-- Core funds from operations per diluted share ("Core FFO") was $0.28 for
the quarter and $1.15 for the year. Funds from Operations per diluted
share ("FFO") as defined by the National Association of Real Estate
Investment Trusts ("NAREIT") was $0.28 for the quarter and $1.23 for
the year.
-- Strong operating momentum:
-- Overall portfolio occupancy increased to 89.1 percent, the best
overall performance since 2004.
-- Tenant retention rate was 76.5 percent for the year.
-- Net absorption was positive for the quarter and nearly 26 million
square feet of leases were completed for the year, the
highest annual volume since 2007.
-- Same property net operating income growth was positive 0.9 percent
for the year ended 2010 over 2009.
-- Successful asset and capital strategy execution:
-- Nearly $441 million of acquisitions for the quarter; and
$919 million for the year.
-- Over $317 million of proceeds generated from non-strategic
dispositions during the quarter; and $533 million for the year.
-- Achieved significant investment concentration progress to 49%
office,
42% industrial, 6% medical office and 3% retail
-- 2011 Core FFO guidance introduced at $1.06 to $1.18 per share.
Financial Performance
-- Core FFO for the fourth quarter was $0.28 compared with $0.31 for the
fourth quarter of 2009. The change is primarily attributable to
$8.0 million ($0.03 per share) of higher termination fees recognized in
the fourth quarter of 2009 over 2010. Core FFO for the year ended 2010
was $1.15 as compared to $1.45 for 2009. The decrease is attributable
to the overall increase in the company's weighted average shares
outstanding from both the April 2009 and June 2010 common equity
offerings.
A reconciliation of FFO as defined by NAREIT to Core FFO is included in
the financial tables included in this release.
-- Net income per diluted share (EPS) for fourth quarter 2010 was $0.04,
as compared to a loss of $0.02 for the same quarter in 2009. Fourth
quarter 2010 EPS was positively impacted by increased gains on sales of
assets. EPS for the year was a loss of $0.07 compared to a loss of
$1.67 in 2009. The loss in 2009 was primarily attributable to $302.6
million of non-cash impairment charges recognized in 2009. EPS in 2010
also benefited from $72.7 million of gains on the sale of properties
and $55.8 million of gain on acquisition of a joint venture partner's
interest.
Operating Performance
Operational highlights include:
-- Overall portfolio occupancy, including projects under development, was
89.1 percent as of December 31, 2010, compared to 88.9 percent at
September 30, 2010 and 87.2 percent at year-end 2009.
-- Occupancy in the bulk distribution portfolio at year end was 90.5
percent, up from 90.2 percent at September 30, 2010, and an increase of
2.0 percent from year-end 2009 occupancy of 88.5 percent.
-- Occupancy in the suburban office portfolio remained steady from the
third quarter at 85.7 percent, and increased 1.4 percent from year-end
2009 occupancy of 84.3 percent.
-- Tenant retention for the fourth quarter and year ended 2010 was 70.1
percent and 76.5 percent, respectively.
-- Same-property net operating income for the three months ended
December 31, 2010 increased nearly 5.0 percent over the same period of
2009. For the twelve months ended December 31, 2010, same property net
operating income increased by 0.9 percent over 2009.
Real Estate Investment Activity
Acquisitions
The company has a comprehensive asset strategy, which provides for
increasing investment in industrial and medical office assets. In alignment
with the execution of this strategy, the company acquired $440.5 million of
assets totaling over 5 million square feet in the fourth quarter of 2010,
bringing the total acquisitions to $919.1 million for the year ended 2010.
The fourth quarter included the following strategic acquisitions:
-- The company closed on $277 million of the previously announced
$450 million acquisition of a primarily industrial portfolio in South
Florida from Premier. The total portfolio includes fifty-one industrial
and five office buildings totaling over 4.9 million square feet. The
company closed on approximately 3.4 million square feet in December,
with the remaining portion expected to close in early 2011, subject to
the finalization of debt assumptions.
-- The company acquired a 190,000 square foot medical office building in
Charlotte, NC. The building is 100 percent leased to a single tenant
through 2020. In connection with the acquisition, the company assumed
$32.9 million of mortgage debt, which matures in 2014 and has an
interest only rate of 5.59 percent.
-- The company acquired three industrial assets in Houston, Texas,
adjacent to the Port of Houston. The assets total over 582,000 square
feet and are 100 percent leased.
Development
Wholly Owned Properties
-- The company's wholly owned development projects under construction at
December 31, 2010 consist of five medical office projects totaling
270,000 square feet and two bulk industrial buildings totaling
1.6 million square feet. These projects are 85 percent pre-leased
in the aggregate.
-- During the fourth quarter, the company started development of four
medical office buildings and one bulk industrial project. The medical
office projects total over 230,000 square feet and are 56 percent
pre-leased in the aggregate. The industrial asset is 300,000 square
feet and 47 percent pre-leased.
Joint Venture Properties
-- The company's joint venture development projects under construction at
December 31, 2010 consist of one medical office project of 460,000
square feet which is 93 percent pre-leased, and a 406,000 square foot
expansion of an existing industrial building that is 100 percent leased
to a single tenant.
-- Additionally, a 62,000 square foot medical office building that is
100 percent leased was placed into service.
Dispositions
Proceeds from fourth quarter building dispositions totaled $302.4 million.
Total dispositions for the year ended 2010, including land sales, were $533
million.
Fourth quarter dispositions included the following:
-- As previously announced in December 2010, the company closed on the
sale of seven suburban office buildings totaling over 1 million square
feet to an existing joint venture in which the company owns a twenty
percent interest.
-- A 533,520 square foot industrial building located in Indianapolis, IN
sold to a user. The asset was not leased and was developed in a joint
venture in which the company owns a 50 percent ownership interest.
-- A 430,500 square foot office building located in Buffalo, NY was sold
to a third party. The asset was 100 percent leased and was originally
developed by the company in its held for sale portfolio.
-- A 213,000 square foot VA medical clinic located in Fort Worth, TX.
The asset was 100 percent leased and was placed into service in the
fourth quarter of 2010.
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 28,
2011, to shareholders of record as of February 14, 2011.
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 February 14, 2011 February 28, 2011
Series K DREPRK $0.406250 February 14, 2011 February 28, 2011
Series L DREPRL $0.412500 February 14, 2011 February 28, 2011
Series M DREPRM $0.434375 March 17, 2011 March 31, 2011
Series N DREPRN $0.453125 March 17, 2011 March 31, 2011
Series O DREPRO $0.523438 March 17, 2011 March 31, 2011
2011 Earnings Guidance
"We ended 2010 with great success in both our core operations and execution
on our longer-term asset strategy," Mr. Oklak stated. "Our outlook for
2011 reflects cautious optimism that the economy will continue to slowly
improve, but that our development business will remain near historic lows.
We are also cautious on our overall occupancy outlook as we have some
larger bulk industrial lease expirations in the first half of the year
where we know the tenants are leaving at the end of their term."
The company announced full-year 2011 Core FFO guidance of $1.06 to $1.18
per share. The assumptions underlying the guidance are as follows:
1. Relatively flat occupancy performance; 2. Relatively flat same property net operating income growth; 3. Consistent construction and development activity; 4. Continued progress on asset strategy execution including completion of Premier and CB Richard Ellis Realty Trust strategic transactions.More specific assumptions and components of 2011 Core FFO will be available by 6:00 p.m. EST today through the Investor Relations section of the company's web-site. 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 is an operating measure and 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 tables 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 ("Core FFO"). 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 tables accompanying this release. About Duke Realty Duke Realty owns and operates more than 139 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. Fourth Quarter Earnings Call and Supplemental Information Duke Realty is hosting a conference call tomorrow, January 27, 2011, at 3:00 p.m. EDT to discuss its fourth quarter operating results and 2011 guidance. 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 and a summary of the key assumptions of its 2011 Core FFO guidance 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
December 31, 2010
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
---------------------- ----------------------
December 31, December 31,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Revenues:
Rental and related
revenue $ 228,868 $ 213,542 $ 878,242 $ 842,232
General contractor and
service fee revenue 100,971 114,097 515,361 449,509
---------- ---------- ---------- ----------
329,839 327,639 1,393,603 1,291,741
---------- ---------- ---------- ----------
Expenses:
Rental expenses 52,509 47,865 197,985 192,270
Real estate taxes 28,682 28,334 118,006 111,189
General contractor and
other services expenses 94,433 108,314 486,865 427,666
Depreciation and
amortization 94,145 81,518 349,064 323,429
---------- ---------- ---------- ----------
269,769 266,031 1,151,920 1,054,554
---------- ---------- ---------- ----------
Other Operating Activities
Equity in earnings of
unconsolidated companies 455 2,543 7,980 9,896
Gain (loss) on sale of
properties 32,745 12,337 39,662 12,337
Earnings from sales of
land - - - 357
Undeveloped land carrying
costs (2,051) (2,757) (9,203) (10,403)
Impairment charges - - (9,834) (275,630)
Other operating expenses (229) (174) (1,231) (1,017)
General and
administrative expense (10,158) (13,224) (41,329) (47,937)
---------- ---------- ---------- ----------
20,762 (1,275) (13,955) (312,397)
---------- ---------- ---------- ----------
Operating income
(loss) 80,832 60,333 227,728 (75,210)
Other income (expense)
Interest and other
income, net 30 305 534 1,229
Interest expense (62,835) (55,519) (239,383) (205,952)
Gain (loss) on debt
transactions (55) (180) (16,349) 20,700
Gain (loss) on
acquisitions, net (1,693) (63) 55,820 (1,062)
---------- ---------- ---------- ----------
Income (loss) from
continuing
operations before
income taxes 16,279 4,876 28,350 (260,295)
Income tax benefit - 3,128 - 13,348
Other income tax items - 4,995 1,126 (7,278)
---------- ---------- ---------- ----------
Income (loss) from
continuing
operations 16,279 12,999 29,476 (254,225)
Discontinued Operations:
Income before impairment
charges and gain on
sales 869 555 2,732 2,885
Impairment charges - - - (26,936)
Gain on sale of
depreciable properties 8,671 1,618 33,054 6,786
---------- ---------- ---------- ----------
Income (loss) from
discontinued
operations 9,540 2,173 35,786 (17,265)
Net income (loss) 25,819 15,172 65,262 (271,490)
Dividends on preferred
shares (16,016) (18,362) (69,468) (73,451)
Adjustments for repurchase
of preferred shares (294) - (10,438) -
Net (income) loss
attributable to
noncontrolling interests 43 157 536 11,340
---------- ---------- ---------- ----------
Net income (loss)
attributable to
common shareholders $ 9,552 ($3,033) ($14,108) ($333,601)
========== ========== ========== ==========
Basic net income (loss) per
common share:
Continuing operations
attributable to common
shareholders $ 0.00 ($0.03) ($0.22) ($1.58)
Discontinued operations
attributable to common
shareholders $ 0.04 $ 0.01 $ 0.15 ($0.09)
---------- ---------- ---------- ----------
Total $ 0.04 ($0.02) ($0.07) ($1.67)
========== ========== ========== ==========
Diluted net income (loss)
per common share:
Continuing operations
attributable to common
shareholders $ 0.00 ($0.03) ($0.22) ($1.58)
Discontinued operations
attributable to common
shareholders $ 0.04 $ 0.01 $ 0.15 ($0.09)
---------- ---------- ---------- ----------
Total $ 0.04 ($0.02) ($0.07) ($1.67)
========== ========== ========== ==========
Duke Realty Corporation
Statement of Funds From Operations
December 31, 2010
(In thousands, except per share amounts)
Three Months Ended
December 31,
(Unaudited)
---------------------------------------------------
2010 2009
------------------------ -------------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
-------- ------- ------ --------- ------- ------
Net Income (Loss)
Attributable to
Common Shareholders $ 9,552 ($3,033)
Less: Dividends on
share based awards
expected to vest (728) (391)
-------- ---------
Net Income (Loss) Per
Common Share- Basic 8,824 252,130 $ 0.04 (3,424) 224,012 ($0.02)
Add back:
Noncontrolling
interest in
earnings of
unitholders 200 5,290 -
Other potentially
dilutive
securities
-------- ------- --------- -------
Net income (Loss) Per
Common Share-
Diluted $ 9,024 257,420 $ 0.04 ($3,424) 224,012 ($0.02)
======== ======= ========= =======
Reconciliation to
Funds From
Operations ("FFO")
Net Income (Loss)
Attributable to
Common Shareholders $ 9,552 252,130 ($3,033) 224,012
Adjustments:
Depreciation and
amortization 96,098 85,453
Company share of
joint venture
depreciation and
amortization 7,403 8,953
Earnings from
depreciable
property
sales-wholly
owned,
discontinued
operations (8,671) (1,618)
Earnings from
depreciable
property
sales-wholly
owned,
continuing
operations (32,745) (12,337)
Noncontrolling
interest share
of adjustments (1,276) (2,308)
-------- ------- --------- -------
Funds From
Operations- Basic 70,361 252,130 $ 0.28 75,110 224,012 $ 0.34
Noncontrolling
interest in
income (loss)
of unitholders 200 5,290 (89) 6,617
Noncontrolling
interest share
of adjustments 1,276 2,308
Other potentially
dilutive
securities 2,984 1,352
-------- ------- --------- -------
Funds From
Operations- Diluted $ 71,837 260,404 $ 0.28 $ 77,329 231,981 $ 0.33
Loss on debt
transactions 55 180
Adjustments for
repurchases of
preferred shares 294 -
Gain on acquisitions,
net 1,693 63
Other income tax
Items - (4,995)
-------- ------- --------- -------
Core Funds From
Operations- Diluted $ 73,879 260,404 $ 0.28 $ 72,577 231,981 $ 0.31
======== ======= ========= =======
Twelve Months Ended
December 31,
(Unaudited)
---------------------------------------------------
2010 2009
------------------------ -------------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
-------- ------- ------ --------- ------- ------
Net Loss Attributable
to Common
Shareholders ($14,108) ($333,601)
Less: Dividends on
share based awards
expected to vest (2,513) (1,759)
-------- ---------
Net Loss Per Common
Share- Basic (16,621) 238,920 ($0.07) (335,360) 201,206 ($1.67)
Add back:
Noncontrolling
interest in
earnings of
unitholders - -
Other potentially
dilutive
securities
-------- ------- --------- -------
Net Loss Per Common
Share- Diluted ($16,621) 238,920 ($0.07) ($335,360) 201,206 ($1.67)
======== ======= ========= =======
Reconciliation to
Funds From
Operations ("FFO")
Net Loss Attributable
to Common
Shareholders ($14,108) 238,920 ($333,601) 201,206
Adjustments:
Depreciation and
amortization 360,184 340,126
Company share of
joint venture
depreciation and
amortization 34,674 36,966
Earnings from
depreciable
property
sales-wholly
owned,
discontinued
operations (33,054) (6,786)
Earnings from
depreciable
property
sales-wholly
owned,
continuing
operations (39,662) (12,337)
Earnings from
depreciable
property
sales-JV (2,308) -
Noncontrolling
interest share
of adjustments (7,771) (11,514)
-------- ------- --------- -------
Funds From
Operations- Basic 297,955 238,920 $ 1.25 12,854 201,206 $ 0.06
Noncontrolling
interest in loss
of unitholders (351) 5,950 (11,099) 6,687
Noncontrolling
interest share
of adjustments 7,771 11,514
Other potentially
dilutive
securities 2,934 1,104
-------- ------- --------- -------
Funds From
Operations- Diluted $305,375 247,804 $ 1.23 $ 13,269 208,997 $ 0.06
Loss (gain) on debt
transactions 16,349 (20,700)
Adjustments for
repurchases of
preferred shares 10,438 -
Impairment
charges 9,834 302,209
Loss (gain) on
acquisitions,
net (55,820) 1,062
Other income tax
items (1,126) 7,278
-------- ------- --------- -------
Core Funds From
Operations- Diluted $285,050 247,804 $ 1.15 $ 303,118 208,997 $ 1.45
======== ======= ========= =======
Duke Realty Corporation
Balance Sheet
December 31, 2010
(In thousands, except per share amounts)
December 31, December 31,
2010 2009
------------- -------------
ASSETS:
Rental Property $ 7,032,889 $ 6,390,119
Less: Accumulated Depreciation (1,406,437) (1,311,733)
Construction in Progress 61,776 103,298
Land Held for Development 625,353 660,723
------------- -------------
Net Real Estate Investments 6,313,581 5,842,407
------------- -------------
Cash 18,384 147,322
Accounts Receivable 23,478 20,604
Straight-line Rents Receivable 135,294 131,934
Receivables on Construction Contracts 7,564 18,755
Investments in and Advances to
Unconsolidated Companies 367,445 501,121
Deferred Financing Costs, Net 46,320 54,489
Deferred Leasing and Other Costs, Net 545,787 371,286
Escrow Deposits and Other Assets 186,423 216,361
------------- -------------
Total Assets $ 7,644,276 $ 7,304,279
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Secured Debt $ 1,065,628 $ 785,797
Unsecured Notes 2,948,405 3,052,465
Unsecured Line of Credit 193,046 15,770
Construction Payables and Amounts due
Subcontractors 44,892 43,147
Accrued Real Estate Taxes 91,502 84,347
Accrued Interest 62,407 62,971
Accrued Expenses 63,175 48,758
Other Liabilities 130,711 198,906
Tenant Security Deposits and Prepaid Rents 54,607 44,258
------------- -------------
Total Liabilities 4,654,373 4,336,419
------------- -------------
Preferred Stock 904,540 1,016,625
Common Stock and Additional Paid-in
Capital 3,576,242 3,269,436
Accumulated Other Comprehensive Loss (1,432) (5,630)
Distributions in Excess of Net Income (1,533,740) (1,355,086)
------------- -------------
Total Shareholders' Equity 2,945,610 2,925,345
------------- -------------
Non-controlling Interest 44,293 42,515
------------- -------------
Total Liabilities and Equity $ 7,644,276 $ 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