Stabilized Occupancy of 98.5
Percent
Duke Realty Corporation (NYSE:DRE), the largest pure-play, domestic
only, industrial REIT, today reported results for the fourth
quarter and full year 2017.
Jim Connor, Chairman and CEO said, "In looking
back, 2017 has proved to be one of the most transformational years
in company history, as we divested of our medical office business
and repositioned ourselves as a pure-play industrial REIT while
providing a return of capital to our shareholders through an $0.85
per share special dividend. I'm pleased to report we
concluded 2017 with an exceptional fourth quarter of operating
performance and continued redeployment of capital into high-quality
industrial assets. We increased stabilized occupancy to 98.5
percent, renewed leases at a very impressive 91.4 percent retention
rate, increased rents by 19.9 percent on new and renewal leases,
and increased same property net operating income by 3.2 percent
during the quarter. We have also backfilled all 750,000
square feet that we previously leased to hhgregg, which is a
testament both to the strength of the industrial real estate market
and the quality of our market level professionals."
Quarterly Highlights
• Net income per diluted share was $0.52 for the quarter and
$4.56 for the year. Funds from Operations (“FFO”) per diluted
share, as defined by the National Association of Real Estate
Investment Trusts (“NAREIT”), was $0.33 for the quarter and $1.27
for the year. Core Funds from Operations (“Core FFO”) per
diluted share was $0.30 for the quarter and $1.24 for the
year.
• Operating performance within the company's industrial
portfolio:
- Total stabilized occupancy at December 31, 2017 of 98.5 percent
compared to 98.0 percent at September 30, 2017 and 98.1 percent at
December 31, 2016
- Total in-service occupancy at December 31, 2017 of 95.7 percent
compared to 95.7 percent at September 30, 2017 and 97.7 percent at
December 31, 2016
- Total occupancy, including properties under development, of
93.8 percent at December 31, 2017 compared to 93.2 percent at
September 30, 2017 and 95.6 percent at December 31, 2016
- Tenant retention of 91.4 percent for the quarter and 80.5
percent for the year
- Same-property net operating income growth of 3.2 percent and
4.0 percent for the three and twelve months ended December 31, 2017
compared to the same periods in 2016
- Total leasing activity of 7.8 million square feet for the
quarter and 23.7 million square feet for the year
- Overall rent growth on new and renewal leases of 19.9 percent
for the quarter and 19.2 percent for the year
• Successful execution of capital transactions in the fourth
quarter:
- Issued $300 million of unsecured notes maturing in December
2027 at a stated rate of 3.375 percent
- Extended the company's $1.2 billion unsecured revolving credit
facility from January 2019 to January 2022 at a variable rate
(subject to adjustment) of LIBOR plus .875 percent
- Completed $248 million of building dispositions during the
quarter and $3.1 billion during the year
- Completed $367 million in acquisitions of eight bulk industrial
buildings during the quarter bringing total acquisitions for the
year to $997 million
- Started three new industrial development projects with expected
costs of $207 million for the quarter bringing the total expected
costs of development starts for the year to $866 million
Mark Denien, Executive Vice President and Chief
Financial Officer, stated, "We are entering 2018 with significant
balance sheet capacity to finance future growth. At the end
of 2017 we had $116 million of cash held in escrow for future 1031
exchanges, $427 million in interest-bearing notes receivable, of
which various notes totaling $145 million are scheduled to mature
at various points throughout 2018, and had no borrowings on our
unsecured line of credit.
With the previously announced $300 million
unsecured note issuance, which we executed at a favorable 3.375
percent coupon rate, we have reduced our ongoing borrowing costs
and optimally sequenced our future debt maturities. In total
we have approximately $1.2 billion to $1.4 billion of liquidity and
balance sheet capacity to fund additional real estate investments
without any equity needs and still maintain our leverage metrics
within our current ratings level."
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 $0.52 per diluted share, or $188 million, for
the fourth quarter of 2017 compared to $0.13 per diluted share for
the fourth quarter of 2016. The increased net income per
diluted share for the quarter was primarily the result of gains on
property sales. Net income for the full year 2017 was $4.56
per diluted share, or $1.65 billion compared to $0.88 per diluted
share, or $315 million, for the full year 2016. The increased
net income per diluted share for the full year was also primarily
the result of gains on property sales.
- FFO, as defined by NAREIT, was $0.33 per diluted share, or $119
million, for the fourth quarter of 2017 compared to $0.29 per
diluted share for the fourth quarter of 2016. The
increased FFO per diluted share for the quarter was primarily due
to the loss on debt extinguishment in the fourth quarter of 2016
related to the early redemption of $130 million of unsecured
notes. FFO, as defined by NAREIT, was $1.27 per diluted
share, or $460 million, for the full year 2017 compared to $1.21
per diluted share for the full year 2016. The increased FFO
per diluted share for the full year was primarily due to lower
losses on debt extinguishment and land impairment charges during
2017 in addition to an overall improvement in key operating
metrics.
- Core FFO was $0.30 per diluted share, or $110 million, for the
fourth quarter of 2017 compared to $0.31 per diluted share for the
fourth quarter of 2016. Core FFO was $1.24 per diluted share,
or $450 million, for the full year 2017 compared to $1.20 for the
full year 2016. The increase in Core FFO for the full year
was due to lower interest expense in 2017, as disposition proceeds
were used to significantly reduce leverage.
Real Estate Investment Activity
Mr. Connor further stated, "We finished the
quarter with an 8.5 million square foot development pipeline, with
total expected stabilized project costs of $676 million. Even
after starting $207 million of developments during the quarter,
which were 12 percent pre-leased, we ended the year with a very
solid pre-leasing level of 63 percent for our development pipeline,
which demonstrates our disciplined approach to starting speculative
developments in high-demand markets and our ability to execute the
lease up of those projects.
During the fourth quarter, we also completed our
previously announced portfolio acquisition from Bridge Development
Partners LLC (the "Bridge Portfolio") as well as three additional
industrial properties."
Acquisitions
The company completed the remaining tranches of
the Bridge Portfolio acquisition during the quarter, which
consisted of five bulk distribution properties totaling 1.8 million
square feet in Northern New Jersey. Additionally, a 32-acre
development parcel in Northern New Jersey was acquired, upon which
development of a new property immediately commenced.
The company also acquired two bulk distribution
properties in Houston totaling 772,000 square feet, which were 100
percent leased, and a 100 percent leased 71,000 square foot
industrial property in the South Bay sub-market of Los Angeles.
Development
The fourth quarter included the following development
activity:
- During the quarter, the company started $207 million of wholly
owned development projects totaling 1.3 million square feet, which
were 12 percent pre-leased in total. These wholly owned
development starts were comprised of a 659,000 square foot
speculative development project in Northern New Jersey on land
acquired during the quarter as part of the Bridge Portfolio
acquisition; a speculative project in Southern California totaling
282,000 square feet; and a 44 percent pre-leased project in Houston
totaling 368,000 square feet.
- Seven projects totaling 3.0 million square feet, which were 83
percent leased, were placed in service during the
quarter.
Building Dispositions
Building dispositions totaled $248 million in
the fourth quarter and included the following wholly owned
properties:
- One medical office building, totaling 363,000 square feet,
which represented the last of the medical office buildings expected
to be sold during 2017
- The company's sole remaining suburban office property in South
Florida, totaling 144,000 square feet
- One non-strategic industrial property in Columbus, OH totaling
one million square feet
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 fourth quarter
dividend will be payable on February 28, 2018 to shareholders of
record on February 15, 2018.
2018 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 issued guidance for net income of
$0.68 to $0.98 per diluted share. The company issued
guidance for FFO, as defined by NAREIT, of $1.24 to $1.32 per
diluted share.
Commenting on the company's 2018 outlook, Mr.
Connor stated, "We are introducing 2018 guidance for Core FFO of
$1.24 to $1.30 per diluted share. Our 2018 Core FFO guidance
is based on the anticipation that we will continue to experience
strong leasing and development results across our markets and will
have redeployed substantially all of the proceeds from the medical
office disposition and returned to normal leverage levels by the
second half of 2018. Our guidance for growth in Adjusted
Funds from Operations ("AFFO"), on a share adjusted basis, ranges
from 2.7 percent to 8.2 percent and is driven largely by the same
reasons as the growth in Core FFO.
Our guidance for 2018 same property NOI growth
reflects a change in methodology, as we disclosed a couple of weeks
ago, whereby our same property population will be defined at the
beginning of each calendar year and will include only buildings
that were stabilized as of the beginning of the prior calendar
year. Our guidance for same property NOI growth ranges from
3.25 percent to 4.75 percent and the projected growth is
anticipated to be from continued strong rental rate increases as
our stabilized occupancy levels are expected to decrease slightly
from our current record levels.
We expect the continued redeployment of the
medical office disposition proceeds in 2018 to primarily be in the
form of development, as opposed to acquisitions, with our guidance
for development starts ranging between $500 million and $700
million. This modest decline in development starts from 2017
is largely due to beginning 2018 with a significant backlog of
development projects currently under construction as well as
continuing a disciplined approach to managing lease-up risk and
maintaining our development pipeline at a healthy level of
pre-leasing."
Ranges for the other key assumptions underlying
this updated guidance are as follows:
- Dispositions of non-strategic properties in a range of
$300 million to $500 million with the proceeds primarily used to
fund development
- Acquisitions of properties in a range of $100 million to $500
million
- Average percent leased of our stabilized portfolio ranging from
97.1 percent to 98.1 percent
- General and administrative expenses ranging from $57 million to
$53 million
More specific assumptions and components of the
company's 2018 guidance will be available by 6:00 p.m. Eastern Time
today through 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 December 31,
2017 supplemental information.
About Duke Realty Corporation
Duke Realty Corporation owns and operates
approximately 146 million rentable square feet of industrial assets
in 21 major logistics markets. 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.
Fourth Quarter Earnings Call and Supplemental
Information
Duke Realty Corporation is hosting a conference
call tomorrow, February 1, 2018, at 3:00 p.m. ET to discuss its
fourth 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 |
|
Twelve Months Ended |
|
December 31, |
|
December 31, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Revenues: |
|
Rental
and related revenue |
|
$ |
179,391 |
|
|
$ |
160,882 |
|
|
$ |
686,514 |
|
|
$ |
641,701 |
|
General
contractor and service fee revenue |
|
|
36,228 |
|
|
|
20,264 |
|
|
|
94,420 |
|
|
|
88,810 |
|
|
|
215,619 |
|
|
|
181,146 |
|
|
|
780,934 |
|
|
|
730,511 |
|
Expenses: |
|
Rental
expenses |
|
|
17,616 |
|
|
|
19,639 |
|
|
|
64,582 |
|
|
|
74,323 |
|
Real
estate taxes |
|
|
27,395 |
|
|
|
23,251 |
|
|
|
108,964 |
|
|
|
98,938 |
|
General
contractor and other services expenses |
|
|
35,381 |
|
|
|
20,137 |
|
|
|
89,457 |
|
|
|
80,467 |
|
Depreciation and amortization |
|
|
76,533 |
|
|
|
60,068 |
|
|
|
273,561 |
|
|
|
242,557 |
|
|
|
156,925 |
|
|
|
123,095 |
|
|
|
536,564 |
|
|
|
496,285 |
|
Other operating
activities: |
|
Equity in
earnings of unconsolidated joint ventures |
|
|
4,787 |
|
|
|
9,999 |
|
|
|
63,310 |
|
|
|
47,403 |
|
Gain on
dissolution of unconsolidated joint venture |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,697 |
|
Promote
income |
|
|
— |
|
|
|
— |
|
|
|
20,007 |
|
|
|
26,299 |
|
Gain on
sale of properties |
|
|
20,330 |
|
|
|
24,504 |
|
|
|
113,669 |
|
|
|
162,093 |
|
Gain on
land sales |
|
|
795 |
|
|
|
7,427 |
|
|
|
9,244 |
|
|
|
9,865 |
|
Other
operating expenses |
|
|
(327 |
) |
|
|
(367 |
) |
|
|
(2,554 |
) |
|
|
(3,864 |
) |
Impairment charges |
|
|
— |
|
|
|
(2,920 |
) |
|
|
(4,481 |
) |
|
|
(18,018 |
) |
General
and administrative expenses |
|
|
(13,779 |
) |
|
|
(13,173 |
) |
|
|
(54,944 |
) |
|
|
(55,389 |
) |
|
|
11,806 |
|
|
|
25,470 |
|
|
|
144,251 |
|
|
|
199,086 |
|
|
Operating income |
|
70,500 |
|
|
|
83,521 |
|
|
|
388,621 |
|
|
|
433,312 |
|
|
Other
income (expenses): |
|
Interest
and other income, net |
|
|
5,524 |
|
|
|
438 |
|
|
|
14,721 |
|
|
|
4,035 |
|
Interest
expense |
|
|
(21,602 |
) |
|
|
(25,452 |
) |
|
|
(87,003 |
) |
|
|
(112,757 |
) |
Loss on
debt extinguishment |
|
|
— |
|
|
|
(25,261 |
) |
|
|
(26,104 |
) |
|
|
(33,934 |
) |
Acquisition-related activity |
|
|
— |
|
|
|
7,258 |
|
|
|
— |
|
|
|
7,176 |
|
Income from continuing
operations, before income taxes |
|
|
54,422 |
|
|
|
40,504 |
|
|
|
290,235 |
|
|
|
297,832 |
|
Income
tax benefit |
|
|
8,275 |
|
|
|
416 |
|
|
|
357 |
|
|
|
589 |
|
Income from continuing operations |
|
62,697 |
|
|
|
40,920 |
|
|
|
290,592 |
|
|
|
298,421 |
|
|
Discontinued
operations: |
|
Income
before gain on sales and income taxes |
|
|
689 |
|
|
|
6,729 |
|
|
|
18,436 |
|
|
|
15,841 |
|
Gain on
sale of depreciable properties |
|
|
128,508 |
|
|
|
531 |
|
|
|
1,357,778 |
|
|
|
1,016 |
|
Income
tax expense |
|
|
(1,728 |
) |
|
|
— |
|
|
|
(12,465 |
) |
|
|
— |
|
Income from discontinued operations |
|
127,469 |
|
|
|
7,260 |
|
|
|
1,363,749 |
|
|
|
16,857 |
|
|
Net income |
|
|
190,166 |
|
|
|
48,180 |
|
|
|
1,654,341 |
|
|
|
315,278 |
|
Net income attributable
to noncontrolling interests |
|
|
(1,747 |
) |
|
|
(425 |
) |
|
|
(19,910 |
) |
|
|
(3,135 |
) |
Net income attributable to common shareholders |
$ |
188,419 |
|
|
$ |
47,755 |
|
|
$ |
1,634,431 |
|
|
$ |
312,143 |
|
|
Basic net income per
common share: |
|
Continuing operations attributable to common shareholders |
|
$ |
0.17 |
|
|
$ |
0.11 |
|
|
$ |
0.80 |
|
|
$ |
0.84 |
|
Discontinued operations attributable to common shareholders |
|
|
0.35 |
|
|
|
0.02 |
|
|
|
3.78 |
|
|
|
0.05 |
|
Total |
|
$ |
0.52 |
|
|
$ |
0.13 |
|
|
$ |
4.58 |
|
|
$ |
0.89 |
|
|
Diluted net income per
common share: |
|
Continuing operations attributable to common shareholders |
|
$ |
0.17 |
|
|
$ |
0.11 |
|
|
$ |
0.80 |
|
|
$ |
0.84 |
|
Discontinued operations attributable to common shareholders |
|
|
0.35 |
|
|
|
0.02 |
|
|
|
3.76 |
|
|
|
0.04 |
|
Total |
|
$ |
0.52 |
|
|
$ |
0.13 |
|
|
$ |
4.56 |
|
|
$ |
0.88 |
|
|
|
Duke Realty Corporation and
Subsidiaries |
Consolidated Balance Sheets |
(Unaudited and in thousands) |
|
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
|
|
2016 |
|
Assets |
|
|
|
|
|
|
|
|
Real estate
investments: |
|
|
Real
estate assets |
|
$ |
6,593,567 |
|
|
$ |
5,144,805 |
|
Construction in progress |
|
|
401,407 |
|
|
|
303,644 |
|
Investments in and advances to unconsolidated joint ventures |
|
|
126,487 |
|
|
|
197,807 |
|
Undeveloped land |
|
|
226,987 |
|
|
|
237,436 |
|
|
|
7,348,448 |
|
|
|
5,883,692 |
|
Accumulated depreciation |
|
|
(1,193,905 |
) |
|
|
(1,042,944 |
) |
|
|
Net real estate investments |
|
6,154,543 |
|
|
|
4,840,748 |
|
|
Real estate investments
and other assets held-for-sale |
|
|
17,550 |
|
|
|
1,324,258 |
|
|
Cash and cash
equivalents |
|
|
67,562 |
|
|
|
12,639 |
|
Accounts receivable,
net |
|
|
19,427 |
|
|
|
15,838 |
|
Straight-line rents
receivable, net |
|
|
93,005 |
|
|
|
82,554 |
|
Receivables on
construction contracts, including retentions |
|
|
13,480 |
|
|
|
6,159 |
|
Deferred leasing and
other costs, net |
|
|
292,682 |
|
|
|
258,741 |
|
Restricted cash held in
escrow for like-kind exchange |
|
|
116,405 |
|
|
|
40,102 |
|
Notes receivable from
property sales |
|
|
426,657 |
|
|
|
25,460 |
|
Other escrow deposits
and other assets |
|
|
186,885 |
|
|
|
165,503 |
|
|
|
$ |
7,388,196 |
|
|
$ |
6,772,002 |
|
|
Liabilities and Equity |
|
|
Indebtedness: |
|
Secured
debt, net of deferred financing costs |
|
$ |
311,349 |
|
|
$ |
383,725 |
|
Unsecured
debt, net of deferred financing costs |
|
|
2,111,542 |
|
|
|
2,476,752 |
|
Unsecured
line of credit |
|
|
— |
|
|
|
48,000 |
|
|
|
2,422,891 |
|
|
|
2,908,477 |
|
|
|
Liabilities related to
real estate investments held-for-sale |
|
|
1,163 |
|
|
|
56,291 |
|
|
Construction payables
and amounts due subcontractors, including retentions |
|
|
54,545 |
|
|
|
44,250 |
|
Accrued real estate
taxes |
|
|
67,374 |
|
|
|
59,112 |
|
Accrued interest |
|
|
17,911 |
|
|
|
23,633 |
|
Other liabilities |
|
|
210,825 |
|
|
|
153,846 |
|
Tenant security
deposits and prepaid rents |
|
|
39,109 |
|
|
|
33,100 |
|
Total liabilities |
|
2,813,818 |
|
|
|
3,278,709 |
|
|
Shareholders'
equity: |
|
Common
shares |
|
|
3,564 |
|
|
|
3,548 |
|
Additional paid-in-capital |
|
|
5,205,316 |
|
|
|
5,192,011 |
|
Accumulated other comprehensive income |
|
|
— |
|
|
|
682 |
|
Distributions in excess of net income |
|
|
(676,036 |
) |
|
|
(1,730,423 |
) |
Total shareholders' equity |
|
4,532,844 |
|
|
|
3,465,818 |
|
|
Noncontrolling
interests |
|
|
41,534 |
|
|
|
27,475 |
|
Total
equity |
|
|
4,574,378 |
|
|
|
3,493,293 |
|
|
|
$ |
7,388,196 |
|
|
$ |
6,772,002 |
|
|
|
Duke Realty Corporation and
Subsidiaries |
Summary of EPS, FFO and AFFO |
Three Months Ended December 31, |
(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 |
$ |
188,419 |
|
|
$ |
47,755 |
|
|
|
Less dividends on
participating securities |
|
(2,454 |
) |
|
|
(608 |
) |
|
|
|
Net income per
common share-basic |
|
185,965 |
|
356,204 |
$ |
0.52 |
|
|
47,147 |
|
354,711 |
$ |
0.13 |
Add back: |
|
Noncontrolling interest in earnings of unitholders |
|
1,750 |
|
3,287 |
|
|
419 |
|
3,424 |
|
Other
potentially dilutive securities |
|
— |
|
753 |
|
|
— |
|
889 |
|
|
Net income
attributable to common shareholders-diluted |
$ |
187,715 |
|
360,244 |
$ |
0.52 |
|
|
47,566 |
|
359,024 |
$ |
0.13 |
Reconciliation
to funds from operations ("FFO") |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to common shareholders |
$ |
188,419 |
|
356,204 |
|
$ |
47,755 |
|
354,711 |
|
Adjustments: |
|
Depreciation and amortization |
|
76,558 |
|
|
|
79,171 |
|
|
Company
share of joint venture depreciation, amortization and other |
|
2,408 |
|
|
|
2,523 |
|
|
Impairment charges - depreciable property |
|
— |
|
|
|
677 |
|
|
Gains on
depreciable property sales - discontinued operations |
|
(128,508 |
) |
|
|
(531 |
) |
|
Gains on
depreciable property sales - continuing operations |
|
(20,330 |
) |
|
|
(24,504 |
) |
|
Income
tax benefit triggered by depreciable property sales |
|
(1,481 |
) |
|
|
(416 |
) |
|
Gains on
depreciable property sales - unconsolidated joint ventures |
|
— |
|
|
|
(196 |
) |
|
Noncontrolling interest share of adjustments |
|
650 |
|
|
|
|
(542 |
) |
|
|
|
NAREIT FFO
attributable to common shareholders - basic |
|
117,716 |
|
356,204 |
$ |
0.33 |
|
|
103,937 |
|
354,711 |
$ |
0.29 |
Noncontrolling interest in income of unitholders |
|
1,750 |
|
3,287 |
|
|
419 |
|
3,424 |
|
Noncontrolling interest share of adjustments |
|
(650 |
) |
|
|
542 |
|
|
Other
potentially dilutive securities |
|
3,016 |
|
|
|
|
3,919 |
|
|
NAREIT FFO
attributable to common shareholders - diluted |
$ |
118,816 |
|
362,507 |
$ |
0.33 |
|
$ |
104,898 |
|
362,054 |
$ |
0.29 |
Gains on
land sales |
|
(795 |
) |
|
|
(7,427 |
) |
|
Gains on
land sales - unconsolidated joint ventures |
|
(3,085 |
) |
|
|
(102 |
) |
|
Loss on
debt extinguishment |
|
— |
|
|
|
25,261 |
|
|
Land
impairment charges |
|
— |
|
|
|
2,243 |
|
|
Gain on
non-depreciable property sale - unconsolidated joint ventures |
|
— |
|
|
|
(6,156 |
) |
|
Other
income tax items |
|
(5,066 |
) |
|
|
— |
|
|
Acquisition-related activity |
|
— |
|
|
|
|
|
|
(7,258 |
) |
|
|
|
Core FFO
attributable to common shareholders - diluted |
$ |
109,870 |
|
362,507 |
$ |
0.30 |
|
$ |
111,459 |
|
362,054 |
$ |
0.31 |
Adjusted
FFO |
|
|
|
|
|
|
|
|
|
|
|
|
|
Core FFO - diluted |
$ |
109,870 |
|
362,507 |
$ |
0.30 |
|
$ |
111,459 |
|
362,054 |
$ |
0.31 |
Adjustments: |
|
Straight-line rental income and expense |
|
(4,992 |
) |
|
|
(3,860 |
) |
|
Amortization of above/below market rents and concessions |
|
(694 |
) |
|
|
165 |
|
|
Stock
based compensation expense |
|
2,467 |
|
|
|
1,845 |
|
|
Noncash
interest expense |
|
1,333 |
|
|
|
1,562 |
|
|
Second
generation concessions |
|
(678 |
) |
|
|
(30 |
) |
|
Second
generation tenant improvements |
|
(7,433 |
) |
|
|
(4,714 |
) |
|
Second
generation leasing commissions |
|
(9,374 |
) |
|
|
(10,058 |
) |
|
Building
improvements |
|
(6,900 |
) |
|
|
|
|
|
(6,391 |
) |
|
|
|
Adjusted FFO -
diluted |
$ |
83,599 |
|
362,507 |
|
$ |
89,978 |
|
362,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Duke Realty Corporation and
Subsidiaries |
Summary of EPS, FFO and AFFO |
Twelve Months Ended December 31, |
(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 |
$ |
1,634,431 |
|
|
|
|
$ |
312,143 |
|
|
|
Less dividends on
participating securities |
|
(3,981 |
) |
|
|
|
|
|
(2,356 |
) |
|
|
|
Net income per
common share-basic |
|
1,630,450 |
|
355,762 |
$ |
4.58 |
|
|
309,787 |
|
349,942 |
$ |
0.89 |
Add back: |
|
Noncontrolling interest in earnings of unitholders |
|
15,176 |
|
3,303 |
|
|
3,089 |
|
3,481 |
|
Other
potentially dilutive securities |
|
3,981 |
|
2,946 |
|
|
|
|
2,356 |
|
3,653 |
|
|
Net income
attributable to common shareholders-diluted |
$ |
1,649,607 |
|
362,011 |
$ |
4.56 |
|
$ |
315,232 |
|
357,076 |
$ |
0.88 |
Reconciliation
to funds from operations ("FFO") |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to common shareholders |
$ |
1,634,431 |
|
355,762 |
|
$ |
312,143 |
|
349,942 |
|
Adjustments: |
|
Depreciation and amortization |
|
299,472 |
|
|
|
317,818 |
|
|
Company
share of joint venture depreciation, amortization and other |
|
9,674 |
|
|
|
14,188 |
|
|
Impairment charges - depreciable property |
|
859 |
|
|
|
3,719 |
|
|
Gains on
depreciable property sales - discontinued operations (1) |
|
(1,352,930 |
) |
|
|
(1,016 |
) |
|
Gains on
depreciable property sales - continuing operations |
|
(113,669 |
) |
|
|
(162,093 |
) |
|
Income
tax expense (benefit) triggered by depreciable property sales |
|
17,660 |
|
|
|
(589 |
) |
|
Gains on
depreciable property sales - unconsolidated joint ventures |
|
(50,693 |
) |
|
|
(23,896 |
) |
|
Gain on
dissolution of unconsolidated joint venture |
|
— |
|
|
|
(30,697 |
) |
|
Noncontrolling interest share of adjustments |
|
10,939 |
|
|
|
|
|
|
(1,157 |
) |
|
|
|
NAREIT FFO
attributable to common shareholders - basic |
|
455,743 |
|
355,762 |
$ |
1.28 |
|
|
428,420 |
|
349,942 |
$ |
1.22 |
Noncontrolling interest in income of unitholders |
|
15,176 |
|
3,303 |
|
|
3,089 |
|
3,481 |
|
Noncontrolling interest share of adjustments |
|
(10,939 |
) |
|
|
1,157 |
|
|
Other
potentially dilutive securities |
|
2,946 |
|
|
|
|
3,653 |
|
|
NAREIT FFO
attributable to common shareholders - diluted |
$ |
459,980 |
|
362,011 |
$ |
1.27 |
|
$ |
432,666 |
|
357,076 |
$ |
1.21 |
Gains on
land sales |
|
(9,244 |
) |
|
|
(9,865 |
) |
|
Gains on
land sales - unconsolidated joint ventures |
|
(3,085 |
) |
|
|
(3,175 |
) |
|
Loss on
debt extinguishment, including share of unconsolidated joint
ventures |
|
26,104 |
|
|
|
35,526 |
|
|
Gain on
non-depreciable property sale - unconsolidated joint ventures |
|
(119 |
) |
|
|
(6,156 |
) |
|
Land
impairment charges |
|
3,622 |
|
|
|
14,299 |
|
|
Promote
income |
|
(20,007 |
) |
|
|
(26,299 |
) |
|
Other
income tax items |
|
(7,685 |
) |
|
|
— |
|
|
Acquisition-related activity |
|
— |
|
|
|
|
|
|
(7,176 |
) |
|
|
|
Core FFO
attributable to common shareholders - diluted |
$ |
449,566 |
|
362,011 |
$ |
1.24 |
|
$ |
429,820 |
|
357,076 |
$ |
1.20 |
Adjusted
FFO |
|
|
|
|
|
|
|
|
|
|
|
|
|
Core FFO - diluted |
$ |
449,566 |
|
362,011 |
$ |
1.24 |
|
$ |
429,820 |
|
357,076 |
$ |
1.20 |
Adjustments: |
|
Straight-line rental income and expense |
|
(17,328 |
) |
|
|
(17,107 |
) |
|
Amortization of above/below market rents and concessions |
|
1,201 |
|
|
|
1,526 |
|
|
Stock
based compensation expense |
|
18,490 |
|
|
|
18,593 |
|
|
Noncash
interest expense |
|
5,780 |
|
|
|
6,156 |
|
|
Second
generation concessions |
|
(772 |
) |
|
|
(341 |
) |
|
Second
generation tenant improvements |
|
(18,630 |
) |
|
|
(22,668 |
) |
|
Second
generation leasing commissions |
|
(24,634 |
) |
|
|
(29,555 |
) |
|
Building
improvements |
|
(15,015 |
) |
|
|
|
|
|
(8,330 |
) |
|
|
|
Adjusted FFO -
diluted |
$ |
398,658 |
|
362,011 |
|
$ |
378,094 |
|
357,076 |
|
(1)
Excludes noncontrolling interest adjustment of ($4.8 million) that
relates to depreciable property sales - discontinued operations
during the twelve months ended December 31, 2017. |
|
|
Duke Realty Corporation and
Subsidiaries |
Reconciliation of Same Property Net Operating
Income Growth |
(Unaudited and in thousands) |
|
|
Three Months Ended |
|
December 31, 2017 |
|
December 31, 2016 |
|
Income from continuing
operations before income taxes |
$ |
54,422 |
|
|
$ |
40,504 |
|
Share of same property
NOI from unconsolidated joint ventures |
|
3,774 |
|
|
|
4,010 |
|
Income and expense
items not allocated to segments |
|
80,622 |
|
|
|
79,927 |
|
Earnings from service
operations |
|
(847 |
) |
|
|
(127 |
) |
Properties not included
and other adjustments |
|
(28,167 |
) |
|
|
(17,909 |
) |
Same property NOI |
$ |
109,804 |
|
|
$ |
106,405 |
|
|
Percent Change |
|
3.2 |
% |
|
|
|
Twelve Months Ended |
|
December 31, 2017 |
|
December 31, 2016 |
|
Income from continuing
operations before income taxes |
$ |
290,235 |
|
|
$ |
297,832 |
|
Share of same property
NOI from unconsolidated joint ventures |
|
15,071 |
|
|
|
16,465 |
|
Income and expense
items not allocated to segments |
|
230,686 |
|
|
|
182,904 |
|
Earnings from service
operations |
|
(4,963 |
) |
|
|
(8,343 |
) |
Properties not included
and other adjustments |
|
(99,681 |
) |
|
|
(73,939 |
) |
Same property NOI |
$ |
431,348 |
|
|
$ |
414,919 |
|
|
Percent Change |
|
4.0 |
% |
|
|
|
Duke Realty Corporation and
Subsidiaries |
Reconciliation of 2018 FFO
Guidance |
(Unaudited ) |
|
|
Pessimistic |
|
|
Optimistic |
|
Net income per common
share, diluted |
$ |
0.68 |
|
|
$ |
0.98 |
|
Depreciation and gains
on sales of depreciated property (including share of joint
venture) |
|
0.56 |
|
|
|
0.34 |
|
FFO per share -
diluted, as defined by NAREIT |
$ |
1.24 |
|
|
$ |
1.32 |
|
Gains on land
sales |
|
— |
|
|
|
(0.02 |
) |
Core FFO per share -
diluted |
$ |
1.24 |
|
|
$ |
1.30 |
|
|
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