Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

REIT's are different from other stocks. They're evaluated by cash flows and occupancy rates and a few other metrics that most industries don't share. They also are taxed differenlty, required to pass along at least 90% of their income to unitholders (that's what they're called: units, not stocks and investors are unitholders instead of stockholders). So a healthy REIT, making good profits, makes for a good income oriented investment.

There are basically 3 types of REIT's:
- Equity REIT: Own and/or rent properties and collect rental income, dividends, and capital gains from property sales.
- Mortgage REIT: Rather than own properties, they own the debt that property owners have. These REIT's are riskier because interest rates will affect their value. When rates go up, these REITs usually go lower.
- Hybrid REIT: A combination of the above two.

Liberty is a self administered and self-managed REIT. It's an equity owner of its properties, making it an equity REIT. As of 12/31/10, it had over 700 properties with about 80 million leasable square feet and about 2000 tenants.

Liberty's occupancy rates are creeping higher, going to 89.9% from 89.5% in the last 2 quarters. Analysts expect rates to stay about the same for the rest of this year. In the third quarter 66% of tenants up for renewal did so, about the same as in the second quarter. In 2010, the renewal rate in the same quarter was 73%. However, in 2011's third quarter there were 112 new leases and 115 renewed leases, an improvement over the same numbers in the second quarter.

Management is busy repositioning the company, moving away from suburban and commodity office space and into industrial and metro office properties. In the third quarter, it bought 1.92 million square feet of mostly industrial property. By the end of this year, there should be 6% less suburban office space, 2% less flex properties and an increase of metro offices by 1% and industrial properties by 7%. Management expects to spend $100 million to $300 million in purchases, receive $250 million to $350 million in sales, and spend $230 million to $250 million in development over the next several quarters, well into 2013. All of these expenditures will lower funds from operations which may decrease the dividend.

- Essential Numbers:
- Market Cap: $3.74 billion
- Forward P/E: 12.73
- Earnings for 2012: $2.58 (consensus of 9 analysts)
- Price to sales ratio: 5.03
- Price to book: 1.79
- Operating margin: 37.10%
- Profit margin: 23.85%
- Return on equity: 6.11%
- Return on assets: 3.51%
- Total cash: $24.42 million
- Cash per share: 21 cents
- Total debt: $2.08 billion
- Debt/Equity: 84.62%
- Current ratio: 2.4
- Book value per share: $18.24
- Beta: 1.22
- 52 week change: - 2.54%
- Shares Outstanding: 116.04 million
- Float: 115.21 million
- Owned by insiders: .61%
- Owned by institutions: 104.4% of the Float

Liberty is moving in a new direction. As with most transitions, it will take time, money and management. Income investors who have patience will find some comfort in the high institutional ownership, the consistency of a healthy dividend, and relatively strong occupancy levels. If you believe the eocnomy is strengthening, then this REIT should be of interest as office buildings will start to fill again as companies begin to hire.