Summary of LIBERTY PROPERTY TRUST

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
Liberty Property Trust (the "Trust") is a self-administered and self-managed Maryland real estate investment trust ("REIT"). Substantially all of the Trust's assets are owned directly or indirectly, and substantially all of the Trust's operations are conducted directly or indirectly, by its subsidiary, Liberty Property Limited Partnership, a Pennsylvania limited partnership (the "Operating Partnership" and, collectively with the Trust and their consolidated subsidiaries, the "Company").
The Company operates primarily in the Mid-Atlantic, Southeastern, Midwestern and Southwestern United States. Additionally, the Company owns certain assets in the United Kingdom.
As of March 31, 2009, the Company owned and operated 357 industrial and 292 office properties (the "Wholly Owned Properties in Operation") totaling 63.6 million square feet. In addition, as of March 31, 2009, the Company owned 16 properties under development, which when completed are expected to comprise 3.1 million square feet (the "Wholly Owned Properties under Development") and 1,344 acres of developable land, substantially all of which is zoned for commercial use. Additionally, as of March 31, 2009, the Company had an ownership interest, through unconsolidated joint ventures, in 46 industrial and 49 office properties totaling 13.1 million square feet (the "JV Properties in Operation" and, together with the Wholly Owned Properties in Operation, the "Properties in Operation"), four properties under development, which when completed are expected to comprise 1.4 million square feet (the "JV Properties under Development" and, together with the Wholly Owned Properties under Development, the "Properties under Development"). The Company also has an ownership interest through unconsolidated joint ventures in 630 acres of developable land, substantially all of which is zoned for commercial use.
The Company focuses on creating value for shareholders and increasing profitability and cash flow. With respect to its Properties in Operation, the Company endeavors to maintain high occupancy levels while increasing rental rates and controlling costs. The Company's operating results depend primarily upon income from rental operations and are substantially influenced by rental demand for the Properties in Operation. Over time, the Company pursued development opportunities that it believes will create value and yield acceptable returns. The Company also acquired properties that it believes will create long-term value, and disposed of properties that no longer fit within the Company's strategic objectives or in situations where it can optimize cash proceeds. Current market conditions are not favorable for acquisitions and development and consequently the potential for growth in operating income from acquisitions and development is anticipated to be limited in 2009.
Recent uncertainty in the global credit markets and declines and weakness in the general economy have negatively impacted the Company's business. The credit markets have become considerably less favorable than in the recent past and the Company has shifted its financing strategy to include more secured debt and equity sales in order to address its financing needs. Additionally, uncertainty about the pricing of commercial real estate and the absence of available financing to facilitate transactions has dramatically reduced the Company's ability to rely on the proceeds from the sale of real estate to provide proceeds to fund investment opportunities.
Consistent with the dramatic slow down in the United States and world economies, rental demand for the Properties in Operation declined for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. Despite this trend, the Company successfully leased 2.8 million square feet during the three months ended March 31, 2009 and attained occupancy of 89.7% for the Wholly Owned Properties in Operation and 91.8% for the JV Properties in Operation for a combined occupancy of 90.1% for the Properties in Operation, all as of that date. At December 31, 2008, occupancy for the Wholly Owned Properties in Operation was 91.1% and for the JV Properties in Operation was 92.2% for a combined occupancy for the Properties in Operation of 91.3%.
GUIDANCE
The Company's guidance for 2009 was originally developed in September 2008. It was premised on assumptions about the economy, the resulting demand for product and the availability of capital. The Company reviewed these assumptions and revised its original guidance in April 2009. The Company's original and revised guidance for 2009 is as follows:

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

WHOLLY OWNED CAPITAL ACTIVITY
Acquisitions
During the three months ended March 31, 2009, conditions for the acquisition of properties were unsettled because of adverse events in the credit markets and the Company did not acquire any operating properties. Dispositions
During the three months ended March 31, 2009, market conditions for dispositions were unsettled, which the Company again attributes to adverse conditions in the credit markets. Disposition activity allows the Company to, among other things,
(1) reduce its holdings in certain markets and product types within a market;
(2) lower the average age of the portfolio; (3) optimize the cash proceeds from the sale of certain assets; and (4) obtain funds for investment activities. During the three months ended March 31, 2009, the Company realized proceeds of $45.6 million from the sale of six operating properties representing 296,000 square feet and 0.3 acres of land. Development
During the three months ended March 31, 2009, the Company brought into service one Wholly Owned Property under Development representing 90,000 square feet and a Total Investment, as defined below, of $15.7 million, and did not initiate any real estate development. As of March 31, 2009, the projected Total Investment of the Wholly Owned Properties under Development was $359.9 million. Although the Company continues to pursue development opportunities, current market conditions are not favorable for development, and the Company currently anticipates only a modest amount of development starts in 2009. Furthermore, any 2009 development starts will be substantially pre-leased. The "Total Investment" for a Property is defined as the Property's purchase price plus closing costs and management's estimate, as determined at the time of acquisition, of the cost of necessary building improvements in the case of acquisitions, or land costs and land and building improvement costs in the case of development projects, and, where appropriate, other development costs and carrying costs.
JOINT VENTURE CAPITAL ACTIVITY
The Company periodically enters into joint venture relationships in connection with the execution of its real estate operating strategy. Acquisitions
During the three months ended March 31, 2009, none of the unconsolidated joint ventures in which the Company held an interest acquired any properties. Dispositions
During the three months ended March 31, 2009, none of the unconsolidated joint ventures in which the Company held an interest disposed of any properties. . Development
During the three months ended March 31, 2009, none of the unconsolidated joint ventures in which the Company held an interest brought any Properties under Development into service. As of March 31, 2009, the projected Total Investment of JV Properties under Development was $191.0 million.

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

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

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




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

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




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

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

Geographic segment data for the three months ended March 31, 2009 and 2008 are included in Note 2 to the Company's financial statements. Forward-Looking Statements
When used throughout this report, the words "believes," "anticipates" and "expects" and similar expressions are intended to identify forward-looking statements. Such statements indicate that assumptions have been used that are subject to a number of risks and uncertainties that could cause actual financial results or management plans and objectives to differ materially from those projected or expressed herein, including: the effect of national and regional economic conditions; rental demand; the Company's ability to identify, and enter into agreements with suitable joint venture partners in situations where it believes such arrangements are advantageous; the Company's ability to identify and secure additional properties and sites, both for itself and the joint ventures to which it is a party, that meet its criteria for acquisition or development; the current credit crisis and its impact on the availability and cost of capital; the effect of prevailing market interest rates; risks related to the integration of the operations of entities that we have acquired or may acquire; risks related to litigation; and other risks described from time to time in the Company's filings with the SEC. Given these uncertainties, readers are cautioned not to place undue reliance on such statements. Critical Accounting Policies and Estimates Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2008 for a discussion of critical accounting policies which include capitalized costs, revenue recognition, allowance for doubtful accounts,

impairment of real estate, intangibles and investments in unconsolidated joint ventures. During the three months ended March 31, 2009, there were no material changes to these policies.
Results of Operations
The following discussion is based on the consolidated financial statements of the Company. It compares the results of operations of the Company for the three months ended March 31, 2009 with the results of operations of the Company for the three months ended March 31, 2008. As a result of the varying levels of development, acquisition and disposition activities by the Company in 2009 and 2008, the overall operating results of the Company during such periods are not directly comparable. However, certain data, including the Same Store comparison, do lend themselves to direct comparison.
This information should be read in conjunction with the accompanying condensed consolidated financial statements and notes included elsewhere in this report. Comparison of Three Months Ended March 31, 2009 to Three Months Ended March 31, 2008
Overview
The Company's average gross investment in operating real estate owned for the three months ended March 31, 2009 decreased to $5,049.7 million from $5,143.6 million for the three months ended March 31, 2008. This decrease in operating real estate owned resulted in a decrease in rental revenue. Despite this decrease, operating expense reimbursement, rental property expenses, real estate taxes and depreciation and amortization all increased.
Total operating revenue decreased to $189.2 million for the three months ended March 31, 2009 from $189.5 million for the three months ended March 31, 2008. This decrease in operating revenue was due to the operations of Comcast Center, which was wholly owned from January 1, 2008 to March 30, 2008 and then was sold into an unconsolidated joint venture in which the Company retains an interest. The decrease was also due to a decrease in "Termination Fees," which totaled $0.3 million for the three months ended March 31, 2009 as compared to $1.3 million for the three months ended March 31, 2008. Termination Fees are fees that the Company agrees to accept in consideration for permitting certain tenants to terminate their leases prior to the contractual expiration date. Termination Fees are included in rental revenue. These decreases were partially offset by acquisition and development buildings that came into service throughout 2008 and the three months ended March 31, 2009.

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

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


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

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

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

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

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

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

Same Store
Property level operating income, exclusive of Termination Fees, for the Same Store properties increased to $123.3 million for the three months ended March 31, 2009 from $120.9 million for the three months ended March 31, 2008, on a straight line basis (which recognizes rental revenue evenly over the life of the lease), and increased to $119.9 million for the three months ended March 31, 2009 from $117.8 million for the three months ended March 31, 2008 on a cash basis. These increases of 1.9% and 1.8%, respectively, are primarily due to an increase in rental rates.
Management generally considers the performance of the Same Store properties to be a useful financial performance measure because the results are directly comparable from period to period. Management further believes that the performance comparison should exclude Termination Fees since they are more event specific and are not representative of ordinary performance results. In addition, Same Store property level operating income and Same Store cash basis property level operating income exclusive of Termination Fees is considered by management to be a more reliable indicator of the portfolio's baseline performance. The Same Store properties consist of the 631 properties totaling approximately 60.3 million square feet owned on January 1, 2008 and excluding properties sold through March 31, 2009.
Set forth below is a schedule comparing the property level operating income, on a straight line basis and on a cash basis, for the Same Store properties for the years ended March 31, 2009 and 2008. Same Store property level operating income and cash basis property level operating income are non-GAAP measures and do not represent income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures because they do not reflect the consolidated operations of the Company. Investors should review Same Store results, along with Funds from operations (see "Liquidity and Capital Resources" section), GAAP net income and cash flow from operating activities, investing activities and financing activities when considering the Company's operating performance. Also, set forth below is a reconciliation of Same Store property level operating income and cash basis property level operating income to net income (in thousands).

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

Unrecovered operating expenses                                               2,945                   2,996


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


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


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

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


Net income                                                        $         33,842        $         36,396

General and Administrative
General and administrative expenses increased to $15.6 million for the three months ended March 31, 2009 compared to $14.0 million for the three months ended March 31, 2008. The increase was primarily due to the accelerated vesting of long term incentive compensation due to the years of service and age of certain employees.
Depreciation and Amortization
Depreciation and amortization increased to $43.6 million for the three months ended March 31, 2009 from $43.1 million for the three months ended March 31, 2008. The increase was primarily due to the increased investment in tenant improvement costs, which are depreciated over a shorter period than buildings. Interest Expense
Interest expense decreased to $38.4 million for the three months ended March 31, 2009 from $41.7 million for the three months ended March 31, 2008. This decrease was related to a decrease in the average debt outstanding, which was $2,579.2 million for the three months ended March 31, 2009, compared to $3,055.7 million for the three months ended March 31, 2008. The effect of the decrease in the average debt outstanding was partially offset by an increase in the weighted average interest rate to 6.3% for the three months ended March 31, 2009 from 6.2% for the three months ended March 31, 2008, as well as a decrease in interest capitalized due to the decrease in development activity. Interest expense allocated to discontinued operations for the three months ended March 31, 2009 and 2008 was $0.3 million and $0.8 million, respectively. This decrease was due to the decrease in the level of dispositions in 2009 compared to 2008.
Other
Gain (loss) on property dispositions decreased to a loss of $0.3 million for the three months ended March 31, 2009 from a gain of $0.6 million for the three months ended March 31, 2008. The decrease was primarily due to impairments recognized on certain of the Company's properties in 2009.

During the three months ended March 31, 2009, the Company purchased $6.9 million principal amount of its August 2010 Senior Notes. These notes were purchased at a $0.5 million discount. The discount is included in net income as a debt extinguishment gain.
Income from discontinued operations decreased to $0.5 million for the three months ended March 31, 2009 from $1.5 million for the three months ended March 31, 2008. The decrease was due to lower operating income and the decrease in gains recognized on sales which were $0.2 million for the three months ended March 31, 2009 compared to $0.6 million for the three months ended March 31, 2008.
As a result of the foregoing, the Company's net income decreased to $33.8 million for the three months ended March 31, 2009 from $36.4 million for the three months ended March 31, 2008.
Liquidity and Capital Resources
Overview
The Company has historically accessed capital primarily from the public unsecured debt markets. The uncertainty in the global credit market has negatively affected this market. As a result, the Company expects to be more reliant on other sources of capital to meet its maturing debt obligations and to complete its development pipeline. The Company believes that it has a significant amount of borrowing capacity available to it from its real estate assets which are generally unsecured. The Company believes that additional capital sources include sources such as proceeds to be realized from the sale of real estate assets. Finally, the Company may access $165 million in funds through the sale of common shares under its continuous equity offering program. The Company paid Citigroup Global Markets Inc., its agent under this program, an aggregate of $1.9 million in fees with respect to the common shares sold through this program during the three months ended March 31, 2009. The Company paid Citigroup Global Markets Inc., an additional $0.4 million in fees with respect . . .