Quarterly Dividend Increased
Duke Realty Corporation (NYSE:DRE), the largest pure-play, domestic
only, industrial REIT, today reported results for the third quarter
of 2017.
Quarterly Highlights
• Net income per diluted share was $0.46 for the quarter. Funds
from Operations (“FFO”) per diluted share, as defined by the
National Association of Real Estate Investment Trusts (“NAREIT”),
was $0.26 for the quarter while Core Funds from Operations (“Core
FFO”) per diluted share was $0.30 for the quarter.
• Portfolio operating performance within the company's
industrial portfolio:
- Total stabilized occupancy at September 30, 2017 of 98.0
percent compared to 97.7 percent at June 30, 2017 and 98.2 percent
at September 30, 2016
- Total in-service occupancy at September 30, 2017 of 95.7
percent compared to 96.0 percent at June 30, 2017 and 97.4 percent
at September 30, 2016
- Total occupancy, including properties under development, of
93.2 percent at September 30, 2017 compared to 93.5 percent at June
30, 2017 and 95.2 percent at September 30, 2016
- Tenant retention of 70.2 percent for the quarter
- Same-property net operating income growth of 2.2 percent and
3.9 percent for the three and nine months ended September 30, 2017
compared to the same periods in 2016
- Total leasing activity of 5.9 million square feet for the
quarter
- Overall rent growth on new and renewal leases of 15.9 percent
for the quarter
• Successful execution of capital transactions:
- Completed the sale of ten properties for a combined sales price
of $301 million
- Redeemed $129 million of 6.75 percent unsecured notes with a
scheduled maturity of March 2020
- Extension of the company's $1.2 billion unsecured revolving
credit facility from January 2019 to January 2022 at a rate
(subject to adjustment) of LIBOR plus .875 percent
- Completed $390 million of acquisitions of nine bulk industrial
buildings in Tier 1 markets during the quarter
- Started new industrial development projects with expected costs
of $230 million
Jim Connor, Chairman and CEO said, "We enjoyed a
successful third quarter of 2017, highlighted by closing on the
first tranche of an acquisition, from Bridge Development Partners,
LLC, that will ultimately include ten state-of-the-art bulk
industrial buildings along with two parcels of undeveloped land
(the "Bridge Portfolio"). We also closed on the sale of seven of
our remaining nine medical office properties as well as three
suburban office buildings, which were our last in the Indianapolis
office market.
From an operational standpoint, we maintained a
high level of stabilized occupancy, which slightly increased to
98.0 percent. Our lease renewal rate for the quarter was 70.2
percent.
We also continued to see significant rent growth
across our portfolio, which we expect to continue in the near
future, with rent growth on new and renewal leases executed during
the quarter totaling 15.9 percent. We reported 2.2 percent growth
in same property net operating income for the quarter which was
driven almost entirely by rental rate growth, since we have been
operating at peak occupancy levels in our same property portfolio
for several quarters now. The previously disclosed hhgregg
bankruptcy had a roughly 80 basis point drag on same store net
operating income growth for the quarter."
Mark Denien, Executive Vice President and Chief
Financial Officer, stated, "We continue to have significant
on-balance sheet financing capacity, with $513 million of cash held
in escrow for future 1031 exchanges, which should mostly be
re-invested in property acquisitions and development projects by
the end of this year. We also have $427 million in interest-bearing
notes receivable, primarily from the medical office disposition,
that will mature over the next three years.
The extension of our revolving credit facility
that we just completed will provide us with a secure source of
capital. We anticipate finishing the year at a lower-than-targeted
level of leverage and in 2018 it is our intention to return to a
leverage profile commensurate with our credit rating, which will
provide a further source of growth.
Finally, we plan to finalize and announce our
special dividend requirement, which should be consistent with our
previously disclosed estimates, in early December."
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 $0.46 per diluted share, or $167 million, for
the third quarter of 2017 compared to $0.32 per diluted share for
the third quarter of 2016. The increased net income per diluted
share was primarily the result of gains on property
sales.
• FFO, as defined by NAREIT, was $0.26 per diluted share for the
third quarter of 2017, or $93 million, compared to $0.31 per
diluted share for the third quarter of 2016. The decreased FFO per
diluted share was primarily due to the loss on debt extinguishment
related to the early redemption of $129 million of unsecured notes
in July 2017.
• Core FFO was $0.30 per diluted share, or $108 million, for the
third quarter of 2017 compared to $0.31 per diluted share for the
third quarter of 2016.
Real Estate Investment Activity
Mr. Connor further stated, “The Bridge Portfolio
includes ten recently constructed state-of-the-art bulk
distribution buildings in Northern New Jersey, South Florida and
Southern California, which we believe to be the best industrial
markets in the country, for a total purchase price of $516 million.
The portfolio also includes two parcels of undeveloped land in
Northern New Jersey, for a total purchase price of $62 million,
upon which construction of two additional properties will commence
later this year or early next year. The entire portfolio, when
construction on the two land parcels is completed, will ultimately
total 4.3 million rentable square feet with a total investment of
slightly under $700 million. We agreed to the terms of the
acquisition in April, at which point the properties were 58 percent
leased in total. After assuming leasing responsibilities in July
2017, we executed additional leases to increase the portfolio to 69
percent leased. We believe that, since April, rental rates have
continued to increase while cap rates have also further
compressed.
During the third quarter we also started $230
million of developments, which were 54 percent pre-leased in total.
We finished the quarter with an 11.1 million square foot
development pipeline, with total expected project costs of $696
million, and a very solid pre-leasing level of 63 percent.
We believe that, on average, our acquisitions
for the year will be executed at roughly the same stabilized cap
rate that we achieved on the medical office disposition and also
better future rent growth, while our development activity will
ultimately generate significantly higher stabilized yields than our
acquisition activity."
Acquisitions
The first tranche of the Bridge Portfolio closed
at the end of September and consisted of two bulk distribution
properties in Southern California, two in South Florida, and one in
Northern New Jersey, all of which totaled $219 million and 1.7
million rentable square feet, and were 70 percent pre-leased. The
remaining five buildings to be acquired in the Bridge Portfolio,
with a total purchase price of $297 million, are all located in
Northern New Jersey.
The company also acquired (i) two properties in
Southern California totaling 1.0 million square feet, which were
100 percent leased, (ii) one parcel of land upon which construction
immediately began on an expansion of one of these Southern
California properties, (iii) a recently completed speculative
property in Chicago and (iv) a 100 percent leased property in
Northern New Jersey.
Development
The third quarter included the following development
activity:
Wholly Owned Properties
• During the quarter, the company started $166 million of wholly
owned development projects totaling 2.4 million square feet, which
were 66 percent pre-leased in total. These wholly owned development
starts were comprised of a speculative development project in the
Lehigh Valley of Pennsylvania totaling 832,000 square feet, a 100
percent pre-leased expansion project in Southern California
totaling 736,000 square feet and a 100 percent pre-leased project
in Dallas totaling 875,000 square feet.
• Nine projects totaling 3.4 million square feet, which were 80
percent leased, were placed in service during the quarter.
Joint Venture Properties
• During the quarter, a 50 percent-owned joint venture started a
708,000 square foot bulk industrial project in Indianapolis, which
was 65 percent pre-leased at September 30, 2017 and subsequently
fully leased, while another 50 percent-owned joint venture started
a 674,000 square foot speculative project in Columbus.
• A 192,000 square foot project in Columbus, which was 100
percent pre-leased, was placed in service during the quarter by a
50 percent-owned joint venture.
Building Dispositions
Building dispositions totaled $301 million in
the third quarter and included the following:
Wholly Owned Properties
• Seven medical office buildings totaling 519,000 square
feet
• Three suburban office properties in Indianapolis, Indiana,
totaling 391,000 square feet, which completed the company's exit
from the Indianapolis office market
Distributions Declared
The company's board of directors declared a
quarterly cash distribution on its common stock of $0.20 per share,
or $0.80 per share on an annualized basis. The third quarter
dividend will be payable on November 30, 2017 to shareholders of
record on November 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 $4.45 to $4.60 per
diluted share from its previous guidance of $4.40 to $4.66 per
diluted share. The company revised its guidance for FFO, as defined
by NAREIT, to $1.22 to $1.29 per diluted share from its previous
guidance of $1.20 to $1.33 and also revised its guidance for Core
FFO to $1.21 to $1.25 per diluted share from its previous range of
$1.20 to $1.26 per diluted share.
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 September 30, 2017
supplemental information.
About Duke Realty Corporation
Duke Realty Corporation owns and operates
approximately 144 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.
Third Quarter Earnings Call and Supplemental
Information
Duke Realty Corporation is hosting a conference
call tomorrow, October 26, 2017, at 3:00 p.m. ET to discuss its
third 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.
Contact Information:
Investors:Ron Hubbard317.808.6060
Media:Helen McCarthy317.708.8010
Duke Realty Corporation and
Subsidiaries |
Consolidated Statement of
Operations |
(Unaudited and in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Revenues: |
|
|
|
|
|
|
|
Rental and related revenue |
|
$169,611 |
|
|
|
$162,322 |
|
|
|
$507,123 |
|
|
|
$480,819 |
|
General contractor and service fee revenue |
|
25,217 |
|
|
|
19,351 |
|
|
|
58,192 |
|
|
|
68,546 |
|
|
|
194,828 |
|
|
|
181,673 |
|
|
|
565,315 |
|
|
|
549,365 |
|
Expenses: |
|
|
|
|
|
|
|
Rental expenses |
|
16,224 |
|
|
|
16,933 |
|
|
|
46,967 |
|
|
|
54,685 |
|
Real estate taxes |
|
28,157 |
|
|
|
26,001 |
|
|
|
81,569 |
|
|
|
75,687 |
|
General contractor and other services expenses |
|
24,079 |
|
|
|
17,182 |
|
|
|
54,077 |
|
|
|
60,330 |
|
Depreciation and amortization |
|
67,992 |
|
|
|
61,820 |
|
|
|
197,028 |
|
|
|
182,489 |
|
|
|
136,452 |
|
|
|
121,936 |
|
|
|
379,641 |
|
|
|
373,191 |
|
Other
operating activities: |
|
|
|
|
|
|
|
Equity in
earnings of unconsolidated companies |
|
1,841 |
|
|
|
12,010 |
|
|
|
58,523 |
|
|
|
37,404 |
|
Gain on
dissolution of unconsolidated company |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
30,697 |
|
Promote
income |
|
- |
|
|
|
2,212 |
|
|
|
20,007 |
|
|
|
26,299 |
|
Gain on
sale of properties |
|
21,952 |
|
|
|
82,698 |
|
|
|
93,339 |
|
|
|
137,589 |
|
Gain on
land sales |
|
5,665 |
|
|
|
1,601 |
|
|
|
8,449 |
|
|
|
2,438 |
|
Other
operating expenses |
|
(770 |
) |
|
|
(1,424 |
) |
|
|
(2,226 |
) |
|
|
(3,496 |
) |
Impairment charges |
|
(3,622 |
) |
|
|
(3,042 |
) |
|
|
(4,481 |
) |
|
|
(15,098 |
) |
General
and administrative expenses |
|
(10,075 |
) |
|
|
(12,534 |
) |
|
|
(41,165 |
) |
|
|
(42,216 |
) |
|
|
14,991 |
|
|
|
81,521 |
|
|
|
132,446 |
|
|
|
173,617 |
|
|
|
|
|
|
|
|
|
Operating income |
|
73,367 |
|
|
|
141,258 |
|
|
|
318,120 |
|
|
|
349,791 |
|
|
|
|
|
|
|
|
|
Other
income (expenses): |
|
|
|
|
|
|
|
Interest
and other income, net |
|
6,404 |
|
|
|
507 |
|
|
|
9,197 |
|
|
|
3,597 |
|
Interest
expense |
|
(20,835 |
) |
|
|
(27,283 |
) |
|
|
(65,401 |
) |
|
|
(87,255 |
) |
Loss on
debt extinguishment |
|
(16,568 |
) |
|
|
(6,243 |
) |
|
|
(26,104 |
) |
|
|
(8,673 |
) |
Acquisition-related activity |
|
- |
|
|
|
(7 |
) |
|
|
- |
|
|
|
(82 |
) |
Income
from continuing operations, before income taxes |
|
42,368 |
|
|
|
108,232 |
|
|
|
235,812 |
|
|
|
257,378 |
|
Income tax (expense) benefit |
|
(359 |
) |
|
|
359 |
|
|
|
(7,918 |
) |
|
|
173 |
|
Income from continuing operations |
|
42,009 |
|
|
|
108,591 |
|
|
|
227,894 |
|
|
|
257,551 |
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
Income
before gain on sales |
|
2,563 |
|
|
|
4,249 |
|
|
|
17,747 |
|
|
|
9,062 |
|
Gain on
sale of depreciable properties, net of tax |
|
120,179 |
|
|
|
319 |
|
|
|
1,229,270 |
|
|
|
485 |
|
Income
tax (expense) benefit |
|
876 |
|
|
|
- |
|
|
|
(10,736 |
) |
|
|
- |
|
Income from discontinued operations |
|
123,618 |
|
|
|
4,568 |
|
|
|
1,236,281 |
|
|
|
9,547 |
|
|
|
|
|
|
|
|
|
Net
income |
|
165,627 |
|
|
|
113,159 |
|
|
|
1,464,175 |
|
|
|
267,098 |
|
Net
income attributable to noncontrolling interests |
|
(358 |
) |
|
|
(1,145 |
) |
|
|
(18,163 |
) |
|
|
(2,710 |
) |
Net income attributable to common shareholders |
|
$165,269 |
|
|
|
$112,014 |
|
|
|
$1,446,012 |
|
|
|
$264,388 |
|
|
|
|
|
|
|
|
|
Basic
net income per common share: |
|
|
|
|
|
|
|
Continuing operations attributable to common shareholders |
|
$0.12 |
|
|
|
$0.31 |
|
|
|
$0.63 |
|
|
|
$0.72 |
|
Discontinued operations attributable to common shareholders |
|
0.34 |
|
|
|
0.01 |
|
|
|
3.43 |
|
|
|
0.03 |
|
Total |
|
$0.46 |
|
|
|
$0.32 |
|
|
|
$4.06 |
|
|
|
$0.75 |
|
|
|
|
|
|
|
|
|
Diluted
net income per common share: |
|
|
|
|
|
|
|
Continuing operations attributable to common shareholders |
|
$0.12 |
|
|
|
$0.31 |
|
|
|
$0.63 |
|
|
|
$0.72 |
|
Discontinued operations attributable to common shareholders |
|
0.34 |
|
|
|
0.01 |
|
|
|
3.40 |
|
|
|
0.03 |
|
Total |
|
$0.46 |
|
|
|
$0.32 |
|
|
|
$4.03 |
|
|
|
$0.75 |
|
|
|
|
|
|
|
|
|
Duke Realty Corporation and
Subsidiaries |
|
Consolidated Balance Sheets |
|
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Assets |
|
|
|
|
|
Real
estate investments: |
|
|
|
|
|
Real
estate assets |
|
|
$6,091,861 |
|
|
|
$5,144,805 |
|
|
Construction in progress |
|
|
441,005 |
|
|
|
303,644 |
|
|
Investments in and advances to unconsolidated companies |
|
|
135,089 |
|
|
|
197,807 |
|
|
Undeveloped land |
|
|
167,928 |
|
|
|
237,436 |
|
|
|
|
|
6,835,883 |
|
|
|
5,883,692 |
|
|
Accumulated depreciation |
|
|
(1,159,493 |
) |
|
|
(1,042,944 |
) |
|
|
|
|
|
|
|
Net real
estate investments |
|
|
5,676,390 |
|
|
|
4,840,748 |
|
|
|
|
|
|
|
|
Real
estate investments and other assets held-for-sale |
|
|
63,604 |
|
|
|
1,324,258 |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
27,315 |
|
|
|
12,639 |
|
|
Accounts
receivable, net |
|
|
20,605 |
|
|
|
15,838 |
|
|
Straight-line rents receivable, net |
|
|
91,045 |
|
|
|
82,554 |
|
|
Receivables on construction contracts, including retentions |
|
|
10,343 |
|
|
|
6,159 |
|
|
Deferred
leasing and other costs, net |
|
|
279,891 |
|
|
|
258,741 |
|
|
Restricted cash held in escrow for like-kind exchange |
|
|
512,520 |
|
|
|
40,102 |
|
|
Notes
receivable from property sales |
|
|
426,678 |
|
|
|
25,460 |
|
|
Other
escrow deposits and other assets |
|
|
189,080 |
|
|
|
165,503 |
|
|
|
|
|
|
|
|
|
|
|
$7,297,471 |
|
|
|
$6,772,002 |
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
Indebtedness: |
|
|
|
|
|
Secured
debt, net of deferred financing costs |
|
|
$312,776 |
|
|
|
$383,725 |
|
|
Unsecured
debt, net of deferred financing costs |
|
|
1,814,104 |
|
|
|
2,476,752 |
|
|
Unsecured
line of credit |
|
|
5,000 |
|
|
|
48,000 |
|
|
|
|
|
2,131,880 |
|
|
|
2,908,477 |
|
|
|
|
|
|
|
|
Liabilities related to
real estate investments held-for-sale |
|
|
2,653 |
|
|
|
56,291 |
|
|
|
|
|
|
|
|
Construction payables
and amounts due subcontractors, including retentions |
|
|
70,432 |
|
|
|
44,250 |
|
|
Accrued real estate
taxes |
|
|
83,152 |
|
|
|
59,112 |
|
|
Accrued interest |
|
|
24,547 |
|
|
|
23,633 |
|
|
Other liabilities |
|
|
195,147 |
|
|
|
153,846 |
|
|
Tenant security
deposits and prepaid rents |
|
|
36,285 |
|
|
|
33,100 |
|
|
Total
liabilities |
|
|
2,544,096 |
|
|
|
3,278,709 |
|
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
Common
shares |
|
|
3,561 |
|
|
|
3,548 |
|
|
Additional paid-in-capital |
|
|
5,195,151 |
|
|
|
5,192,011 |
|
|
Accumulated other comprehensive income |
|
|
- |
|
|
|
682 |
|
|
Distributions in excess of net income |
|
|
(488,328 |
) |
|
|
(1,730,423 |
) |
|
Total
shareholders' equity |
|
|
4,710,384 |
|
|
|
3,465,818 |
|
|
|
|
|
|
|
|
Noncontrolling
interests |
|
|
42,991 |
|
|
|
27,475 |
|
|
Total
equity |
|
|
4,753,375 |
|
|
|
3,493,293 |
|
|
|
|
|
|
|
|
|
|
|
$7,297,471 |
|
|
|
$6,772,002 |
|
|
|
|
|
|
|
|
Duke Realty Corporation and
Subsidiaries |
|
|
Summary of EPS, FFO and AFFO |
|
|
Three Months Ended September 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 |
|
$165,269 |
|
|
|
|
|
$112,014 |
|
|
|
|
|
|
Less: dividends
on participating securities |
|
(444 |
) |
|
|
|
|
(580 |
) |
|
|
|
|
|
Net income per common share-
basic |
|
164,825 |
|
355,905 |
|
$0.46 |
|
|
111,434 |
|
351,856 |
|
$0.32 |
|
|
|
Add
back: |
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in earnings of unitholders |
|
1,535 |
|
3,301 |
|
|
|
1,131 |
|
3,495 |
|
|
|
|
Other potentially dilutive securities |
|
444 |
|
2,896 |
|
|
|
580 |
|
3,630 |
|
|
|
|
Net income attributable to common
shareholders- diluted |
|
$166,804 |
|
362,102 |
|
$0.46 |
|
|
$113,145 |
|
358,981 |
|
$0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to funds from
operations ("FFO") |
|
|
|
|
|
|
|
|
|
|
Net income attributable to common
shareholders |
|
$165,269 |
|
355,905 |
|
|
|
$112,014 |
|
351,856 |
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
68,029 |
|
|
|
|
|
80,688 |
|
|
|
|
|
|
Company share of joint venture depreciation, amortization and
other |
|
2,171 |
|
|
|
|
|
3,772 |
|
|
|
|
|
|
Impairment charges - depreciable property |
|
- |
|
|
|
|
|
3,042 |
|
|
|
|
|
|
Gains on depreciable property sales - wholly owned,
discontinued operations (1) |
|
(121,348 |
) |
|
|
|
|
(319 |
) |
|
|
|
|
|
Gains on depreciable property sales - wholly owned,
continuing operations |
|
(21,952 |
) |
|
|
|
|
(82,698 |
) |
|
|
|
|
|
Income tax benefit triggered by depreciable property
sales |
|
(516 |
) |
|
|
|
|
(359 |
) |
|
|
|
|
|
Gains on depreciable property sales - joint
ventures |
|
37 |
|
|
|
|
|
(5,668 |
) |
|
|
|
|
|
Noncontrolling interest share of adjustments |
|
677 |
|
|
|
|
|
15 |
|
|
|
|
|
|
NAREIT FFO attributable to common
shareholders - basic |
|
92,367 |
|
355,905 |
|
$0.26 |
|
|
110,487 |
|
351,856 |
|
$0.31 |
|
|
|
Noncontrolling interest in income of unitholders |
|
1,535 |
|
3,301 |
|
|
|
1,131 |
|
3,495 |
|
|
|
|
Noncontrolling interest share of adjustments |
|
(677 |
) |
|
|
|
|
(15 |
) |
|
|
|
|
|
Other potentially dilutive securities |
|
2,896 |
|
|
|
3,630 |
|
|
|
|
NAREIT FFO attributable to common
shareholders - diluted |
|
$93,225 |
|
362,102 |
|
$0.26 |
|
|
$111,603 |
|
358,981 |
|
$0.31 |
|
|
|
Gain on land sales, including share of joint
venture |
|
(5,665 |
) |
|
|
|
|
(4,673 |
) |
|
|
|
|
|
Loss on debt extinguishment |
|
16,568 |
|
|
|
|
|
6,243 |
|
|
|
|
|
|
Land impairment charges |
|
3,622 |
|
|
|
|
|
- |
|
|
|
|
|
|
Promote income |
|
- |
|
|
|
|
|
(2,212 |
) |
|
|
|
|
|
Acquisition-related activity |
|
- |
|
|
|
|
|
7 |
|
|
|
|
|
|
Core FFO attributable to common
shareholders - diluted |
|
$107,750 |
|
362,102 |
|
$0.30 |
|
|
$110,968 |
|
358,981 |
|
$0.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
FFO |
|
|
|
|
|
|
|
|
|
|
Core FFO -
diluted |
|
$107,750 |
|
362,102 |
|
$0.30 |
|
|
$110,968 |
|
358,981 |
|
$0.31 |
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
Straight-line rental income and expense |
|
(4,292 |
) |
|
|
|
|
(5,742 |
) |
|
|
|
|
|
Amortization of above/below market rents and
concessions |
|
1,232 |
|
|
|
|
|
303 |
|
|
|
|
|
|
Stock based compensation expense |
|
1,943 |
|
|
|
|
|
3,262 |
|
|
|
|
|
|
Noncash interest expense |
|
1,244 |
|
|
|
|
|
1,609 |
|
|
|
|
|
|
Second generation concessions |
|
(19 |
) |
|
|
|
|
(240 |
) |
|
|
|
|
|
Second generation tenant improvements |
|
(3,700 |
) |
|
|
|
|
(3,352 |
) |
|
|
|
|
|
Second generation leasing commissions |
|
(4,983 |
) |
|
|
|
|
(3,628 |
) |
|
|
|
|
|
Building improvements |
|
(5,184 |
) |
|
|
|
|
(677 |
) |
|
|
|
|
|
Adjusted FFO -
diluted |
|
$93,991 |
|
362,102 |
|
|
|
$102,503 |
|
358,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes noncontrolling interest adjustment of
$1,169 on depreciable property sales - wholly owned, discontinued
operations during the three months ended September 30,
2017. |
|
|
Duke Realty Corporation and
Subsidiaries |
|
Summary of EPS, FFO and AFFO |
|
Nine Months Ended September 30 |
|
(Unaudited and in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
|
Wtd. |
|
|
|
Wtd. |
|
|
|
|
|
Avg. |
Per |
|
|
Avg. |
Per |
|
|
|
Amount |
Shares |
Share |
|
Amount |
Shares |
Share |
|
|
Net income attributable to common
shareholders |
|
$1,446,012 |
|
|
|
|
|
$264,388 |
|
|
|
|
|
Less: dividends
on participating securities |
|
(1,527 |
) |
|
|
|
|
(1,751 |
) |
|
|
|
|
Net income per common share-
basic |
|
1,444,485 |
|
355,614 |
|
$4.06 |
|
|
262,637 |
|
348,341 |
|
$0.75 |
|
|
Add
back: |
|
|
|
|
|
|
|
|
|
Noncontrolling interest in earnings of unitholders |
|
13,427 |
|
3,307 |
|
|
|
2,670 |
|
3,499 |
|
|
|
Other potentially dilutive securities |
|
1,527 |
|
3,026 |
|
|
|
1,751 |
|
3,565 |
|
|
|
Net income attributable to common
shareholders- diluted |
|
$1,459,439 |
|
361,947 |
|
$4.03 |
|
|
267,058 |
|
355,405 |
|
$0.75 |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to funds from
operations ("FFO") |
|
|
|
|
|
|
|
|
|
Net income attributable to common
shareholders |
|
$1,446,012 |
|
355,614 |
|
|
|
$264,388 |
|
348,341 |
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
222,914 |
|
|
|
|
|
238,647 |
|
|
|
|
|
Company share of joint venture depreciation, amortization and
other |
|
7,266 |
|
|
|
|
|
11,664 |
|
|
|
|
|
Impairment charges - depreciable property |
|
859 |
|
|
|
|
|
3,042 |
|
|
|
|
|
Gains on depreciable property sales - wholly owned,
discontinued operations (1) |
|
(1,224,422 |
) |
|
|
|
|
(485 |
) |
|
|
|
|
Gains on depreciable property sales - wholly owned,
continuing operations |
|
(93,339 |
) |
|
|
|
|
(137,589 |
) |
|
|
|
|
Income tax expense (benefit) triggered by depreciable
property sales |
|
19,142 |
|
|
|
|
|
(173 |
) |
|
|
|
|
Gains on depreciable property sales - joint
ventures |
|
(50,694 |
) |
|
|
|
|
(23,700 |
) |
|
|
|
|
Gain on dissolution of unconsolidated company |
|
- |
|
|
|
|
|
(30,697 |
) |
|
|
|
|
Noncontrolling interest share of adjustments |
|
10,307 |
|
|
|
|
|
(604 |
) |
|
|
|
|
NAREIT FFO attributable to common
shareholders - basic |
|
338,045 |
|
355,614 |
|
$0.95 |
|
|
324,493 |
|
348,341 |
|
$0.93 |
|
|
Noncontrolling interest in income of unitholders |
|
13,427 |
|
3,307 |
|
|
|
2,670 |
|
3,499 |
|
|
|
Noncontrolling interest share of adjustments |
|
(10,307 |
) |
|
|
|
|
604 |
|
|
|
|
|
Other potentially dilutive securities |
|
3,026 |
|
|
|
3,565 |
|
|
|
NAREIT FFO attributable to common
shareholders - diluted |
|
$341,165 |
|
361,947 |
|
$0.94 |
|
|
$327,767 |
|
355,405 |
|
$0.92 |
|
|
Gain on land sales, including share of joint
venture |
|
(8,449 |
) |
|
|
|
|
(5,510 |
) |
|
|
|
|
Loss on debt extinguishment, including share of joint
venture |
|
26,104 |
|
|
|
|
|
10,265 |
|
|
|
|
|
Gain on non-depreciable property sale - joint
venture |
|
(119 |
) |
|
|
|
|
- |
|
|
|
|
|
Land impairment charges |
|
3,622 |
|
|
|
|
|
12,056 |
|
|
|
|
|
Promote income |
|
(20,007 |
) |
|
|
|
|
(26,299 |
) |
|
|
|
|
Income tax benefit from valuation allowance
adjustment |
|
(2,619 |
) |
|
|
|
|
- |
|
|
|
|
|
Acquisition-related activity |
|
- |
|
|
|
|
|
82 |
|
|
|
|
|
Core FFO attributable to common
shareholders - diluted |
|
$339,697 |
|
361,947 |
|
$0.94 |
|
|
$318,361 |
|
355,405 |
|
$0.90 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
FFO |
|
|
|
|
|
|
|
|
|
Core FFO -
diluted |
|
$339,697 |
|
361,947 |
|
$0.94 |
|
|
$318,361 |
|
355,405 |
|
$0.90 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Straight-line rental income and expense |
|
(12,336 |
) |
|
|
|
|
(13,247 |
) |
|
|
|
|
Amortization of above/below market rents and
concessions |
|
1,895 |
|
|
|
|
|
1,361 |
|
|
|
|
|
Stock based compensation expense |
|
16,023 |
|
|
|
|
|
16,748 |
|
|
|
|
|
Noncash interest expense |
|
4,448 |
|
|
|
|
|
4,594 |
|
|
|
|
|
Second generation concessions |
|
(94 |
) |
|
|
|
|
(311 |
) |
|
|
|
|
Second generation tenant improvements |
|
(11,197 |
) |
|
|
|
|
(17,954 |
) |
|
|
|
|
Second generation leasing commissions |
|
(15,260 |
) |
|
|
|
|
(19,497 |
) |
|
|
|
|
Building improvements |
|
(8,115 |
) |
|
|
|
|
(1,939 |
) |
|
|
|
|
Adjusted FFO -
diluted |
|
$315,061 |
|
361,947 |
|
|
|
$288,116 |
|
355,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes noncontrolling interest adjustment of
($4,848) on depreciable property sales - wholly owned, discontinued
operations during the nine months ended September 30,
2017. |
|
Duke Realty Corporation and
Subsidiaries |
|
Reconciliation of Same Property Net Operating
Income Growth |
|
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
September 30, 2017 |
|
September 30, 2016 |
|
|
|
|
|
|
|
|
Income from continuing
operations before income taxes |
|
$42,368 |
|
|
|
$108,232 |
|
|
|
Share of same property
NOI from unconsolidated joint ventures |
|
3,824 |
|
|
|
4,094 |
|
|
|
Income and expense
items not allocated to segments |
|
85,605 |
|
|
|
14,717 |
|
|
|
Earnings from service
operations |
|
(1,138 |
) |
|
|
(2,169 |
) |
|
|
Properties not included
and other adjustments |
|
(23,000 |
) |
|
|
(19,532 |
) |
|
|
Same property NOI |
|
$107,659 |
|
|
|
$105,342 |
|
|
|
|
|
|
|
|
|
Percent Change |
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
September 30, 2017 |
|
September 30, 2016 |
|
|
|
|
|
|
|
|
Income from continuing
operations before income taxes |
|
$235,812 |
|
|
|
$257,378 |
|
|
|
Share of same property
NOI from unconsolidated joint ventures |
|
11,297 |
|
|
|
12,454 |
|
|
|
Income and expense
items not allocated to segments |
|
150,064 |
|
|
|
103,000 |
|
|
|
Earnings from service
operations |
|
(4,115 |
) |
|
|
(8,216 |
) |
|
|
Properties not included
and other adjustments |
|
(69,971 |
) |
|
|
(53,589 |
) |
|
|
Same property NOI |
|
$323,087 |
|
|
|
$311,027 |
|
|
|
|
|
|
|
|
|
Percent Change |
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Duke Realty Corporation and
Subsidiaries |
|
Reconciliation of 2017 FFO
Guidance |
|
(Unaudited ) |
|
|
|
|
|
|
|
|
Pessimistic |
|
Optimistic |
|
|
Net income per common
share, diluted |
|
$4.45 |
|
|
|
$4.60 |
|
|
|
Depreciation and gains
on sales of depreciated property (including share of joint
venture) |
|
(3.23 |
) |
|
|
(3.31 |
) |
|
|
FFO per share -
diluted, as defined by NAREIT |
|
$1.22 |
|
|
|
$1.29 |
|
|
|
Gains on land
sales |
|
(0.02 |
) |
|
|
(0.04 |
) |
|
|
Other reconciling
items |
|
0.01 |
|
|
|
0.00 |
|
|
|
Core FFO per share -
diluted |
|
$1.21 |
|
|
|
$1.25 |
|
|
|
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