,463
Income taxes	(146		)	(63		)	(324		)	(613		)
Equity in earnings of unconsolidated joint ventures	769			1,109			1,685			1,643
Discontinued operations (1)	3,097			54,028			7,895			58,292
Net income	$	37,680		$	92,841		$	77,282		$	127,784


(1)	Includes Termination Fees of $110,000 and $644,000 for the three and six months ended June 30, 2012 , respectively, and $4,000 and $29,000 for the three and six months ended June 30, 2011 , respectively.

General and Administrative

General and administrative expenses increased to $ 14.6 million for the three months ended June 30, 2012 compared to $ 13.3 million for the three months ended June 30, 2011 and increased to $31.8 million for the six months ended June 30, 2012 compared to $29.2 million for the six months ended June 30, 2011 . These increases were primarily due to increases in acquisition-related expenditures, cancelled project expense, incentive compensation and costs associated with operating initiatives. General and administrative expenses include salaries, wages and incentive compensation for general and administrative staff along with related costs, consulting, marketing, public company expenses, costs associated with the acquisition of properties and other general and administrative costs.

Depreciation and Amortization

Depreciation and amortization increased to $ 40.7 million for the three months ended June 30, 2012 from $ 38.6 million for the three months ended June 30, 2011 and increased to $82.0 million for the six months ended June 30, 2012 from $77.5 million for the six months ended June 30, 2011 . This increase was primarily due to the increased investment in operating real estate.

Interest Expense

Interest expense increased to $ 30.8 million for the three months ended June 30, 2012 from $ 29.4 million for the three months ended June 30, 2011 . The increase was primarily due to the increase in the average debt outstanding to $ 2,421.2 million for the

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three months ended June 30, 2012 from $ 2,203.6 million for the three months ended June 30, 2011 . This increase was partially offset by a decrease in the weighted average interest rate to 5.4% for the three months ended June 30, 2012 from 5.7% for the three months ended June 30, 2011 as well as an increase in interest capitalized during the three months ended June 30, 2012 due to an increase in development activity. Interest expense decreased to $60.1 million for the six months ended June 30, 2012 from $62.2 million for the six months ended June 30, 2011 . This decrease was primarily related to a decrease in the weighted average interest rate to 5.5% for the six months ended June 30, 2012 from 5.8% for the six months ended June 30, 2011 as well as an increase in interest capitalized during the six months ended June 30, 2012 due to an increase in development activity. These decreases were partially offset by the increase in the average debt outstanding to $2,355.1 million for the six months ended June 30, 2012 from $2,255.6 million for the six months ended June 30, 2011 .

Interest expense allocated to discontinued operations for the three months ended June 30, 2012 and 2011 was $ 77,000 and $ 2.8 million , respectively, and for the six months ended June 30, 2012 and 2011 was $1.7 million and $6.2 million , respectively. This decrease was due to the level of dispositions in 2012 and 2011.

Other

Gain on property dispositions increased to $335,000 for the three months ended June 30, 2012 from $ 302,000 for the three months ended June 30, 2011 and decreased to $858,000 for the six months ended June 30, 2012 from $1.5 million for the six months ended June 30, 2011 .

Income from discontinued operations decreased to $ 3.1 million for the three months ended June 30, 2012 from $ 54.0 million for the three months ended June 30, 2011 and decreased to $7.9 million for the six months ended June 30, 2012 from $58.3 million for the six months ended June 30, 2011 . This decrease was due to lower operating income related to properties in discontinued operations for the three months ended June 30, 2012 and the decrease in gains recognized on sales (net of impairment charges) which were $3.0 million for the three months ended June 30, 2012 compared to $50.2 million for the same period in 2011. The decrease for the six month periods was due to lower operating income related to properties in discontinued operations for the six months ended June 30, 2012 and the decrease in gains recognized on sales which were $4.0 million for the six months ended June 30, 2012 compared to $50.6 million for the six months ended June 30, 2011 .

As a result of the foregoing, the Company’s net income decreased to $ 37.7 million for the three months ended June 30, 2012 from $ 92.8 million for the three months ended June 30, 2011 and decreased to $77.3 million for the six months ended June 30, 2012 from $127.8 million for the six months ended June 30, 2011 .

Liquidity and Capital Resources

Overview

The Company seeks to maintain a conservative balance sheet and pursue a strategy of financial flexibility. The Company expects to expend $250 million to $350 million to fund its investment in development properties in 2012. The Company’s remaining 2012 debt maturities total approximately $238.2 million. The Company anticipates that it will invest $100 million to $300 million in acquisitions in 2012 . The Company expects to realize approximately $250 million to $350 million in proceeds from asset sales in 2012 . The Company believes that proceeds from asset sales, its available cash, borrowing capacity from its Credit Facility (as defined below) and its other sources of capital including the public debt and equity markets will provide it with sufficient funds to satisfy these obligations.

Activity

As of June 30, 2012 , the Company had cash and cash equivalents of $193.7 million , including $39.6 million in restricted cash.

Net cash flow provided by operating activities decreased to $160.7 million for the six months ended June 30, 2012 from $166.7 million for the six months ended June 30, 2011 . This $6.1 million decrease was primarily due to the operating results relating to the sale of a portfolio of properties for $195 million in April 2012 offset by related interest savings. Net cash flow provided by operating activities is the primary source of liquidity to fund distributions to shareholders and for recurring capital expenditures and leasing transaction costs for the Company’s Wholly Owned Properties in Operation.

Net cash provided by investing activities decreased to $38.2 million for the six months ended June 30, 2012 compared to $112.5 million for the six months ended June 30, 2011 . This $74.3 million decrease primarily resulted from a decrease in net proceeds from the dispositions of properties/land and an increase in investment in development in progress partially offset by net cash activity related to the public reimbursement receivable/escrow. At June 30, 2011, the Company placed $53.6 million in escrow for the purchase of two properties which were subsequently acquired during the year ended December 31, 2011. No similar activity occurred in 2012.

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Net cash used in financing activities decreased to $63.9 million for the six months ended June 30, 2012 compared to $339.2 million for the six months ended June 30, 2011 . This $275.3 million decrease was primarily due to the redemption of preferred units during 2012 as well as the net changes in the Company’s debt during the respective periods. During the six months ended June 30, 2012 , the Company redeemed $32.5 million of outstanding 6.65% Series F Cumulative Redeemable Preferred Units for $26.0 million . Also, the Company redeemed $95.0 million of outstanding 7.45% Series B Cumulative Redeemable Preferred Units and $100.0 million of outstanding 7.40% Series H Cumulative Redeemable Preferred Units at par. In addition, the Company issued $400 million of 10-year , 4.125% senior unsecured notes. The net proceeds from this issuance were used to repay borrowings under the Company's Credit Facility and for general corporate purposes. Net cash used in financing activities includes proceeds from the issuance of equity and debt, net of debt repayments, equity repurchases and distributions.

The Company funds its development activities and acquisitions with long-term capital sources and proceeds from the disposition of properties. For the six months ended June 30, 2012 , a portion of these activities were funded through a $500 million Credit Facility (the “Credit Facility”). The interest rate on borrowings under the Credit Facility fluctuates based upon ratings from Moody’s Investors Service, Inc., Standard and Poor’s Ratings Group and Fitch, Inc. Based on the Company’s existing ratings, the interest rate for borrowings under the Credit Facility at June 30, 2012 was LIBOR plus 107.5 basis points.

The Company uses debt financing to lower its overall cost of capital in an attempt to increase the return to shareholders. The Company staggers its debt maturities and maintains debt levels it considers to be prudent. In determining its debt levels, the Company considers various financial measures including the debt to gross assets ratio and the fixed charge coverage ratio. As of June 30, 2012 , the Company’s debt to gross assets ratio was 40.4% and for the six months ended June 30, 2012 , the fixed charge coverage ratio was 3.0 x. Debt to gross assets equals total long-term debt and borrowings under the Credit Facility divided by total assets plus accumulated depreciation including accumulated depreciation on assets held for sale. The fixed charge coverage ratio equals income from continuing operations before gain on property dispositions, including operating activity from discontinued operations, plus interest expense and depreciation and amortization, divided by interest expense, including capitalized interest, plus distributions on preferred units.

As of June 30, 2012 , $281.2 million in mortgage loans and $2,192.6 million in unsecured notes were outstanding with a weighted average interest rate of 5.55% . The interest rates on $2,457.8 million of mortgage loans and unsecured notes are fixed and range from 4.1% to 7.5% . The weighted average remaining term for the mortgage loans and unsecured notes is 5.3 years.

The scheduled principal amortization and maturities of the Company’s mortgage loans, unsecured notes and the Credit Facility and the related weighted average interest rates as of June 30, 2012 are as follows (in thousands, except percentages):



	MORTGAGES										WEIGHTED AVERAGE INTEREST RATE
	PRINCIPAL AMORTIZATION		PRINCIPAL MATURITIES		UNSECURED NOTES		CREDIT FACILITY		TOTAL		WEIGHTED AVERAGE INTEREST RATE
2012	$	2,286	$	5,794	$	230,100	$	—	$	238,180	6.37	%
2013	4,583		4,510		—		—		9,093		5.73	%
2014	4,966		2,684		200,000		—		207,650		5.66	%
2015	4,512		44,469		316,000		—		364,981		5.17	%
2016	3,298		182,318		300,000		—		485,616		6.10	%
2017	2,090		2,349		296,543		—		300,982		6.61	%
2018	—		—		100,000		—		100,000		7.50	%
2020	—		—		350,000		—		350,000		4.75	%
2021 & thereafter	—		17,311		400,000		—		417,311		4.15	%
	$	21,735	$	259,435	$	2,192,643	$	—	$	2,473,813	5.55	%

General

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

Calculation of Funds from Operations

The National Association of Real Estate Investment Trusts (“NAREIT”) has issued a standard definition for Funds from operations (as defined below). The SEC has agreed to the disclosure of this non-GAAP financial measure on a per share basis in its Release No. 34-47226, Conditions for Use of Non-GAAP Financial Measures. The Company believes that the calculation of Funds from

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operations is helpful to investors and management as it is a measure of the Company’s operating performance that excludes depreciation and amortization and gains and losses from operating property dispositions. As a result, year over year comparison of Funds from operations reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, providing perspective not immediately apparent from net income. In addition, management believes that Funds from operations provides useful information to the investment community about the Company’s financial performance when compared to other REITs since Funds from operations is generally recognized as the standard for reporting the operating performance of a REIT. Funds from operations available to common shareholders is defined by NAREIT as net income (computed in accordance with generally accepted accounting principles (“GAAP”)), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Funds from operations available to common shareholders does not represent net income or cash flows from operations as defined by GAAP and does not necessarily indicate that cash flows will be sufficient to fund cash needs. It should not be considered as an alternative to net income as an indicator of the Company’s operating performance or to cash flows as a measure of liquidity. Funds from operations available to common shareholders also does not represent cash flows generated from operating, investing or financing activities as defined by GAAP. Historically the Company included impairment charges in this computation. However, excluding impairment charges from the computation of Funds from operations is consistent with NAREIT's reaffirmation in November 2011 of its July 2000 guidance on NAREIT-defined Funds from operations, which indicated that impairment write-downs of depreciable real estate should be excluded in the computation of Funds from operations. Accordingly, Funds from operations have been restated for prior periods.

Funds from operations (“FFO”) available to common shareholders for the three and six months ended June 30, 2012 and 2011 are as follows (in thousands, except per share amounts):

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	Three Months Ended						Six Months Ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Reconciliation of net income to FFO - basic:
Net Income available to common shareholders	$	34,111		$	84,978		$	71,200		$	113,887
Basic - Income available to common shareholders	34,111			84,978			71,200			113,887
Basic - income available to common shareholders per weighted average share	$	0.29		$	0.74		$	0.61		$	1.00
Adjustments:
Depreciation and amortization of unconsolidated joint ventures	3,554			3,669			7,170			7,318
Depreciation and amortization	40,420			41,194			81,466			85,165
Gain on property dispositions	(2,979		)	(50,542		)	(4,083		)	(51,042		)
Noncontrolling interest share in addback for depreciation and amortization and gain on property dispositions	(1,264		)	186			(2,637		)	(1,372		)
Funds from operations available to common shareholders – basic	$	73,842		$	79,485		$	153,116		$	153,956
Basic Funds from operations available to common shareholders per weighted average share	$	0.63		$	0.69		$	1.32		$	1.35
Reconciliation of net income to FFO - diluted:
Net Income available to common shareholders	$	34,111		$	84,978		$	71,200		$	113,887
Diluted - income available to common shareholders	34,111			84,978			71,200			113,887
Diluted - income available to common shareholders per weighted average share	$	0.29		$	0.74		$	0.61		$	0.99
Adjustments:
Depreciation and amortization of unconsolidated joint ventures	3,554			3,669			7,170			7,318
Depreciation and amortization	40,420			41,194			81,466			85,165
Gain on property dispositions	(2,979		)	(50,542		)	(4,083		)	(51,042		)
Noncontrolling interest less preferred share distributions and excess of carrying amount over preferred unit redemption	1,085			2,867			2,292			3,849
Funds from operations available to common shareholders - diluted	$	76,191		$	82,166		$	158,045		$	159,177
Diluted Funds from operations available to common shareholders per weighted average share	$	0.63		$	0.69		$	1.31		$	1.34
Reconciliation of weighted average shares:
Weighted average common shares - all basic calculations	116,683			114,623			116,359			114,285
Dilutive shares for long term compensation plans	876			783			806			802
Diluted shares for net income calculations	117,559			115,406			117,165			115,087
Weighted average common units	3,767			3,926			3,788			3,927
Diluted shares for Funds from operations calculations	121,326			119,332			120,953			119,014

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.

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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, 2011 .

Item 4. Controls and Procedures

Controls and Procedures with respect to the Trust

(a) Evaluation of Disclosure Controls and Procedures

The Trust’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the Trust’s Chief Executive Officer and Chief Financial Officer have concluded that the Trust’s disclosure controls and procedures, as of the end of the period covered by this report, were effective to provide reasonable assurance that information required to be disclosed by the Trust in its reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms and (ii) accumulated and communicated to the Trust’s management, including its principal executive and principal financial officers, or persons performing similar function, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting

There were no changes in the Trust’s internal control over financial reporting during the quarter ended June 30, 2012 that have materially affected or are reasonable likely to materially affect the Company’s internal control over financial reporting.

Controls and Procedures with respect to the Operating Partnership

(a) Evaluation of Disclosure Controls and Procedures

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

(b) Changes in Internal Control Over Financial Reporting

There were no changes in the Operating Partnership’s internal control over financial reporting during the quarter ended June 30, 2012 that have materially affected or are reasonable likely to materially affect the Operating Partnership’s internal control over financial reporting.

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PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

The Company is not a party to any material litigation as of June 30, 2012 .


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, 2011 .


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

In April and May, 2012, individuals acquired a total of 68,500 common shares of beneficial interest of Liberty Property Trust in exchange for the same number of units of limited partnership interests in Liberty Property Limited Partnership. These individuals acquired these units of limited partnership interests in connection with their contribution to the Operating Partnership of certain assets previously. The exchange of common shares of beneficial interest for the units of limited partnership is exempt from the registration requirement of the Securities Act of 1933, as amended, pursuant to Section 4(2) thereunder.


Item 3.	Defaults upon Senior Securities

None.


Item 4.	Mine Safety Disclosures

Not applicable.


Item 5.	Other Information

None.

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Item 6.	Exhibits



4.1*	Second Supplemental Indenture, dated as of June 11, 2012, between the Operating Partnership, as Issuer, and U.S. Bank National Association, as Trustee, supplementing the Senior Indenture, dated as of September 22, 2010, between the Operating Partnership, as Obligor, and U.S. Bank National Association, as Trustee, and relating to $400,000,000 principal amount of 4.125% Senior Notes due 2022 of Liberty Property Limited Partnership.

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

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

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

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

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

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

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

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

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

101.INS	XBRL Instance Document (furnished herewith).

101.SCH	XBRL Taxonomy Extension Schema Document (furnished herewith).

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (furnished herewith).

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (furnished herewith).

101.LAB	XBRL Extension Labels Linkbase (furnished herewith).

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith).

________________________

* Filed herewith

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SIGNATURES

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

LIBERTY PROPERTY TRUST



/s/ WILLIAM P. HANKOWSKY		August 1, 2012
William P. Hankowsky		Date
Chairman of the Board of Trustees, President and Chief Executive Officer (Principal Executive Officer)

/s/ GEORGE J. ALBURGER, JR.		August 1, 2012
George J. Alburger, Jr.		Date
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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SIGNATURES

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

LIBERTY PROPERTY LIMITED PARTNERSHIP



BY:	Liberty Property Trust
	General Partner

/s/ WILLIAM P. HANKOWSKY		August 1, 2012
William P. Hankowsky		Date
Chairman of the Board of Trustees, President and Chief Executive Officer (Principal Executive Officer)

/s/ GEORGE J. ALBURGER, JR.		August 1, 2012
George J. Alburger, Jr.		Date
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX



EXHIBIT NO.

4.1	Second Supplemental Indenture, dated as of June 11, 2012, between the Operating Partnership, as Issuer, and U.S. Bank National Association, as Trustee, supplementing the Senior Indenture, dated as of September 22, 2010, between the Operating Partnership, as Obligor, and U.S. Bank National Association, as Trustee, and relating to $400,000,000 principal amount of 4.125% Senior Notes due 2022 of Liberty Property Limited Partnership.

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

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

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

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

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

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

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

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

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

101.INS	XBRL Instance Document (furnished herewith).

101.SCH	XBRL Taxonomy Extension Schema Document (furnished herewith).

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (furnished herewith).

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (furnished herewith).

101.LAB	XBRL Extension Labels Linkbase (furnished herewith).

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith).

______________________




		LIBERTY PROPERTY LIMITED PARTNERSHIP

		By:		Liberty Property Trust,
				as its sole General Partner

		By:		/s/ George J. Alburger, Jr.

				Name: George J. Alburger, Jr.
				Title: Chief Financial Officer




		U.S. BANK NATIONAL ASSOCIATION, as Trustee

		By:		/s/ George J. Rayzis

				Name: George J. Rayzis
				Title: Vice President



EXHIBIT 12.1 - STATEMENT RE: COMPUTATION OF RATIO
OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES

LIBERTY PROPERTY TRUST / LIBERTY PROPERTY LIMITED PARTNERSHIP
(Amounts in thousands except ratio amounts)


		Six Months Ended June 30, 2012

Earnings before fixed charges:
Income before allocation of noncontrolling interest
and income from investments in unconsolidated
subsidiaries		$	73,382
Add:	Interest expense	57,691
	Depreciation expense on capitalized interest	803
	Amortization of deferred
	financing costs	2,418

Earnings before fixed charges		$	134,294


Fixed charges:
Interest expense		$	57,691
Amortization of deferred financing charges		2,418
Capitalized interest		3,852

Fixed charges		63,961

Preferred unit distributions		7,479

Combined fixed charges		$	71,440

Ratio of earnings to fixed charges		2.10

Ratio of earnings to combined fixed charges		1.88



Date:	August 1, 2012	By: /s/ WILLIAM P. HANKOWSKY
		William P. Hankowsky
		Chairman, President and Chief Executive Officer



Date:	August 1, 2012	By: /s/ WILLIAM P. HANKOWSKY
		William P. Hankowsky
		Chairman, President and Chief Executive Officer of
		Liberty Property Trust, the Registrant’s sole general partner




Attest: /s/ James J. Bowes

Name: James J. Bowes
Title: General Counsel




Attest: /s/ Stephen J. Kaba

Name: Stephen J. Kaba
Title: Vice President



Date:	August 1, 2012	By: /s/ GEORGE J. ALBURGER, JR.
		George J. Alburger, Jr.
		Executive Vice President and Chief Financial Officer