-- Recurring funds from operations per diluted share which excludes certain
non-recurring items ("Recurring FFO") was $0.31 for the quarter and
$1.45 for the year; in line with guidance. FFO including non-recurring
items was $0.33 for the quarter and $0.06 for the year.
-- Liquidity position further enhanced during the quarter:
-- Unsecured revolving line of credit completed; $850 million facility
renewed through February 2013 with $200 million accordion feature;
no balance outstanding on the line at year end;
-- Properties and land sold; $150 million in proceeds generated in
the fourth quarter;
-- Available cash at year end to pay all 2010 unsecured debt
maturities;
-- Over $1.6 billion of capital raised during the year.
-- Positive momentum in operating performance:
-- Overall portfolio occupancy increased to 87.8 percent;
-- Tenant retention rate at nearly 80 percent;
-- Positive net absorption for the quarter and over 22 million square
feet of leases completed during the year;
-- Total overhead expenses reduced over 10 percent year over
year according to plan.
-- 2010 Recurring FFO guidance issued: $0.95 - $1.15 per share.
"During 2009 we made significant progress on the capital side of our
business, raising over $1.6 billion. In addition, during the fourth
quarter we renewed our line of credit through 2013 and had no balance
outstanding on the line at year end," said Dennis D. Oklak, chairman and
chief executive officer. "We also ended the year with positive leasing
momentum, increasing our occupancy by 80 basis points during the fourth
quarter."
Oklak continued, "As we look forward to 2010, we expect economic conditions
to remain challenging; however, we will continue to execute on our
operating, capital and asset strategies."
Financial Performance
-- The following table reconciles FFO, as defined by NAREIT, to
Recurring FFO as measured by the company, for both the fourth quarter and
years ended 2009 and 2008.
Three Months Twelve Months
Ended Ended
December 31, December 31,
2009 2008 2009 2008
----- ----- ----- -----
FFO $0.33 $0.70 $0.06 $2.51
Adjustments
Impairment charges and
loss on business combinations - 0.07 1.45 0.07
Gains on debt transactions - (0.01) (0.10) (0.01)
Gains on preferred stock repurchases - (0.09) - (0.09)
Valuation adjustments on deferred tax assets (0.02) - 0.04 -
----- ----- ----- -----
Recurring FFO $0.31 $0.67 $1.45 $2.48
===== ===== ===== =====
-- Recurring FFO for the fourth quarter was $0.31 compared with $0.67 for
the fourth quarter of 2008. The variance is primarily attributable to an
increase in our weighted average share count due to the common equity
offering in April 2009, gains on the sale of land and build-for-sale
properties in the fourth quarter of 2008 and gains on the repurchase of
preferred stock and debt in the fourth quarter of 2008. Recurring FFO for
the year was $1.45 compared with $2.48 for 2008 and this variance was also
primarily attributable to the same items mentioned above, causing the
quarterly variance. Recurring FFO includes $2.9 million ($0.01 per share)
and $9.6 million ($0.05 per share) of severance costs for the fourth
quarter and year 2009, respectively.
-- Net income per diluted share (EPS) for fourth quarter 2009 was a loss of
$0.02, as compared to earnings of $0.13 for the same quarter in 2008. The
variance is primarily attributable to a gain on the repurchase of preferred
stock and debt recognized in the fourth quarter of 2008. EPS for the year
was a loss of $1.67 compared to earnings of $0.33 for 2008. The loss was
primarily driven by $302.6 million of non-cash impairment charges
recognized in 2009 and the dilution from the follow on equity offering as
noted above.
Financing Transactions and Liquidity
-- The company successfully renewed its unsecured revolving credit
facility in November 2009. Under terms of the renewal, the facility has a
borrowing capacity of $850 million with an interest rate on borrowings of
275 basis points plus LIBOR, and matures in February 2013. The terms also
include a $200 million accordion feature to increase the facility to $1.05
billion. There is currently no balance outstanding under the facility.
-- Total capital raised in 2009 exceeded $1.6 billion from equity and
unsecured debt offerings, asset sales, and secured financing transactions.
As of year-end 2009, the company had nearly $1 billion of liquidity
available from its available unsecured line of credit and cash on hand.
Portfolio Performance
"Despite the challenging leasing markets, 2009 ended with positive momentum
in operations including filling a significant portion of our speculative
industrial space with long-term leases and quality tenants," said Mr.
Oklak. "Our tenant retention for 2009 was nearly 80 percent and we
extended near term expirations when appropriate. The decisions we made
throughout 2009 will contribute positively for the future as we come out of
the recession."
Specific operational highlights include:
-- Overall portfolio occupancy, including projects under development, was
87.8 percent as of December 31, 2009, compared to 87.0 percent at September
30, 2009.
-- Tenant retention for the fourth quarter and year were 79.6 percent and
79.4 percent, respectively.
-- The company executed major leases for properties during the fourth
quarter, including filling speculative industrial buildings in Columbus,
Chicago and Atlanta totaling 2 million square feet.
-- Same property net operating income decreased by 5.9 percent for the
fourth quarter of 2009, compared with the three-month period ended December
31, 2008. Same property net operating income decreased by approximately 2.7
percent for the 12-month period ended December 31, 2009, compared with the
same period ended December 31, 2008, and was within expectations given the
economic environment.
Real Estate Investment Activity
Development
Wholly Owned Properties
-- The company's wholly owned development pipeline at December 31, 2009
consists of four significantly pre-leased projects and reflects reduced
development volume as well as the company's focus on pre-leased projects.
The total estimated costs of these projects upon stabilization are $122.2
million, with $30.4 million in costs remaining to be funded. The pipeline
is 662,000 square feet and 97 percent pre-leased in the aggregate.
-- During the fourth quarter 2009, the company placed into service five
buildings and completed one expansion on an existing industrial asset. In
aggregate, these assets and expansion totaled 702,000 square feet and were
83.6% pre-leased. Included in these assets were four medical office
properties totaling approximately 280,000 square feet, which were 58.9%
pre-leased in the aggregate, a 306,977 square foot expansion to a 100% pre-
leased industrial building, and an 116,000 square foot, 100% pre-leased
suburban office building.
Joint Venture Properties
-- The company's joint venture development pipeline at December 31,
2009, consists of two projects which total 497,000 square feet and are 13
percent pre-leased. The total estimated costs of these projects upon
stabilization are $157.8 million, with $61.9 million in remaining costs to
be funded. Each joint venture has obtained third-party debt to finance
construction of these properties. (All joint venture costs and square
footage are reported at 100 percent ownership.)
-- The company began construction of one medical office property (62,000
square feet) that is 100% pre-leased.
Dispositions
Proceeds from fourth quarter non-strategic building dispositions were
$144.4 million at a stabilized capitalization rate of 8.3 percent and
primarily comprised of mid-west office properties. For the year ended
2009, the company received gross proceeds of $299.7 million from the sale
of non-strategic properties and land parcels.
Dividends Declared
The company's board of directors declared a quarterly cash dividend on the
company's common stock of $0.17 per share, or $0.68 per share on an
annualized basis. The fourth quarter dividend will be payable February 26,
2010, to shareholders of record as of February 12, 2010.
The board also declared the following dividends on the company's
outstanding preferred stock:
NYSE Quarterly
Class Symbol Amount/Share Record Date Payment Date
--------- -------- -------------- ----------------- -----------------
Series J DREPRJ $ 0.414063 February 12, 2010 February 26, 2010
Series K DREPRK $ 0.406250 February 12, 2010 February 26, 2010
Series L DREPRL $ 0.412500 February 12, 2010 February 26, 2010
Series M DREPRM $ 0.434375 March 17, 2010 March 31, 2010
Series N DREPRN $ 0.453125 March 17, 2010 March 31, 2010
Series O DREPRO $ 0.523438 March 17, 2010 March 31, 2010
Earnings Guidance and 2010 Outlook
"As we look forward to the remainder of 2010, we expect another challenging
year given the state of the economy," Oklak said. "While economic
forecasts call for tepid GDP growth during 2010, unemployment remains high
and is expected to worsen with nominal economic growth forecasted by the
end of the year. Our earnings guidance reflects the economic environment we
face as we continue to focus on improving our portfolio performance and
further positioning our business for growth as the economy recovers."
The company expects Recurring FFO for 2010 to be in the range of $0.95 to
$1.15 per share. The assumptions underlying Recurring FFO guidance are as
follows:
-- No gains from the sale of build-for-sale properties;
-- Relatively flat occupancy performance;
-- Slightly declining same property NOI growth;
-- Dilutive effect of non-strategic property dispositions;
-- Flat new development volume; and
-- No acquisitions
More specific assumptions and components of 2010 Recurring FFO will be
available after 6:00pm EST today through the Investor Relations section of
company's web-site.
Information Regarding FFO
We compute FFO in accordance with standards established by the National
Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines
FFO as net income (loss) before non-controlling interest and excluding
gains (losses) on sales of depreciable property and extraordinary items
(computed in accordance with generally accepted accounting principles
("GAAP")); plus real estate related depreciation and amortization, and
after similar adjustments for unconsolidated joint ventures. We believe
FFO to be most directly comparable to net income as defined by GAAP. We
believe 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 our cash needs, including our ability to
make cash distributions to shareholders. A reconciliation of net income
per share, as defined by GAAP, to FFO per share, as defined by NAREIT, is
included in the financial information accompanying this release.
For information purposes, we also provide FFO adjusted for certain
non-recurring items such as impairment charges, gains (losses) on debt
transactions and gains (losses) on the repurchases of preferred stock to
reflect what management defines as Recurring FFO. Although our calculation
of Recurring FFO differs from NAREIT's definition of FFO and may not be
comparable to that of other REITs and real estate companies, we believe it
provides a meaningful supplemental measure of our operating performance. A
reconciliation of FFO as defined by NAREIT to Recurring FFO is included in
the Financial Performance section of this release.
About Duke Realty Corporation
Duke Realty Corporation owns and operates more than 135 million rentable
square feet of industrial and office, including medical office, space in 20
U.S. cities. Duke Realty Corporation is publicly traded on the NYSE under
the symbol DRE and is listed on the S&P MidCap 400 Index. More information
about Duke is available at www.dukerealty.com.
Fourth Quarter Earnings Call and Supplemental Information
Duke is hosting a conference call tomorrow, January 28, 2010, at 3:00 p.m.
EST 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 Web site.
A copy of the company's supplemental information fact book will be
available after 6:00 p.m. EST today through the Investor Relations section
of the company's Web site.
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, projected financing sources, future
transactions with joint venture partners, 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, including the
current economic recession; (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) increases in operating
costs; (x) changes in the dividend policy for the company's common stock;
(xi) the reduction in the company's income in the event of multiple lease
terminations by tenants; and (xii) impairment charges. 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,
2008. 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
Statement of Operations
December 31, 2009
(In thousands, except per share amounts)
Quarter Ended Twelve Months Ended
---------------------- ----------------------
December 31, December 31,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Revenues:
Rental and related
revenue $ 226,098 $ 219,824 $ 894,580 $ 857,559
General contractor and
service fee revenue 114,097 162,777 449,509 434,624
---------- ---------- ---------- ----------
340,195 382,601 1,344,089 1,292,183
---------- ---------- ---------- ----------
Expenses:
Rental expenses 50,759 48,309 203,537 191,264
Real estate taxes 30,143 26,866 119,113 103,819
General contractor and
service operations
expenses 108,314 151,865 427,666 418,743
Depreciation and
amortization 85,117 82,991 338,975 308,139
---------- ---------- ---------- ----------
274,333 310,031 1,089,291 1,021,965
---------- ---------- ---------- ----------
Other Operating Activities
Equity in earnings of
unconsolidated companies 2,543 6,633 9,896 23,817
Gain on sale of
properties 12,337 12,400 12,337 39,057
Earnings from sales of
land - 4,160 357 12,651
Undeveloped land carrying
costs (2,757) (2,458) (10,403) (8,204)
Impairment charges - (10,716) (301,794) (10,165)
Other operating expenses (174) (2,474) (1,017) (8,298)
General and
administrative expense (13,224) (10,008) (47,937) (39,508)
---------- ---------- ---------- ----------
(1,275) (2,463) (338,561) 9,350
---------- ---------- ---------- ----------
Operating income
(loss) 64,587 70,107 (83,763) 279,568
Other Income (Expense)
Interest and other income
(expense), net 305 228 1,229 1,451
Interest expense (59,160) (52,823) (220,239) (198,449)
Gain (loss) on debt
transactions (180) 1,953 20,700 1,953
Loss on business
combinations (63) - (1,062) -
---------- ---------- ---------- ----------
Income (loss) from
continuing
operations before
income taxes 5,489 19,465 (283,135) 84,523
Income tax benefit
(expense) 3,128 2,090 13,348 7,005
Valuation allowance on
deferred tax asset 4,995 - (7,278) -
---------- ---------- ---------- ----------
Income (loss) from
continuing
operations 13,612 21,555 (277,065) 91,528
Discontinued Operations:
Income (loss) before
impairment and gain on
sales (58) 203 (439) 3,185
Impairment charges - (1,266) (772) (1,266)
Gain on sale of
depreciable properties 1,618 5,021 6,786 16,961
---------- ---------- ---------- ----------
Income (loss) from
discontinued
operations 1,560 3,958 5,575 18,880
Net income (loss) 15,172 25,513 (271,490) 110,408
Dividends on preferred
shares (18,362) (18,388) (73,451) (71,426)
Gain on repurchase of
preferred shares, net - 14,046 - 14,046
Net (income) loss
attributable to
noncontrolling interests 157 (1,043) 11,340 (2,620)
---------- ---------- ---------- ----------
Net income (loss)
attributable to
common shareholders ($ 3,033) $ 20,128 ($ 333,601) $ 50,408
========== ========== ========== ==========
Basic net income (loss) per
Common Share:
Continuing operations
attributable to common
shareholders ($ 0.02) $ 0.10 ($ 1.70) $ 0.20
Discontinued operations
attributable to common
shareholders $ 0.00 $ 0.03 $ 0.03 $ 0.13
---------- ---------- ---------- ----------
Total ($ 0.02) $ 0.13 ($ 1.67) $ 0.33
========== ========== ========== ==========
Diluted net income (loss)
per Common Share:
Continuing operations
attributable to common
shareholders ($ 0.02) $ 0.10 ($ 1.70) $ 0.20
Discontinued operations
attributable to common
shareholders $ 0.00 $ 0.03 $ 0.03 $ 0.13
---------- ---------- ---------- ----------
Total ($ 0.02) $ 0.13 ($ 1.67) $ 0.33
========== ========== ========== ==========
Duke Realty Corporation
Statement of Funds From Operations
December 31, 2009
(In thousands, except per share amounts)
Three Months Ended
December 31,
(Unaudited)
--------------------------------------------------
2009 2008
------------------------- -----------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
--------- ------- ------ ------- ------- -------
Net Income (Loss)
Attributable to
Common Shares ($ 3,033) $20,128
Less: Dividends on
share based awards
expected to vest (391) (415)
--------- -------
Net Income (Loss) Per
Common Share- Basic (3,424) 224,012 ($0.02) 19,713 147,615 $ 0.13
Add back:
Noncontrolling
interest in
earnings of
unitholders - 1,025 7,299
Potentially
dilutive
securities
--------- ------- ------- -------
Net Income (Loss) Per
Common Share- Diluted ($ 3,424) 224,012 ($0.02) $20,738 154,914 $ 0.13
========= ======= ======= =======
Reconciliation to
Funds From Operations
("FFO")
Net Income (Loss)
Attributable to
Common Shares ($ 3,033) 224,012 $20,128 147,615
Adjustments:
Depreciation and
amortization 85,453 83,996
Company share of
joint venture
depreciation and
amortization 8,953 9,552
Earnings from
depreciable
property
sales-wholly
owned (13,955) (5,021)
Earnings from
depreciable
property sales-JV - -
Noncontrolling
interest share of
adjustments (2,308) (4,176)
--------- ------- ------- -------
Funds From Operations-
Basic 75,110 224,012 $ 0.34 104,479 147,615 $ 0.71
Noncontrolling
interest in
earnings (loss)
of unitholders (89) 6,617 1,025 7,299
Joint venture
partner
convertible
ownership option - 1,708 4,284
Noncontrolling
interest share of
adjustments 2,308 4,176
Potentially
dilutive
securities 1,352 433
--------- ------- ------- -------
Funds From Operations-
Diluted 77,329 231,981 $ 0.33 111,388 159,631 $ 0.70
(Gains) losses on
debt transactions 180 (1,953)
Gains on preferred
stock repurchases - (14,046)
Impairment charges
and loss on
business
combination 63 11,431
Change in
valuation
allowance on
deferred tax
assets (4,995) -
--------- ------- ------- -------
Recurring Funds From
Operations- Diluted $ 72,577 231,981 $ 0.31 106,820 159,631 $ 0.67
========= ======= ======= =======
Twelve Months Ended
December 31,
(Unaudited)
--------------------------------------------------
2009 2008
------------------------- -----------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
--------- ------- ------ ------- ------- -------
Net Income (Loss)
Attributable to
Common Shares ($333,601) $50,408
Less income allocated
to participating
securities (1,759) (1,631)
--------- -------
Net Income (Loss) Per
Common Share- Basic (335,360) 201,206 ($1.67) 48,777 146,915 $ 0.33
Add back:
Noncontrolling
interest in
earnings of
unitholders - 2,640 7,619
Potentially
dilutive
securities 19
--------- ------- ------- -------
Net Income (Loss) Per
Common Share- Diluted ($335,360) 201,206 ($1.67) $51,417 154,553 $ 0.33
========= ======= ======= =======
Reconciliation to
Funds From Operations
("FFO")
Net Income (Loss)
Attributable to
Common Shares ($333,601) 201,206 $50,408 146,915
Adjustments:
Depreciation and
amortization 340,126 314,952
Company share of
joint venture
depreciation and
amortization 36,966 38,321
Earnings (loss)
from depreciable
property
sales-wholly
owned (19,123) (16,961)
Earnings (loss)
from depreciable
property sales-JV - (495)
Noncontrolling
interest share of
adjustments (11,514) (16,527)
--------- ------- ------- -------
Funds From Operations-
Basic 12,854 201,206 $ 0.06 369,698 146,915 $ 2.52
Noncontrolling
interest in
earnings (loss)
of unitholders (11,099) 6,687 2,640 7,619
Noncontrolling
interest share of
adjustments 11,514 16,527
Potentially
dilutive
securities 1,104 507
--------- ------- ------- -------
Funds From Operations-
Diluted 13,269 208,997 $ 0.06 388,865 155,041 $ 2.51
(Gains) losses on
debt transactions (20,700) (1,953)
Gains on preferred
stock repurchases - (14,046)
Impairment charges
and loss on
business
combination 303,271 11,431
Change in
valuation
allowance on
deferred tax
assets 7,278 -
--------- ------- ------- -------
Recurring Funds From
Operations- Diluted $ 303,118 208,997 $ 1.45 384,297 155,041 $ 2.48
========= ======= ======= =======
Duke Realty Corporation
Balance Sheet
December 31, 2009
(In thousands, except per share amounts)
December 31, December 31,
2009 2008
----------- -----------
ASSETS:
Rental Property $ 6,390,119 $ 6,297,923
Less: Accumulated Depreciation (1,311,733) (1,167,113)
Construction in Progress 103,298 159,330
Land Held for Development 660,723 806,379
----------- -----------
Net Real Estate Investments 5,842,407 6,096,519
----------- -----------
Cash 147,322 22,532
Accounts Receivable 20,604 28,026
Straight-line Rents Receivable 131,934 123,863
Receivables on Construction Contracts 18,755 75,100
Investments in and Advances to Unconsolidated
Companies 501,121 693,503
Deferred Financing Costs, Net 54,489 47,907
Deferred Leasing and Other Costs, Net 371,286 369,224
Escrow Deposits and Other Assets 216,361 234,209
----------- -----------
Total Assets $ 7,304,279 $ 7,690,883
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Secured Debt $ 785,797 $ 507,351
Unsecured Notes 3,052,465 3,285,980
Unsecured Line of Credit 15,770 483,659
Construction Payables and Amounts due
Subcontractors 43,147 105,227
Accrued Real Estate Taxes 84,347 78,483
Accrued Interest 62,971 56,376
Accrued Expenses 48,758 45,059
Other Liabilities 198,906 187,425
Tenant Security Deposits and Prepaid Rents 44,258 41,348
----------- -----------
Total Liabilities 4,336,419 4,790,908
----------- -----------
Preferred Stock 1,016,625 1,016,625
Common Stock and Additional Paid-in Capital 3,269,436 2,703,997
Accumulated Other Comprehensive Income (5,630) (8,652)
Distributions in Excess of Net Income (1,355,086) (867,951)
----------- -----------
Total Shareholders' Equity 2,925,345 2,844,019
----------- -----------
Non-controlling Interest 42,515 55,956
----------- -----------
Total Liabilities and Equity $ 7,304,279 $ 7,690,883
=========== ===========
Contact Information: Contact Information: Media: Jim Bremner 317.808.6920 jim.bremner@dukerealty.com Investors: Randy Henry 317.808.6060 randy.henry@dukerealty.com