-- Core funds from operations per diluted share ("Core FFO") was $0.30
for the quarter. Funds from Operations per diluted share ("FFO")
as defined by the National Association of Real Estate Investment Trusts
("NAREIT") was $0.50 for the quarter and included $57.5 million
($0.22 per share) associated with a net gain on the acquisition of our
Dugan Realty, L.L.C. ("Dugan") joint venture partner's 50% interest
in industrial assets, and a $5.7 million ($0.02 per share) reduction
from adjustments related to the repurchase of preferred stock in the
open market.
-- Overall portfolio performance improved:
-- Overall portfolio occupancy at September 30, 2010 was 88.9 percent,
up a full one percent from 87.9 percent at June 30, 2010.
-- Tenant retention rate was 78.5 percent for the quarter.
-- Over 8.5 million square feet of leases were executed during the
quarter.
-- Same property net operating income for the three months ended
September 30, 2010, increased 1.5 percent.
-- Asset and Capital strategy execution:
-- Acquisitions completed during the third quarter of 2010 totaled
$442.0 million, including the acquisition of our joint venture
partner's 50 percent interest in Dugan for $298.2 million.
-- $53.7 million face amount of 8.375% Series O preferred stock was
repurchased in the open market during the third quarter, at a
7.8 percent yield.
-- Dispositions of non-strategic assets during the quarter totaled
$42.6 million.
-- 2010 Core FFO guidance is being updated to $1.11 to $1.15 per share
from previously announced $0.95 - $1.15 per share.
Financial Performance
-- Core FFO for the third quarter was $0.30 compared with $0.32 for the third quarter of 2009. The change is primarily attributable to an increase in the company's weighted average share count resulting from its June 2010 common equity offering. FFO as defined by NAREIT was $0.50 for the third quarter 2010 and a loss of ($1.02) for the third quarter 2009. Included in the $0.50 per share for 2010 is $57.5 million ($0.22 per share) associated with a net gain on the acquisition of our joint venture partner's 50% interest in Dugan, and a $5.7 million ($0.02 per share) reduction from adjustments related to the repurchase of preferred stock in the open market. Included in the 2009 third quarter FFO loss of $1.02 were non-cash impairment and related charges of $297.1 million ($1.28 per share), and $13.6 million ($0.06 per share) of losses on debt transactions. A reconciliation of FFO as defined by NAREIT to Core FFO is included in the Financial Performance section of this release. -- Net income per diluted share (EPS) for third quarter 2010 was $0.13, as compared to a loss of $1.44 for the same quarter in 2009. Third quarter 2010 EPS was positively impacted by the $57.5 million gain on the acquisition of our joint venture partner's 50% interest in Dugan as noted above. The loss in 2009 was primarily attributable to the impairment and other non-cash charges and losses on debt transactions recognized in the third quarter of 2009.Portfolio Performance Operational highlights include:
-- Overall portfolio occupancy, including projects under development, was 88.9 percent as of September 30, 2010, compared to 87.9 percent at June 30, 2010. -- Occupancy in the bulk distribution portfolio surpassed the 90.0 percent threshold, ending at 90.2 percent as of September 30, 2010. -- Occupancy in the suburban office portfolio was 85.7 percent, an increase of 117 basis points over second quarter 2010. -- Tenant retention for the quarter was 78.5 percent. -- Same-property net operating income for the three months ended September 30th increased 1.5 percent, improving over a 1.6 percent decrease in same property net operating income for the three months ended June 30, 2010. For the twelve months ended September 30, 2010, same property net operating income decreased by 1.7 percent, improving from a 3.0 percent decrease for the twelve months ended June 30, 2010.Real Estate Investment Activity Acquisitions After raising over $600 million of capital from multiple sources in the second quarter of 2010, the company utilized a portion of the proceeds to execute the following:
-- On July 1st, the company closed the previously announced acquisition of our joint venture partner's 50 percent interest in Dugan. The acquired portfolio includes 106 industrial buildings totaling 20.8 million square feet located in Midwest and Southeast markets. -- In August, the company acquired two suburban office assets in South Florida. The buildings total over 465,000 square feet and were 89 percent leased as of September 30, 2010. -- In September, the company acquired a joint venture partner's 50% interest in a 936,000 square foot bulk industrial asset located in Columbus, OH. The asset is 100 percent leased to a single tenant.Development Wholly Owned Properties
-- During the quarter, the company executed a build-to-suit lease for a 1.3 million square foot bulk industrial building. The lease is for ten years and the project, which is now under construction, is located in Columbus, Ohio. -- The company's wholly owned development pipeline at September 30, 2010 consists of two pre-leased medical office projects totaling over 250,000 square feet and the 100 percent pre-leased build-to-suit industrial project noted above. The total estimated costs of these projects upon stabilization are $109.4 million, with $49.4 million in costs remaining to be funded. The total pipeline is 1.6 million square feet which is 99.0 percent pre-leased in the aggregate. -- During the third quarter 2010, the company placed into service a 48,000 square foot medical office building that was 90.3 percent leased when placed in-service.Joint Venture Properties
-- During the quarter, the company executed a lease for and began construction of a 406,000 square foot expansion for a single tenant industrial building in Indianapolis. -- The company's joint venture development pipeline at September 30, 2010 consists of two medical office projects which total 522,000 square feet and are 94 percent pre-leased, and a 406,000 square foot expansion noted above. The total estimated costs of these projects upon stabilization are $202.7 million, with $100.1 million in remaining costs to be funded. (All joint venture costs and square footage are reported for 100 percent ownership.)Dispositions Proceeds from third quarter building dispositions at a stabilized capitalization rate of 8.4 percent were $42.6 million. Significant dispositions included:
-- A 282,000 square foot industrial building located in Louisville, KY sold to the existing tenant; -- A 173,000 square foot industrial building located in St. Louis, MO sold to a user; and -- A 61,000 square foot office building located in Raleigh, NC sold to a third party.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 third quarter dividend will be payable November 30, 2010, to shareholders of record as of November 16, 2010. The board also declared the following dividends on the company's outstanding preferred stock:
Quarterly
Class NYSE Symbol Amount/Share Record Date Payment Date
-------- ----------- ------------- ----------------- -----------------
Series J DREPRJ $0.414063 November 16, 2010 November 30, 2010
Series K DREPRK $0.406250 November 16, 2010 November 30, 2010
Series L DREPRL $0.412500 November 16, 2010 November 30, 2010
Series M DREPRM $0.434375 December 17, 2010 December 31, 2010
Series N DREPRN $0.453125 December 17, 2010 December 31, 2010
Series O DREPRO $0.523438 December 17, 2010 December 31, 2010
2010 Earnings Guidance
The company adjusted its full-year 2010 Core FFO guidance to $1.11 to $1.15
per share from its previous range of $0.95 to $1.15 per share. The updated
guidance reflects the effects of the June 2010 common equity offering on
the respective periods.
Information Regarding FFO
The company computes 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. The company
believes FFO to be most directly comparable to net income as defined by
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 its ability to make cash distributions to shareholders. A
reconciliation of net income and net income per share, as defined by GAAP,
to FFO and FFO per share, as defined by NAREIT, is included in the
financial information accompanying this release.
For information purposes, the company also provides 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 impairment charges, tax expenses or benefits related to
either changes in deferred tax asset valuation allowances or changes in tax
exposure accruals that were established as the result of the adoption of
new accounting principles, gains (losses) on debt transactions, adjustments
related to the repurchase of preferred stock and gains on and related costs
of acquisitions. Although the 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. A reconciliation of FFO
as defined by NAREIT to Core FFO is included in the Financial Performance
section of this release.
About Duke Realty
Duke Realty owns and operates more than 135 million rentable square feet of
industrial and office, including medical office, space in 18 major U.S.
cities. Duke Realty is publicly traded on the NYSE under the symbol DRE and
is listed on the S&P MidCap 400 Index. More information about Duke Realty
is available at www.dukerealty.com.
Third Quarter Earnings Call and Supplemental Information
Duke Realty is hosting a conference call tomorrow, October 28, 2010, at
3:00 p.m. EDT 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 Web site.
A copy of the company's supplemental information will be available by 6:00
p.m. EDT 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,
2009. 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
September 30, 2010
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
---------------------- ----------------------
September 30, September 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Revenues:
Rental and related
revenue $ 238,920 $ 219,082 $ 674,413 $ 653,078
General contractor and
service fee revenue 132,351 100,880 414,391 335,412
---------- ---------- ---------- ----------
371,271 319,962 1,088,804 988,490
---------- ---------- ---------- ----------
Expenses:
Rental expenses 50,261 49,030 151,221 150,021
Real estate taxes 34,405 29,202 93,381 86,722
General contractor and
service other services
expenses 124,653 96,241 392,433 319,352
Depreciation and
amortization 97,323 85,880 261,748 248,870
---------- ---------- ---------- ----------
306,642 260,353 898,783 804,965
---------- ---------- ---------- ----------
Other Operating Activities
Equity in earnings of
unconsolidated companies 580 2,364 7,525 7,353
Gain (loss) on sale of
properties (125) - 6,917 -
Earnings from sales of
land - - - 357
Undeveloped land carrying
costs (2,359) (2,601) (7,152) (7,646)
Impairment charges (1,860) (274,572) (9,834) (291,521)
Other operating expenses (580) (323) (1,002) (843)
General and
administrative expense (8,476) (11,233) (31,171) (34,713)
---------- ---------- ---------- ----------
(12,820) (286,365) (34,717) (327,013)
---------- ---------- ---------- ----------
Operating income (loss) 51,809 (226,756) 155,304 (143,488)
Other income (expense)
Interest and other
income, net 149 796 504 924
Interest expense (64,049) (56,180) (182,771) (157,260)
Gain (loss) on debt
transactions (167) (13,631) (16,294) 20,880
Gain (loss) on business
combinations, net 57,513 - 57,513 (999)
---------- ---------- ---------- ----------
Income (loss) from
continuing operations
before income taxes 45,255 (295,771) 14,256 (279,943)
Income tax benefit - 4,326 - 10,220
Other income tax items 1,126 (12,273) 1,126 (12,273)
---------- ---------- ---------- ----------
Income (loss) from
continuing operations 46,381 (303,718) 15,382 (281,996)
Discontinued Operations:
Income (loss) before
impairment charges and
gain on sales (473) (160) (322) 1,211
Impairment charges - (10,273) - (11,045)
Gain on sale of
depreciable properties 11,527 - 24,383 5,168
---------- ---------- ---------- ----------
Income from
discontinued operations 11,054 (10,433) 24,061 (4,666)
Net income (loss) 57,435 (314,151) 39,443 (286,662)
Dividends on preferred
shares (16,726) (18,363) (53,452) (55,089)
Adjustments for repurchase
of preferred shares (5,652) - (10,144) -
Net (income) loss
attributable to
noncontrolling interests (993) 9,632 562 11,583
---------- ---------- ---------- ----------
Net income (loss)
attributable to
common shareholders $ 34,064 $ (322,882) $ (23,591) $ (330,168)
========== ========== ========== ==========
Basic net income (loss) per
common share:
Continuing operations
attributable to common
shareholders $ 0.09 $ (1.40) $ (0.21) $ (1.69)
Discontinued operations
attributable to common
shareholders $ 0.04 $ (0.04) $ 0.10 $ (0.02)
---------- ---------- ---------- ----------
Total $ 0.13 $ (1.44) $ (0.11) $ (1.71)
========== ========== ========== ==========
Diluted net income (loss)
per common share:
Continuing operations
attributable to common
shareholders $ 0.09 $ (1.40) $ (0.21) $ (1.69)
Discontinued operations
attributable to common
shareholders $ 0.04 $ (0.04) $ 0.10 $ (0.02)
---------- ---------- ---------- ----------
Total $ 0.13 $ (1.44) $ (0.11) $ (1.71)
========== ========== ========== ==========
Duke Realty Corporation
Statement of Funds From Operations
September 30, 2010
(In thousands, except per share amounts)
Three Months Ended
September 30,
(Unaudited)
----------------------------------------------------
2010 2009
------------------------- -------------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
--------- ------- ------ --------- ------- ------
Net Income (Loss)
Attributable to
Common Shares $ 34,064 ($322,882)
Less: Dividends on
share based awards
expected to vest (694) (391)
--------- ---------
Net Income (Loss)
Per Common Share-
Basic 33,370 251,866 $ 0.13 (323,273) 223,952 ($1.44)
Add back:
Noncontrolling
interest in
earnings of
unitholders 1,041 5,517 -
Other potentially
dilutive securities
--------- ------- --------- -------
Net income (Loss)
Per Common Share-
Diluted $ 34,411 257,383 $ 0.13 ($323,273) 223,952 ($1.44)
========= ======= ========= =======
Reconciliation to
Funds From
Operations ("FFO")
Net Income (Loss)
Attributable to
Common Shares $ 34,064 251,866 ($322,882) 223,952
Adjustments:
Depreciation and
amortization 97,913 87,647
Company share of
joint venture
depreciation and
amortization 7,336 8,543
Earnings from
depreciable
property sales-
wholly owned,
discontinued
operations (11,527) -
Earnings from
depreciable
property sales-
wholly owned,
continuing
operations 125 -
Earnings from
depreciable
property sales-JV - -
Noncontrolling
interest share
of adjustments (2,018) (2,771)
--------- ------- --------- -------
Funds From
Operations- Basic 125,893 251,866 $ 0.50 (229,463) 223,952 ($1.02)
Noncontrolling
interest in income
(loss) of
unitholders 1,041 5,517 (9,545) 6,646
Noncontrolling
interest share
of adjustments 2,018 2,771
Other potentially
dilutive securities 2,621 1,073
--------- ------- --------- -------
Funds From
Operations- Diluted $ 128,952 260,004 $ 0.50 ($236,237) 231,671 ($1.02)
(Gains) losses on
debt transactions 167 13,631
Adjustments for
repurchases of
preferred shares 5,652 -
Impairment charges 1,860 284,845
Gain on business
combinations, net (57,513) -
Other income tax
items (1,126) 12,273
--------- ------- --------- -------
Core Funds From
Operations- Diluted $ 77,992 260,004 $ 0.30 $ 74,512 231,671 $ 0.32
========= ======= ========= =======
Nine Months Ended
September 30,
(Unaudited)
----------------------------------------------------
2010 2009
------------------------- -------------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
--------- ------- ------ --------- ------- ------
Net Loss Attributable
to Common Shares ($ 23,591) ($330,168)
Less: Dividends on
share based awards
expected to vest (1,699) (1,366)
--------- ---------
Net Loss Per Common
Share- Basic (25,290) 234,468 ($0.11) (331,534) 193,520 ($1.71)
Add back:
Noncontrolling
interest in
earnings of
unitholders - -
Other potentially
dilutive securities
--------- ------- --------- -------
Net Loss Per Common
Share- Diluted ($ 25,290) 234,468 ($0.11) ($331,534) 193,520 ($1.71)
========= ======= ========= =======
Reconciliation to
Funds From
Operations ("FFO")
Net Loss Attributable
to Common Shares ($ 23,591) 234,468 ($330,168) 193,520
Adjustments:
Depreciation and
amortization 264,086 254,673
Company share of
joint venture
depreciation and
amortization 27,271 28,013
Earnings from
depreciable
property sales-
wholly owned,
discontinued
operations (24,383) (5,168)
Earnings from
depreciable
property sales-
wholly owned,
continuing
operations (6,917) -
Earnings from
depreciable
property sales-JV (2,308) -
Noncontrolling
interest share
of adjustments (6,611) (9,302)
--------- ------- --------- -------
Funds From
Operations- Basic 227,547 234,468 $ 0.97 (61,952) 193,520 ($0.32)
Noncontrolling
interest in loss
of unitholders (620) 6,172 (11,410) 6,711
Noncontrolling
interest share
of adjustments 6,611 9,302
Other potentially
dilutive securities 2,652 883
--------- ------- --------- -------
Funds From
Operations- Diluted $ 233,538 243,292 $ 0.96 ($ 64,060) 201,114 ($0.32)
(Gains) losses on
debt transactions 16,294 (20,880)
Adjustments for
repurchases of
preferred shares 10,144 -
Impairment charges 9,834 302,209
(Gain) loss on
business
combinations, net (57,513) 999
Other income tax
items (1,126) 12,273
--------- ------- --------- -------
Core Funds From
Operations- Diluted $ 211,171 243,292 $ 0.87 $ 230,541 201,114 $ 1.15
========= ======= ========= =======
Duke Realty Corporation
Balance Sheet
September 30, 2010
(In thousands, except per share amounts)
September 30, December 31,
2010 2009
------------- -------------
ASSETS:
Rental Property $ 6,901,320 $ 6,390,119
Less: Accumulated Depreciation (1,394,450) (1,311,733)
Construction in Progress 86,930 103,298
Land Held for Development 638,962 660,723
------------- -------------
Net Real Estate Investments 6,232,762 5,842,407
------------- -------------
Cash 20,849 147,322
Accounts Receivable 26,040 20,604
Straight-line Rents Receivable 138,604 131,934
Receivables on Construction Contracts 19,611 18,755
Investments in and Advances to
Unconsolidated Companies 357,217 501,121
Deferred Financing Costs, Net 46,452 54,489
Deferred Leasing and Other Costs, Net 500,279 371,286
Escrow Deposits and Other Assets 217,974 216,361
------------- -------------
Total Assets $ 7,559,788 $ 7,304,279
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Secured Debt $ 1,069,348 $ 785,797
Unsecured Notes 2,948,271 3,052,465
Unsecured Line of Credit 97,980 15,770
Construction Payables and Amounts due
Subcontractors 38,197 43,147
Accrued Real Estate Taxes 126,702 84,347
Accrued Interest 36,067 62,971
Accrued Expenses 47,636 48,758
Other Liabilities 130,509 198,906
Tenant Security Deposits and Prepaid Rents 40,819 44,258
------------- -------------
Total Liabilities 4,535,529 4,336,419
------------- -------------
Preferred Stock 907,275 1,016,625
Common Stock and Additional Paid-in
Capital 3,573,835 3,269,436
Accumulated Other Comprehensive Loss (2,184) (5,630)
Distributions in Excess of Net Income (1,499,605) (1,355,086)
------------- -------------
Total Shareholders' Equity 2,979,321 2,925,345
------------- -------------
Non-controlling Interest 44,938 42,515
------------- -------------
Total Liabilities and Equity $ 7,559,788 $ 7,304,279
============= =============
Contact Information: Contact Information: Media: Jim Bremner 317.808.6920 jim.bremner@dukerealty.com Investors: Randy Henry 317.808.6060 randy.henry@dukerealty.com