$2.45 Billion of Previously Announced
$2.95 Billion Medical Office Sales Completed at 4.6 Percent
In-Place Cap Rate
Duke Realty Corporation (NYSE:DRE), a leading industrial property
REIT, today reported results for the second quarter of 2017.
Quarterly Highlights
•Net income per diluted share was $3.38 for the quarter.
Funds from Operations (“FFO”) per diluted share, as defined by the
National Association of Real Estate Investment Trusts (“NAREIT”),
was $0.36 for the quarter while Core Funds from Operations (“Core
FFO”) per diluted share was $0.32 for the quarter.
•Portfolio operating performance within the company's industrial
portfolio:
- Total stabilized occupancy at June 30, 2017 of 97.7 percent
compared to 98.7 percent at March 31, 2017 and 98.1 percent at June
30, 2016
- Total in-service occupancy at June 30, 2017 of 96.0 percent
compared to 97.9 percent at March 31, 2017 and 96.7 percent at June
30, 2016
- Total occupancy, including properties under development, of
93.5 percent at June 30, 2017 compared to 95.9 percent at March 31,
2017 and 95.6 percent at June 30, 2016
- Tenant retention of 71.5 percent for the quarter
- Same-property net operating income growth of 3.6 percent and
4.6 percent for the three and six months ended June 30, 2017
compared to the same periods in 2016
- Total leasing activity of 4.6 million square feet for the
quarter
- Overall rent growth on new and renewal leases of 18.7 percent
for the quarter
•Successful execution of capital transactions:
- Completed the sale of 77 medical office properties, ownership
interests in two unconsolidated medical office joint ventures, one
parcel of undeveloped medical office land and one non-strategic
industrial building for a combined sales price of $2.46 billion,
with an additional $20 million promote payment related to the sale
of one of the unconsolidated joint ventures
- Redeemed $286 million of 6.5 percent unsecured notes with a
scheduled maturity of January 2018
- Repaid $250 million variable-rate term loan with a scheduled
maturity in January 2019
- Repaid the $237 million of borrowings on the company's
unsecured line of credit that was outstanding on March 31,
2017
- Completed $124 million of acquisitions of five bulk industrial
buildings in Tier 1 markets during the quarter
- Started new industrial development projects with expected costs
of $154 million
Jim Connor, Chairman and CEO said, "I am happy
to announce that we have substantially completed the previously
announced sale of our medical office business, generating $2.45
billion in proceeds to date, with the remaining properties expected
to close during the third quarter. This transaction generated
significant stakeholder value and positions us for substantial
future growth as the leading pure play domestic industrial
REIT.
We continued to maintain high levels of
occupancy, completing the second quarter with stabilized occupancy
in our industrial portfolio at 97.7 percent, which reflects an
expected slight decrease from the peak occupancy that we reached at
March 31, 2017. Rental rate growth on new and renewal leases
continues to be very strong, with growth for leases executed during
the quarter totaling nearly 19 percent."
Mark Denien, Executive Vice President and Chief
Financial Officer, stated, "We were able to utilize immediately a
portion of the proceeds from our medical office sales to reduce
indebtedness, paying off over $930 million of debt since March 31,
2017, including $129 million of 6.75 percent unsecured notes that
were repaid earlier this month and that were scheduled to mature in
March 2020.
Of the total sales price from the medical office
dispositions, $400 million was structured as seller financing,
which bears interest at 4 percent and matures over the next three
years, while another $796 million was placed in escrow accounts to
finance future acquisitions and development. These actions
will enable us to prudently re-deploy proceeds over time as
opportunistic investment opportunities arise.
After using the remaining proceeds to finance
development and acquisition activities, we finished the quarter
with $76 million of available cash."
Financial Performance
•A complete reconciliation, in dollars and per share amounts, of
net income to FFO, as defined by NAREIT, as well as to Core FFO, is
included in the financial tables included in this release.
•Net income was $3.38 per diluted share, or $1.22 billion, for
the second quarter of 2017 compared to $0.31 per diluted share for
the second quarter of 2016. The significant increase in net
income per diluted share from the second quarter of 2016 was driven
by the gains recognized on the medical office sales.
•FFO, as defined by NAREIT, was $0.36 per diluted share for the
second quarter of 2017, or $131 million, compared to $0.35 per
diluted share for the second quarter of 2016. FFO, as defined by
NAREIT, increased from the second quarter of 2016 as the result of
$20 million of promote income, which was partially offset by a $7
million increase in debt extinguishment costs.
•Core FFO was $0.32 per diluted share, or $117 million, for the
second quarter of 2017 compared to $0.30 per diluted share for the
second quarter of 2016. The increase to Core FFO was the
result of improved operational performance from increased occupancy
and rental rate growth. The impact of the company's medical
office sales was not fully reflected in Core FFO during the second
quarter of 2017 due to the majority of such sales being completed
in June.
Real Estate Investment Activity
Mr. Connor further stated, “We started $154
million of developments, which were 35 percent pre-leased in
total. After considering the speculative developments we have
recently started, we finished the quarter with a 10.9 million
square foot development pipeline, with total expected project costs
of $774 million, and a strong pre-leasing level of 65
percent. As reflected in our updated 2017 guidance, we expect
to continue to re-deploy the proceeds of our medical office sales
to fund a robust development pipeline.
The medical office sale proceeds will also be
used to fund our pipeline of acquisitions, as reflected in our
updated guidance, which are in high-barrier markets and are
generally newly constructed properties. Earlier this month we
closed on three acquisitions; two in Southern California and one in
Northern New Jersey for a total of $150 million. We have
approximately $500 million of acquisitions in Southern California,
New Jersey and South Florida under contract and subject to
customary closing conditions that we expect to close by year end.
Many of the pending acquisitions are recently completed speculative
development projects, allowing for future value creation as we
execute leases in these high-growth markets. These
acquisitions will be immediately accretive to FFO and AFFO upon
stabilization as the stabilized returns will be in excess of the
cap rate achieved on the medical office disposition.
Also, given the high-barrier markets where these acquisitions are
located, they will provide better prospects for future rent growth
than our medical office properties provided."
Development
The second quarter included the following development
activity:
Wholly Owned Properties
•During the quarter, the company started $121 million of wholly
owned bulk industrial development projects totaling 1.8 million
square feet, which were 20 percent pre-leased in total. These
wholly owned development starts were comprised of four industrial
developments, which included a speculative development project in
the Lehigh Valley of Pennsylvania totaling one million square feet,
a 46 percent pre-leased project in Minneapolis totaling 375,000
square feet and two projects in other markets totaling 360,000
square feet and 47 percent pre-leased.
•Four industrial projects totaling 1.9 million square feet,
which were 65 percent leased, were placed in service during the
quarter.
Joint Venture Properties
•During the quarter, a 50 percent-owned joint venture started a
400,000 square foot bulk industrial product in Indianapolis, which
was 100 percent pre-leased, while another 50 percent-owned joint
venture started a 232,000 square foot bulk industrial project in
Columbus, which was 44 percent pre-leased.
•A 284,000 square foot industrial project in Indianapolis, which
was 100 percent pre-leased, was placed in service during the
quarter by a 50 percent-owned joint venture.
Acquisitions
The company acquired two recently completed bulk
industrial properties in Chicago totaling 502,000 square feet,
which were 100 percent leased, and three vacant bulk industrial
projects in South Florida totaling 677,000 square feet, which were
recently completed on a speculative basis.
Building Dispositions
Building dispositions totaled $2.46 billion in
the second quarter and included the following:
Wholly Owned Properties
•A 10 building portfolio of 100 percent-leased medical office
buildings, sold to a hospital system, totaling 381,000 square
feet
•65 medical office buildings totaling 4.6 million square feet,
of which four buildings were under construction and one building
was undergoing expansion, sold to a subsidiary of Healthcare Trust
of America, Inc. ("HTA")
•Two medical office buildings, sold to another investor
resulting from the exercise of a right of first refusal by a
hospital system, totaling 206,000 square feet
•One non-strategic industrial building, totaling 68,000 square
feet
Joint Venture Properties
•The company's ownership interest in one unconsolidated medical
office joint venture sold to HTA
•The company's ownership interest in one unconsolidated medical
office joint venture, sold to our partner pursuant to a buy/sell
provision
•The company's ownership interest in a joint venture that owned
one suburban office property was acquired by its partner
Distributions Declared
The company's board of directors declared a
quarterly cash distribution on its common stock of $0.19 per share,
or $0.76 per share on an annualized basis. The second quarter
dividend will be payable on August 31, 2017 to shareholders of
record on August 16, 2017.
2017 Earnings Guidance
A reconciliation of the company's per share
guidance for diluted net income per common share to FFO, as defined
by NAREIT and to Core FFO is included in the financial tables to
this release. The company revised its guidance for net income
to $4.40 to $4.66 per diluted share from its previous guidance of
$4.19 to $4.70 per diluted share. The company revised its
guidance for FFO, as defined by NAREIT, to $1.20 to $1.33 per
diluted share from its previous guidance of $1.07 to $1.21 and also
revised its guidance for Core FFO to $1.20 to $1.26 per diluted
share from its previous range of $1.16 to $1.24 per diluted
share. The company revised its guidance for the range of
growth in adjusted funds from operations ("AFFO"), on a share
adjusted basis, to a range of 0.9 percent to 4.7 percent from the
previous range of 0.0 percent to 5.7 percent.
Key changes to the assumptions underlying this
updated guidance are as follows:
•The estimate for acquisitions was increased to a range of $700
million to $1.1 billion from the previous range of $150 million to
$900 million;
•The estimate for development starts was increased to a range of
$700 million to $900 million from the previous range of $500
million to $700 million;
•The pessimistic end of the estimate for average percentage
leased was increased to 96.4 percent from the previous estimate of
96.0 percent;
•The estimate for growth in same property net operating income
was narrowed to a range of 3.0 percent to 3.8 percent from the
previous range of 2.5 percent to 4.3 percent;
•The estimate for special dividends per share was narrowed to a
range of $0.70 to $1.15 from the previous range of $0.70 to
$2.00.
More specific assumptions and components of the
2017 guidance will be available by 6:00 p.m. Eastern Time today in
the company’s supplemental information packet and in the Range of
Estimates page in the Investor Relations section of the company's
website. FFO and AFFO
Reporting Definitions
FFO: FFO is computed in
accordance with standards established by NAREIT. NAREIT
defines FFO as net income (loss) excluding gains (losses) on sales
of depreciable property, impairment charges related to depreciable
real estate assets; plus real estate related depreciation and
amortization, and after similar adjustments for unconsolidated
joint ventures. The company believes FFO to be most directly
comparable to net income as defined by generally accepted
accounting principles ("GAAP"). The company believes that FFO
should be examined in conjunction with net income (as defined by
GAAP) as presented in the financial statements accompanying this
release. FFO does not represent a measure of liquidity, nor is it
indicative of funds available for the company’s cash needs,
including the company’s ability to make cash distributions to
shareholders.
Core FFO: Core FFO is computed
as FFO adjusted for certain items that are generally non-cash in
nature and that materially distort the comparative measurement of
company performance over time. The adjustments include gains on
sale of undeveloped land, impairment charges not related to
depreciable real estate assets, tax expenses or benefits related to
(i) changes in deferred tax asset valuation allowances, (ii)
changes in tax exposure accruals that were established as the
result of the adoption of new accounting principles, or (iii)
taxable income (loss) related to other items excluded from FFO or
Core FFO (collectively referred to as “other income tax items”),
gains (losses) on debt transactions, gains (losses) on and related
costs of acquisitions, gains on sale of merchant buildings, promote
income and severance charges related to major overhead
restructuring activities. Although the company’s calculation of
Core FFO differs from NAREIT’s definition of FFO and may not be
comparable to that of other REITs and real estate companies, the
company believes it provides a meaningful supplemental measure of
its operating performance.
AFFO: AFFO is a supplemental
performance measure defined by the company as Core FFO (as defined
above), less recurring building improvements and total second
generation capital expenditures (the leasing of vacant space that
had previously been under lease by the company is referred to as
second generation lease activity) related to leases commencing
during the reporting period and adjusted for certain non-cash items
including straight line rental income and expense, non-cash
components of interest expense and stock compensation expense, and
after similar adjustments for unconsolidated partnerships and joint
ventures.
Same-Property Performance
The company includes same-property net operating
income growth as a property-level supplemental measure of
performance. The company utilizes same-property net operating
income growth as a supplemental measure to evaluate property-level
performance, and jointly-controlled properties are included at the
company's ownership percentage.
A reconciliation of net income from continuing
operations to same property net operating income is included in the
financial tables to this release. A description of the
properties that are excluded from the company’s same-property net
operating income measure is included on page 17 of its June 30,
2017 supplemental information.
About Duke Realty Corporation
Duke Realty Corporation owns and operates
approximately 138 million rentable square feet of industrial assets
in 21 major U.S. metropolitan areas. Duke Realty Corporation is
publicly traded on the NYSE under the symbol DRE and is listed on
the S&P 500 Index. More information about Duke Realty
Corporation is available at www.dukerealty.com.
Second Quarter Earnings Call and Supplemental
Information
Duke Realty Corporation is hosting a conference
call tomorrow, July 27, 2017, at 3:00 p.m. ET to discuss its second
quarter operating results. All investors and other interested
parties are invited to listen to the call. Access is available
through the Investor Relations section of the company's
website.
A copy of the company's supplemental information
will be available by 6:00 p.m. ET today through the Investor
Relations section of the company's website.
Cautionary Notice Regarding Forward-Looking
Statements
This news release may contain forward-looking
statements within the meaning of the federal securities laws.
All statements, other than statements of historical facts,
including, among others, statements regarding the company’s future
financial position or results, future dividends, and future
performance, are forward-looking statements. Those statements
include statements regarding the intent, belief or current
expectations of the company, members of its management team, as
well as the assumptions on which such statements are based, and
generally are identified by the use of words such as "may," "will,"
"seeks," "anticipates," "believes," "estimates," "expects,"
"plans," "intends," "should," or similar expressions.
Forward-looking statements are not guarantees of future performance
and involve risks and uncertainties that actual results may differ
materially from those contemplated by such forward-looking
statements. Many of these factors are beyond the company’s
abilities to control or predict. Such factors include, but are not
limited to, (i) general adverse economic and local real estate
conditions; (ii) the inability of major tenants to continue paying
their rent obligations due to bankruptcy, insolvency or a general
downturn in their business; (iii) financing risks, such as the
inability to obtain equity, debt or other sources of financing or
refinancing on favorable terms, if at all; (iv) the company’s
ability to raise capital by selling its assets; (v) changes in
governmental laws and regulations; (vi) the level and volatility of
interest rates and foreign currency exchange rates; (vii) valuation
of joint venture investments, (viii) valuation of marketable
securities and other investments; (ix) valuation of real estate;
(x) increases in operating costs; (xi) changes in the dividend
policy for the company’s common stock; (xii) the reduction in the
company’s income in the event of multiple lease terminations by
tenants; (xiii) impairment charges, (xiv) the effects of
geopolitical instability and risks such as terrorist attacks; (xv)
the effects of weather and natural disasters such as floods,
droughts, wind, tornadoes and hurricanes; and (xvi) the effect of
any damage to our reputation resulting from developments relating
to any of items (i) – (xv). Additional information concerning
factors that could cause actual results to differ materially from
those forward-looking statements is contained from time to time in
the company's filings with the Securities and Exchange
Commission. The company refers you to the section entitled
“Risk Factors” contained in the company's Annual Report on Form
10-K for the year ended December 31, 2016. Copies of each filing
may be obtained from the company or the Securities and Exchange
Commission.The risks included here are not exhaustive and undue
reliance should not be placed on any forward-looking statements,
which are based on current expectations. All written and oral
forward-looking statements attributable to the company, its
management, or persons acting on their behalf are qualified in
their entirety by these cautionary statements. Further,
forward-looking statements speak only as of the date they are made,
and the company undertakes no obligation to update or revise
forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating
results over time unless otherwise required by law.
Duke Realty Corporation and
Subsidiaries |
Consolidated Statement of
Operations |
(Unaudited and in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Revenues: |
|
|
|
|
|
|
|
Rental
and related revenue |
$ |
165,836 |
|
|
$ |
157,910 |
|
|
$ |
337,512 |
|
|
$ |
318,497 |
|
General
contractor and service fee revenue |
|
23,576 |
|
|
|
26,044 |
|
|
|
32,975 |
|
|
|
49,195 |
|
|
|
189,412 |
|
|
|
183,954 |
|
|
|
370,487 |
|
|
|
367,692 |
|
Expenses: |
|
|
|
|
|
|
|
Rental
expenses |
|
14,506 |
|
|
|
17,017 |
|
|
|
30,743 |
|
|
|
37,752 |
|
Real
estate taxes |
|
26,902 |
|
|
|
24,899 |
|
|
|
53,412 |
|
|
|
49,685 |
|
General
contractor and other services expenses |
|
22,374 |
|
|
|
22,228 |
|
|
|
29,998 |
|
|
|
43,148 |
|
Depreciation and amortization |
|
67,013 |
|
|
|
61,136 |
|
|
|
129,036 |
|
|
|
120,669 |
|
|
|
130,795 |
|
|
|
125,280 |
|
|
|
243,189 |
|
|
|
251,254 |
|
Other
operating activities: |
|
|
|
|
|
|
|
Equity in
earnings of unconsolidated companies |
|
51,933 |
|
|
|
3,534 |
|
|
|
56,682 |
|
|
|
25,394 |
|
Gain on
dissolution of unconsolidated company |
|
- |
|
|
|
30,697 |
|
|
|
- |
|
|
|
30,697 |
|
Promote
income |
|
20,007 |
|
|
|
24,087 |
|
|
|
20,007 |
|
|
|
24,087 |
|
Gain on
sale of properties |
|
34,341 |
|
|
|
39,314 |
|
|
|
71,387 |
|
|
|
54,891 |
|
Gain on
land sales |
|
1,279 |
|
|
|
707 |
|
|
|
2,784 |
|
|
|
837 |
|
Other
operating expenses |
|
(718 |
) |
|
|
(836 |
) |
|
|
(1,457 |
) |
|
|
(2,072 |
) |
Impairment charges |
|
- |
|
|
|
(5,651 |
) |
|
|
(859 |
) |
|
|
(12,056 |
) |
General
and administrative expenses |
|
(11,858 |
) |
|
|
(11,584 |
) |
|
|
(31,090 |
) |
|
|
(29,682 |
) |
|
|
94,984 |
|
|
|
80,268 |
|
|
|
117,454 |
|
|
|
92,096 |
|
|
|
|
|
|
|
|
|
Operating
income |
|
153,601 |
|
|
|
138,942 |
|
|
|
244,752 |
|
|
|
208,534 |
|
|
|
|
|
|
|
|
|
Other
income (expenses): |
|
|
|
|
|
|
|
Interest
and other income, net |
|
2,260 |
|
|
|
567 |
|
|
|
2,792 |
|
|
|
3,090 |
|
Interest
expense |
|
(21,680 |
) |
|
|
(29,511 |
) |
|
|
(44,566 |
) |
|
|
(59,644 |
) |
Loss on
debt extinguishment |
|
(9,561 |
) |
|
|
(2,430 |
) |
|
|
(9,536 |
) |
|
|
(2,430 |
) |
Acquisition-related activity |
|
- |
|
|
|
(72 |
) |
|
|
- |
|
|
|
(75 |
) |
Income
from continuing operations, before income taxes |
|
124,620 |
|
|
|
107,496 |
|
|
|
193,442 |
|
|
|
149,475 |
|
Income
tax benefit (expense) |
|
(5,426 |
) |
|
|
157 |
|
|
|
(7,557 |
) |
|
|
(186 |
) |
Income
from continuing operations |
|
119,194 |
|
|
|
107,653 |
|
|
|
185,885 |
|
|
|
149,289 |
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
Income
before gain on sales |
|
11,095 |
|
|
|
2,278 |
|
|
|
15,185 |
|
|
|
4,484 |
|
Gain on
sale of depreciable properties, net of tax |
|
1,109,091 |
|
|
|
252 |
|
|
|
1,109,091 |
|
|
|
166 |
|
Income
tax expense |
|
(11,613 |
) |
|
|
- |
|
|
|
(11,613 |
) |
|
|
- |
|
Income
from discontinued operations |
|
1,108,573 |
|
|
|
2,530 |
|
|
|
1,112,663 |
|
|
|
4,650 |
|
|
|
|
|
|
|
|
|
Net
income |
|
1,227,767 |
|
|
|
110,183 |
|
|
|
1,298,548 |
|
|
|
153,939 |
|
Net
income attributable to noncontrolling interests |
|
(17,224 |
) |
|
|
(1,116 |
) |
|
|
(17,805 |
) |
|
|
(1,565 |
) |
Net
income attributable to common shareholders |
$ |
1,210,543 |
|
|
$ |
109,067 |
|
|
$ |
1,280,743 |
|
|
$ |
152,374 |
|
|
|
|
|
|
|
|
|
Basic
net income per common share: |
|
|
|
|
|
|
|
Continuing operations attributable to common shareholders |
$ |
0.33 |
|
|
$ |
0.30 |
|
|
$ |
0.52 |
|
|
$ |
0.43 |
|
Discontinued operations attributable to common shareholders |
|
3.07 |
|
|
|
0.01 |
|
|
|
3.08 |
|
|
|
0.01 |
|
Total |
$ |
3.40 |
|
|
$ |
0.31 |
|
|
$ |
3.60 |
|
|
$ |
0.44 |
|
|
|
|
|
|
|
|
|
Diluted
net income per common share: |
|
|
|
|
|
|
|
Continuing operations attributable to common shareholders |
$ |
0.33 |
|
|
$ |
0.30 |
|
|
$ |
0.51 |
|
|
$ |
0.43 |
|
Discontinued operations attributable to common shareholders |
|
3.05 |
|
|
|
0.01 |
|
|
|
3.06 |
|
|
|
0.01 |
|
Total |
$ |
3.38 |
|
|
$ |
0.31 |
|
|
$ |
3.57 |
|
|
$ |
0.44 |
|
|
|
|
|
|
|
|
|
Duke Realty Corporation and
Subsidiaries |
|
Consolidated Balance Sheets |
|
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Assets |
|
|
|
|
|
Real
estate investments: |
|
|
|
|
|
Real
estate assets |
|
$ |
5,500,036 |
|
|
$ |
5,144,805 |
|
|
Construction in progress |
|
|
469,734 |
|
|
|
303,644 |
|
|
Investments in and advances to unconsolidated companies |
|
|
132,817 |
|
|
|
197,807 |
|
|
Undeveloped land |
|
|
189,469 |
|
|
|
237,436 |
|
|
|
|
|
6,292,056 |
|
|
|
5,883,692 |
|
|
Accumulated depreciation |
|
|
(1,122,527 |
) |
|
|
(1,042,944 |
) |
|
|
|
|
|
|
|
Net real
estate investments |
|
|
5,169,529 |
|
|
|
4,840,748 |
|
|
|
|
|
|
|
|
Real
estate investments and other assets held-for-sale |
|
|
213,654 |
|
|
|
1,324,258 |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
76,326 |
|
|
|
12,639 |
|
|
Accounts
receivable, net |
|
|
23,580 |
|
|
|
15,838 |
|
|
Straight-line rents receivable, net |
|
|
86,824 |
|
|
|
82,554 |
|
|
Receivables on construction contracts, including retentions |
|
|
9,274 |
|
|
|
6,159 |
|
|
Deferred
leasing and other costs, net |
|
|
263,358 |
|
|
|
258,741 |
|
|
Restricted cash held in escrow for like-kind exchange |
|
|
839,128 |
|
|
|
40,102 |
|
|
Notes
receivable from property sales |
|
|
423,946 |
|
|
|
25,460 |
|
|
Other
escrow deposits and other assets |
|
|
211,950 |
|
|
|
165,503 |
|
|
|
|
|
|
|
|
|
|
$ |
7,317,569 |
|
|
$ |
6,772,002 |
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
Indebtedness: |
|
|
|
|
|
Secured
debt, net of deferred financing costs |
|
$ |
337,729 |
|
|
$ |
383,725 |
|
|
Unsecured
debt, net of deferred financing costs |
|
|
1,942,399 |
|
|
|
2,476,752 |
|
|
Unsecured
line of credit |
|
|
- |
|
|
|
48,000 |
|
|
|
|
|
2,280,128 |
|
|
|
2,908,477 |
|
|
|
|
|
|
|
|
Liabilities related to
real estate investments held-for-sale |
|
|
9,089 |
|
|
|
56,291 |
|
|
|
|
|
|
|
|
Construction payables
and amounts due subcontractors, including retentions |
|
|
73,749 |
|
|
|
44,250 |
|
|
Accrued real estate
taxes |
|
|
65,551 |
|
|
|
59,112 |
|
|
Accrued interest |
|
|
13,944 |
|
|
|
23,633 |
|
|
Other liabilities |
|
|
173,457 |
|
|
|
153,846 |
|
|
Tenant security
deposits and prepaid rents |
|
|
38,195 |
|
|
|
33,100 |
|
|
Total
liabilities |
|
|
2,654,113 |
|
|
|
3,278,709 |
|
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
Common
shares |
|
|
3,557 |
|
|
|
3,548 |
|
|
Additional paid-in-capital |
|
|
5,196,184 |
|
|
|
5,192,011 |
|
|
Accumulated other comprehensive income |
|
|
- |
|
|
|
682 |
|
|
Distributions in excess of net income |
|
|
(585,592 |
) |
|
|
(1,730,423 |
) |
|
Total
shareholders' equity |
|
|
4,614,149 |
|
|
|
3,465,818 |
|
|
|
|
|
|
|
|
Noncontrolling
interests |
|
|
49,307 |
|
|
|
27,475 |
|
|
Total
equity |
|
|
4,663,456 |
|
|
|
3,493,293 |
|
|
|
|
|
|
|
|
|
|
$ |
7,317,569 |
|
|
$ |
6,772,002 |
|
|
|
|
|
|
|
|
Duke Realty Corporation and
Subsidiaries |
|
Summary of EPS, FFO and AFFO |
|
Three Months Ended June 30 |
|
(Unaudited and in thousands, except per share
amounts) |
|
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
Wtd. |
|
|
|
Wtd. |
|
|
|
|
|
Avg. |
Per |
|
|
Avg. |
Per |
|
|
|
Amount |
Shares |
Share |
|
Amount |
Shares |
Share |
|
|
Net income
attributable to common
shareholders |
$1,210,543 |
|
|
|
|
$109,067 |
|
|
|
|
|
Less: dividends on
participating securities |
|
(540 |
) |
|
|
|
|
(582 |
) |
|
|
|
|
Net income per common share-
basic |
|
1,210,003 |
|
355,647 |
$3.40 |
|
|
108,485 |
|
347,464 |
$0.31 |
|
|
Add back: |
|
|
|
|
|
|
|
|
|
Noncontrolling interest in earnings of unitholders |
|
11,240 |
|
3,305 |
|
|
|
1,101 |
|
3,504 |
|
|
|
Other
potentially dilutive securities |
|
540 |
|
3,029 |
|
|
|
582 |
|
3,465 |
|
|
|
Net income attributable to common
shareholders- diluted |
$1,221,783 |
|
361,981 |
$3.38 |
|
$110,168 |
|
354,433 |
$0.31 |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to funds from
operations ("FFO") |
|
|
|
|
|
|
|
|
|
Net income attributable to common
shareholders |
$1,210,543 |
|
355,647 |
|
|
$109,067 |
|
347,464 |
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
73,328 |
|
|
|
|
|
80,161 |
|
|
|
|
|
Company
share of joint venture depreciation, amortization and other |
|
2,602 |
|
|
|
|
|
4,253 |
|
|
|
|
|
Gains on
depreciable property sales - wholly owned, discontinued
operations |
|
(1,103,077 |
) |
|
|
|
|
(252 |
) |
|
|
|
|
Gains on
depreciable property sales - wholly owned, continuing
operations |
|
(34,341 |
) |
|
|
|
|
(39,314 |
) |
|
|
|
|
Income
tax expense (benefit) triggered by depreciable property sales |
|
19,658 |
|
|
|
|
|
(157 |
) |
|
|
|
|
Gains on
depreciable property sales - joint ventures |
|
(48,933 |
) |
|
|
|
|
(91 |
) |
|
|
|
|
Gain on
dissolution of unconsolidated company |
|
- |
|
|
|
|
|
(30,697 |
) |
|
|
|
|
Noncontrolling interest share of adjustments |
|
10,046 |
|
|
|
|
|
(139 |
) |
|
|
|
|
NAREIT FFO
attributable to common shareholders -
basic |
|
129,826 |
|
355,647 |
$0.37 |
|
|
122,831 |
|
347,464 |
$0.35 |
|
|
Noncontrolling interest in income of unitholders |
|
11,240 |
|
3,305 |
|
|
|
1,101 |
|
3,504 |
|
|
|
Noncontrolling interest share of adjustments |
|
(10,046 |
) |
|
|
|
|
139 |
|
|
|
|
|
Other
potentially dilutive securities |
|
3,029 |
|
|
|
3,465 |
|
|
|
NAREIT FFO
attributable to common shareholders -
diluted |
$131,020 |
|
361,981 |
$0.36 |
|
$124,071 |
|
354,433 |
$0.35 |
|
|
Gain on
land sales |
|
(1,279 |
) |
|
|
|
|
(707 |
) |
|
|
|
|
Loss on
debt extinguishment |
|
9,561 |
|
|
|
|
|
2,430 |
|
|
|
|
|
Land
impairment charges |
|
- |
|
|
|
|
|
5,651 |
|
|
|
|
|
Gain on
non-depreciable property sale - joint venture |
|
(119 |
) |
|
|
|
|
- |
|
|
|
|
|
Promote
income |
|
(20,007 |
) |
|
|
|
|
(24,087 |
) |
|
|
|
|
Income
tax benefit from valuation allowance adjustment |
|
(2,619 |
) |
|
|
|
|
- |
|
|
|
|
|
Acquisition-related activity |
|
- |
|
|
|
|
|
72 |
|
|
|
|
|
Core FFO
attributable to common shareholders -
diluted |
$116,557 |
|
361,981 |
$0.32 |
|
$107,430 |
|
354,433 |
$0.30 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
FFO |
|
|
|
|
|
|
|
|
|
Core FFO - diluted |
$116,557 |
|
361,981 |
$0.32 |
|
$107,430 |
|
354,433 |
$0.30 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Straight-line rental income and expense |
|
(4,725 |
) |
|
|
|
|
(3,794 |
) |
|
|
|
|
Amortization of above/below market rents and concessions |
|
121 |
|
|
|
|
|
424 |
|
|
|
|
|
Stock
based compensation expense |
|
3,600 |
|
|
|
|
|
3,108 |
|
|
|
|
|
Noncash
interest expense |
|
1,649 |
|
|
|
|
|
1,527 |
|
|
|
|
|
Second
generation concessions |
|
(75 |
) |
|
|
|
|
(71 |
) |
|
|
|
|
Second
generation tenant improvements |
|
(4,685 |
) |
|
|
|
|
(6,585 |
) |
|
|
|
|
Second
generation leasing commissions |
|
(7,868 |
) |
|
|
|
|
(6,071 |
) |
|
|
|
|
Building
improvements |
|
(1,687 |
) |
|
|
|
|
(741 |
) |
|
|
|
|
Adjusted FFO -
diluted |
$102,887 |
|
361,981 |
|
|
$95,227 |
|
354,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes noncontrolling interest share of gains of $6,014
on depreciable property sales - wholly owned, discontinued
operations during the three months ended June 30, 2017. |
|
Duke Realty Corporation and
Subsidiaries |
|
Summary of EPS, FFO and AFFO |
|
Six Months Ended June 30 |
|
(Unaudited and in thousands, except per share
amounts) |
|
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
Wtd. |
|
|
|
Wtd. |
|
|
|
|
|
Avg. |
Per |
|
|
Avg. |
Per |
|
|
|
Amount |
Shares |
Share |
|
Amount |
Shares |
Share |
|
|
Net income
attributable to common
shareholders |
$1,280,743 |
|
|
|
|
$152,374 |
|
|
|
|
|
Less: dividends on
participating securities |
|
(1,083 |
) |
|
|
|
|
(1,171 |
) |
|
|
|
|
Net income per
common share- basic |
|
1,279,660 |
|
355,466 |
$3.60 |
|
|
151,203 |
|
346,564 |
$0.44 |
|
|
Add back: |
|
|
|
|
|
|
|
|
|
Noncontrolling interest in earnings of unitholders |
|
11,892 |
|
3,310 |
|
|
|
1,539 |
|
3,501 |
|
|
|
Other
potentially dilutive securities |
|
1,083 |
|
3,013 |
|
|
|
569 |
|
2,162 |
|
|
|
Net income
attributable to common shareholders-
diluted |
$1,292,635 |
|
361,789 |
$3.57 |
|
$153,311 |
|
352,227 |
$0.44 |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
to funds from operations
("FFO") |
|
|
|
|
|
|
|
|
|
Net income
attributable to common
shareholders |
$1,280,743 |
|
355,466 |
|
|
$152,374 |
|
346,564 |
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
154,885 |
|
|
|
|
|
157,959 |
|
|
|
|
|
Company
share of joint venture depreciation, amortization and other |
|
5,096 |
|
|
|
|
|
7,892 |
|
|
|
|
|
Impairment charges - depreciable property |
|
859 |
|
|
|
|
|
- |
|
|
|
|
|
Gains on
depreciable property sales - wholly owned, discontinued
operations |
|
(1,103,077 |
) |
|
|
|
|
(166 |
) |
|
|
|
|
Gains on
depreciable property sales - wholly owned, continuing
operations |
|
(71,387 |
) |
|
|
|
|
(54,891 |
) |
|
|
|
|
Income
tax benefit triggered by depreciable property sales |
|
19,658 |
|
|
|
|
|
186 |
|
|
|
|
|
Gains on
depreciable property sales - joint ventures |
|
(50,731 |
) |
|
|
|
|
(18,033 |
) |
|
|
|
|
Gain on
dissolution of unconsolidated company |
|
- |
|
|
|
|
|
(30,697 |
) |
|
|
|
|
Noncontrolling interest share of adjustments |
|
9,640 |
|
|
|
|
|
(623 |
) |
|
|
|
|
NAREIT FFO
attributable to common shareholders -
basic |
|
245,686 |
|
355,466 |
$0.69 |
|
|
214,001 |
|
346,564 |
$0.62 |
|
|
Noncontrolling interest in income of unitholders |
|
11,892 |
|
3,310 |
|
|
|
1,539 |
|
3,501 |
|
|
|
Noncontrolling interest share of adjustments |
|
(9,640 |
) |
|
|
|
|
623 |
|
|
|
|
|
Other
potentially dilutive securities |
|
3,013 |
|
|
|
3,434 |
|
|
|
NAREIT FFO
attributable to common shareholders -
diluted |
$247,938 |
|
361,789 |
$0.69 |
|
$216,163 |
|
353,499 |
$0.61 |
|
|
Gain on
land sales |
|
(2,784 |
) |
|
|
|
|
(837 |
) |
|
|
|
|
Loss on
debt extinguishment, including joint venture share |
|
9,536 |
|
|
|
|
|
4,022 |
|
|
|
|
|
Gain on
non-depreciable property sale - joint venture |
|
(119 |
) |
|
|
|
|
- |
|
|
|
|
|
Land
impairment charges |
|
- |
|
|
|
|
|
12,056 |
|
|
|
|
|
Promote
income |
|
(20,007 |
) |
|
|
|
|
(24,087 |
) |
|
|
|
|
Income
tax benefit from valuation allowance adjustment |
|
(2,619 |
) |
|
|
|
|
- |
|
|
|
|
|
Acquisition-related activity |
|
- |
|
|
|
|
|
75 |
|
|
|
|
|
Core FFO
attributable to common shareholders -
diluted |
$231,945 |
|
361,789 |
$0.64 |
|
$207,392 |
|
353,499 |
$0.59 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
FFO |
|
|
|
|
|
|
|
|
|
Core FFO - diluted |
$231,945 |
|
361,789 |
$0.64 |
|
$207,392 |
|
353,499 |
$0.59 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Straight-line rental income and expense |
|
(8,044 |
) |
|
|
|
|
(7,505 |
) |
|
|
|
|
Amortization of above/below market rents and concessions |
|
663 |
|
|
|
|
|
1,058 |
|
|
|
|
|
Stock
based compensation expense |
|
14,080 |
|
|
|
|
|
13,486 |
|
|
|
|
|
Noncash
interest expense |
|
3,204 |
|
|
|
|
|
2,985 |
|
|
|
|
|
Second
generation concessions |
|
(75 |
) |
|
|
|
|
(71 |
) |
|
|
|
|
Second
generation tenant improvements |
|
(7,497 |
) |
|
|
|
|
(14,602 |
) |
|
|
|
|
Second
generation leasing commissions |
|
(10,277 |
) |
|
|
|
|
(15,869 |
) |
|
|
|
|
Building
improvements |
|
(2,931 |
) |
|
|
|
|
(1,262 |
) |
|
|
|
|
Adjusted FFO -
diluted |
$221,068 |
|
361,789 |
|
|
$185,612 |
|
353,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes noncontrolling interest share of gains of $6,014
on depreciable property sales - wholly owned, discontinued
operations during the six months ended June 30, 2017. |
|
|
Duke Realty Corporation and
Subsidiaries |
Reconciliation of Same Property Net Operating
Income Growth |
(Unaudited and in thousands) |
|
|
|
|
|
|
Three Months Ended |
|
|
June 30, 2017 |
|
June 30, 2016 |
|
|
|
|
|
|
Income from continuing
operations before income taxes |
$124,620 |
|
|
$107,496 |
|
|
Share of same property
NOI from unconsolidated joint ventures |
|
3,749 |
|
|
|
4,265 |
|
|
Income and expense
items not allocated to segments |
|
1,996 |
|
|
|
12,234 |
|
|
Earnings from service
operations |
|
(1,202 |
) |
|
|
(3,816 |
) |
|
Properties not included
and other adjustments |
|
(20,962 |
) |
|
|
(15,705 |
) |
|
Same property NOI |
$108,201 |
|
|
$104,474 |
|
|
|
|
|
|
|
Percent Change |
|
3.6 |
% |
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
June 30, 2017 |
|
June 30, 2016 |
|
|
|
|
|
|
Income from continuing
operations before income taxes |
$193,442 |
|
|
$149,475 |
|
|
Share of same property
NOI from unconsolidated joint ventures |
|
7,473 |
|
|
|
8,360 |
|
|
Income and expense
items not allocated to segments |
|
64,461 |
|
|
|
87,955 |
|
|
Earnings from service
operations |
|
(2,977 |
) |
|
|
(6,047 |
) |
|
Properties not included
and other adjustments |
|
(46,321 |
) |
|
|
(33,180 |
) |
|
Same property NOI |
$216,078 |
|
|
$206,563 |
|
|
|
|
|
|
|
Percent Change |
|
4.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Duke Realty Corporation and
Subsidiaries |
Reconciliation of 2017 FFO
Guidance |
(Unaudited ) |
|
|
|
|
|
|
Pessimistic |
|
Optimistic |
|
Net income per common
share, diluted |
$4.40 |
|
|
$4.66 |
|
|
Depreciation and gains
on sales of depreciated property (including share of joint
venture) |
|
(3.20 |
) |
|
|
(3.33 |
) |
|
FFO per share -
diluted, as defined by NAREIT |
$1.20 |
|
|
$1.33 |
|
|
Gains on land
sales |
|
0.00 |
|
|
|
(0.05 |
) |
|
Other reconciling
items |
|
0.00 |
|
|
|
(0.02 |
) |
|
Core FFO per share -
diluted |
$1.20 |
|
|
$1.26 |
|
|
Contact Information:
Investors:
Ron Hubbard
317.808.6060
Media:
Helen McCarthy
317.708.8010
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